“Establishment” in the EU requires a broad interpretation, says the CJEU

by Alina Trapova

While likelihood of confusion, reputation, earlier national rights, distinctiveness and descriptiveness, etc. certainly form the “meat” of most EU trade mark disputes, a case can be quickly thrown out of court on the ground that the said court is not the right forum to hear the dispute. This is however not what is foreseen to happen in the Hummel vs. Nike conflict below, which originated in the German courts (and is perhaps going to unfold there in the future).

Whoiswho

Hummel Holding owns an international trade mark registration designating the EU for goods in Class 25 (“clothing”).

Nike Inc., the first defendant, is the ultimate holding company of the Nike Group, which has its seat in the US.

Nike Retail BV, the second defendant, forms part of the Nike Group and has its seat in the Netherlands. Interestingly, this undertaking operates a website on which Nike goods are sold in Germany and supplies independent dealers, again in Germany, with Nike goods.

Nike Deutschland GmbH, not a party to the proceedings, is a subsidiary of Nike Retail BV and has its seat in Germany. It does not have its own website, nor does it sell goods to the end consumer or intermediaries. What it actually engages in, is the negotiation of contracts between intermediaries and Nike Retail BV and the support of Nike Retail BV in connection with advertising and performance of contracts. It also provides after-sale service to consumers.

Previously on whohasjurisdiction

Hummel claims that some of Nike’s products, in particular basketball shorts, infringe its trade mark and that most of these infringements took place in Germany. Hence, it brought an action against Nike Inc. and Nike Retail BV before the Regional Court of Düsseldorf (Germany). The court held that it had jurisdiction since Nike Deutschland GmbH was an “establishment” of Nike. The action failed however on the merits.

Upon appeal, the concept of “establishment” as per Article 97(1) EUTM was disputed. Ultimately, the question for the CJEU for a preliminary ruling was whether Nike Deutschland GmbH is an “establishment” for the purpose of Article 97(1)?

CJEU favours uniformity and broad interpretation

On 18 May 2017, the CJEU gave its preliminary ruling in which it emphasised heavily the necessity for an “autonomous” and “uniform” interpretation of the concept of “establishment”.

Next, the Court analysed the wording, context and objective of Article 97(1) EUTMR.

(i) Wording

The provision says in essence that infringement proceedings in EUTM matters are to be brought in “courts of the Member State in which the defendant is domiciled” or “has an establishment”.

It is apparent from the wording of the provision that a defendant, not domiciled in the EU, may have one or more establishments within the EU, which suggests that actions may be brought before the courts of various Member States where those establishments are located.

(ii) Context and objective

The Article aims to ensure that a court in the EU always has jurisdiction to hear and determine disputes concerning infringement of an EU trade mark. As such, Article 97(1) establishes the primary rule of domicile/establishment. Only if the defendant has no domicile, nor an establishment in an EU Member State, then do the subsequent provisions kick in. They would act as an alternative, which provides for jurisdiction to lie with the courts of the domicile or establishment of the plaintiff and, as a further alternative, with the courts of the Member State where EUIPO has its seat (Article 97(2) and (3)). These are designed in a somewhat cascade manner. So the concept of “establishment” should be interpreted broadly since this is not the exception to the basic rule of jurisdiction at the defendant’s domicile. This was a point also emphasised by the Advocate General.

Touching upon some of the facts of the dispute before it, the Court ruled that it is irrelevant whether a body has legal personality for the purpose of it being an “establishment”. What matters is that third parties are able to rely on the appearance created by the establishment acting as an extension of the parent body. Coming even closer to the peculiarities of the dispute, the Court considered irrelevant the fact that an undertaking is a second-tier subsidiary of a parent body with a seat outside the EU and not a direct one.

Eventually, such a second-tier subsidiary, with a seat in a Member State, of a parent body, without a seat in the EU, is an “establishment” of that parent body if there are visible signs that the subsidiary is a centre of operations which, in the Member State where it is located, has a certain real and stable presence from which a commercial activity is pursued, as manifested by the presence of personnel and material equipment and has the appearance of permanency to the outside world, such as an extension of the parent body.

Full judgment can be found here.

Alina Trapova LL.M. (QMUL)