Have you discovered that online stores unrelated to your business are selling goods under your brand? At the same time, you understand that the products are genuine and were lawfully placed on the market.
In such cases, the principle of trademark exhaustion does indeed limit the trademark owner’s ability to prohibit resale. However, it does not deprive the owner of the right to protect the brand’s reputation, warranty policy, and commercial relationships.
Legal framework in Ukraine
Under paragraph 6 of Article 16 of the Law of Ukraine “On Protection of Rights to Marks for Goods and Services” the exclusive right of a trademark owner does not extend to the use of the mark in relation to goods that were put into circulation by the trademark owner or with their consent. This rule applies provided that the trademark owner has no legitimate grounds to oppose the further commercialization of such goods. In particular, the owner may object if the condition of the goods has been altered or impaired after they were placed on the market.
Ukraine follows the international principle of exhaustion of trademark rights. This means that a trademark owner cannot generally object to the import and resale of genuine goods that were first placed on the market anywhere in the world by the right holder or with the right holder’s consent.
At the same time, court practice shows that even in such situations a trademark owner may still enforce their intellectual property rights if they can demonstrate “legitimate grounds” to prohibit further sale of the goods.
What qualifies as “legitimate grounds” to prohibit resale?
In practice, Ukrainian courts consider the following actions by sellers as potential legitimate grounds:
- Deterioration of product quality or functional characteristics (e.g., changes to the product configuration, alteration of the contents of the original set, or interference with the product).
- Removal or modification of labeling, expiration dates, or other essential elements on the goods or their packaging.
- Sale of genuine goods without original packaging, instructions, or warranty documentation.
- Misleading consumers regarding the seller’s status or warranty coverage, including creating the impression of being an official representative or authorized distributor.
- Damage to the manufacturer’s reputation, for example, through sales in inappropriate conditions, atypical sales channels, or the accumulation of persistent negative consumer feedback.
Courts also emphasize that consumers typically attribute responsibility for product quality to the trademark owner and the manufacturer, even when the goods are resold by third parties.
Court practice: proving grounds to restrict resale
A notable example is case No. 757/19365/19 considered by the Pecherskyi District Court of Kyiv. In its decision of 14 December 2020, later upheld on appeal, the court satisfied the trademark owner’s claims against a group of online sellers who marketed genuine goods but with altered product sets and misleading information regarding official warranties.
The court prohibited the defendants from using the claimant’s trademarks in connection with the sale of such goods and ordered the withdrawal and transfer of the respective products to the claimant.
The court established that the sellers’ actions:
- misled consumers as to the origin of the goods;
- created the impression of a commercial connection between the sellers and the trademark owner;
- negatively affected the brand’s reputation.
This case serves as an important reminder to businesses that the sale of genuine goods does not automatically eliminate liability.
Alignment with EU approach
Ukrainian court practice is consistent with the principles set out in EU Directive 2015/2436, which permits trademark owners to oppose the further commercialization of goods where their condition has been changed or impaired after being placed on the market.
The case law of the Court of Justice of the European Union also clarifies that the use of a third party’s trademark in advertising or sales in a way that creates the impression of a commercial link with the trademark owner may constitute legitimate grounds to prohibit such use.
Practical enforcement strategy for trademark owners
It is important to understand that a court will not side with a trademark owner solely because of the unauthorized resale of genuine goods. To successfully rely on the exception to the exhaustion principle, the owner must provide convincing evidence that the seller’s actions:
- misled consumers regarding the origin of the goods or the conditions of their use;
- caused damage to the brand’s reputation (consumer complaints, negative reviews, media coverage);
- involved alterations to the goods, their labeling, or packaging without the owner’s consent.
Such evidence may include:
- test purchases;
- expert opinions on the condition of the goods;
- official consumer complaints;
- photographs documenting changes in labeling or packaging.
Conclusions
The principle of trademark exhaustion strikes a balance between free trade and trademark owners’ rights. However, this balance does not leave a brand unprotected.
If the resale of genuine goods harms brand reputation, alters warranty policies, or misleads consumers about a commercial link with the trademark owner, the law provides effective mechanisms for brand protection. In practice, the success of such enforcement largely depends on timely legal assessment and a well-structured response strategy.
A proactive legal approach not only helps stop infringements but also enables businesses to establish systematic control over the use of their brand on the market.
Author: Oleksandra Soroka