Luxury watch-making brands like Rolex, Patek Philippe, and Audemars Piguet have a history of vigorously enforcing their intellectual property rights, including their valuable trademark rights, and have contributed to the creation of an array of important IP case law in Europe and beyond. This includes a first of its kind trademark decision in Sweden that centers on third-party customization or personalization of watches.
The customization of watches by third parties has grown significantly in recent years. In a short amount of time, a market has been created for owners of high-end timepieces to customize their watches by adding features and changing appearances in order to create unique works of art. The customization process – whereby a third party modifies an existing watch, sometimes removing and re-applying the original trademark and adding features not on the original model, and thereafter, markets and sells the modified timepiece – raises several trademark-centric questions, as well as questions regarding private use versus commercial use. In addition to posing trademark issues, these questions are often considered under the rubrics of sustainability, upcycling, and the right to repair, as well.
The commercial success of the trend of modification/personalization of products in the high-end watch segment has recently led to a proliferation of companies that has started to offer similar customization and personalization services for watches from mid-market brands, leading to litigation.
In one such case, Swiss watchmaker Tissot sued a Swedish defendant that was selling Tissot watches directly to customers and offered customized versions of the watches that it had personalized according to a number of different concepts and delivered the finished watch to the customer. Tissot argued that that the trademark rights in the watches had not been exhausted, and that the defendant’s actions constituted trademark infringement (under Article 15.1 of the Trademark Regulation) of Tissot’s EU trademark.
Tissot also argued that even if the defendant had bought the watches on the EU market, the third-party customization process damaged the watches and constituted reason for Tissot to object to the future marketing and commercialization of the modified watch products (under Article 15.2 of the Trademark Regulation).
The defendant mounted a two-pronged defense, arguing that: (1) the customization service it offered customers was an extension of the customers’ private use of the Tissot watches they had bought and did thus, not constitute trademark use or infringement; and (2) it acquired the watches on the EU market and thus, Tissot’s trademark rights in the watches had been exhausted after that initial sale. The defendant also took the position that the customization process did not damage the watches and did not give Tissot the right to object to the future commercialization and marketing of the products.
Confusion & No Exhaustion
The court found that the defendant had sold Tissot watches through its e-commerce website, and as an integrated part of the sales process, the customer could decide to customize the watch according to a number of pre-determined themes, created by the defendant. As such, this was not a case in which customers first had bought Tissot watches on the market and then subsequently used the defendant’s services to customize the watches. The customization service offered by the defendant was, thus, not private in nature and the defendant’s use of the Tissot trademark in this context constituted trademark use, according to the court.
As to the issue of trademark exhaustion, the court reiterated that it followed from the practice of the CJEU that the defendant had the burden of proof that the exclusive trademark rights in these watches had been exhausted (C-291/16 Schweppes, p. 52). Against the background, the court held that it was up to the defendant, alone, to prove that the watches had been put on the market in the EU by Tissot.
Interestingly, the court did not discuss the more nuanced view of the issue of burden of proof for exhaustion of trademark rights, issued by the CJEU just two months prior in the Hewlett Packard case (C-367/21). While this was likely an oversight, in fairness to the court, the facts of that case differ from the ones in this case in several aspects.
The court took what arguably constitutes a stern view of the evidence invoked by the defendant and concluded that it failed to show that the exclusive trademark rights in these watches had been exhausted. The invoices and receipts provided by the defendant indicated, among other things, the place of purchase, and the model and number of watches purchased by the defendant, but not any information (e.g. serial numbers) that could make it possible to link a specific invoice or receipt to a specifically-sold Tissot watch. As such, the court sided with Tissot on this front, as well.
The court also confirmed that even if the defendant had been able to show that it had bought the watches on the open market, Tissot retained the right under Article 15.2 of the Trademark Regulation to object to the further marketing of the customized Tissot watches in this case. The court reached this conclusion based on a finding of passing-off and its determination that based on the use of Tissot trademarks in connection with the modified watches, customers were likely to get the impression that there was a commercial relationship between Tissot and the defendant, which damaged the functions of Tissot’s trademarks.
It should be mentioned here that many third-party watch customization companies are careful to make clear on their websites – via disclaimers – that there is no commercial relationship between the customizer and the watchmaker. The absence of such language was likely an expensive oversight by the defendant in this case.
The court, thus, sided with Tissot on its claims and awarded substantial damages to the watchmaker.
The Bigger Picture
The Tissot case raises interesting trademark issues, as well as evidentiary questions about the burden of proof for exhaustion of trademark rights, that are particularly timely in the context of recent discussions about sustainability and the right to repair.
It is worth noting that the Swedish court’s decision was issued just weeks after a similar case was decided by the Swiss Supreme Court in a case that pitted Rolex against an unnamed Swiss defendant (that was widely reported to be the high-end customization pioneer Artisans de Geneve). In this case, Rolex argued that the defendant’s customization work, which required it to remove and then reapply Rolex trademarks on the dials alongside the atelier’s own trademark, constituted trademark infringement.
The Swiss Supreme Court – much like the Swedish court – made an important distinction between the private and commercial uses of trademarks, that is between: (1) the atelier’s supply of watch customization services to private individuals who brough their privately-owned Rolex watches to the atelier and wished to have them customized according to specific instructions; and (2) the atelier selling customized Rolexes to its customers on a larger scale.
Based on the facts of the Rolex case, and in contrast to the outcome of the Swedish case, the atelier’s customization work was found to be allowed under the first private use scenario. Taken together, the Swiss and Swedish decisions likely point the way forward for the watch customization industry in Europe.
Hans Eriksson is a Partner at Westerberg & Partners, a leading Swedish IP and litigation firm based in Stockholm.
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