The Court of Justice considers that a subsidiary should be considered an establishment in the framework of the EU Trademark Regulation

Thursday, 6 of July of 2017

On 18 May 2017, the Court of Justice of the European Union published its Judgment C-617/15, Hummel Holding related to the concept of establishment in a Member State for the purpose of Art. 97 Regulation 207/2009 on the EU Trademark (EUTR) (at present Art. 125 Regulation 2017/1001).

The case is referred to an infringement action brought by Hummel Holding, a Danish company, before the German courts against Nike Inc. (USA) and Nike Retail BV (The Netherlands). Among other things, Hummel Holding asks for an injunction against Nike Inc. prohibiting the import, export, advertising, offering for sale and placing on the market of the goods concerned in the whole territory of the European Union.

The problem for Hummel Holding is that according to Art. 97 EUTR, for the German courts to declare jurisdiction to hear about the infringement committed in the whole territory of the EU either the defendant should be domiciled or should have an establishment in Germany. If that is not the case, German courts’ jurisdiction would be limited to the infringement committed in Germany (art. 97.5). Nike Inc. is domiciled in the US. However, Nike Retail has a subsidiary in Germany, Nike Deustchland Gmbh that at the same time is a second-tier subsidiary of Nike Inc. In the reference to the CJEU, the German court ask whether such a subsidiary can be considered an establishment within the meaning of Art. 97.1 EUTR.

Following the reasoning of the Advocate General, the CJEU states that as previously established in Judgement of 5 June 2014, C-360/12, Coty Germany the interpretation criteria of the Regulation 1215/2012 (Brussels I Regulation) – that includes the concept of establishment in Art. 7.5 – do not necessarily apply in the context of the EUTR. According to the CJEU (pars. 27 and 28):

Brussels I Regulation, on the one hand, and Regulation No 207/2009, on the other, do not pursue the same objectives. Thus, Brussels I Regulation aims to lay down, in addition to the defendant’s domicile, alternative grounds of jurisdiction based on a close link between the court and the action, or in order to facilitate the sound administration of justice, or, in relation to insurance, consumer and employment contracts, to protect the weaker party by rules of jurisdiction more favourable to his interests than the general rules.

Regulation 207/2009 for its part aims, according to recitals 15 to 17, to strengthen the protection of EU trade marks, to prevent inconsistent decisions on the part of the courts and to ensure that the unitary character of those trade marks is not undermined, by means of decisions of EU trade mark courts which have effect and cover the entire area of the European Union.

With this in mind, it comes as no surprise that the CJEU adopts an autonomous notion of establishment for the purpose of Art. 97 EUTR that diverges from the restrictive concept of establishment that is upheld in the framework of the Brussels I Regulation to reduce forum shopping. In particular, the CJEU considers that there is a establishment for the purpose of the EUTR when there are visible signs (pars. 37-40):

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.

It is 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 must thus 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 is also irrelevant.

Furthermore, it is, in principle, irrelevant for the purposes of Article 97(1) of Regulation No 207/2009 whether the establishment thereby determined has participated in the alleged infringement.

The interpretation of the CJEU favors the effective enforcement of EU Trademarks in the sense that increases the forum shopping options for EU Trademark owners to initiate pan-EU infringement actions. However, in our opinion, predictability of the grounds of jurisdiction is severely harmed. Contrary to what the CJUE states about Art. 7.5 Brussels I Regulation, in order to file the complaint before the court where the establishment (subsidiary) is located it is not required that the infringement arose out of the operations of that establishment. In the particular case, Nike Inc. was sued in Germany for infringements committed by Nike Retail, but Nike Deustchland had not committed any infringement. This interpretation is very dangerous for third-country companies that have established several subsidiaries in multiple Member States. As a consequence of this new judgment, this companies can be sued in any Member State where any of their subsidiaries are established being irrelevant whether these subsidiaries have participated or not in the infringement.