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EU Commercial Law 2011III.B. Trade in IPR protected goods: Parallel Importation and ExhaustionPart 2

Jens Schovsbo



Regulating Parallel Importation

Two ”schools”:• “Contract” (implied licence) (e.g. Traditional French

and UK law and to some extent also present U.S. law)• ”Freedom of Contract”; the parties defines the

balance.• ”Exhaustion” (originated in Germany 1900 (J.

Kohler)) • The legislator defines the balance.

• A statutory limitation to the distribution right which has the effect that a rightholder automatically looses (some of) its distribution rights with the first marketing of a copy.



Phase 2: Rules on ExhaustionExhaustion and Trade Marks (TM-Directive 89/104)

Article 5: Rights conferred by a trade mark1. The registered trade mark shall confer on the proprietor exclusive

rights therein …2. The following, inter alia, may be prohibited ... (a) affixing the sign to

the goods or to the packaging thereof; (b) offering the goods, or putting them on the market; (c) importing or exporting the goods under the sign; (d) using the sign on business papers and in advertising.

Article 7: Exhaustion of the rights conferred by a trade mark1. The trade mark shall not entitle the proprietor to prohibit its use [i.e.

rely on Article 5] in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.

2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialization of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.



Legislation and contract

• Silhouette point 25: “... Articles 5 to 7 of the Directive must be construed as embodying a complete harmonization of the rules relating to the rights conferred by a trade mark ...”

• This has consequences not only for • Member Countries which cannot have national rules on

national nor global exhaustion (the Directive implies “total harmonization”)

but also for• Private parties who too some extent are limited in their

freedom to “contract around” the exhaustion rule (the rule is “mandatory law”).

BUT: Whereas the consequences for Member Countries are not too difficult to understand the impact on private parties of the exhaustion rule is more tricky.



“Consent”

Two Issues:1) The legal framework

1) “Contract Law” or “Trade Mark Law”?

2) The Practical effects1) When, where, and how could “consent” be expressed?

• Sebago,• Zino Davidoff



”Consent”: C-173/98, Sebago/facts

• Sebago is the proprietor of .. marks in the name 'Docksides‘ and ‘Sebago’ … registered, inter alia, for shoes. Maison Dubois is the exclusive distributor in the Benelux of shoes bearing Sebago's trade marks.

• .. GB-Unic advertised Docksides Sebago shoes for sale in its

Maxi-GB hypermarkets. The goods in question were 2 561 pairs of shoes manufactured in El Salvador and purchased from a company incorporated under Belgian law which specialises in parallel importation. The entire stock was sold during the summer of 1996.

• Sebago and Maison Dubois do not dispute that the shoes sold by GB-Unic were genuine goods. They claim, however, that since they had not authorised the sale of those shoes in the Community GB-Unic had no right to sell them there.



Sebago/decision

Article 7(1) must be interpreted as meaning that: — for there to be consent within the meaning of Article 7(1) of

that directive, such consent must relate to each individual item of the product in respect of which exhaustion is pleaded.



Sebago/the Legal Framework

42. If the concept of consent were a matter for the national laws

of the Member States, the consequence for trade mark proprietors could be that protection would vary according to the legal system concerned. ...

43. It therefore falls to the Court to supply a uniform interpretation of the concept of 'consent ...

SO: “Consent” is an EU concept. It also seems as if the ECJ is saying that it’s a trade mark concept. But what about national contract law? Could trade mark law maybe point to national contract law? Or should one completely disregard contract law?



C-414/99, Zino Davidoff/facts

9 In 1996 Davidoff entered into an exclusive distribution contract with a trader in Singapore. In accordance with that contract, the distributor undertook, first, to sell Davidoff products solely within a defined territory outside the EEA to local sub-distributors, sub-agents and retailers and, second, to impose in turn on those co-contractors a prohibition of resale outside the stipulated territory. …

10 A & G Imports Ltd (A & G) acquired stocks of Davidoff products, manufactured within the EEA, which had originally been placed on the market in Singapore by Davidoff or with its consent.

13 A & G relied on Articles 5(1) and 7(1) of the Directive, maintaining that, having regard to the circumstances in which the goods were placed on the market in Singapore, their importation and sale was, or should be deemed to have been, with Davidoff's consent.

14 Davidoff denied that it had consented, or could be deemed to have consented, to the products concerned being imported into the EEA.



Davidoff/the Questions

(1) Insofar as [the TMD] refers to goods being put on the market in the Community with the consent of the proprietor of a mark, is it to be interpreted as including consent given expressly or implicitly and directly or indirectly?

(2) Where:(a) a proprietor has consented to or allowed goods to be placed in the hands of a

third party in circumstances where the latter's rights to further market the goods are determined by the law of the contract of purchase under which that party acquired the goods, and

(b) the said law allows the vendor to impose restrictions on the further marketing or use of the goods by the purchaser but also provides that, absent the imposition by or on behalf of the proprietor of effective restrictions on the purchaser's right to further market the goods, the third party acquires a right to market the goods in any country, including the Community,

then, if restrictions effective according to that law to limit the third party's rights to market the goods have not been imposed, is the Directive to be interpreted so as to treat the proprietor as having consented to the right of the third party acquired thereby to market the goods in the Community?

Or putting it differently: What we would really like to know is this: 1) Is the framework for understanding “consent” (really) trade mark law and not national contract law? 2) What does it mean anyway?



Davidoff/the reasoning

37 … the concept of consent used in Article 7(1) of the Directive must be interpreted uniformly throughout the Community legal order.

39 Articles 5 to 7 of the Directive embody a complete harmonisation … (Silhouette)

40 Article 5 of the Directive confers on the trade mark proprietor exclusive rights entitling him, inter alia, to prevent all third parties not having his consent from importing goods bearing the mark. Article 7(1) contains an exception to that rule in that it provides that the trade mark proprietor's rights are exhausted where goods have been put on the market in the EEA by the proprietor or with his consent.

41 It therefore appears that consent, which is tantamount to the proprietor's renunciation of his exclusive right under Article 5 of the Directive to prevent all third parties from importing goods bearing his trade mark, constitutes the decisive factor in the extinction of that right.

42 If the concept of consent were a matter for the national laws of the Member States, the consequence for trade mark proprietors could be that protection would vary according to the legal system concerned. The objective of the same protection under the legal systems of all the Member States set out in the ninth recital in the preamble to Directive 89/104, where it is described as fundamental, would not be attained.

43 It therefore falls to the Court to supply a uniform interpretation of the concept of consent to the placing of goods on the market within the EEA as referred to in Article 7(1) of the Directive.



Davidoff/the Ruling

43. It therefore falls to the Court to supply a uniform interpretation of the concept of consent to the placing of goods on the market within the EEA as referred to in Article 7(1) of the Directive.

SO: Trade Mark Law is the lense through which we should look at “consent”. Forget about national contract law and read the Directive! This is trade mark law and it’s the TM rules which should be given a uniform interpretation! Not contract law …

On this basis:… consent may be implied, where it follows from facts and circumstances … which, in the view of the national court, unequivocally demonstrate that the proprietor has renounced his right to oppose placing of the goods on the market within the European Economic Area.2. Implied consent cannot be inferred:- from …3. With regard to exhaustion of the trade mark proprietor's exclusive right, it is not relevant:…



Summing Up on “Consent”

• It’s a Trade Mark Law concept. TM is the Framework.

• This doesn’t mean that the intentions of the parties to an agreement for the sale of branded goods are not important but their importance must be decided on the basis of the trade mark rules.



C-16/03, Peak Holding/facts: “Putting on the market”

Peak Holding, Denmark, is the proprietor of the trade mark Peak Performance.

Factory Outlet, Sweden, is the parallel importer. In late 2000, Factory Outlet marketed a consignment of app. 25 000

garments under the Peak Performance trade mark.1. The articles came from the Peak Performance collections for the

years 1996 to 1998. They had been manufactured outside the EEA on behalf of that company and had been imported into the EEA in order to be sold there.

2. In November and December 1999, all the garments in the consignment formed part of those offered for sale to final consumers in Copenhagen (Denmark) in the Base Camp store supplied by Carli Gry Danmark A/S, a sister company of Peak Performance Production. The consignment thus consisted of goods which had remained unsold after the sales.

3. Peak Performance Production sold that consignment to COPAD International (‘COPAD’), an undertaking established in France. According to Peak Holding, the contract concluded on that occasion provided that the consignment was not to be resold in European countries other than Russia and Slovenia ..



C-16/03, Peak Holding/What does it mean?

When were the goods ”put on the market”?

• By the manufacture outside of the EEA?• By the importation into the EEA in order to be sold there? • By the offering for sale to final consumers in

Copenhagen?• By the sale to COPAD including a provision that the

consignment was not to be resold in European countries other than Russia and Slovenia ..



C-16/03, Peak Holding/the Reasons and the Rule

The Reasons:31 The expression ‘put on the market’ … constitutes a decisive

factor …32 It must therefore be given a uniform interpretation …33 The interpretation of the provision in question must … be

sought with regard to the scheme and objectives of the Directive.

The Rule:40 A sale which allows the proprietor to realise the

economic value of his trade mark exhausts the exclusive rights conferred by the Directive, more particularly the right to prohibit the acquiring third party from reselling the goods.



C-143/00 Boehringer Ingelheim/facts

6 Each of the pharmaceutical products concerned by the main proceedings has been marketed under a trade mark by one of the claimants within the Community, where it was purchased by one of the defendants and imported into the United Kingdom. For the latter purpose, the defendants have to some extent altered the packaging of the products and the instruction leaflets going with them [“repackaging”].



Boehringer/background

17 before the [TMD] was adopted, the Court's case-law on those issues had been developed on the basis of the provisions of the EEC Treaty relating to intra-Community trade. …

18 However, Article 7 of the Directive, like Article 30 EC, is intended specifically to reconcile the fundamental interest in protecting trade mark rights with the fundamental interest in free movement of goods between Member States, so that those two provisions, which pursue the same result, must be interpreted in the same way …



Boehringer/ruling

1. Article 7(2) … must be interpreted as meaning that a trade mark proprietor may rely on its trade mark rights in order to prevent a parallel importer from repackaging pharmaceutical products unless the exercise of those rights contributes to artificial partitioning of the markets between Member States.

2. Replacement packaging of pharmaceutical products is objectively necessary within the meaning of the Court's case-law if, without such repackaging, effective access to the market concerned, or to a substantial part of that market, must be considered to be hindered as the result of strong resistance from a significant proportion of consumers to relabelled pharmaceutical products.

3. A parallel importer must, in any event, in order to be entitled to repackage trade-marked pharmaceutical products, fulfil the requirement of prior notice. If the parallel importer does not satisfy that requirement, the trade mark proprietor may oppose the marketing of the repackaged pharmaceutical product. It is incumbent on the parallel importer himself to give notice to the trade mark proprietor of the intended repackaging. In the event of dispute, it is for the national court to assess, in the light of all the relevant circumstances, whether the proprietor had a reasonable time to react to the intended repackaging.



Summing Up and the Broader Picture

Consider the broader implications of the exhaustion PRINCIPLE as seen from

1) A Right holder’s perspective2) A Consumer’s Perspective, and 3) An Internal Market Perspective.

What are the Pros and Cons?

Documents

Sted og dato (Indsæt --> Diasnummer) Dias 1 Navn på enhed (Indsæt --> Diasnummer) EU Commercial Law 2011 III.B. Trade in IPR protected goods: Parallel