October 22, 2012 9:30 AM
THE HAGUE--Diageo, the world's leading premium drinks business, has lost its appeal to the High Court in The Hague in its legal battle against six Front Street retailers it had accused of illegally selling decoded products.
Following the ruling of a judge of the Court of First Instance of February 2010, the Joint Court confirmed on September 30, 2011, that the six retailers had not been violating Diageo's rights, nor had been acting against the law by selling products obtained via so-called parallel import.
Diageo had filed a so-called cassation case against the Joint Court ruling, in which the High Court judges ruled on Friday.
Diageo Brands B.V., Diageo North America Inc. and R&A Bailey & Co. had initially filed their case in November 2008 against Sriram N.V, Cardinal Gift Shop N.V., Nandwani N.V., Jaanvi N.V., Rekhasuresh Lalwani N.V. and Planet Duty Free N.V. because they had been selling alcoholic beverages without the required codes on the bottles.
Diageo, a global company, trading in more than 180 markets around the world, is manufacturer and distributor of a broad collection of alcoholic beverage brands, including Smirnoff, Johnnie Walker, Captain Morgan, Baileys, J&B, José Cuervo, Tanqueray, and Guinness. The company has manufacturing facilities in the Caribbean and across the globe.
According to Diageo, production batch or lot codes are placed on products to make it possible for the manufacturer to quickly and easily recall a product which is defective or non-compliant with manufacturing standards.
Decoded products cannot be identified by the manufacturer and therefore pose a threat to the consumer, the company claimed. Products sold by the authorised distributor are never decoded, as this would be an infringement of his agreement with the brand owner.
This issue had already been the subject of several previous court cases, including at the High Court in The Hague, which were all thrown out.
Diageo is considering the tampering with their bottles, purchased by store owners through cheaper, parallel import and not via its local agent, to be an infringement on its trademark and intellectual property.
Diageo stated that their brands are well-known and have a luxury image which was damaged by the Front Street stores by the sale of bottles with labels from which the codes were removed or made invisible.
Diageo retained its right to protect the exclusive image of the bottles and packages. It also stated that identification numbers were mandatory under the Federal Ordinance Labelling of Food Items of 1995 to combat counterfeit and to make recalls possible.
In Friday's ruling, the High Court stated that it did not disagree with the conclusions drawn by the Joint Court judges, that the physical changes made to the bottles were "minor" and did "noticeably damage the good reputation of Diageo's brands" and their "luxury image," and would not lead to confusion about the product's origin.
The High Court judges also followed the Joint Court position in finding it proven that the identification marks were placed on the bottles to combat counterfeit, which it considered legitimate in connection with Diageo's objective to limit its liability.
Similar to the Joint Court, the High Court also considered this in itself legitimate reason to be of lesser importance than the government-induced system of free parallel import.