25 July 2022

Trademark holders are "producers" for product liability purposes, according to CJEU

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The Court of Justice of the European Union (CJEU) has answered questions about the Product Liability Directive and clarified what "producer" means in the directive. According to the CJEU, this is any person who has affixed, or authorised the affixing of, its name, trademark or other distinctive sign to a product. Specifically, the CJEU dismisses the argument that any further criteria are required except for the affixing of the name, trademark or other distinctive sign to a product. Consequently, a strict liability regime applies to trademark holders when it comes to product liability. Trademark holders should be mindful of the potential liability risks implied by this ruling in their day-to-day business.

Background of the case


A Finnish consumer buys a new espresso machine. The next day, a house fire occurs which, according to the accident report, has been caused by the espresso machine. The espresso machine bears the sign of the trademark holder, as well as its subsidiary, but it was manufactured by the subsidiary.


The consumer's insurance reimburses the damage suffered and subsequently sues the trademark holder for product liability. The trademark holder, for its part, argues that it is not liable because it cannot be considered a producer. The Finnish court hearing the case refers questions to the CJEU for a preliminary ruling. The main question for the CJEU to answer is: besides the trademark being affixed to the product, are there are other criteria for a trademark holder to be regarded as a producer?.


Union law


The Product Liability Directive states that a producer is liable for the damage caused by a defect in its product. The producer is defined as "the manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part and any person who, by putting its name, trademark or other distinguishing feature on the product, presents himself as its producer". The directive also provides that if several persons are liable for the same damage, they will each be jointly and individually liable.


CJEU ruling


In its judgment (at paragraph 34) on 7 July 2022, the CJEU answered the question posed by the Finnish court as follows. "Furthermore, it should be noted that, by putting his name, trade mark or other distinguishing feature on the product at issue, the person who presents himself as a producer gives the impression that he is involved in the production process or assumes responsibility for it. Accordingly, by using such particulars, that person is effectively using his reputation in order to make that product more attractive in the eyes of consumers which, in return, justifies his liability being incurred in respect of that use."


In addition, the CJEU ruled that a division of liability between the trademark holder and its subsidiary has no consequences for consumers, as they should be relieved of their duty to address the actual producer for compensation. The consumer can therefore turn to both the trademark holder and its subsidiary.


Impact


According to the CJEU, it is not required that the person who has affixed its name, trademark or other distinctive sign to the product, or has allowed it to be affixed, also present itself as a producer in some other way. The CJEU dismissed the suggestion that any further criteria should be fulfilled. Therefore, when a trademark owner has its name affixed to its product, it will be considered a producer.


This is the first time that the CJEU has explicitly ruled on this issue. The ruling makes clear that the Product Liability Directive places a broad responsibility on trade mark holders. It is therefore advisable for trademark holders to keep a close eye on the quality of the products that their subsidiaries and/or sublicensees produce. Where possible, trademark licences should include arrangements regarding quality control and product liability.