Case BriefsInternational Courts

European Court of Justice (ECJ): Confédération paysanne, a French agricultural union which defends the interests of small-scale farming, together with eight other associations, brought an action before the Conseil d’État (Council of State, France) in order to contest the French legislation which exempts organisms obtained by mutagenesis from the obligations imposed by the Directive on genetically modified organisms (GMOs). [Directive 2001/18/EC of the European Parliament and of the Council of 12 March 2001 on the deliberate release into the environment of genetically modified organisms and repealing Council Directive 90/220/EEC (OJ 2001 L 106, p. 1)].

In particular, the directive provides that GMOs must be authorised following an assessment of the risks which they present for human health and the environment and also makes them subject to traceability, labelling and monitoring obligations. Confédération paysanne was of the view that the use of herbicide-resistant seed varieties carries a risk of significant harm to the environment and to human and animal health, in the same way as GMOs obtained by transgenesis. It is in this context, ECJ was requested by the Conseil d’État to determine, whether organisms obtained by mutagenesis are GMOs and whether they are subject to the obligations laid down by the GMO Directive.

ECJ held that organisms obtained by mutagenesis are GMOs within the meaning of the GMO Directive, in so far as the techniques and methods of mutagenesis alter the genetic material of an organism in a way that does not occur naturally and those organisms come, in principle, within the scope of the GMO Directive and are subject to the obligations laid down by that directive. The Court, however, made clear that the GMO Directive does not apply to organisms obtained by means of certain mutagenesis techniques, namely, those which have conventionally been used in a number of applications and have a long safety record. It nevertheless specified that the Member States are free to subject such organisms, in compliance with EU law (in particular the rules on the free movement of goods), to the obligations laid down by the GMO Directive or to other obligations.

Court also held that the GMO Directive is applicable to organisms obtained by mutagenesis techniques that have emerged since its adoption, as risks linked to the use of these new mutagenesis techniques might prove to be similar to those that result from the production and release of a GMO through transgenesis and new techniques make it possible to produce genetically modified varieties at a rate out of all proportion to those resulting from the application of conventional methods of mutagenesis.

The Court considered that the concept of ‘genetically modified variety’ must be construed as referring to the concept of a GMO in the GMO Directive, with the result that varieties obtained by mutagenesis which come under that directive must fulfil the condition for inclusion in the ‘common catalogue of varieties of agricultural plant species the seed of which may be marketed’ only if all appropriate measures have been taken to avoid risks to human health and the environment. [Confédération paysanne v. Premier ministre and Ministre de I’Agriculture, de I’Agroalimentaire et de la Forêt, Case C-528/16, judgment dated 25-07-2018]

Case BriefsInternational Courts

European Court of Justice: In 2006, EUIPO registered the three-dimensional shape of a ‘4 Finger KitKat’ as a EU trademark in respect of sweets, bakery products, pastries, biscuits, cakes and waffles. In 2007, Cadbury Schweppes (now Mondelez UK Holdings & Services) filed an application with EUIPO for a declaration of invalidity of the registration. In 2012, EUIPO rejected that application. The General Court annulled EUIPO’s decision. It considered that EUIPO had erred in law in finding that the mark at issue had acquired distinctive character through use in the EU, when such acquisition had been proved only for part of the territory of the EU. Although it had been established that the mark at issue had acquired distinctive character through use in ten countries, the General Court held that EUIPO could not validly conclude its examination without ruling on the relevant public’s perception of the mark in four other Member States (in particular, Belgium, Ireland, Greece and Portugal) and without analysing the evidence adduced in respect of those Member States.

Nestlé, Mondelez and EUIPO appealed to the Court of Justice against the judgment of the General Court. Appeal by Mondelez was found inadmissible. Nestlé and EUIPO submitted in their appeals that the General Court’s interpretation is incompatible with the unitary character of the European trademark and the very existence of a single market.

ECJ concluded that, although it is not necessary, for the purposes of registering a mark that was formerly devoid of distinctive character, that evidence of the acquisition by that mark of distinctive character through use be submitted in respect of each individual Member State, the evidence submitted for registering a sign as an EU trademark under Article 7(3) of Regulation No 207/2009 must be capable of establishing such acquisition throughout the Member States of the EU in which the sign did not, ab initio, have such character for the purposes of Article 7(1)(b) (Storck v OHIM, C-25/05 P, EU:C:2006:422, paragraph 83). The Court also stated that the part of the EU referred to in Article 7(2) may be comprised, where necessary, of a single Member State.

It followed that, with regard to a mark that is, ab initio, devoid of distinctive character across all Member States, such a mark can be registered pursuant to that provision only if it is proved that it has acquired distinctive character through use throughout the territory of the European Union (Chocoladefabriken Lindt & Sprüngli v OHIM, C-98/11 P, EU:C:2012:307, paras 61 and 63). This was contrary to the arguments by Nestlé and EUIPO that where a mark is devoid of inherent distinctive character throughout the EU, it is sufficient, in order for it to be registered as an EU trademark to prove that it has acquired distinctive character through use in a significant part of the European Union, even though such evidence has not been provided in respect of every Member State.

ECJ held that General Court was right in annulling EUIPO’s decision, in which EUIPO concluded that distinctive character had been acquired through use of the mark at issue without adjudicating on whether that mark had acquired such distinctive character in Belgium, Ireland, Greece and Portugal. On the basis of those considerations, the Court dismissed the appeals of Nestlé and EUIPO.[P Société des produits Nestlé SA v. Mondelez UK Holdings & Services Ltd, formerly Cadbury Holdings Ltd. and EUIPO,[2018] Bus LR 1848,  decided on 25-07-2018]

Case BriefsInternational Courts

European Court of Justice (ECJ): The ECJ has declared that Malta has failed to fulfil its obligations under EU law by adopting a certain derogation regime not complying with the strict conditions laid down by the Directive on the conservation of wild birds.

Directive 2009/147/EC of European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (Directive) provides that Member States must take the requisite measures to establish a general system of protection for several bird species. Nevertheless, Member States may derogate from that obligation where there is no other satisfactory solution, to permit, under strictly supervised conditions and on a selective basis, the capture, keeping or other judicious use of certain birds in small numbers. In 2014 and 2015, Malta adopted several measures authorising the capture of seven species of finches by means of traditional nets (‘clap-nets’) to benefit from the derogation laid down in the Directive. The European Commission considered these measures not meeting the conditions of the Directive and therefore approached ECJ.

The Court ruled that measures adopted by Malta did not comply with the Directive since they did not contain any reference to the absence of another satisfactory solution. The Court recalled its case-law WWF Italia, C-60/05, EU:C:2006:378 according to which the Member States may authorise actions affecting the protected species only on the basis of decisions containing a clear and sufficient statement of reasons which refers to the conditions of the Directive. Court further noted that the minutes of the meetings of the Ornis Committee cited by Malta did not reveal any in-depth assessment of alternative solutions. The Court determined that Malta has not complied with the condition that derogation must concern only ‘small numbers’ of birds as derogation did not ensure the maintenance of the population of the species concerned at a satisfactory level. In that regard, the Court noted in particular a 2007 study by NGO BirdLife Malta and defects in Malta’s assessment of ‘reference population’.

The Court further remarked that the condition of trapping in small numbers was not met and recreational trapping of birds could not be considered judicious. Additionally, the Court considered that the condition that only the selective live-capturing of finches can be permitted was not met either by the non-selective nature of the method of capturing using nets. Finally, the Court found that Malta has not adduced evidence that the derogation at issue was used under strictly supervised conditions as the density of license holders and registered trapping stations in Malta was very high, and merely 23% of hunters were subject to individual checks. To corroborate this, the Court mentioned trapping inside ‘Natura 2000’ sites.

After making these observations, ECJ concluded that the Republic of Malta has failed to fulfil its obligations under Article 5(a) and (e) and Article 8(1) of Directive read in conjunction with Article 9(1) of that directive. [European Commission v. Republic of Malta, Case C-557/15, order dated 21-06-2018]

Case BriefsForeign Courts

European Court of Justice: ECJ has provided guidance on the scope of the standstill obligation. It ruled that gun-jumping (when an acquiring company seeks to exercise control over a target company’s business operations pre-close) can only occur when the acquiring company’s action results in a lasting change in the control of the target business and not simply because the target company takes unilateral actions in anticipation of the merger.

In 2013, Ernst & Young (EY) entered into a merger agreement with KPMG Denmark. Danish law, on the lines of EU merger-control law, prohibited the parties to a merger transaction from taking any steps to implement the transaction prior to receiving clearance from the Danish Competition Council. It is the “standstill obligation” and its violation is considered to be “gun-jumping.”

As per the agreement, KPMG Denmark gave notice to terminate its cooperation agreement with KPMG International on the day that the merger agreement was signed, before the companies had even notified the Danish Competition and Consumer Authority (DCCA) of their proposed merger, much less received clearance for it. While the notice was effective immediately, the termination did not take effect until the transaction closed. Subsequent to the notice, KPMG International established a new auditing business in Denmark. In December 2014, the DDCA ruled that KPMG Denmark had breached its standstill obligation and had jumped the gun in implementing the merger. The parties appealed that decision, and the case was referred to the ECJ for a preliminary ruling.

ECJ noted that Article 7(1) (the “standstill obligation”) of the EU Merger Regulation (EUMR) limits the standstill obligation to “concentrations” as defined under Article 3 EUMR, i.e., to situations where there is a “change of control on a lasting basis” allowing an acquirer to exercise decisive influence over the target company. The ECJ added that even the partial implementation of a concentration falls within the scope of Article 7(1) EUMR. It explained that preparatory or ancillary acts to the concentration which do not lead to a change of control, do not fall within the scope of Article 7(1) EUMR.

In essence, the EUMR applies to any transaction constituting a concentration to which Regulation 1/2003 does not apply. This means that conduct of the merging parties may breach (i) the standstill obligation if it contributes to a change of lasting control prior to clearance by the Commission, or (ii) breach Article 101 TFEU if it does not lead to a change of control, but nevertheless restricts competition within the internal market. An example of the latter conduct could be an exchange of sensitive commercial information between two merging competitors.

The ECJ concluded that the termination of the cooperation agreement between KPMG Denmark and KPMG International was not subject to the prohibition of gun-jumping as termination did not contribute to the change of control over KPMG Denmark despite the fact that it took place before the DCCA had cleared the transaction. The ECJ further stated that whether an alleged gun-jumping violation causes market effects is irrelevant. [Ernst & Young v. Konkurrencerådet, [2018] Bus LR 1718, dated 31-05-2018].

Case BriefsForeign Courts

European Court of Justice: In May 2013, Christian Louboutin initiated proceedings before the District Court, The Hague, Netherlands, claiming that Van Haren had infringed the mark at issue. In July 2013, that Court delivered a default judgment upholding in part the claims of Christian Louboutin. Van Haren challenged that judgment before the referring court, the District Court, The Hague, claiming that the mark at issue was invalid on the basis of Article 2.1(2) of the Benelux Convention on Intellectual Property (Trade Marks and Designs). Legal battle over trademarking Louboutin’s signature red-soled high-heeled shoes centred on whether his trademark involved a shape or a colour.

Article 3 of Directive 2008/95 provides grounds for refusal or invalidity of trademark on the grounds inter alia if the sign consist ‘exclusively’ of the shape which results from the nature of the goods themselves or which is necessary to obtain a technical result or which gives substantial value to the goods. Similar limitations on trademarks are laid in of Article 2.1(2) of the Benelux Convention. In the application for registration, the mark at issue is described as follows: ‘The mark consists of the colour red (Pantone 18-1663TP) applied to the sole of a shoe as shown (the contour of the shoe is not part of the trade mark but is intended to show the positioning of the mark)’.

In the context of trade mark law, the concept of ‘shape’ is usually understood as a set of lines or contours that outline the product concerned. The question before the Court was whether the fact that a particular colour is applied to a specific part of the product concerned results in the sign at issue consisting of a shape within the meaning of Article 3(1)(e)(iii) of Directive 2008/95. While pointing out that no definition of ‘shape’ has been provided in the directive the Court found that its meaning has to be understood by considering its usual meaning in everyday language.

Court noted that while it was true that the shape of the product or of a part of the product plays a role in creating an outline for the colour, it cannot, however, be held that a sign consists of that shape in the case where the registration of the mark did not seek to protect that shape but sought solely to protect the application of a colour to a specific part of that product. It ruled that Article 3(1)(e)(iii) of Directive 2008/95/EC of European Parliament relating to trade marks must be interpreted as meaning that a sign consisting of a colour applied to the sole of a high-heeled shoe does not consist exclusively of a ‘shape’, within the meaning of that provision. The Court in The Hague will deliver the final ruling on the matter based on the ECJ decision. [Christian Louboutin SAS v. Van Haren Schoenen BV, [2018] Bus LR 1411, order dated 12-06-2018]

Case BriefsForeign Courts

European Court of Justice: While dealing with the issue regarding the interpretation of Article 10(1) and (2) of Council Directive 92/85/EEC of 19 October 1992 (also known as Pregnant Workers Directive, 1992) on the measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding, the Court (Third Chamber) composed of L. Bay Larsen, President of the Chamber, J. Malenovský, M. Safjan (Rapporteur), D. Šváby and M. Vilaras, JJ., held that pregnant and breastfeeding women can be dismissed on the grounds of collective redundancy as Directive 92/85 excludes national legislation (in present case, the Spanish law) which does not prohibit, in principle, the dismissal of a worker who is pregnant or has recently given birth or is breastfeeding, as a preventative measure. It only provides, by way of reparation, to declare such a dismissal void when it is unlawful.

In January 2013, the Spanish company Bankia, opened a period of consultation with its workers’ representatives with a view to carrying out a collective redundancy. After arriving upon an agreement, the company notified a worker, who was pregnant at the time, of her dismissal by letter on the ground that it was necessary to significantly reduce the number of staff. After unsuccessfully challenging the decision of the company before the Social Court, Mataró, the aggrieved person appealed before the High Court of Justice of Catalonia, which in turn referred the matter to the ECJ, seeking an interpretation of the prohibition on dismissing pregnant workers, provided in Directive 92/85.

Perusing the laws on point, the Court observed that in such cases, the employer must provide the dismissed pregnant worker with the reasons justifying the redundancy as well as the objective criteria chosen to identify the workers to be dismissed. Further interpreting the provision in question, the Court held that, the Directive does not preclude national legislation which in the context of a collective redundancy, makes no provision for pregnant workers or who have recently given birth or who are breastfeeding, to be afforded a priority status in relation to either being retained or redeployed and the Member States are free to grant higher protection to pregnant workers and breastfeeding mothers. [Jessica Porras Guisado v. Bankia SA, Case C-103/16, decided on 22.02.2018]