Does the sale of replacement parts and accessories for Testarossa cars and used Testarossas qualify as genuine use of the Testarossa trademark? If so, is the trademark used only for high-priced luxury sports cars, or for the whole category of cars?
Ferrari SpA v DU, Joined Cases C-720/18 and C-721/18 (judgment of the Court of Justice of the European Union of 22 October 2020)
By registering a trademark, the proprietor obtains a right to use it exclusively for profit or professionally in a specific territory, such as Poland or the European Union. This right can be held virtually indefinitely; it is only necessary to make regular payment for successive periods of protection. From a business point of view, it is an attractive way of protecting an asset essential for identifying the company’s goods and services on the market, which in many cases is particularly important for the proprietor.
Genuine use of a trademark
When awarding such significant rights, in principle the law imposes on the proprietor only one requirement (other than payment): the trademark must be used genuinely. In short, this means use of the trademark in accordance with its primary function, which is to guarantee the identity of the origin of the goods and services for which it has been registered, to create or maintain a market for those goods and services. The use cannot be token or merely intended to maintain the rights to the trademark.
The proprietor does not have to prove continuously that it uses the trademark. Such a need arises only when a third party requests revocation of the right to the trademark, or there is an objection to registration of another trademark and the applicant alleges non-use of the prior trademark to overcome the objection. Then the proprietor must provide evidence showing that during the five years preceding the filing of the application for revocation of the trademark or the application for registration of the trademark by a third party, the proprietor has actually used the trademark in the relevant territory and in relation to the goods for which the trademark is registered or the goods covered by the objection.
It sounds simple, but in fact it is difficult and tedious to prove.
Pursuant to Art. 13 of Directive 2008/95/EC (now Art. 21 of Directive (EU) 2015/2436), the rule in revocation disputes is that if genuine use of a trademark has not been demonstrated for all the goods and services for which the trademark has been registered, instead of completely revoking the proprietor’s rights, the list of goods and services for which the trademark is registered is limited to those for which use has been demonstrated. In other words, the right is only revoked in respect to certain goods and services, leaving it in force for the rest.
Facts surrounding the Testarossa trademarks case
A revocation case was pending before the German courts involving Ferrari SpA’s rights to registered trademarks for (to simplify) vehicles and their parts (Class 12):
In the main proceedings it was established that between 1984 and 1991 Ferrari sold a sports car model called the Testarossa. Then, by 1996, it was selling 512 TR and F512 M models, successors to the Testarossa, and one model of the Ferrari F12 TRS in 2014. There are only 7,000 cars in the world bearing the Testarossa mark.
During the relevant period for assessing the use of the trademarks, Ferrari was using them to identify replacement parts and accessories for Testarossas (between 2011 and 2016, replacement parts generated a turnover of about EUR 17,000) and also offering maintenance services for those vehicles. In addition, after inspection, Ferrari was reselling used Testarossas.
A number of doubts arose in the case of the Testarossa trademarks. In this article, we will comment on just a few of them:
- Whether the resale of used cars by the proprietor of a trademark is a genuine use of the trademark
- When after-sales service and sale of replacement parts for goods placed on the market qualify as genuine use of the trademark
- How to create subcategories of goods or services, and whether the use of the trademark for part of the goods falling within a wider category is to be regarded as use of the trademark for the whole category of goods (which in this case boiled down to establishing whether the use of the trademark for “high-priced luxury sports cars” is to be regarded as use of the trademark for the general category of “cars”).
Resale of used goods by the proprietor of a trademark
In the main proceedings Ferrari indicated that it was selling used Testarossa cars, and those sales required Ferrari to consider the car as “its own” again, so that the resale constituted a “new” genuine use of the trademark. This position was rejected by the German court of first instance, which found that placing the product on the market resulted in exhaustion of the proprietor’s rights. Exhaustion means that the trademark proprietor cannot, in principle, prohibit third parties from using the trademark in relation to goods marked with it which were marketed in the EU by the proprietor or with its consent. Therefore, the national court took the view that if the proprietor cannot prohibit third parties from carrying out a particular act, then that act by the proprietor does not constitute use of the trademark enabling it to retain the rights to the trademark.
The Court of Justice of the European Union shared Ferrari’s position. It held that the resale of used goods as such does not constitute use of the trademark, but if, when reselling used goods, the proprietor of the trademark actually uses it in accordance with its essential function (identification of the source of origin), that may constitute a genuine reuse of the trademark. According to the court, the provisions on exhaustion of rights (Art. 7(1) of Directive 2008/95/EC, now Art. 15(1) of Directive (EU) 2015/2436) confirmed this interpretation, as they do not prohibit the proprietor from reusing the trademark for products it had already placed on the market. Exhaustion of the rights to the trademark does not prevent the proprietor from reusing the trademark.
Sale of replacement parts and after-sale service
Citing the case law to date, the CJEU stated that the use of a trademark for replacement parts that were an integral part of the goods previously placed on the market and designated by the contested trademark may constitute genuine use of the trademark. Moreover, this use covers not only the replacement parts themselves, but also the goods containing those replacement parts. It is irrelevant whether the registration of the trademark covers only the entire goods or also their replacement parts. Thus, if Testarossa trademarks were registered for cars and their replacement parts, using them for only replacement parts should qualify as genuine use of the trademark for both cars and replacement parts.
The court also required those conclusions to be applied when examining the nature of after-sales services, and indicated that they may also constitute a form of genuine use of the trademark. However, as in the case of the sale of replacement parts, such classification is possible only where the disputed trademark, which has been used on goods previously placed on the market, is actually used in the provision of services relating to those goods. In other words, the provision of services relating to goods previously sold, but without the use of the trademark for that purpose, is not a form of genuine use. Using the example of the Testarossa trademarks, a form of genuine use of the trademark would be to offer a “Ferrari Testarossa car service” and not a “Ferrari car service,” even if the service covered models designated with the Testarossa trademarks.
Rules for creating subcategories of goods
The national court’s question on whether the use of the Testarossa trademark is to be classified as use exclusively for “high-priced luxury sports cars” or for “cars” as such comes down to consideration of the rules for creating subcategories of goods and services. In that context, the CJEU pointed out that the essential criterion to be applied to distinguish coherent and independent subcategories of goods is their purpose and intended use. In this process, it is only relevant if the consumer wishing to purchase goods in a given category associates all goods belonging to it with a trademark. Such a finding cannot be ruled out solely on the grounds that the goods belong to different markets or different market segments, especially as the proprietor of a trademark has a legitimate interest in expanding its range of products.
Goods often have more than one purpose and use. In such a case, subcategories of goods cannot be created accounting for each of the purposes on its own, as this would not allow independent subcategories to be defined consistently and would result in undue restriction of the rights of a trademark proprietor. For example, a laptop and its software can be used for playing computer games, office work, playing movies and music, processing of graphics, and many other purposes. If the proprietor of a trademark demonstrates use of the trademark only for gaming laptops, that should not result in restricting the rights to the trademark only to such computers, as those laptops may also be used for other purposes. This leads to the conclusion that the proprietor of a trademark is not obliged to demonstrate genuine use of the trademark for each “purpose” separately.
With regard to the Testarossa trademarks, the court made it clear that the subcategory of goods proposed by the German courts, referred to as “high-priced luxury sports cars,” is not appropriate. The mere fact that goods are expensive and thus may belong to a specific market is not sufficient to consider them an independent subcategory within a class. The attribute of “luxury” also does not create a homogeneous subgroup within the category of goods such as vehicles, as various types of cars can be described this way. And the term “sports,” and related potential use of a car in motor sports, is only one of the characteristics these cars possess, without losing their primary use, i.e. as a means of road transport for passengers and their goods.
Consequently, if a trademark has been used only for certain goods, such as high-priced luxury sports cars, or only for replacement parts or accessories for such goods, in principle it should be considered to be used genuinely for all goods belonging in that category (and thus cars in general) and their constituent replacement parts.
The Testarossa judgment is important for practice, especially for trademarks in the automotive industry, as the CJEU confirmed that the proprietor’s use of the trademark for resale of used goods may constitute genuine use of the trademark. It also pointed out that after-sales services involving goods previously placed on the market under the trademark may constitute a form of genuine use of the trademark as long as the trademark is used to provide the services.
This judgment will provide important interpretive guidance in many trademark revocation cases, particularly those involving luxury brands, as the court made clear that the price and luxury of a good do not call for carving out a particular subcategory of goods. In the case of the broad category of goods where consumers associate all the goods with a trademark, the proprietor of the trademark does not have to demonstrate its use for each individual product. In that case, use of the trademark for certain goods should be regarded as genuine use of the trademark in respect of all goods in the category. The CJEU pointed out that there is no need to find more precise, narrower categories of goods using as a criterion one of several purposes served by the goods (the predominant purpose), as this methodology would lead to inconsistencies and, consequently, unjustified narrowing of the proprietor’s rights.
Paulina Mleczak, attorney-at-law, Intellectual Property practice, Wardyński & Partners