Sales of grey market goods prohibited – Noerr helps Japanese luxury cosmetics manufacturer to succeed in main proceedings as well

Dusseldorf Regional Court has ruled in favour of Japanese luxury cosmetics manufacturer Kanebo to prohibit online and in-store sales of grey market goods by a German retail chain throughout Europe (judgment of 29 September 2022, case: 37 O 95/18). This judgment in the main proceedings confirms a decision handed down by Dusseldorf Higher Regional Court in the previous injunction proceedings, in which a German higher court for the first time prohibited grey market luxury cosmetics from being sold in a sales environment harmful to reputation and image. This decision was also obtained by Noerr.

Kanebo had filed a claim for injunctive relief, provision of information and damages against the defendant retail chain based on their resale of original cosmetics labelled with the brands “SENSAI” and “KANEBO”. While due to the trade mark law principle of exhaustion, prohibiting the resale of original goods brought onto the EU market by the manufacturer itself is generally excluded, the manufacturer can oppose such sales for “legitimate reasons”.

According to Dusseldorf Regional Court, such a legitimate reason exists if luxury cosmetics are resold in an environment that is likely to adversely affect the prestigious image of the goods labelled with the brand. In the present case, the court affirmed both that the cosmetic products had a luxury character and that their reputation was adversely affected. The court stated that for a luxury character to exist it was necessary for the trade mark owner to formulate and actually live up to a luxury image for its product, with the specific form of sale being particularly significant. In the present case, the claimant maintains a selective distribution system that is strictly regulated and practiced. The court also held that the presentation of the goods by the defendant being challenged did not live up to the image of SENSAI/KANEBO cosmetic products, especially since the sales channels and points of sale were used for all kinds of goods, which – even given a partially higher-quality product range – made it impossible to create an “aura of exclusivity” of any kind.

The judgment is not yet final.

As in the earlier injunction proceedings, Kanebo was represented by Noerr’s trade mark and distribution law expert Janina Wortmann.

Advisors to Kanebo Cosmetics Deutschland GmbH: Noerr Partnerschaftsgesellschaft mbB

Janina Wortmann (associated partner, Munich), Christoph Rieken (partner, Munich), Lucas Günther (senior associate, Berlin, all Intellectual Property)