According to the latest practice of the Court of Justice of the European Union, geographical packaging requirements are only legal if they aim to preserve the quality of the product, guarantee its origin, or ensure control.
Read lawyer Hans Sønderby Christensen’s article published on Friday, May 31, 2019, on Jyllands-Posten’s website here.
For European companies, it is essential to know when the consideration for their geographical product interests must give way to other companies’ demands for the free movement of goods and services. Similarly, exporting companies need to know when the consideration for consumers’ demands to know the product’s origin prevails. The Court of Justice of the European Union does not automatically allow geographically protected agricultural products to be required to be packaged within the production region. This is confirmed by a new judgment from December 2018. With the judgment, the Court of Justice of the European Union establishes that a geographical packaging requirement is only legal if it is a necessary and proportionate means to ensure the product’s quality, if it guarantees the product’s geographical origin, or if it is necessary to ensure control of the product specification for the geographical designation by which the product is protected.
The case arose from the association, Schutzverbandes der Schwarzwälder Schinkenhersteller, which wanted an amendment to the product specification for “Schwarzwälder Schinken”, which has been registered as a protected geographical designation since 1997. The association therefore submitted an application to the Deutsches Patent- und Markenamt (the German Patent and Trademark Office, hereinafter DPMA) in March 2005 to have the product specification for this product amended so that “Schwarzwälder Schinken” must be packaged within the production region.
Due to objections, Schutzverbandes der Schwarzwälder Schinkenhersteller submitted a renewed application in February 2007 to the DPMA for amendment of the product specification. Objections were also lodged against this application, including from a large distributor of meat products which undertakes cutting and packaging of “Schwarzwälder Schinken” outside the production area.
In December 2008, the DPMA rejected the application for amendment of the product specification from Schutzverbandes der Schwarzwälder Schinkenhersteller regarding cutting and packaging. The DPMA justified the rejection on the grounds that the application was not in accordance with EU law. Schutzverbandes der Schwarzwälder Schinkenhersteller then brought an action before the Bundespatentgericht (the German Federal Patent Court). In October 2011, the Bundespatentgericht ruled that the application for amendment of the product specification complied with the requirements of EU law, whereby the DPMA’s decision was annulled. One of the defendants, referred to in the judgment as “EC”, then initiated an appeal before the Bundesgerichtshof (the German Federal Court), which in April 2014 overturned the Bundespatentgericht’s decision and referred the case back to the Bundespatentgericht for reconsideration. The Bundespatentgericht then chose to postpone the case and refer the question to the Court of Justice of the European Union.
The Court of Justice of the European Union was then requested to answer whether it is in accordance with EU law for an authority to grant a request for amendment of a product specification, according to which a product certified by a protected geographical designation must be packaged in its geographical production area.
Initially, the Court of Justice of the European Union referred to the wording of the EU’s rules on product specifications for protected geographical designations. Based on this, the Court of Justice of the European Union noted that a product specification that makes the awarding of a protected geographical designation conditional on the product being packaged in a defined geographical area must aim at one of the following; to preserve the quality of the product, to guarantee its origin, or to ensure control of the product.
The Court of Justice of the European Union then noted that the consideration of promoting the quality of agricultural products with the aim of improving their reputation, including through the use of designations of origin, which enjoy special protection, is generally recognised in EU legislation as part of the common agricultural policy. The purpose of EU legislation is also to accommodate consumers’ expectations of quality products and that the products should have a specific geographical origin. Partly to promote agricultural producers’ opportunity to achieve better income on equal terms of competition in return for a real effort to promote quality products.
The Court of Justice of the European Union then established that a product specification according to which the product must not be packaged outside its geographical production area has restrictive effects on trade. It can therefore only be in accordance with EU law if the restriction constitutes a necessary and appropriate means to precisely ensure one of the three considerations contained in the EU’s rules on product specifications for protected geographical designations. That is, the consideration for preserving the product’s quality, origin and ensuring control.
The Court then clarified the scope of these three possible justifications for justifying the geographical packaging requirement. The clarifications are intended to enable the Bundespatentgericht to make the final assessment itself.
As far as the consideration for preserving the product’s quality is concerned, the Court of Justice of the European Union clarified that the geographical packaging requirement in the product specification is only relevant if packaging outside the product’s geographical production area entails an increased risk to the quality. On the other hand, the requirement cannot be relevant if other similar products are exposed to the same risks. This criterion must be considered narrow, as the Court of Justice of the European Union attaches decisive importance to whether an increased risk can be documented as a result of packaging outside the production region.
As far as the consideration for ensuring the product’s traceability and origin is concerned, the Court of Justice of the European Union noted that Schutzverbandes der Schwarzwälder Schinkenhersteller had not documented that packaging in the geographical production area was necessary to guarantee the product’s origin. Thus, it was not sufficient that the association had put forward the argument in a general way and without any further justification.
As far as the consideration for ensuring effective control of the product is concerned, the Court of Justice of the European Union noted that a control carried out outside the production area may in some cases give a lesser guarantee of the product’s quality and authenticity. This applies in particular in cases where the product specification presupposes in-depth and systematic controls, and where a specialised knowledge among the control staff of the product’s manufacturing stages and properties is a prerequisite for control that can only be difficult to introduce in the other Member States. The Court of Justice of the European Union established that this justification is not viable because the Bundespatentgericht had already stated that the product specification for “Schwarzwälder Schinken” only contains instructions that must be considered customary in the ham trade and which did not go beyond the applicable criteria for food hygiene.
The Court of Justice of the European Union then left it to the Bundespatentgericht to assess whether the requirement in the product specification in question, according to which “Schwarzwälder Schinken” may only be packaged within its geographical production area, is a necessary and proportionate means to ensure the product’s quality, to guarantee the product’s origin or to ensure control of the product specification of the protected geographical designation.
However, the condition regarding the consideration for ensuring the product’s quality is considered narrow by the Court of Justice of the European Union, as Schutzverbandes der Schwarzwälder Schinkenhersteller must demonstrate an increased risk to the product’s quality as a result of, for example, transport. Furthermore, the condition regarding the consideration for ensuring effective control must be considered excluded by the Bundespatentgericht, just as Schutzverbandes der Schwarzwälder Schinkenhersteller had also not documented that packaging in the production region was necessary to guarantee the product’s origin.
Although the Court of Justice of the European Union did not specifically take a position on whether the product specification in question for “Schwarz-wälder Schinken” can be approved, the Court of Justice of the European Union provides several significant interpretative contributions to how EU law should be interpreted and applied by the national courts in connection with disputes of this kind. The judgment is thus relevant for all who produce or distribute agricultural products that are protected by a geographical designation and who need to know the scope of this protection. In advance, however, it seems almost certain that the Bundespatentgericht will conclude that the geographical packaging requirement cannot be introduced, as the Court sets narrow conditions for fulfilling the three requirements, where at least one must be fulfilled.