The matter at hand
Schweppes is the proprietor of the Spanish national mark 'Schweppes'. In 2014, the Spanish company Red Paralela imported bottles of tonic water bearing the trade mark 'Schweppes'. These bottles originated from the UK, where Schweppes had previously assigned the UK trade mark 'Schweppes' to Coca-Cola.
Schweppes argued that the bottles were put on the UK market by Cola-Cola, a company with whom it shared no formal connection, and that it had not (tacitly) consented to the import and marketing of said bottles on the Spanish market. According to Schweppes, neither Coca-Cola's placement of the bottles on the UK market, nor the circumstance that both companies were involved in a joint exploitation of the sign 'Schweppes' as a global trade mark, could lead to exhaustion of the Spanish trade mark rights.
The case was brought before the Commercial Court of Barcelona which stayed the proceedings and referred several questions to the ECJ for preliminary ruling.
The judgment of the ECJ
The ECJ first of all recalls that in determining a trade mark's scope of protection "regard must be had to the essential function of the trade mark, which is to guarantee the identity of the origin of the trade mark, which is to guarantee the identity of the origin of the trade marked product to the consumer or end user by enabling him, without any possibility of confusion, to distinguish that product form goods having another origin" (paragraph 38).
The ECJ continues that this essential function can no longer be independently fulfilled, and therefore no rights can be exercised, if "following the assignment of some national parallel trade marks to a third party, the proprietor, either acting alone or maintaining his coordinated trade mark strategy with that third party, has actively and deliberately continued to promote the appearance or image of a single global trade mark, thereby generating or increasing confusion on the part of the public concerned as to the commercial origin of goods bearing that mark" (paragraph 40). It is for the national court to assess whether this is the case.
The ECJ furthermore finds that, even in the event that the proprietor had not promoted the image of a single global trade mark, he may not oppose the import of such goods if there exist economic links between himself and the third party, insofar that they "coordinate their commercial policies or reach an agreement in order to exercise joint control over the use of those marks, so that it is possible for them to determine, directly or indirectly, the goods to which the trade mark is affixed and to control the quality of those goods" (paragraph 47). The ECJ explains that this would lead to "a partitioning of the national markets which is not justified by the purpose of trade mark rights and is, in particular, unnecessary in order to preserve the essential function of the marks concerned" (paragraph 47). The burden of proof of the existence of the aforementioned economic link is on the trader, who must "forward a body of precise and consistent evidence from which it may be inferred that such economic links exist" (paragraph 54).