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03-Apr-2007
Close ... But No Cigar!

This was a case involving the parallel importation of Cuban cigars bearing famous cigar brands such as H Upmann and Punch into the United Kingdom. The case gives further guidance on the sort of circumstances in which a brand owner has "consented" to sales of branded product in the EU with the result that its trade mark rights are "exhausted".

Background

In Cuba, tobacco and cigar production is essentially state controlled. Whilst the majority of farms are in private ownership cigars are manufactured in factories, the majority of which are owned by the Cuban Ministry of Agriculture. A joint venture company Corporacion Habanos SA (50% Cuban State owned, 50% owned by European interests) (HSA) was granted by the Cuban government the exclusive right to buy, sell and market nationally and internationally Cuban rolled tobacco and owned relevant tobacco trade marks such as H Upmann and Punch. HSA granted another company, Hunters & Frankau Ltd (H&F) exclusive UK rights for importation, sale and distribution of Cuban cigars.

Mastercigars Direct Ltd (MDL) are parallel importers of Cuban cigars. MDL purchased cigars from a local Cuban entity La Casa De Habano ("Casa"). Casa handled domestic Cuban cigar sales but HSA allowed them to sell consignments of cigars (limited to $25,000 value by customer) to foreigners for export.

How the case arose

A consignment of Cuban cigars imported by MDL was detained by HM Customs at the request of HSA alleging that the cigars were counterfeit. MDL sought release of the goods and commenced proceedings for a declaration that the goods were genuine, not counterfeit, and that there was no infringement of trade marks as a result of the importation. At the first instance trial the Court held that the cigars were not counterfeit but their importation into the EEA did infringe HSA’s rights in the H Upmann and Punch trade marks because HSA had not consented to such importation.

The law

Article 5.1 of the Trade Mark Directive (89/104) confers on the trade mark owners the exclusive right to use in the course of trade the mark for goods for which it is registered (here HSA and the H Upmann and Punch marks) BUT Article 7 of the same Directive provides that the trade mark owner cannot object to use of the mark in relation to goods placed on the EEA market by the owner or with his consent. Clearly there was no express consent here. The question was whether trade mark owner consent could be implied from its actions and all the circumstances.

The key case on consent is a European Court of Justice decision in Zino Davidoff v A&G Import (2001) ECR I-8691. Put shortly, the key finding in that Judgment was this: when you are considering whether there has been some sort of implied consent on the part of the trade mark owner to goods bearing the mark being placed on the EEA market "the factors taken into consideration in finding implied consent must unequivocally demonstrate that the trade mark proprietor has renounced any intention to enforce his exclusive rights".

The Court of Appeal Judgment

The Court of Appeal found that the trade mark owner, HSA, in practice had a considerable degree of control over the operations of Casa. Specifically:

  • HSA had allowed Casa sales to foreigners of consignments of Cuban cigars up to $25,000 per customer, a small but commercially significant amount;

  • Cuban cigars could not be exported without HSA supplied and approved invoices;

  • The cigars were "co-branded" La Casa de Habono and HSA received a 2% royalty in respect of the same;

  • HSA had a practical degree of influence, if not control over the activities of Casa.

    In these circumstances the Court of Appeal held that the trade mark owner had impliedly but unequivocally consented to the placing of such cigars on the EEA market and that its trade marks rights, in consequence, were exhausted.

    Key point in the Judgment

    It is not surprising, given all the facts, that the Court of appeal considered that HSA had impliedly consented to the cigar consignments being placed on the EEA market. The point of general application is guidance on the meaning of "unequivocal consent". The Court of Appeal made it clear that "unequivocal" had nothing to do with standards of proof. A defendant does not have to prove unequivocal consent up to the hilt or of a criminal "beyond reasonable doubt" standard. It is enough to show that, on the (civil standard) balance of probabilities that the acts of the trade mark owner were consistent with that trade mark owner having consented to EEA sales.


  • Source: Mondaq News Alerts