THE BOTTOM LINE
- Brand Protection is Paramount: Companies have a strong right to block the sale of their products—even by third parties—if the goods’ condition could damage the brand’s reputation for quality and safety.
- Exhaustion Doctrine Clarified: Intellectual property rights are not “exhausted” for goods under a T1 customs status (i.e., non-EU goods in transit). Selling such goods within the EU/EEA without the brand owner’s consent constitutes infringement.
- Strategic Litigation Risk: Acquiring goods that a brand owner has disavowed carries significant legal and financial risk. Courts may prioritize the original manufacturer’s safety concerns over a reseller’s commercial interests, even if the goods appear undamaged.
THE DETAILS
This case stems from the aftermath of the July 2023 fire aboard the Fremantle Highway cargo ship. A consortium of Dutch companies (the appellants) purchased 260 BMW vehicles that, while not burned, were aboard the vessel during the incident. The cars were originally destined for Taiwan under a T1 customs status, meaning they were non-EU goods in transit. After the appellants acquired the vehicles, BMW seized them, asserting that their sale would infringe its trademark and design rights due to potential hidden damage that could compromise safety and tarnish the BMW brand. The appellants sought to have this seizure lifted in summary proceedings, a request that has now been rejected on appeal.
The Hague Court of Appeal aligned its decision with a recent ruling in the main proceedings, confirming that BMW’s intellectual property rights were not exhausted. The doctrine of exhaustion, which typically prevents a brand owner from controlling resale after the first sale, did not apply here. The court reasoned that because the vehicles were always under a transit customs status and had never been placed on the market within the European Economic Area (EEA) with BMW’s consent, the brand owner retained its rights to control their distribution. This serves as a crucial clarification for businesses involved in the trade of goods that transit through, but are not destined for, the EU.
Ultimately, the court’s decision hinged on a balance of interests, weighing the appellants’ financial investment against BMW’s right to protect its brand integrity and ensure public safety. The court found that BMW had a “legitimate reason” to oppose the resale of the vehicles, not just within the EU, but globally. The potential for latent defects caused by extreme heat and corrosive gases during the fire posed a significant safety risk. Allowing these potentially compromised cars onto any market could severely damage BMW’s reputation. The court concluded that this interest in brand protection and safety outweighed the appellants’ commercial desire to resell the vehicles, thereby upholding the seizure.
SOURCE
Source: Gerechtshof Den Haag (The Hague Court of Appeal)
