Background

On 16 April 2025, the District Court of The Hague in the Netherlands handed down a decision relating to the complex issue of trade mark exhaustion in the context of parallel trade disputes.

The claimant, Coty Beauty Germany (Coty), is a global cosmetics company and exclusive licensee of several well-known trade marks, including Hugo Boss. Coty operates a selective distribution network for the products in the European Economic Area (EEA). The defendant, Easycosmetic Benelux (Easycosmetic), is an unauthorised wholesaler of perfumes and cosmetics that operates outside of Coty’s selective distribution network.

The dispute concerned a 200ml bottle of “Bottled Night” Hugo Boss perfume, which was being sold by Easycosmetic in the Netherlands. Coty claimed that this specific bottle had originally been shipped to South Africa and therefore had not been placed on the EEA market by Coty or with its consent.

Legal Framework

The case hinged on Article 15(1) of the EU Trade Mark Regulation (2017/1001), which states that a trade mark owner cannot oppose further commercialisation of goods once they have been lawfully placed on the EEA market by or with the trade mark owner’s consent. This principle is referred to as trade mark exhaustion.

However, the District Court of The Hague clarified the position on the burden of proof in trade mark exhaustion cases, which is nuanced. The trade mark holder, here Coty, must initially substantiate the claim of infringement. However, the burden of proving that the trade mark is exhausted—in this case, that the goods were lawfully placed on the EEA market—lies with the defendant, Easycosmetic.

However, the District Court of The Hague clarified the position on the burden of proof in trade mark exhaustion cases, which is nuanced. The trade mark holder, here Coty, must initially substantiate the claim of infringement. However, the burden of proving that the trade mark is exhausted—in this case, that the goods were lawfully placed on the EEA market—lies with the defendant, Easycosmetic.

• The claimant operates a selective distribution system;
• The goods do not clearly identify the intended market;
• The trade mark owner refuses to share information about the disputed product’s intended destination; and
• The defendant’s suppliers are not forthcoming about their own sources of supply.

In Coty v Easycosmetic, it was not necessary for the court to rule on whether the burden of proof had shifted, because Easycosmetic ceased to dispute that the perfume bottles were marketed for outside the EEA.

Still, this did not mean that Coty’s product traceability evidence went to waste.

The Role of Traceability in Coty’s Victory

A pivotal element in Coty’s success was its ability to trace the product’s origin and distribution path. Coty presented evidence from its internal product tracking system, which showed that the specific bottle in question had been manufactured for and shipped to a non-EEA market, specifically South Africa.

The traceability system allowed Coty to:

• Identify the batch number and match it to a specific shipment;
• Demonstrate the intended market for the product; and
• Prove the lack of consent for EEAmarketing of the perfume bottle.

Traceability: A Legal Sword and Shield

The Coty v Easycosmetic ruling is a powerful reminder that traceability is not just a logistics tool, it is a legal asset. For companies looking to protect their brands, especially those operating a selective distribution system, investing in an effective product tracking system is essential for protecting brand reputation and trade marks in the EEA.

• A traceability system is necessary to comply with certain government regulations, for example cosmetic distributors are already obliged under the EU Cosmetic Regulations (EC) No 1223/2009, which was retained by UK law as the UK’s Cosmetic Regulations, to maintain a traceability system.
• A robust traceability system can serve as decisive evidence in legal disputes to thwart unauthorised parallel imports from outside the EEA. As this case proves, there are certain circumstances in which the court will instruct the trade mark owner to provide evidence of non-EEA origin. Therefore, a well-maintained product traceability system ensures that brand owners are able to provide convincing evidence in court.
• A solid traceability system acts as a deterrent to unauthorised resellers who want to exploit a non-EEA bargain, and this case serves as a reminder to unauthorised resellers that they may find themselves defenceless and out of pocket in infringement lawsuits.
• If products are traceable, the brand owner may be able to operate and enforce its selective distribution system with greater ease, as it allows it to identify sources of supply of unauthorised resellers and ensure such product leaks are appropriately dealt with (for instance, also against EEA partners that breach their selective distribution terms with the brand by selling outside the network).
• Traceability can support efficient and compliant product recalls.
• Product traceability can assist with verifying commercial warranty/repair claims from consumers, for instance where a commercial warranty from the brand is only available for products purchased from approved sources (permitted in most member states).
• Finally, a suitably designed traceability system can also in principle be deployed to meet a brand’s digital product password obligations under legislation such as the EU’s Ecodesign for Sustainable Products Regulation.

Ultimately, a traceability system is a powerful legal and commercial resource for brands. Our team would be happy to assist your brand with establishing and maintaining a compliant and effective traceability system.