2019/05/29 – 23 Cdo 5955/2017 (summary)

Judgment of the Supreme Court of 29 May 2019, Ref. No. 23 Cdo 5955/2017
(Abuse of a dominant position, unfair competition, advertising, disparagement)

In the present decision, the Supreme Court of the Czech Republic mainly dealt with two matters. The first one being whether a legal person with a dominant position on the market can abuse this position by exercising an intellectual property right. The second one whether publication and dissemination of the phrase “the older generation” presents a disparagement in the sense of an unfair competition practice.

The original plaintiffs were the sole owner of the “Fiskars” trademark portfolio together with the authorized user of these trademarks on the European market. They sought protection against the defendant (“petitioner”) who imported and sold Fiskars products in the Czech Republic, even though these products were intended exclusively for the North American market. According to the appellate court the donduct of the defendant's company represented an illegal parallel import which infringed trademark rights. The appellate court did not deal with defendant's objection regarding the alleged abuse of a dominant position by the plaintiffs and stated that exercise of a trademark right cannot infringe Articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”), which is incorrect as it contradicts conclusions of the case law of the Court of Justice of the European Union (“CJEU”). The Supreme Court subsequently summarized this case law. Article 102 of the TFEU prohibits undertakings to abuse a dominant position within the internal market or in a substantial part of it in so far as it may affect trade between member states. The exercise of an intellectual property right is one of the factors influencing company’s position on the market. Only if an undertaking has a dominant position can this undertaking abuse its dominant position on the market by exercising intellectual property rights. According to the CJEU this can happen under exceptional circumstances. The prerequisite of the “exceptional circumstances” has been confirmed in case law of CJEU in a number of decisions (e.g. IMS Health v. NDC Health, C-418/01, judgment from 29 April 2004 or Tiercé Ladbroke v Commission, T-504/93, judgment from 12 June 1997). Among other judgements cited by the Supreme Court belong Micro Leader Business v Commission, T-198/98, judgment from the 16 December 1999 or RTE and ITP v Commission, C-241/91 and C-242/91, judgment from 6 April 1995. It follows from the abovementioned decisions that a dominant undertaking may abuse its position by exercising intellectual property rights, including trademark rights, only under exceptional circumstances which have the effect of supressing a competition on the relevant market. At the same time, the appellate court did not proceed correctly when it did not examine preconditions for the application of Article 102 TFEU, in particular whether the plaintiffs' position on the relevant market was really dominant. The Supreme Court thus returned the matter to this extent to the appellate court for further proceedings.

Regarding the alleged disparagement, the Supreme Court ruled as follows. In the present case, the petitioner referred to the plaintiffs' products (Fiskars axes) as “brilliant older generation axes” and to the competing products (Patriot axes) as “new generation top axes”. As a general rule, wording “new generation” is linked to the concept of a product which is technically or technologically improved in relation to products manufactured earlier. New generations of products are launched specifically to replace older products. They achieve this goal with regularly improved quality, new features or other innovations. Labelling another competitor's product as an “older generation” while labelling other comparable product as a “new generation” gives the average consumer an impression that the first product is technically outdated or underdeveloped. Therefore, such a wording is likely to cause harm to the other competitor. Against this background, it is no longer significant whether the Fiskars axes were otherwise rated positively in the presentation of the petitioner. Point of view of an individual consumer who may perceive the older generation products as “proven by time” is also insignificant (despite petitioner's claims) as the decisive factor is how the average consumer perceives the product presentation.