In Spain, the trade mark Schweppes is owned by Schweppes and that company has an exclusive right to its use in the country. In the UK, however, the trade mark is owned by Coca Cola, which bought the rights to the name in 13 European Economic Area countries from Orangina Schweppes in 1999.
When a distribution company called Red Paralela began importing and selling Schweppes branded tonic water from the UK, Schweppes began infringement proceedings against it.
Schweppes argued that as the trade marks and the products themselves are identical, consumers will be unable to identify their commercial origin.
Red Paralela said that trade mark rights had been exhausted due to "tacit consent" and that there were "undeniable legal and economic links" between Coca-Cola and Schweppes in the use of Schweppes as a universal mark.
The Barcelona commercial court has asked the CJEU, Europe's highest court, to decide whether Schweppes can oppose the importation under Spanish law, or if EU law precludes this.
Advocate general Paolo Mengozzi said in an opinion that EU law precludes reliance on an exclusive right if, given the economic links between their respective proprietors, it’s clear that the marks are under "unitary control".
The CJEU has previously said that rights conferred by a trade mark are exhausted where the owner of the trade mark in the importing state and exporting state are the same, or are economically linked, the advocate general said.
The owners of parallel marks that are created when single mark fragments can be regarded as economically linked if they "coordinate their commercial policies with a view to exercising joint control over the use of their respective marks", he said.
In principle, he said, Red Paralela has to show that there is existing coordination between Schweppes and Coca-Cola to give rise to unitary control, by presenting "a body of precise and consistent evidence showing the existence of such control"
Schweppes in Spain would then have to prove that it has not reached any agreement, and that it is not collaborating with the Coca-Cola in the UK to bring the mark under unitary control, the opinion said.
EU law does not allow reliance on an exclusive right where it is clear the marks are under unitary control and that the proprietor of the mark in the importing state can influence the goods to which the mark can be affixed in the exporting state and control their quality, the advocate general said.
The CJEU will now give judgment before the case returns to the Barcelona court to see whether the conditions for the exhaustion of Schweppes' rights have been met.
Intellectual property expert Iain Connor of Pinsent Masons, the law firm behind Out-Law.com said: "The advocate general has restated some well-established principles of EU law in relation to the use of an identical trade mark by different parties. If neither Schweppes company can exercise control over the other and there is no economic link between them, then Schweppes will be able to stop importation of Schweppes products from the UK based on its local, Spanish trade mark rights."