Bird & Bird safeguards the selective distribution of renowned luxury cosmetic brands

On the 8th of December, the specialised business division of the Milan Court reiterated that a selective distribution system serves as a valid objective reason for avoiding the implications of the "exhaustion of trademark rights" principle.

Specifically, the Court deemed the selective distribution system, used by a leading company in the industry for the resale of their own branded cosmetic products, a legitimate reason to oppose the sale of the company's products by unauthorised third-party distributors, because the latter were external to the distribution circuit.

In the course of routine checks conducted to protect their distinctive trademarks, Bird & Bird’s client found that several of its branded products were being sold on e-commerce platforms linked to a Danish company, which is outside of the client’s selective distribution network. After issuing a warning, which was not addressed, the client accused the Danish company of violating their rights over the registered trademarks. They contended that the legitimate selective distribution system would block the application of the exhaustion principle, as per Article 5 of the Italian code of Intellectual Property and requested the implementation of suitable precautionary measures.

The Court confirmed that the existence of a “selective distribution” network, designed to safeguard the luxury and prestige of a product, gives the owner of said trademark a particularly “strong” exclusive right of use. Based on this, the owner can prohibit the licensee and any third parties that have purchased from the licensee, from selling the products marked with the distinctive sign, when the conditions of sale could potentially harm the brand. The court has thus stopped the online marketplace from continuing the indiscriminate sale of the products in question on their websites, deeming the unauthorised sale to be illegal and prejudicial, even from a counterfeiting perspective.

This case reaffirms that the implementation of a selective distribution system that is compatible with antitrust law, can help halt unauthorised sales with actions for IP infringements.

Bird & Bird has supported the company with a multidisciplinary team consisting of partner Federico Marini Balestra, who handled the antitrust aspects, and senior counsel Fulvio Mellucci and senior associate Alessandro Berti Arnoaldi Veli, who dealt with the IP aspects.

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