With or without permission: Who may sell brands where?

Regardless of whether it's Vichy or Hugo Boss, Tom Tailor, Armani or Fissler - brands are always a promise of quality, which is linked to a certain, usually higher, price.

Their radiance always "rubs off" a little on their seller, too.

The question of who may sell brands and under what conditions isn’t new.

The boom in e-commerce has nevertheless given it contemporary topicality.

Read in this article under which circumstances you as a trader may sell branded goods (profitably) and in which cases a branded manufacturer can prohibit the Internet sale of its products in protection of its interests.

Content of this page:

1. Exhaustion principle: When the trademark owner loses his rights
2. After verified sale to the EU: trademarks may be sold freely
3. Selective distribution: the authority of the trademark owner
4. Selling brands online: In own store yes, on third-party platforms no
5. Brand logo use: Basically permitted, trade-offs possible
6. Conclusion

1. Exhaustion principle: When the trademark owner loses his rights

In principle, it could be assumed that only the owner of a trademark may decide where and whether his products may be sold online at all.

From a legal point of view, however, it’s not quite that simple. According to the so-called exhaustion principle in trademark law, a trademark owner loses the right to prohibit the (online) sale of his products under certain conditions.

However, it’s a prerequisite that the owner of the trademark has sold his goods into the European market himself or through a third party.

It’s irrelevant from where the goods were delivered. The only decisive factor is that the products were sold with the consent of the trademark owner in the EU or the signatory states of the European Economic Area.

This means that the trademark owner's right to determine his goods is "exhausted". (Sec. 24 (1) Trademark Act). The buyer or even third parties may sell the trademarks as they please.

2. After verified sale to the EU: Trademarks may be sold freely

Whether the products have actually been put on sale by an authorized third party, i.e. with the consent of the owner of the trademark, isn't always easy for the individual online retailer to verify.

In case of doubt, however, he must prove so.

If, for example, the supplier can identify himself as an official importer or is even listed in the distribution lists of the brand owner, the factual situation is clear.

In less clear circumstances, where the distributor may need to justify why it assumed that the supplier was authorized, it’s generally advisable to seek the advice of a lawyer specializing in intellectual property.

3. Selective distribution: The authority of the trademark owner

However, the legal situation is quite different if the owner of the trademark has installed a selective distribution system for the sale of its goods.

This means that, in principle, only selected authorized dealers are allowed to sell the brands.

The authorized dealers agree to meet certain quality requirements, for example with regard to advisory services and general service or even store design. Selective distribution is legally permissible if it serves to secure a certain character of prestige or luxury image.

Whether brand manufacturers are allowed to prohibit any distribution partners they selected this way from selling brands online was highly controversial for a long time. A decision by the European Court of Justice in December 2017 currently serves as a guideline.

4. Selling brands online: In own store yes, on third-party platforms no

In this specific case, the European judges found that the brand manufacturer with selective distribution had to be granted a legitimate interest in quality-assuring sales that were appropriate to the image of the product.

For this reason, authorized distributors may nevertheless sell their goods in their own online store - if it’s designed and managed like an "electronic store window" of the renowned retail store.

But: The trademark owner may expressly prohibit its distribution partners from using third-party platforms to sell the trademarks.

This primarily means Amazon and Ebay, of course.

In the opinion of the court, selling on Amazon or Ebay runs counter to the justified maintenance of the luxury image. Neither could brand manufacturers demand the same quality standards from third-party platforms that they had imposed on their own retailers.

The bottom line, however, is that the ECJ ruling means nothing other than that brand manufacturers with selective distribution may prohibit their dealers from selling on the Internet on Ebay and Amazon.

Dealers without a distribution agreement, on the other hand, can in principle sell their branded goods (from EEA imports) without restrictions in the real and/or virtual world - therefore also on Amazon, Ebay and other online stores.

5. Brand logo use: Basically allowed, trade-offs possible

If you as a retailer are allowed to sell brands, then you’re also allowed to use the associated brand logo and advertise with it - as long as it’s present on the original products you sell and you (theoretically) have some inventory.

It’s not mandatory that an actual stock of goods be available at all times. However, this rule doesn’t apply without restriction either.

The trademark owner can withdraw your permission for "justified reasons". This is the case, for example, if the condition of the goods has demonstrably "deteriorated" due to your storage or handling.

In the case of suppliers of spare parts or accessories for branded goods, the use of the brand logo is legally controversial. However, even car repair shops are allowed to use the pure logotype.

6. Conclusion

Trademarks are an integral part of our lives and enjoy comprehensive protection under the law.

In online commerce, it’s not rare for them to increase a store’s attractiveness. If you want to sell trademarks, you need to carefully consider the rights of trademark owners.

As a general rule, brand-name manufacturers with selective distribution can prohibit the sale of their products on third-party platforms, and you can expect severe penalties for violations.

Despite a number of fundamental rulings on the Internet sale of trademarks without a distribution tie, the circumstances of the individual case are still decisive in cases of doubt.

Therefore, it’s always advisable to consult a competent attorney specializing in intellectual property rights if the facts of the case are not entirely clear, in order to avoid later damage.

Photo credit:: ArturVerkhovetskiy | Panthermedia