New Supreme Court Judgment on the Exhaustion of Trademark Rights

The Finnish Supreme Court handed down a significant judgement in case KKO:2023:87 on 17 November 2023. The judgment concerns the doctrine of exhaustion of trademark rights, which has been fully harmonised within the EU as a legal principle. The case had previously been heard by the Market Court and the Court of Justice of the European Union.

The principle of exhaustion of trademark rights is based on Article 15 of the Trademark Directive ((EU) 2015/2436), pursuant to which a trademark does not entitle the proprietor to prohibit its use in relation to goods that have been put on the market in the EU (or the EEA) under that trademark by the proprietor or with the proprietor's consent. However, the principle does not apply if the trademark proprietor has legitimate reasons to oppose further commercialisation of the goods. The assessment of whether these legitimate reasons exist played an important role in the resolution of the case at all court instances.

The case was originally brought to the Market Court by SodaStream who requested the Market Court to confirm that MySoda had infringed SodaStream’s trademark rights. SodaStream had placed gas cylinders that had been engraved with SodaStream’s trademark and affixed with SodaStream’s label on the market in Finland. When MySoda received these empty gas cylinders from consumers, it removed SodaStream’s labels and replaced them with its own pink or white labels, leaving SodaStream’s trademark engraved on the cylinder. MySoda then refilled the cylinders and further marketed and sold them in Finland.

The Market Court handed down its judgment where it partially accepted and partially rejected SodaStream’s infringement action on 5 September 2019. Both parties appealed the decision to the Supreme Court, which decided to refer the case to the Court of Justice of the European Union (“CJEU”) for a preliminary ruling. The CJEU handed down its judgment on 27 October 2022, after which the Finnish Supreme Court continued the hearing of the case. The judgment of the CJEU has been explained in more detail in our previous legal alert.

The Supreme Court assessed SodaStream’s legitimate reasons and grounds for opposing MySoda’s conduct by considering whether MySoda’s sale of gas cylinders created a false impression of an economic link between MySoda and SodaStream to consumers. Ultimately, the Supreme Court found that the trademark proprietor may oppose the conduct of a reseller that has marketed goods on which it has replaced the label bearing the original trademark with other markings, still leaving the original trademark visible on the goods, if the new markings create a false impression to consumers that there is an economic link between the trademark proprietor and the reseller.

In the present case, the Supreme Court followed the same approach as the CJEU and the Market Court. The Supreme Court held that the trademark proprietor’s right to oppose the reseller’s conduct must be assessed in the light of the trademark proprietor’s legitimate interests, especially the interest that protects the origin of the product. Additionally, weight should be given to the reseller’s activities as a whole, such as the conditions in which the goods are sold. This also includes the information contained on the goods and their new labels, the distribution practices of the relevant industry, and the consumer’s level of knowledge of these practices.

When assessing the likelihood of confusion, the Supreme Court emphasized the extent and clarity of the information included on the new labels that the reseller had affixed to the gas cylinders. MySoda’s white labels contained a notice that ruled out any economic link between SodaStream and MySoda and clarified the roles of both parties. The pink labels, however, did not include such notice. Therefore, the original issuer of the gas cylinders, i.e. SodaStream, was not identified in a clear and unambiguous manner and the likelihood of confusion among consumers was apparent.

On these grounds, the Supreme Court ruled that SodaStream had the right to oppose MySoda’s conduct in terms of the pink labels affixed by MySoda, but not as regards the white labels. Thus, the interim decision of the Market Court was not amended.

The Supreme Court’s judgment provides clarity both to trademark proprietors and the resellers of the trademark proprietors’ products in terms of their activities in the circular economy of the EU.

Firstly, the judgment can be viewed as strengthening the exclusive rights of a trademark proprietor. The judgment highlights and supports the trademark proprietor’s legitimate interest that protects the trademark’s function as guaranteeing the product’s origin by allowing the trademark proprietor to oppose the activities of the resellers. Additionally, the trademark proprietors can rely more securely on their rights in particular cases, as the conditions for utilising the said rights have been clarified.

Secondly, the judgment will also clarify the principle of exhaustion of trademark rights. This results in the pronounced obligation of the reseller of goods to ensure that new markings affixed to reused goods are sufficiently clear and unambiguous. It is the reseller’s obligation to make sure that the new markings do not cause a likelihood of confusion of an economic link between the trademark proprietor and the reseller, taking also into account the distribution and marketing methods of the products on the market.

If you have any questions about the judgment, please contact the undersigned or your regular Borenius contact.