The Federal Court of Justice in Germany has issued two judgments which deal with the burden of proof in relation to alleged counterfeit products. Both cases concern the well-known "CONVERSE ALL STAR" brand (also known as “Chuk’s”) but differ in their details (File numbers: I ZR 52/10; I ZR 132/10).
Genuine looking products bearing the CONVERSE brand had been distributed by wholesale dealers without the permission of the trade mark owner and (in the second case) by a sole distributor within Germany. The wholesale dealers claimed the CONVERSE shoes they sold were originals and had been imported in the EU with the approval of the trade mark owners. As a result, rights in the CONVERSE trade mark had been exhausted according to § 24 MarkenG (German Trade Mark Act) and further distribution could no longer be prohibited by CONVERSE or its distribution partners.
CONVERSE doubted that the products were originals or had been introduced into the EU with its consent. Consequently they asked the defendants to prove the genuineness of the shoes and to deliver information on the origin of the products. The distributors claimed that CONVERSE had the burden to prove these facts. It is indeed a general rule under German law that each party to an ongoing litigation has to prove the facts which favour its particular legal position. If one follows this rule strictly it would have been for CONVERSE to substantiate the counterfeit nature of the products. The Federal Court of Justice, however, decided in favour of CONVERSE. As long as the trade mark owners have established some facts that substantiate a potential trade mark infringement, it is the distributor which has to bear the burden of proof.
The Federal Court of Justice also laid down one exception to this rule. This applies when the trade mark owner has set up an internal distribution system which enables him to control cross-border distribution of his products within the EU which constitutes a danger of market partitioning.
- In one of the pending cases (I ZR 137/10) the judges declined to apply the exception. The shoes were without any doubt original “Chuk’s” and the defendant had claimed they originated from an authorized Slovenian distributor. However, due to the termination of the distribution contract of the Slovenian dealer the risk of market partitioning could not arise since CONVERSE could no longer influence the dealer. The defendant wholesale dealer could not prove that it was indeed the Slovenian distributor the shoes originated from and that they were therefore not counterfeits. As a result, it was held that the defendant had not met the burden of proof and he had to cease and desist from further distribution of the shoes.
- In the second case (I ZR 52/10) according to the decision of the Federal Court of Justice it was not clear whether the shoes sold by the wholesaler dealer were originals or had been brought into the EU with the permission of CONVERSE. The Judges referred the matter back to the court of first instance to clear up these facts but stated at the same time that it will be the defendant wholesale dealer and not CONVERSE which bears the burden of proof for these facts.
The Judgment removes the burden of proof from trade mark owners in relation to the prosecution of counterfeits and non-EU-authorized distribution of original products. Until now the verification of the genuineness of branded products has hindered the smooth enforcement of claims and required the investment of substantial resources on the part of trade mark owners, as well as a willingness to make certain trade secrets public. Life will become easier in that respect for brand owners so long as they do not fall within the exception mentioned by the Federal Court of Justice.