Trade marks: Meaning of establishment

Summary

The European Court of Justice (ECJ) has ruled on the meaning of establishment within Article 97(1) of the EU Trade Mark Regulation (207/2009/EC) (Article 97(1)) for the purposes of bringing infringement proceedings.

Background

Under Article 97(1) and the recast Brussels Regulation (1215/2012/EU), EUTM infringement proceedings must be brought in the courts of the EU member state in which the defendant is domiciled or, if they are not domiciled in any of the member states, in which they have an establishment.

Facts

H sued NI in Germany for infringement of its international trade mark with effect in the EU in relation to the sale of sports clothing. NI was the ultimate holding company of the N group and had its seat in the US. ND had its seat in Germany and was not a party to the proceedings. However, it was a second-tier subsidiary of NI and provided pre- and post-sale services.

The German court requested a preliminary ruling from the ECJ on the meaning of establishment within Article 97(1).

Decision

The ECJ ruled that under Article 97(1), a legally distinct second-tier subsidiary, with its seat in a member state, of a parent body that had no seat in the EU was an establishment of the parent body if the subsidiary was a centre of operations that, in the member state where it was located, had a certain real and stable presence from which commercial activity was pursued, and had the appearance of permanency to the outside world, such as an extension of the parent body.

Article 97(1) must be interpreted broadly. Following a broad interpretation, there must be visible signs enabling the existence of an establishment within the meaning of Article 97(1) to be easily recognised. Therefore the existence of an establishment required a real and stable presence, from which commercial activity was pursued, as shown by the presence of personnel and material equipment. 

Generally, it was irrelevant whether the establishment in the territory of a member state of an undertaking whose seat was outside the EU had legal personality or not. 

Third parties must be able to rely on the appearance created by an establishment acting as an extension of the parent body. 

In principle, it was irrelevant for the purposes of Article 97(1) whether the establishment had participated in the alleged infringement. Any such requirement would not be reconcilable with the broad interpretation of establishment set out above.

Comment

Since many large non-EU corporations have legally independent first or second-tier subsidiaries within the EU, the ECJ's ruling has implications for EUTM rights-holders seeking to pursue infringers whose ultimate holding companies lie outside the EU. The ruling limits the obstacles that those EUTM rights-holders must overcome when pursuing an infringer whose ultimate holding company lies outside the EU, provided that the entity fulfils certain minimum requirements to qualify as an establishment. 

Case: Hummel Holding A/S v Nike Inc and another C-617/15.

First published in the July 2017 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.