Ruling confirms attaching a trademark to a product creates liability for defects

23/11/2022

The European Court of Justice (ECJ) has ruled that putting a name, trademark or other distinguishing feature on a product makes a company liable for damage caused by defects even if they are not involved in the production process or marketing.


This follows a court action in Finland involving damages incurred when a coffee machine bought from a dealer caught fire. The owner of the Philips trademark, Koninklijke Philips N.V., argued it was not involved in the machine’s manufacturing process. The coffee machine was made in Romania by Saeco and marketed in Finland with trademark “Philips” next to “Saeco”.


In the ruling the ECJ found that Philips was effectively using its reputation to make that product more attractive in the eyes of consumers, and this justified Philips’ liability being confirmed.


This judgment stresses the importance of quality control provisions in license agreements whenever a trade name and/or trademark owner authorised the use of its trade name and/or trademark on a product produced by a third party. As a consequence it is important for producers, distributors and tradename and trademark owners involved to contractually agree on the division of liability.


However, the ruling also clarifies any division of liability between producers, distributors and the trademark owner has no effect in relation to consumers, who must specifically be relieved of the burden of having to determine the actual producer to bring claims of damage.


This judgment also stresses the importance for a trade name /trademark owner to contractually deal with the possibility to terminate a license agreement in the event of a defective product and how to deal with damage to the reputation and or goodwill of the trade name/trademark involved.


The ECJ made it clear that the  Product Liability Directive defines a “producer” as any party that puts its name, trademark or other distinguishing feature on the product at issue, as the party is presenting itself as a producer and gives the impression to the consumer that it is involved in the production process or assumes responsibility for it.


The Product Liability Directive (PLD) provides a system at European level for compensating people who suffer physical injury or damage to consumer property due to defective products. Since the adoption of the Directive in 1985, there have been significant changes in the way products are produced, distributed and operated, and key transformations to Europe’s economy are underway.


The EU is in the process of modernising rules on machinery, radio equipment and general product safety, as well as creating new rules on safe and trustworthy artificial intelligence systems.


W Denis arrange liability insurance for businesses and directors throughout the world and if you would like a quotation or to hear more about our services or have any queries, please visit www.wdenis.eu or contact Vida Jarašiūnaitė Vida.Jarasiunaite@wdenis or Mark Dutton at mark.dutton@wdenis.com

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