The Court of Justice of the European Union (CJEU) boosted the hopes of trademark owners to combat infringements by a one-stop-shop action against the corporate parent. In a decision handed down on 18 May 2017 (Case C-617/15), the CJEU ruled that Article 97(1) of the EU Trademark Regulation must be interpreted as meaning that a legally distinct second-tier subsidiary, with its seat in a Member State, of a parent body that has no seat in the European Union is an ‘establishment’, within the meaning of that provision, of that parent body if the subsidiary is a center of operations which, in the Member State where it is located, has a certain real and stable presence from which commercial activity is pursued, and has the appearance of permanency to the outside world, such as an extension of the parent body.
Under the EUTMR, claims for trademark infringement shall be brought in the courts of the Member State of the EU in which the defendant is domiciled or, if he is not domiciled in any of the Member States, in which he has an establishment. If the defendant is neither domiciled nor has an establishment in any of the Member States, such proceedings shall be brought in the courts of the Member State in which the plaintiff is domiciled or, if he is not domiciled in any of the Member States, in which he has an establishment. If neither the defendant nor the plaintiff is so domiciled or has such an establishment, infringement proceedings with EU-wide effect may only be brought before the commercial court in Alicante, Spain.
As yet, most courts took the view that an affiliated company could not qualify as an establishment of the corporate parent. As a consequence, trademark owners were often forced to initiate separate proceedings against the infringer’s local distribution companies in each Member State concerned. With today’s judgment, this is likely to change. The CJEU ruled that it was irrelevant whether the establishment on the territory of a Member State of an undertaking whose seat is outside the European Union has legal personality or not. Third parties thus had to be able to rely on the appearance created by an establishment acting as an extension of the parent body. The fact that an undertaking with its seat in a Member State before the courts of which an action is brought is a second-tier subsidiary of the undertaking whose seat is located outside of the European Union and not a direct subsidiary of that undertaking was also irrelevant, provided that the establishment had a certain real and stable presence, from which commercial activity is pursued, as manifested by the presence of personnel and material equipment. In addition, that establishment must have the appearance of permanency to the outside world, such as the extension of a parent body. However, it was, in principle, irrelevant for the purposes of Article 97(1) EUTMR whether the establishment thereby determined has participated in the alleged infringement.
Thies Boesling, who represented the plaintiff before the CJEU, comments: ‘Today’s judgment significantly strengthens the position of trademark owners against third-State infringers. So far, the connecting factor of an ‚establishment’ had little practical relevance because courts interpreted the term too narrowly. With the inclusion of legally distinct entities that are not directly involved in the accused acts, this is likely to change. Speaking about disputes between global corporations, in most cases the defendant will have a subsidiary in one or more Member States of the EU.’