Stopping grey imports and price dumping with legal measures

Client and background

The hi-fi firm Audio Pro markets its loudspeakers in over thirty countries on four continents. During 2011, some Swedish retailers were selling one of the company's loudspeakers at almost half their usual price. Subsequently, Audio Pro received a speaker for repair under guarantee and found that the product had an invalid serial number. It was suspected that retail chains in Sweden possibly brought in grey imports of Audio Pro's original loudspeakers from outside the EC area without the company's permission. On the basis of the EC legal principle of regional exhaustion of trademark rights, grey import of original TM labeled goods without the permission of the trademark holder is deemed to constitute trademark infringement on its own. However, the right holder must show probable cause for trademark infringement in the first place in order to obtain a court order forcing an alleged infringer to disclose origin and distribution chain of the items.

The case

AWA deemed that the offering of the loudspeaker in Sweden already on account of the altered serial number could be held to constitute trademark infringement to be pursued separately, but also serve as "probable cause" for demanding the Swedish retailers to disclose the origin and distribution chain of the otherwise original trademark labeled items. A warning letter was sent to one of the retail chains with a request to stop marketing and selling the loudspeakers and to provide details about the distribution channels. The retail chain was reluctant to admit to trademark infringement and would not provide any information on how the products had come onto the Swedish market. With AWA's help, Audio Pro sued the retail chain. During trial it was eventually revealed that the items in question indeed were grey imported into the EC from another country outside the EC, where the goods originally had been put on the market by the trademark holder. Stockholm District Court ruled that the retail chain was guilty of trademark infringement and that the sales and marketing activities relating to the product in question must end.

Value for the client

As a result of the actions, Audio Pro has succeeded in eradicating the grey imports of the company's loudspeakers. The price dumping has been brought to a minimum and market prices are under control, which has led to Audio Pro's net sales more than doubling.