C-40/70

JUDGMENT OF 18. 1. 1971 — CASE 40/70

In Case 40/70

Reference to the Court under Article 177 of the EEC Treaty by the Tribunale Civile e Penale, Milan, for a preliminary ruling in the action pending before that court between

SIRENA S.R.L.

and

EDA S.R.L. FIORENZA FERRARI, TERESA FORMAGGIA, PIETRO GRUGNI, MARIO BIRAGHI,

SIRENA v EDA

JUDGMENT

Issues of fact and of law

I — Facts — on enjoyment of this same trade­ mark since 21 October 1944, the date According to the order referring the from which the trade-mark which matter, the facts on which this request was originally registered in Italy by is based may be summarized as follows: the firm Mark Allen began to lose Sirena, the applicant in the main action, its commercial validity and was not accuses the defendants of having in­ thereafter renewed or used by that fringed its trade-marks Nos 186046, firm; 121719 and 112603, constituted by the — on its status as proprietor of the words 'Prep' and 'Prep Good Morning' trade-marks Nos 121719 and 112603, and by other words or symbols. In fact, which it registered in Italy in 1952 the defendants imported into Italy pots at a time when the commercial valid­ of medicinal cosmetic cream on which ity of the trade-mark 'Prep' as the the said trade-marks had been appended mark of the products of Mark Allen at the outset and which had been sup­ had already diminished. plied by a German undertaking holding Novimpex, one of the defendants in the a licence from the American firm Mark main action, contested the validity of the Allen, the producer of 'Prep'. abovementioned contract. It states that Sirena based its claim: the contract infringes Articles 85 and — on a contract concluded in 1937 86 of the EEC Treaty since it allows with the firm Mark Allen in which Sirena to prevent the importation from the latter assigned to it the trade­ other Community countries of products mark 'Prep'; to which the trade-mark 'Prep' had been — on the quiet and exclusive enjoyment lawfully attached in their place of origin. of the trade-mark 'Prep' since 1937; Furthermore, Novimpex claims that

Italian law is incompatible with the — this coordination is rendered neces­ Community rule in so far as it supports sary even if the right in the trade­ the claims made by Sirena. mark was acquired through a con­ tract concluded before the entry into force of the EEC Treaty where the II — Wording and grounds proprietor continues to use the trade­ of the order referring mark which he holds in order to the questions bring about a partition of territory within the Community for the dis­ By order of 12 June 1970 the Tribunale tribution of a particular product; Civile e Penale, Milan, decided to refer — in this case, the exercise of the na­ to the Court the following questions: tional court's 'discretionary power' to '1. Are Articles 85 and 86 applicable to refer the matter to the Court is ren­ the effects of a contract of assign­ dered necessary 'in view of the seri­ ment of a trade-mark made before ousness of the consequences which the Treaty entered into force? might result from the proposed in­ 2. Must the said Articles 85 and 86 be terpretation of the Community rules interpreted as preventing the pro­ and the need to submit appraisal of prietor of a trade-mark lawfully regis­ them to the court which is the best tered in one Member State from exer­ qualified to ascertain the spirit of the cising the absolute right derived from rules in the context of the politico- the trade-mark to prohibit third par­ economic interests which led to their ties from importing from other coun­ adoption'. tries of the Community products bearing the same trade-mark, lawfully III — Procedure attached to them in their place of origin?' The order referring the matter is ac­ The procedure followed the normal course. companied by the following reasoning: — The measures adopted by the Com­ In pursuance of Article 20 of the Pro­ mission of the European Commun­ tocol on the Statute of the Court of ities, and in particular Article 3 (b) Justice of the EEC written observations of Regulation No 67/67 of 22 March were submitted by Sirena, Novimpex, 1967 (OJ English Special Edition the Government of the Kingdom of the 1967, p. 10) reveal a tendency to Netherlands and the Commission of the consider as incompatible with Com­ European Communities. munity law agreements on the regis­ After hearing the report of the Judge- tration and use of trade-marks in­ Rapporteur and the views of the Ad­ tended to create monopolies and vocate-General, the Court decided to dominant positions within a country open the oral procedure without any of the Community; preparatory inquiry. — the abovementioned provision pro­ The oral observations of Sirena and nounces a general principle, valid Novimpex and of the Commission were even apart from any appraisal of the presented at the hearing on 15 Decem­ validity of exclusive agreements and ber 1970. making clear the need to coordinate The Advocate-General delivered his Community law on competition and opinion at the hearing on 21 January national law on industrial property 1971. rights, in so far as the latter allows In the procedure before the Court the proprietor of a trade-mark to Sirena was represented by Mario enjoy an absolute territorial protec­ Rotondi and Erminio Parini of the tion; Milan Bar and Ernest Arendt of the

Luxembourg Bar, Novimpex by out that two of the trade-marks in dis Giuseppe Celona and Rosario Nolasco pute were registered in Italy by Sirena of the Milan Bar, the Government of for the first time in 1952. Consequently, the Kingdom of the Netherlands by W. Sirena did not use these trade-marks in Riphagen, Legal Adviser to the Ministry pursuance of a contract but on the basis for Foreign Affairs and the Commission 'of a personal, original and absolute of the European Communities by its right'; the reference to the EEC Treaty Legal Adviser, Giuseppe Marchesini. is therefore relevant. The same applies to trade-mark No

1. With regard to the facts, it must be date of expiry, whereas Sirena, having made clear that: always used the name 'Prep', made the — Sirena is the proprietor of the follow later registrations. In any case, Sirena is ing trade-marks entered in the therefore the exclusive proprietor of this Italian Register: trade-mark. — No 186646 registered on 2 April 3. As regards the second question, the 1963 (renewal of trade-marks rules of the EEC Treaty on competition registered in 1931 and 1943 re have not extinguished trade-mark rights. spectively) and covering the name Novimpex is wrong in invoking the case- 'Prep'; law of the Court (Judgment in Joined — No 121719 registered on 26 April Cases 56 and 58/64, Consten-Grundig, 1952 and relating to the words [1966] ECR 299) and of national courts 'Prep' and 'Good Morning' as well on parallel imports into exclusive areas as to symbols; since such a phenomenon is quite dif

In this by Novimpex; consequently, Sirena case the manufacture or the importation brought the main action against that by third parties of products bearing this company and against a number of trade-mark is a commonplace act of in re-sellers. fringement'. 2. As regards the first question raised It is impossible to speak of a derived by the national court, it must be pointed right' in respect of two trade-marks hav-

ing the same content where the pro fore or after the entry into force of prietors in different countries are them the Treaty; selves different. It is a question in fact — the proprietor of a right to a trade in such a case of 'two completely in mark in a particular country has the dependent rights'. The prohibition on right to prevent the production and importation from one of these countries sale of products bearing his distinc into the other does not depend on the tive mark, manufactured or placed on intuition of the proprietor established the market without his consent by a in the exporting country but on the sub producer organization which has in jective right of the holder established in another country, and by virtue of an the importing country. original title or of a licence from a The expression trade-mark legally at third party, the right to use in that tached in another country' is equivocal, country a similar distinctive mark. since the legal appending, along with the The company Novimprex observes in exclusive rights flowing from it, is particular that: limited to the country which has granted 1.

trade-marks. However, the statement as the same product was sold ex contained in that judgment according to clusively by Sirena at lit. 500 per which 'a higher sale price of the paten jar it was possible to sell it for lit. 250 ted product as compared with that of the in spite of the cost of transport from unpatented product coming from another Germany and still make a reasonable Member State does not necessarily con profit; stitute an abuse' is of no importance in a — before the national court, Novimpex case like the present where Novimpex is asserted that since 'parallel imports' selling products at almost half the price had been accepted as permissible by of the product developed in Italy by the Italian courts, the same principle Sirena On the basis of almost forty must apply in respect of the pro years' research and experience'. prietor of a national trade-mark, pro In conclusion, Sirena maintains that the vided that the trade-mark appearing Court should therefore reply as follows to on the imported product had been the questions raised by the national court: legally attached at its place of origin; — the right to the exclusive use of a — Novimpex requested that the matter trade-mark properly registered is per

SIRENA v EDA

ing the markets within the Com function of the trade-mark is. Relying munity. on the case-law of the Member States — The said articles must be interpreted and the opinion of various authors, it as prohibiting the assertion of rights makes, inter alia, the following points: deriving from a trade-mark legally — the trade-mark is intended to guaran registered in a Member State in tee the origin of the product and to order to prevent the importation, distinguish it from other goods; from other Community countries, of however, the product sold by the products on which the same trade

Common Market. It would suffice for mark is incompatible with the per any commercial operator to acquire any missibility of parallel imports. trade-mark whatsoever in order to pre (d) It is not different in cases where vent imports into the protected territory there exist no economic links between and this would apply to any product the assignor and the assignee of trade at all, and even semi-finished products mark rights. This situation is moreover or raw materials. The barriers thus difficult to imagine, for, with the excep erected would be even more effective tion of French law—which stipulates than those resulting from customs duties however that 'only licences for use may since the latter obstacle can be sur create a territorial limitation'—the laws mounted through economic sacrifice. of Member States prohibit any assign Competition would exist only to the ment of a trade-mark right unaccom extent to which an equivalent product panied by the transfer of the business was offered on the national market; or a part of it. modern consumer psychology has shown It follows therefore that under every how restricted these limits are. system of legislation, the absence of (b) The protection claimed by Sirena is economic links between the contracting contrary to Articles 2, 3(a) and (j), 5 parties results in the nullity of the and even 36 of the Treaty. contract.

where they provide for the temporal trade-mark would suffer throughout the continuity of technical assistance and entire Common Market. communication of all information con (g) Some consider that the prohibition cerning changes in and modernization laid down in Article 85(1) only operates of the product. in so far as the effects set out therein (e) For the purposes of the application are 'appreciable'. In reality, however, of Article 85 of the Treaty, no dis this provision introduces no quantita tinction should be drawn between con

The A person who acquires the absolute product characterized by a trade-mark right to a trade-mark has no interest should not, however, be considered as which warrants protection. In fact, such capable of substitution since the func a person, by the fact of having chosen tion of a trade-mark is precisely that of a trade-mark corresponding to that creating a distinction. registered in another country, has (h) The above considerations have waived the use of a name which, in shown in particular: relation to customers, may be capable — that the contract concluded between of serving as an independent indication the original proprietor of the trade of origin and of guarantee.

common market. This thesis does not foreign national, the power to prevent stop the trade-mark from playing its the free movement of goods within proper role; on the contrary, if the the Common Market, and through seller wishes to prevent the public the mere fact of registration of a which demands the product from being trade-mark; deceived, he must ensure that the pro — it should therefore be declared that ducts of the person acquiring the trade Article 85 prohibits the assignment mark possess the same quality and the of a trade-mark having as its object same characteristics, for otherwise the or effect to impede free trade

between Member States in the pro (j) For all these reasons, writers on the duct in question. subject have accepted that a monopoly (i) Maving on to Article 86 of the based on a trade-mark right may give Treaty, Novimpex points out the diffi rise to the creation of a dominant posi culty in defining generally the expres tion within the meaning of Article 86 sion 'any abuse . . . of a dominant since industrial property is not, more position within the Common Market or over, exempt from the application of in a substantial part of it'. On the other the Treaty. hand, the Court, when it gives a pre The proprietor of the trade-mark there liminary ruling, cannot act as an fore enjoys by definition an absolute administrative authority for which it dominant position in relation to his may possibly be permissible to exempt product. The Treaty does not prohibit a certain number of trade-marks from him from making use of this power, the application of Article 86 and then but prohibits him from abusing it, in to bring the exemptions to an end other words, from using it for purposes when it appears that they threaten to incompatible with the function of the prevent freedom of trade. On the con trade-mark. trary, the Court must establish a uni Furthermore, in interpreting Article 86 form case-law which, in this case, can one cannot disregard the content of consist only in the applicability of Article 85. However, if the latter pro Article 86 to all trade-marks. vision refers only to conduct which may The actual power to limit competition affect trade and restrict competition, it is always, and necessarily, the con is difficult to accept that Article 86 sequence of a dominant position. requires the domination of the whole Returning to the question of the Common Market or a sector of it.

cases. In fact, every undertaking occupies such a position at least as The question must be answered in the regards its preferred market. affirmative if, at the time when the

trade-mark right in question was used, products bearing the same trade-mark as the contract, by virtue of which this that of which he is the proprietor, this right may have been created or trans exercise cannot, by itself, constitute an ferred, could still be considered as abuse of a dominant position; any other subsisting. point of view is contrary to the prin However, the mere fact that the ciples of national law on trade-marks acquisition or the creation of trade and affects the very essence of such law. mark rights which are used, inter alia, It may, however, happen that the ex in order to prevent goods from being clusive right is exercised in circum imported under the same trade-marks stances such as are tantamount to abuse from other Member States, is the con of a dominant position; but in this case, sequence of contracts concluded before it is only by reason of these circum or after the entry into force of the stances that Article 86 is applied.

in Italy. In this case, the matter must any case, since 1944, the date be examined in the light of Article 85. when the trade-mark of the If, however, the two firms acted original proprietor, Mark Allen, independently, Article 85 cannot be expired, owing to the latter's applied. It must therefore be examined failure to renew and use it; whether circumstances exist justifying — on an original acquisition of title the application of Article 86. as regards the 'Good Morning' In this connexion, the following observa and the other names or symbols tions must be made: when the proprietor for which protection is requested. of the trade-mark exercises the exclusive Since Novimpex alleges the nullity of right granted to him in the importing the contract of assignment concluded country in order to keep off the market between Mark Allen and Sirena owing

to the absence of a transfer at the same pretation requested that 'if it were found time of the business or a part of the that there were no agreement, a finding business, and since Sirena replies that especially likely in the case of an such a condition was not required by original acquisition of title, this would the Italian law in force at the time, the automatically preclude the application dispute can only be settled by the of Article 85'. national court. The latter, however,

In any case, provisions may have an effect on the what is certain is that Sirena itself exercise but not on the entitlement to manufactured and placed on the Italian such a right. On the other hand, as market the products identified by that regards exercise of that right, the Court trade-mark, a circumstance which is has stated that it is only the improper related to the fact that, as from the date use of the rights flowing from national when the transfer was concluded, Mark legislation on trade-marks which should Allen refrained from exporting to Italy, be prevented.

time. No link continued to exist after rights in the trade-mark and having as 1937 between Mark Allen and Sirena its sole object to guarantee absolute either on the organizational level or of territorial protection. On the other an economic or legal nature. hand, in the present case, it is a ques The manufacture of the respective pro tion of a single transfer of an intangible ducts of these two firms developed asset which took place prior to the entry independently, so that it is impossible into force of the Treaty. to say what differences may exist at the As regards the applicability of Article present time between the products of 86, the Commission recalls the judgment Mark Allen and those manufactured by in Parke, Davis and Co. from which it Sirena. follows that the difference between the prices demanded by Sirena, on the one

JUDGMENT OF 18. 1. 1971 — CASE 40/70

'Article 85 and 86 of the EEC Treaty text of a contract which fulfils the do not apply to the effects of a con­ function proper to it (namely, to guaran­ tract of absolute assignment of a tee the origin of a particular product) trade-mark (in this case, of a contract and which establishes no obligation or made before the entry into force of link between the parties apart from the Treaty) in so far as such contract those flowing directly from the transfer seeks no result and produces no of the ownership in the trade-mark to effects extraneous to its specific pur­ sever the legal consequences which the pose'. national law attaches to the status of proprietor'. The position of Sirena and 4. On the second question Mark Allen corresponds in practice to that which would have ensued had they This question is closely linked to the registered the trade-mark 'Prep' in­ first; if the latter receives the reply dependently and ab origine and in suggested above, it is impossible to see Italy respectively. how the assignee's right to protect him­ Consequently, the present question self against imports made by third should be answered in the following manner: parties can be excluded, even where the competing products legally bear the 'Articles 85 and 86 of the EEC same trade-mark. Treaty do not prohibit the proprietor 'Territorial protection undoubtedly of a trade-mark, which is legally constitutes the most worrying effect— registered in a Member State in the from the point of view of the Com­ circumstances mentioned above, from munity rules on competition—of the using the right, granted to him by contract of assignment of a trade-mark, national law, to prevent imports from as is shown both by the case-law of the another Member State of products to Court and by that of the national courts. which the same trade-mark was legally However, it is not possible in the con- attached in its place of origin'.

3 The question asked, therefore, amounts to this: assuming that the national law recognizes the right of a trade-mark proprietor to impede imports from other Member States, does Community law affect the extent of this right?

4 Article 85 and subsequent articles of the Treaty do not deal expressly with the relationships between the Community system of competition and national laws concerning industrial and commercial property rights and, more par­ ticularly, trade-marks. On the other hand, since national rules concerning the protection of industrial and commercial property have not yet been unified within the framework of the Community, the national character of this pro­ tection is likely to create obstacles, both to the free movement of proprietary products, and to the Community system of competition.

5 In the sphere of provisions relating to the free movement of products, pro­ hibitions and restrictions on imports justified on the grounds of protection of industrial and commercial property are allowed by Article 36, subject to the express condition that they 'shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States'. Article 36, although it appears in the Chapter of the Treaty dealing with quantitative restrictions on trade between Member States, is based on a prin­ ciple equally applicable to the question of competition, in the sense that even if the rights recognized by the legislation of a Member State on the subject of industrial and commercial property are not affected, so far as their existence is concerned, by Articles 85 and 86 of the Treaty, their exercise may still fall under the prohibitions imposed by those provisions.

9 By virtue of this provision, 'all agreements between undertakings, decisions by association of undertakings, and concerted practices' which may affect trade between Member States, and which have as their object or effect the distortion of competition, are prohibited as incompatible with the Common Market. A trade-mark right, as a legal entity, does not in itself possess those elements of contract or concerted practice referred to in Article 85 (1). Nevertheless, the exercise of that right might fall within the ambit of the prohibitions contained in the Treaty each time it manifests itself as the sub­ ject, the means or the result of a restrictive practice. When a trade-mark right is exercised by virtue of assignments to users in one or more Member States, it is thus necessary to establish in each case whether such use leads to a situation falling under the prohibitions of Article 85.

10 Such situations may in particular arise from restrictive agreements between proprietors of trade-marks or their successors in tide enabling them to pre­ vent imports from other Member States. If the combination of assignments to different users of national trade-marks protecting the same product has the result of re-enacting impenetrable frontiers between the Member States, such practice may well affect trade between States, and distort competition in the Common Market. The matter would be different if, in order to avoid any partitioning of the market, the agreements concerning the use of national rights in respect of the same trade-mark were to be effected in such condi­ tions as to make the general use of trade-mark rights as Community level compatible with the observance of the conditions of competition and unity of

15 It is clear from the wording of this provision that what it prohibits is a combination of three elements: the existence of a dominant position, its abuse, and the possibility that trade between Member States may thereby be affected.

16 It should first be observed that the proprietor of a trade-mark does not enjoy a 'dominant position' within the meaning of Article 86 merely because he is in a position to prevent third parties from putting into circulation, on the territory of a Member State, products bearing the same trade-mark. Since the article requires that the position in question should extend to at least a 'substantial part' of the Common Market, it is also necessary that the pro­ prietor should have power to impede the maintenance of effective competition over a considerable part of the relevant market, having regard in particular to the existence and position of any producers or distributors who may be marketing similar goods or goods which may be substituted for them.

JUDGMENT OF 18. 1. 1971 — CASE 40/70

17 As regards the abuse of a dominant position, although the price level of the product may not of itself necessarily suffice to disclose such an abuse, it may, however, if unjustified by any objective criteria, and if it is particularly high, be a determining factor.

Costs

18 The costs incurred by the Commission and by the Government of the Kingdom of the Netherlands, both of which have submitted observations to the Court, are not recoverable and as these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the Tribunale Civile e Penale, Milan, costs are a matter for that court.

SIRENA v EDA

2. (a) The proprietor of a trade-mark does not enjoy a dominant position within the meaning of Article 86 of the Treaty merely because he is in a position to prevent third parties from putting into circulation, on the territory of a Member State, products bearing the same trade­ mark. He must also have power to impede the maintenance of effective competition over a considerable part of the relevant market;

(b) Although the price level of a product may not, of itself, necessarily suffice to disclose the abuse of a dominant position within the mean­ ing of the said article, it may, however, if unjustified by any objective criteria, and if it is particularly high, be a determining factor.

Lecourt Donner Trabucchi

Monaco Mertens de Wilmars Pescatore Kutscher

Delivered in open court in Luxembourg on 18 June 1975.