In the event of damage caused by a defective product, the injured party is often faced with the question of who to pursue for damages. At first glance, the answer seems clear: under the EU Product Liability Directive, the producer of the product is liable regardless of fault. But how does one find out who the producer is in practice? And what happens if there is contradictory information on a product? The ECJ dealt with this question in a recent reference for a preliminary ruling from Finland.
What has happened?
- The case concerned a coffee machine manufactured in Romania by the Italian company, Saeco International Group SpA. The coffee machine caught fire and caused significant damage to the home of the owner. The claimant, an insurance company, reimbursed the injured party and claimed damages from Koninklijke Philips NV under product liability law. Koninklijke Philips is the Dutch parent company of Saeco and was not itself involved in the manufacture of the defective coffee machine.
- The coffee machine and its packaging bore the Philips and Saeco logo trade marks, both registered by Koninklijke Philips. The coffee machine also bore a Saeco CE mark, an address in Italy and the imprint "Made in Romania". After different decisions at first and second instance, the Supreme Court of Finland referred to the ECJ the question whether Koninklijke Philips was liable under the EU Product Liability Directive for the damage caused by its subsidiary's coffee machine. Is it sufficient for liability as a producer that the Philips trade mark was on the product? Or would Koninklijke Philips have had to present itself as the producer of the product in some other way to be liable? Koninklijke Philips defended itself by claiming that there were clear indications on the product that Saeco, not Koninklijke Philips, had manufactured the coffee machine.
- The ECJ ruled that Koninklijke Philips is liable under the Directive. Under Article 3(1) of the Directive, the producer is not only the manufacturer of a finished product, a raw material or a component part, but also "any person who, by putting his name, trademark or other distinguishing feature on the product presents himself as its producer."
- The ECJ's ruling is not surprising given the clear wording of Article 3 of the Directive. However, it is notable that both Koninklijke Philips's and Saeco's trade marks were on the product, and it seemed possible to determine who the actual manufacturer was from the information on the product. According to the ECJ, a consumer does not have to determine the "most appropriate" producer. If a company advertises a product under its trade mark, it bears the risk of being held liable for product defects under the Directive.
- The decision does not bind the UK since it was issued by the ECJ after the end of the Brexit transition period. However, it is an important decision for those operating in the EU.
Want to know more?
The ECJ confirmed that Koninklijke Philips is liable under the EU Product Liability Directive because a producer under Article 3(1) of the Directive is also “any person who, by putting his name, trademark or other distinguishing feature on the product presents himself as its producer”.
The ECJ based its decision on the following reasons:
- Pursuant to the wording of the Directive, a person does not have to be involved in the manufacturing process of the product in order to be classified as a "producer". There can be several producers of a product, including the trade mark owner and the actual manufacturer.
- Putting a trade mark on a product creates the impression that the owner is involved in the manufacturing process or at least responsible for it. A trade mark owner is using its reputation to make the product more attractive. In return, the owner can be held liable for product defects.
- The term "producer" must be interpreted broadly in order to protect the consumer. There is no difference between the person who puts its trade mark on the product and the person who actually manufactures the product. The consumer does not have to look for the "most appropriate" producer but can claim full damages from any of them at their free choice.
The ECJ thereby confirmed that a company who allows its trade mark to be put on a product is subject to strict liability for defects in that product. By allowing the actual manufacturer to use its trade mark, the parent company became liable under product liability law. This applies even if other indications on the product suggest that the actual manufacturer is a different company than the trade mark owner.
The ECJ's ruling is not surprising, especially since the wording of Article 3 of the Directive is very clear. Nevertheless, the interesting aspect of this case is that there were two trade marks on the product, and it seemed possible to determine who the actual manufacturer was in view of the information on the product. However, according to the ECJ, the consumer does not have to go to these lengths. They can demand full compensation for their damage from any possible producer of the product, be it the actual manufacturer or the trade mark owner. The producers will then have to determine among themselves who should ultimately bear the costs.
It is interesting to ask whether this ruling would also apply if the product had expressly stated "Manufactured by Saeco International Group SpA" next to the Philips trade mark. Judging by the ECJ's reasoning, it seems that Koninklijke Philips would still have been liable in this scenario. In particular, it has previously been held that liability as a quasi-producer does not depend on an injured party having relied on the trade mark owner's involvement in the manufacture of the product or on the actual manufacturer of the product not being known.
A company who wishes to advertise a product under its trade mark therefore bears the risk of being held liable for product defects under the Directive solely for this reason. It is not possible to avoid liability based on the fact that the product was actually manufactured by someone else.
