Strauss Adriatic doo, proprietor of the famous mark “Doncafe”, sued a defendant who had distributed coffee cups to which it affixed the mark. The Commercial Court in Belgrade found that the defendant took unfair advantage of the reputation of the mark owned by Strauss Adriatic doo, damaged the mark’s distinctive character, and damaged its reputation (judgment of 15 October 2013, Strauss Adriatic doo v. Yao Fa doo, Case no. 41 P 5082/2013). The court also determined that consumers of the cups would be “misled”, which in the context probably means that, according to the Court, the defendant was responsible for creating a likelihood of confusion.

The court, therefore, found the defendant Yao Fa doo responsible on a number of grounds: parasitism (taking unfair advantage of the famous mark), blurring (damage to the distinctive character of the mark), tarnishment (damage to reputation), and confusion (consumers would think that the cups originated from the same company that produced the coffee). The court may have overzealously applied the provisions of the Serbian Trademark Act that contain various grounds for liability, without explaining why each specific ground was applicable in the case at hand.

From the text of the judgment it may be concluded that Strauss Adriatic doo did not seek a finding of likelihood of confusion, because, as the plaintiff wrote in a submission, the mark “Doncafe” is protected in Class 30 of the Nice Classification, whereas the cups would belong to Class 21 (household or kitchen utensils and containers). So the plaintiff relied on a provision of the Serbian Trademark Act (current Article 43(2)) prohibiting dilution:

“The holder of a registered famous mark may prevent other persons from using the same or similar mark for designation of goods and/or service, which are not similar to those in respect of which the trademark is registered, if such use of the mark would indicate a connection between those goods and/or service and the holder of the famous trademark and if it is likely that the interests of the holder of the famous mark would suffer damages by such use.”

This provision almost literally transposes Article 16 (3) of TRIPS into the Serbian trademark law.

The Commercial Court first decided against the defendant in a judgment of 29 September 2012, but offered virtually no reasoning for the decision, apart from the fact that Strauss Adriatic doo owned a nationally registered trademark “Doncafe” (reg. no. 44094), and that the Market Inspectorate had seized from a retailer four coffee cups on which the trademark was affixed, all four supplied by Yao Fa doo. The Court, remarkably, failed to consider the plaintiff’s argument that his mark “Doncafe” was famous.

On 13 June 2013, the Commercial Appellate Court of the Republic of Serbia set aside the judgment and ordered retrial. The appellate court instructed the Commercial Court to determine whether the plaintiff’s mark was famous, and whether the other conditions from Article 43(2) for a finding of dilution were met. The Commercial Appellate Court also requested from the first-instance court to assess the similarity of goods at question, although the appeals court did not explain why that was necessary.

In its new judgment, from 15 October of this year, the Commercial Court in Belgrade offered several arguments to conclude that “Doncafe” was a famous mark. The conclusion is probably non-controversial, considering the volume of the sale of coffee offered under the mark, as well as the duration and extent of advertising and publicity of the mark.

More debatable is the Court’s conclusion that Yao Fa doo, by virtue of selling the coffee cups with the mark “Doncafe”, caused confusion and both types of dilution (blurring and tarnishment), in addition to acting parasitically.

The Commercial Court, in spite of the instruction received from the Commercial Appellate Court, again failed to look into the issue of (dis)similarity of the goods. In the absence of such analysis, the court’s conclusion that the consumers would be “misled” by the defendant’s use of the mark “Doncafe” remains unsubstantiated. The court could not reach a reasonable conclusion about the likelihood of confusion without first looking into the similarity of goods at issue.

In the specific case, the assessment of similarity would be challenging. On the one hand, coffee and coffee cups are complementary products, and consumers may well believe that the cups sold under the same mark as the coffee are made under the authority of the proprietor of the trademark for the coffee, which in turn would justify a conclusion that there exists a likelihood of confusion. On the other, such a conclusion is not inevitable, as the Waterford Stellenbosch judgment of the Court or Justice of the EU (CJEU) attests. (In Waterford, Case C-398/07 P, Judgment of 7 May 2009, the CJEU found no error in the conclusion of the Court of First Instance that there was no likelihood of confusion, because complementarity between wine glasses and wine was not sufficiently pronounced for consumers to believe that the goods in question were similar and that the producer of wine devoted a part of his activities to the distribution of wine glasses).

It is possible, therefore, that if the court analysed the issue of similarity of the goods, it could have concluded that the distribution of “Doncafe” coffee cups would not create a likelihood of confusion among consumers as to the origin of the coffee cups. But the opposite conclusion is at least as likely. In any event, the Commercial Court ignored the issue of the similarity of the goods altogether.

The Court’s failure to look into the issue of similarity of goods also brings into question the conclusion that the defendant’s use of trademark damaged its distinctive character (i.e. blurred the mark “Doncafe”). Distinctive character of a mark is damaged when the use by defendant “leads to dispersion of the identity and hold upon the public mind of the earlier mark. That is notably the case when the earlier mark, which used to arouse immediate association with the goods and services for which it is registered, is no longer capable of doing so” (CJEU, Intel Corporation Inc. v CPM United Kingdom Ltd, Case C-252/07, Judgment of 27 November 2008, para. 29).

If coffee and coffee cups are highly similar goods, then the use of the mark “Doncafe” on the cups does not, as and of itself, have to lead to dispersion of the identity of the mark. The mark is, in fact, likely to continue to arouse immediate association with the coffee. It is telling, in this regard, that, when the U.S. Congress introduced the concept of dilution in the trademark law, the purpose of the provision prohibiting dilution by “blurring” was to prevent unauthorized use of a famous mark by others upon dissimilar products. See Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026 (2d Cir. 1989).

The court also summarily reached the conclusion about the damage to reputation (“tarnishment”). Strauss Adriatic doo claimed that the quality of the cups with the sign “Doncafe” was below the plaintiff’s high standards, that consumers would believe that the cups were sold with the assent from the coffee producer, and that, as a result, the consumers’ perception of the coffee would deteriorate. The Commercial Court established that Yao Fa doo was indeed responsible for damage to reputation of the “Doncafe” mark, but the Court did not explain why. If the cups were, in fact, of reasonable quality, there may have been no damage at all. In addition, “it cannot be assumed that each mark with a reputation conveys, by the mere fact of its reputation, an image of prestige or superior quality”, as the Court of First Intance put it in Sigla SA v. OHIM (Case T-215/03, Judgment of 22 March 2007, para. 58; the mark was used for a fast food chain). The status of a famous mark does not automatically assume a prestigious or high-quality image, so the Commercial Court should have at least made an assessment to this effect. It is difficult to see how a mark devoid of an aura of prestige or superior quality can be tarnished by the use of the mark on products of reasonably high quality.

The remaining finding by the Commercial Court, about the defendant’s parasitic behavior, although probably correct, also leaves something to be desired when it comes to corroborating argumentation – because the Court did not offer any.