C-51/75

EMI RECORDS v CBS UNITED KINGDOM

country, the requirement that such protection which the national laws of third party must, for the purpose of each Member State afford to the his exports to the Community, proprietor of the mark against the obliterate the mark on the products importation of products from third concerned and perhaps apply a countries bearing a similar or identical different mark forms part of the mark.

permissible consequences of the

In Case 51/75

Reference to the Court under Article 177 of the EEC Treaty by the High Court of Justice, London, for a preliminary ruling in the action pending before that court between

EMI RECORDS LIMITED, Middlesex,

gives the following

JUDGMENT

Facts

The order making the reference and the I — Facts and written procedure written observations submitted under Article 20 of the Protocol on the Statute 1. In May 1887 the 'American of the Court of Justice of the EEC may Graphophone Company' was formed in be summarized as follows: the United States operating in the sphere

JUDGMENT OF 15. 6. 1976 — CASE 51/75

Columbia Graphophone Company On 13 February 1917 the Columbia agreed to sell to the Columbia Graphophone Company established a Graphophone Company Limited inter wholly-owned subsidiary in England alia the goodwill and all the assets of named the 'Columbia Graphophone business carried on until then by the Company Limited' to which it entrusted company itself, or through its London the management of its business in the branch, with the exclusive right to use United Kindom and in Europe. the name 'Columbia Graphophone Company'.

In December 1917 the Columbia Graphophone Manufacturing Company Article 2 of the agreement provides: was formed in the United States. A transfer of shares was effected between 'The Vendors will not at any time this undertaking and the American hereafter so long as the Company exists Graphophone Company. The shares and carries on business either solely or transferred are said to have included the jointly with or as manager or agent for holding of the American Graphophone

the Columbia Phonograph Company Community. Incorporated. In 1925 the Columbia Graphophone Company Limited 5. In 1934 Grigsby-Grunow, the acquired a controlling interest in this American undertaking which had in undertaking which thus became its 1931 purchased the holding of Columbia subsidiary. Graphophone Limited in Columbia Phonograph Company Incorporated, sold 4. In 1931 a new company, named by auction this holding which was first of Electric and Musical Industries Limited, all purchased by Sacro Enterprises Inc. was formed in England. In the course of and subsequently by the American 1931 this undertaking, today known as Record Corporation. In 1938 Columbia EMI Limited, acquired the shares of the Broadcasting System Inc. purchased the Columbia Graphophone Company shares in the latter undertaking including Limited and the shares of another its holding in the Columbia Phonograph English company called the Gramo­ Company Incorporated. Through a series phone Company Limited. of assignments effected over a number of years the Columbia Phonograph Company Incorporated divested itself of In accordance with the agreements the American Columbia marks: in 1954 relating to this transfer the Columbia those marks became the property of Graphophone Company Limited Columbia Broadcasting System Inc. divested itself of its holding in the which has been known since 1974 as Columbia Phonograph Company In­ CBS Inc. corporated which was transferred to an American company named Grigsby- 6. The proprietor of the Columbia Grunow. marks in the United States, CBS Inc.

(which group including subsidiaries is EMI Records maintains that the hereinafter referred to as 'CBS), also importation and sale in the United owns the Columbia marks in the Kingdom, in Denmark and the Federal countries of North and South American Republic of Germany of the records of and in a number of other countries. Most CBS Inc. bearing the Columbia mark records manufactured in the United constitute an infringement of the States and elsewhere bear the Columbia trade-mark rights which it owns in those mark. Member States as well as in the Community as a whole. In this Furthermore CBS sells in the connexion it has applied to the High Community records manufactured in Court of Justice, London, the Sø-og factories which it owns in certain Handelsret, Copenhagen and the Member States. Those records are sold in Landgericht Köln requesting those courts the Community under a mark other than to order CBS to cease the production, Columbia, in most cases the CBS mark. importation and sale in the said Member States of records bearing the Columbia A proportion of those records is mark. manufactured from American Columbia recordings and then sold under the CBS On the other hand CBS states that the mark. However, this is only so if the principles of Community law, especially demand for an American recording the provisions of the free movement of reaches a certain figure. In a relatively goods and on competition, prevent the limited number of cases when the plaintiff from exercising the right which demand in the United Kingdom for it claims. records originally manufactured in the United States did not appear to justify The marks referred to in the present case such reproduction the European are as follows: subsidiaries of CBS Inc. and retailers (a) a word-mark 'Columbia' registered in imported them from the United States. 1920 in the United Kingdom by the For the purposes of those importations Columbia Graphophone Company the Columbia mark was sometimes Limited under No 402.839. This obliterated or concealed by a label stuck mark was used for the first time in to the record and the sleeve but in other the United Kingdom in 1900 by the instances such obliteration, in particular Columbia Phonograph Company that on the record, was not carried out. Limited; (b) a word-mark 'Columbia' registered in CBS United Kingdom Limited, 1928 in the United Kingdom by the (hereinafter called 'CBS UK'), purchased Columbia Graphophone Company in 1964 by CBS Inc., CBS Grammofon Limited under No 497.370

A from exercising its rights in the predecessors in tide and the trade-mark under the appropriate predecessors in tide of B at a time national law in every Member State to when such predecessors in tide were prevent: wholly-owned subsidiary and parent (i) the sale by B in each Member State companies respectively), but of goods bearing the mark X ownership of the trade-mark X now manufactured and marked with the owned by B has changed hands on a mark X by B outside the Community number of occasions; in a territory where he is entitled to (7) There is not now and never has been apply the mark X, or any legal, financial, technical or (ii) the manufacture by B in any Member economic link between A and B as State of goods bearing the mark X?' now constituted; and (8) Under the appropriate national laws In order the better to clarify the scope of the Member States of the of those questions the High Court Community (excluding Community of Justice supplied the following law) A has the right to take information: proceedings for infringement of '(1) An economic unit 'A' (comprising a trade-mark so as to prevent the parent company and its subsidiary manufacture and/or sale in Member companies) is the owner of a States of B's goods bearing the particular trade-mark ('X') in the trade-mark X'.

countries; 10. A certified copy of the order for (4) B comprises (inter alia) a parent reference was received at the Court of company established outside the. Justice on 9 June 1975. In the two Community and one or more parallel cases 86/75 and 96/75 the orders wholly-owned subsidiary companies for reference arrived at the Court on 1 established within the Community August 1975 and 5 September 1975 and manufactures and sells within respectively. the Community large quantities of similar goods under different Written observations were submitted in trade-marks from the trade-mark X; accordance with Article 20 of the (5) B now sells and proposes to continue Protocol on the Statute of the Court of to sell in the Community similar Justice of the EEC by the undertaking goods but bearing mark X; EMI Records Limited represented by Mr (6) For some years well prior to the C. C. Marriott (Case 51/75), by Mr Kaj Second World War the trade-mark X Holm-Nielsen (Case 86/75) and by Mr currently owned by A and B in their H. Rasner (Case 96/75); and by the respective territories was held by the undertaking CBS United Kingdom same interrelated undertakings (A Limited represented by Mr F. P. Neill, having acquired its rights to the Q. C, and Mr Antony Watson, instructed trade-mark X by virtue of by Messrs McKenna & Co.; the arrangements made between its undertaking CBS Grammofon A/S

On hearing the report of the The questions put, taking account of Judge-Rapporteur and the views of the their wording, may also cover the Advocate General the Court decided to assignment of this mark. open the oral procedure without any preparatory inquiry. After setting out those statements of fact EMI Records observes on the one hand By an order of 3 December 1975 it that there is no identity between CBS decided to join the three cases for the and the original assignor of the purposes of the oral procedure. American Columbia marks, and on the other hand that the European marks in dispute have been used exclusively by the II — Written observations sub­ EMI group in all the Member States of mitted under Article 20 of the Community for many years so that the Protocol on the Statute thereafter consumers have come to of the Court of Justice associate them with a specific line of products. Owing to the link between the present case and the two other parallel The function of a mark is precisely to proceedings the statements lodged in the enable customers to distinguish amongst three cases may be summarized as competing products the products to follows: which it is affixed and in this connexion it is not essential that the customers A — Written observations submitted know the name of the proprietor of the by EMI Records Limited mark.

EMI Records recalls that the trade-mark To refuse EMI the right to prohibit the relied upon in Case 86/75 is based upon imports in dispute amounts not only to a Danish trade-mark registered in 1960 restricting the exercise of the trade-mark and explains that none of the rights which it owns in the Community assignments which took place in 1917 but also to denying the very existence of and in 1923 concerned a Danish those rights which can no longer fulfil registration of this mark. their specific purpose.

of its trade-mark right does not impede abbreviated to 'CBS' and also conjures up CBS' right to exploit in Europe the for consumers the idea of an American market which it has created using the product, fails to take account of the fact mark under which it is known there (in that CBS had the said name or style even the majority of cases the CBS mark). In before it acquired the rights to the mark reality CBS seeks to be released from the in question. obligation to apply an adhesive label to records produced in the United States EMI Records then considers the legal and sent to Europe to cover the demand aspects of the questions put in the light which cannot be immediately met of the provisions of the Treaty on the through local production, or indirectly, to free movement of goods and on be in a position to limit such production competition, interpreted with regard to by substituting for it imports from the the case-law of the Court and of the United States. various decisions of the Commission. In particular it makes the following It is thus incorrect and exaggerated to observations: state that the exercise by EMI of its trade-mark rights affects CBS adversely so far as competition is concerned. Any 1. On the rules of the Treaty relating to trader using trade-marks to which he has the free movement of goods no tide in the market to which he exports his products can also complain (a) The provisions of the Treaty on the that he does not have free access to this free movement of goods have as their market. Furthermore, although it is true objective the abolition of quantitative that EMI distributes inter alia American restrictions and measures having CBS records it is none the less true that equivalent effect but only with regard to for the purposes of such distribution EMI 'trade between Member States'. This ensures that the Columbia mark is interpretation is corroborated not only by obliterated and that the records in the very wording of these rules and by question are sold under another mark. the 'Preamble' and by the 'Principles' of Cases in which an indirect subsidiary has the Treaty but also by the case-law of the distributed records under the Columbia Court.

The argument that EMI has endeavoured takings. If no agreement or concerted and is endeavouring to impede trade practice presently exists Article 85 is between Member States or to divide up inapplicable. The English court is correct markets within the Community is quite in its statement on this point in Case unfounded for, at the latest from the 51/75 as to the absence of connexions years 1922/1923, when the American between CBS an EMI in so far as the predecessor of CBS finally severed its ties word 'connexion' indicates relations with its English subsidiary, the marks other than normal commercial relations. and the commercial organization If this word must be understood as surrounding them in all the States which indicating any contractual relation today make up the Community became whatsoever, apart from an isolated sale, the property of the predecessors of EMI there certain contractual connexions and subsequently the property of EMI. between the relevant undertakings until 1970 at the latest. At all events whatever (b) In those circumstances only the interpretation is adopted there is at provisions on the common commercial present no connexion in the widest sense policy could possibly call for of the word between the two consideration. However, those provisions undertakings. do not contain any prohibition against the establishment by the Community of Moreover, the prohibition by EMI against barriers to trade with third countries.

The discerning the conditions under which mere exercise of this right in order to products coming from a third country prevent third parties distributing may be considered, with regard to products bearing the same mark in the customs, to be in free circulation in the common market may be restricted, if Community and may obtain the same necessary and as an exception, by treatment as that of products coming Community law only if it jeopardizes one from the Community. This provision in of the basic principles of the common market.

2. On the rules on competition could not fall under the prohibition set out in Article 85 of the Treaty. In such a (i) On Article 85 of the Treaty case protection of the trade-mark rights comes within the scope of national law. (a) For its application this provision requires the existence of 'agreements' or (b) Moreover the assignment of a mark 'concerted practices' between under does not itself constitute an agreement in

restraint of competition and prohibited (c) Moreover, even supposing that the by the Treaty. In accordance with the assignment of the mark had originally case-law of the Court and with various formed part of a much wider agreement, decisions of the Commission Article 85 Article 85 is not to this extent applicable is only applicable if such an assignment to the exercise of the exclusive right forms part of or constitutes the since the contract of assignment and the implementation or the confirmation of agreements whereby the assignment was an agreement to share markets within the effected were implemented in the

indicated. From 1922/23 the various agreements of 16 November 1922, 5 May 1923 and 5 January 1932 were proprietors of the American Columbia terminated in 1946; mark were unable to invoke any right in the Member States. The EMI and CBS — the clauses on the exchange of catalogues contained in the groups were thenceforth engaged in agreements of 1917, 1922/23, 1946 active competition within the common and 1962 cannot be considered as market and EMI merely exercises its being in restraint of competition trade-mark right solely in order to since their principal purpose was to protect the special role assigned to it by

The considered more particularly by CBS application of this principle in fact Schallplatten that the CBS and EMI supposes: groups at no point maintained — that the products in dispute have agreements in restraint of competition to been lawfully marketed by the which Article 85 of the Treaty could proprietor of the right, or with his have been applicable. All the agreements consent, on the same market from still in force in the course of the which they originated, nineteen sixties were, furthermore, — that such products come from the terminated by those companies towards same factories or at least from the end of this period or at the factories controlled by the same beginning of the nineteen seventies. group,

(e) Nor may the objection be made None of those conditions is met in this regarding EMI's right that since the case. Ultimately, any consideration products in dispute were legally covered regarding the 'common origin' of the by the same mark in the country of marks is only of limited relevance in this origin they might, in accordance with the case since the provisions of the Treaty on case-law of the Court, move freely in the the free movement of goods in the common market. First of all the context of which this principle was laid judgments from which such a principle down in the Hag judgment does not is deduced relate solely to cases regarding apply to trade with third countries. the preservation of the unity of the common market, whereas in this case the (g) Finally, in all the cases where the disputed exercise of the trade-mark right Court has prohibited the proprietor of scarcely jeopardizes the freedom of trade the mark from preventing the between Member States. Secondly the importation of goods bearing the same principle stated by the Court cannot be mark, it has not only restricted this recognized as an absolute and general prohibition to the case where the imports rule that 'what is lawful in any country is came from 'another Member State but also lawful within the Community'. The also applied the principle of 'reciprocity' general application of this rule would in for the benefit of the two proprietors of fact have very serious consequences for the mark. This principle is nowhere to the undertakings of the common market: be found in the present case since CBS it would jeopardize the protection prevents EMI from using the Columbia afforded by the trade-mark right, it would mark in the United States. render them liable to considerable financial expense in order to develop and (ii) On Article 86 of the Treaty protect their marks and would at the same time pave the way for the This provision is not applicable in the uncontrolled supply of spurious products. present case for the simple reason that In addition it would imply an EMI does not enjoy a dominant position infringement of the obligations either within the national market of each undertaken by the Member States within Member State or within the common the framework of the Paris Convention market considered as a whole. In fact on the protection of industrial property. EMI is exposed to strong competition not only from the CBS group in the (f) Likewise it is impossible to transpose Community but also from other to the present case the principle laid important groups such as Philips, down by the Court in the Hag judgment Deutsche Grammophon, Teldec, ACA ([1974] ECR 731) and derived from the and several other smaller undertakings. concept of the 'common origin' of This also holds good with regard to retail various identical marks. The expression trade in the Member States where EMI 'common origin' which the Court owns retail undertakings for in such employed on this occasion is only States the records of all those producers, meaningful if it relates to an instance including CBS, are distributed under all where parallel rights are created the existing marks, although, naturally,

only in so far as they do not infringe proprietors of the disputed marks in the marks protected there. United States and in the common market, owned after 1877 the Columbia On the basis of those observations EMI device — and word-marks. After suggests that a negative reply should be describing the situation currently given to questions put in Case 51/75. obtaining in this sphere it produces a More explicitly it suggests that the reply series of agreements made between 1917 in Case 96/75 should be: and 1967 between American and English Columbia undertakings, in order to prove The principles of Community law the existence of technical and economic neither prevent the application of the links between those undertakings. trade-mark right based on national law nor the right to prohibit B from CBS UK observes furthermore that marketing in the Member States goods whilst the two relevant marks were never bearing the distinctive mark X.' actually owned by an American Columbia company, none the less, when and in Case 86/75 the following: they were registered (in 1920 and 1928), there was a close relationship between The provisions of the Treaty establishing the English Columbia company which the European Economic Community, carried out the registration (Columbia especially those relating to the free Graphophone Company Limited) and movement of goods cannot be the American Columbia companies (the interpreted as disentitling the owner of a Columbia Graphophone Company in national trade-mark right from invoking 1920 and the Columbia Phonograph his trade-mark right in order to prevent Company Inc. in 1928). the sale within the subject country of goods produced and affixed with a mark CBS Grammofon for its part recalls that in a country outside the common market on 15 June 1922, that is to say, at a time before the Constructive Finance by an undertaking which in such country is entitled to use the trade-mark. Article Company Limited acquired the shares in 85 of the Treaty cannot apply where Columbia Graphophone Company there are no agreements or concerted Limited (16 November 1922) the latter practices in force between the company registered another Columbia undertakings in question. The Treaty device-mark for records.

The registration proprietor, a dominant position under of this mark, however, required previous Article 86 of the Treaty.' use of it since the word 'Columbia' is also the name of a state. Owing to the B — Written observations submitted employment of the devicemark of 1922 by CBS United Kingdom Limited, including the word 'Columbia' such use CBS Grammofon A/S and CBS has in fact taken place. Schallplatten GmbH This indicates the interdependence CBS UK considers first of all the history between the disputed mark and the said relating to the transfers of the ownership device-mark, the proprietor of which (the of the various companies which, before Columbia Graphophone Company Gra the companies which are presently the phophone Company.

distribute new CBS issues originating neither technically possible nor from the United States without, however, commercially conceivable, for those being obliged in their capacity as relatively modest sales within the proprietors of the Columbia mark to common market, to print stickers apply an adhesive label. designed to obliterate the name 'Columbia' appearing on those records, or record sleeves which do not bear this CBS Schallplatten also provides name. information on the marks referred to in this dispute. The two marks registered in If it were held that EMI is entitled to Germany in 1924 by the Columbia prohibit CBS from importing such Graphophone Company Limited are records into the common market and identical with those which were distributing them under the Columbia registered in 1906 and 1910 in England mark CBS would no longer be in a in the name of the Columbia position to satisfy the demand for Phonograph Company General (sub­ American records on the said market. sequently named 'the Columbia Graphophone Company') and assigned in Such a disadvantage is all the more 1917 to the Columbia Graphophone serious in the field of quadraphonic Company Limited. Those marks, recordings which represents a new and including the mark in dispute, which was very recent stage in the technical also registered in Germany in 1931 by development of sound recordings. At the Columbia Graphophone Company present two basic systems are used for Limited, were assigned in 1965 by the such recordings: the system known latter company to the English company under the 'SQ' mark employed by CBS now named EMI Records Limited. and EMI and that named 'CD-4' developed by RCA. Records CBS UK then recalls that the CBS group manufactured in accordance with one of possesses factories in various Member those systems cannot be used on States of the Community and that the reproducing equipment designed for the records produced by those factories are other system so that owners of sold in the common market under marks reproducing equipment are obliged to other than the Columbia mark, the buy only recordings manufactured by a majority under the CBS mark. A particular system. CBS has manufactu­ substantial number of those records red such quadraphonic records for

approximately three years essentially for of the problem on the basis of the the American market but some months provisions of the Treaty on the free ago it also began to produce them in the movement of goods and competition Netherlands for the common market. interpreted in the light of the case-law of Nevertheless for practical reasons they the Court and the various decisions of are only produced if the demand in the the Commission. In particular they make Member States amounts to 1 200 copies the following observations: at least for each record although the

The judgments of the Court and market of an important producer of SQ several dicisions of the Commission in records would also appreciably reduce this sphere have recognized that trade the supply there of such records: it thus may also be affected within the meaning would endanger the commercial and of Article 85 of the Treaty by measures technical development of the system in impeding imports from third countries. question and could confer a decisive Since this article runs parallel to the said competitive advantage on the CD-4 provisions it may thus be conceded that system employed by RCA. impediments placed in the way of such imports may also be constituted by Furthermore the use by EMI of its obstacles to 'trade between Member Columbia trade-marks is, as is clear from States' with which the second sentence of an opinion poll carried out in Germany Article 36 of the Treaty is concerned. by CBS, capable of misleading

JUDGMENT OF 15. 6. 1976 — CASE 51/75

have a higher status than those protected were for a long period (until 1952) by a trade-mark and the use of the latter repeated in the agreements concluded is particularly liable to contribute to the between the proprietor of the mark both partitioning of the market and to affect after its assignment and after the adversely the free movement of goods. If dissolution of the group connexions there is a conflict between the absolute between those companies.

EMI RECORDS v CBS UNITED KINGDOM

It is thus clear from the clauses on the partitioning of markets. Since the group partitioning of the markets and connexions between the two companies restriction of competition contained in have ceased to exist — initially in the the agreements of 1917, 1922/23, 1932 course of the years 1922 to 1925 and and 1962 that the situation in dispute subsequertly and definitively from 1931 resembles that in the Grundig-Consten — there is no longer any question of an case where the Court held that both the internal allocation of tasks between agreement on the prohibition of exports companies on the division of markets and that relating to the filing and and in this connexion the exclusive right registration of an identical mark for all to use the Columbia mark in each area dealers were contrary to Article 85 of the covered by the contract played an Treaty ([1966] ECR 299). important role.

JUDGMENT OF 15. 6. 1976 — CASE 51/75

that this constitutes abuse of such other or through agreements which position: for there to be such an abuse can be traced to the same original the exercise of the right must occur in proprietor of both marks. the context of conduct which is abusive 2. Where agreements referred to under in nature. Such an abuse may occur if, as Paragraph 1 above have been in the present case, the person enjoying a concluded before the entry into force dominant position, whilst asserting his of the EEC Treaty it is necessary but trade-mark right in order to prevent also sufficient for their effects to imports — including imports from third continue thereafter. countries — of goods to which an 3. Agreements restricting competition — identical mark has been legally applied including agreements of the type in another country, himself markets, or mentioned under Paragraph 1 above allows his subsidiaries to market, within — entered into between connected the Community the same goods under undertakings and as such falling the said mark. This is why, if the Court outside the prohibition of Article 85, finds in favour of EMI, it ought at least to none the less come within the scope state that the exercise of the trade-mark of Article 85 if they are maintained right in dispute is only permissible to the after the connexion between the extent that EMI ensures that its own original parties to the agreement has subsidiaries cease such marketing. been terminated. 4. If the proprietor of a trade-mark in On the basis of those observations CBS one Member State invokes the mark UK concludes that the following reply with regard to the importation by should de given to the questions put: other undertakings of products to which the same mark has been

movement of goods and to competition contained in Articles 30, 36 and 85 of The provisions relating to the free the Treaty establishing the European movement of goods and Article 85 of the Economic Community. EEC Treaty are infringed if proprietor A of a trade-mark registered in a Member CBS Grammofon suggests the following State uses his trade-mark rights in order reply: to prevent the importation of goods 1. Where a trade-mark is invoked in a which in another State situated outside Member State in relation to imports the European Communities are lawfully from a third country of products to given an identical trade-mark having the which the same mark has been legally same origin by undertaking B and are applied in that country, Article 85 is there put into circulation. inapplicable, provided that the proprietors of the trademarks for the This applies in particular if A draws his two countries have acquired the trade-mark rights from agreements which marks, or the right to use them, had as their objective a partitioning of through agreements between each the markets.'

EMI RECORDS v CBS UNITED KINGDOM

trade-marks. In support of its view it The Danish Government observes that states that according to the order making the mark can no longer fulfil its purpose, the reference there is no legal, economic, which is to differentiate products of financial or technical link between the different origins, once the proprietor two groups, one within the Community cannot prevent imports of spurious the other in certain third countries, products originating from a producer which own the Columbia mark. These with whom he has no legal or economic companies each hold separately in connexion. The case-law of the Court in various countries the same trade-mark in this sphere, on the barrier which respect of similar products.

Furthermore it must not be Any other view amounts to imposing forgotten that, according to the express discriminatory conditions on all wording of the orders for reference, for proprietors of trade-marks in the many years there has been no link Community since the enormous between the two companies in question. expenses which they incur to launch, In those circumstances the application to promote and develop their marks would import from a third country of the benefit their direct competitors. principles laid down by the Court, in particular in Sirena judgment ([1971] Moreover, it is mistaken to claim that in ECR) and the Hag judgment ([1974] the circumstances of the case there is an ECR 731), would result in unfairness to unjustified barrier in the sense of Articles the proprietor of a mark in the 30 to 36, 85 and 86 of the Treaty.

industrial and commercial property rights, including the case of infringement Having set out these general of trade-marks. It is thus impossible to considerations the Danish government reserve privileged treatment for imports considers more particulary the meaning

of the provisions of the Treaty on the the present case does not disclose the free movement of goods and on necessary conditions for its competition. With regard to Articles 30 application, that is to say, the to 36 it notes that those provisions refer existence of an agreement or a solely to trade between Member States concerted practice restricting and that Article 85 is not applicable in competition. In fact it is clear from the present case by reason of the fact the statement of the facts in the order that, as has been found by the national making the reference that since 1931 court, there is no legal, financial, there has no longer been any legal or technical or economic link between the economic link between the two proprietors of the mark in dispute. proprietors of the Columbia marks; This latter article, even supposing — Article 86 of the Treaty cannot apply moreover that agreements in restriction in this case since there is nothing to of trade are capable of affecting trade indicate an abuse of the trade-mark; between Member States, is not applicable — Article 30 of the Treaty only refers to to trade with third countries. quantitative restrictions and measures having equivalent effect 'between

This is borne out not only judgment in the Sirena case that the by the manner in which the Treaty proprietor of a trade-mark does not enjoy provides for the establishment of the a dominant position within the meaning common commercial policy with of Article 86 of the Treaty by the mere regard to third countries but also by fact of his exclusive right. the agricultural regulations and the policy regarding commercial On the basis of those considerations the agreements hitherto implemented by Danish Government concludes that a the Community.

Under Article XX(d) Article 85 of the Treaty also applies of GATT the Member States are not to restrictions on competition arising obliged to prohibit as an obstacle to from the actions of undertakings trade the exercise of trade-mark established outside the common rights in the sphere of Community market it is none the less true that external trade.

propounded on this point in the Community; judgment raises other problems — Even assuming that Article 30 could which are difficult to resolve. apply to the present case, the exercise by A of his trade-mark rights would The German Government consequently be covered by the derogation concludes that the following reply should contained in Article 36 of the Treaty. be given to the first question in Case Community law does not prohibit 51/75: the right of the proprietor of a mark 'Articles 110 et seq. and 30 et seq. of the in a Member State to prohibit third EEC Treaty are to be interpreted as parties, even if in another Member meaning that the proprietor of a State they are proprietors of an trade-mark registered in one Member identical mark having the same State of the Community may oppose the origin, from affixing this mark to a importation of goods bearing the same product and from marketing it on the mark from a country outside the territory of the first State; Community in so far as the conditions — On the other hand Community law for the application of Article 85 et seq. of prohibits the proprietor of a the EEC Treaty do not apply'. trade-mark form preventing the importation of products bearing the With regard to the second question in the same mark, coming from another same case the German Government Member State and manufactured by a states that the trade-mark does not entitle third party who is the proprietor in its proprietor to prohibit others from the latter State of an identical mark manufacturing a specific product but having the same origin. However, this merely entitles him to prohibit the use of is not so in the present case since in a certain appellation or sign identifying all the Member States in the it. The question put must thus be read as Community the mark in dispute asking whether, in certain circumstances, belongs to one and the same A may prevent B from applying to proprietor (the plaintiff in the main certain goods the mark which A holds in action). a Member State and from distributing such goods under this mark in the same The German Government ends by State. In replying to such a question it suggesting the following reply to the must be considered: second question: — that, according to the facts set out in the order making the reference A ist The owner of a trade-mark right in a the proprietor of the mark in dispute Member State of the Community is not

disentitled by the provisions of Community legislation but from a Community law from prohibiting, on the conflict arising between those basis of his trade-mark right, goods, in systems and the action of a third respect of which the trade-mark is party from outside the common protected, from being marked with the market. trade-mark in this Member State and from being put into circulation when so After setting out those general marked.' considerations the French Government in addition observes F — Written observations submitted by — that the provisions of the Treaty on the French Government the free movement of goods (Article 30 et seq.) are not applicable to the The French Government reviews the present case: the present proceedings essential characteristics of the national relate on the one hand to trade legal system of the Member States between a Member State and a third regarding trade-mark law, considers the country and, on the other hand, to scope of the provisions of the EEC the dispute existing between a local Treaty in this sphere and then points out manufacturer and the proprietor of a that in its case-law the Court has local trade-mark; endeavoured to control the exercise of — the rules on competition are likewise trade-mark rights without affecting the inapplicable. In fact in the said existence as such of this right, as is judgments in the Hag and Sirena defined and protected by national cases the Court acknowledged that legislation. The solution adopted by the Article 85 of the Treaty does not Court in particular in the Sirena apply where there exists between the judgment ([1971] ECR) and the Hag two present proprietors of the mark judgment ([1974] ECR 731) essentially 'no legal, financial, technical or consists in refusing to consider the economic links'. The Court also competing marks as territorially stated that the proprietor of a mark independent and in re-establishing, in does not enjoy a dominant position the person of the current proprietors, the within the meaning of Article 86 community of interests which originally merely because he is in a position to existed. However, in order to define the prohibit third parties from putting scope of this solution it must be borne in into circulation, on the territory of a mind Member State, products bearing the — that the marks considered by the same trade-mark. Such a position Court in those two judgments were only comes about if, inter alia, the purely national marks of Member proprietor exercises his right in such States; a way as to impede the maintenance — that the aim of the Treaty consists in of effective competition over a merging the national markets of the considerable part of the relevant Member States into a single market market; and not to assist under abnormal or — it is clear from the statement of facts illegal conditions the penetration of in the orders for reference that those those markets by persons from third conditions are wholly lacking in the countries; present case; — that in the present cace the exercise — in addition an affirmative reply to the by A of his trade-mark right against questions put would without any B does not affect trade between justification favour B at the expense Member States. Furthermore, the of A since the latter would be unable

regarded as infringing the mark in movement of goods refer exclusively to that latter country if he were to use trade between Member States in this case the relevant mark there. Furthermore they cannot restrict B's exercise of its an affirmative reply would be all the exclusive right. Furthermore, when A more harmful to the nationals of the prohibits B from using the mark in Community in that the Paris dispute within the Community it is Convention did not adopt the merely exercising its right normally principle of reciprocity and merely without effecting any arbitrary recognized the principle of treating discrimination or disguised restriction on foreigners as equivalent to nationals. trade between Member States within the meaning of Article 36 of the Treaty.

Treaty. On the contrary unless the to use the mark in dispute within the proprietor of a mark infringes other Community. Likewise in the Hag provisions of the Treaty the exercise of case the products which it was sought those rights contributes to the attainment to prohibit from being marketed in a of the objectives referred to by Article 2. Member State, to the extent that they bore the mark in dispute, were In the present case the economic unit lawfully marketed in another Member referred to as B in the orders for State whereas in the present case B reference has no right to use the disputed has not lawfully marketed them in mark within the Community. In those any part of the Community.

Further based. more, in the Hag case the relevant Having made this point the Irish mark had a common origin in an Government considers the implications undertaking established in the of the provisions of the Treaty on the Community whereas in the present free movement of goods (Article 30 et case the mark has a common origin seq.) and on competition (Article 85). in an undertaking established in a third country. Finally, in this case the (a) The Irish Government considers transfer of the mark did not play a that since the provisions on the free part in partitioning markets within

only undertaking which is entitled to use In addition the Irish Government further the mark in dispute in the Community has neither concluded an agreement nor suggests that a negative reply should be participated in any concerted practice given in Cases 86/95 and 96/75. regarding this mark with another H — Written observations submitted undertaking 'within' the Community. by the Netherlands Government Furthermore there does not presently exist and never has existed any legal, The Netherlands Government considers financial, technical or economic link the problem in dispute in the light of the between the proprietor of the mark in provisions of the Treaty on competition the Community and the proprietor of the (Articles 85 and 86) and on the free mark in a third country; nor is there any movement of goods (Articles 30 to 36). It indication of concerted action between makes the following particular those two undertakings. The only observations:

agreements which can have any — in its judgment in the Hag case importance, those dated 27 April 1917, ([1974] ECR 731) the Court found do not come within the category that the application of Article 85 of prohibited by Article 85 (cf. the the Treaty was excluded on the abovementioned Centrafarm Judgment). grounds that there existed no legal, Consideration of the provisions of those financial, technical or economic links agreements, as reproduced in the order between the two proprietors of the making the reference, leads to the mark. As is clear from the statement

EMI RECORDS v CBS UNITED KINGDOM

of facts in the order making the against the proprietors of a mark in reference this is precisely the the Member States to the advantage situation in the present case. of those owning the same mark in a — with regard to Article 86 the Court third country. It would be found in its judgment in the Sirena detrimental to consumers who are case ([1971] ECR) that the proprietor accustomed to associate a mark with of a mark does not enjoy a dominant a specific product and would deprive position merely because he is in a the mark itself of its particular position to prevent third parties from function.

origin. Those conditions are absent in this case. Furthermore the fact that Furthermore, in the absence of express the relevant marks had the same provision to the contrary, and there is no origin would have been taken into such provision in the present case, the consideration by the Court if the EEC Treaty must not be interpreted so as point at issue had been barriers to the to favour the proprietors of trade-marks free movement of goods between in a third country as compared to those Member States whereas the present who own trade-mark rights recognized case relates to barriers to trade by Member States. Likewise, in the between a Member State and a third absence of provisions to the contrary in country. Community law, it is permissible for — an affirmative reply to the questions Member States to subject spurious put would result in discrimination products from third countries to

JUDGMENT OF 15. 6. 1976 - CASE 51/75

restrictions on imports for reasons purpose of which is to partition the similar to those set out by Article 36 of common market or which for the Treaty. another reason is contrary to the the provisions of Article 85 (1) or of Having made the above points the Article 86. Government of the United Kingdom — Whilst it is true that an agreement considers the implications of the concluded before the entry into force provisions of the Treaty on competition of the Treaty may fall under Article and on the free movement of goods and 85 it is nevertheless necessary that in particular makes the following the parties should have concluded observations: such an agreement with the purpose of evading the prohibitions of the (a) On the rules on competition: Treaty. — Article 85 refers exclusively to — A is entitled to mark X in all the

EMI RECORDS v CBS UNITED KINGDOM

either — whether and to what extent the (i) the sale thereby of goods bearing the mark X manufactured and abovementioned rules are applicable to marked with the mark X by B the present case. outside the Community in a 1. It considers first of all the rules on territory where he is entitled to the free movement of goods and makes in apply the mark X, or particular the following observations. (ii) the manufacture by B in any Member State of goods bearing (a) The provisions of Articles 30 to 36 the mark X.' of the Treaty apply solely to trade 'between Member States' and prohibit the J — Written observations submitted by partitioning of national markets within the Commission of the European the Community.

Furthermore market. there is no guarantee of 'reciprocity' to assure the proprietor of a mark in the Article 85 applies to restrictions on common market of treatment in third competition which constitute the subject, countries identical to that which, the means or the consequence of an according to the argument put forward agreement, or concerted practice or, less by CBS, Community law must confer on frequently, of a decision by an the proprietor of the mark in a third association. On the other hand Articles

common market. On the other hand this (c) The fact that the records bearing the question retains its importance in other mark in dispute are 'in free circulation in

a Member State' can in no way shield separate undertakings and whether there them from the provisions which, in the is genuine competition between the two public interest and for the protection of partners which is capable of being private interests, are also applied to restricted by such an agreement. This products originating from the said State. concept can in no way be employed to allow the parent company to import It is clear from Article 10 (1) of the spurious products into a Member State Treaty that the conditions relating to with the intention of selling them within 'free circulation' consist in completing the Community. If this were not so, then, the import formalities and paying any since goods originating in the common customs duties and charges having market may not be treated less favourably equivalent effect which are due. Since the than those from third countries, the imported goods have complied with parent company could also affix the those conditions the fact that they are in spurious mark to products imported free circulation in the Community without a mark or manufactured by its merely has the effect of exempting them subsidiary, thus infringing the mark from the application of other taxation protected by the legislation of the and from other customs formalities but Member State where the subsidiary by no means implies that the regularity carries on business. of their marketing has been verified in relation to the national provisions of the (e) Furthermore the principle stated by importing State regarding industrial and the Court in the Hag judgment ([1974] commercial property rights. ECR 731) does not apply to the present case. This principle: A differing interpretation of the concept — relates to a case where the proprietors of goods 'in free circulation' such, as that of two identical marks having the put forward by CBS, is not only contrary same origin own those marks within to the wording of Article 10 of the Treaty the Community whereas in the but puts domestic goods at a present case one of the two disadvantage in relation to goods proprietors owns the mark in dispute imported from third countries. It also in all the Member States whilst the results in depriving marks registered in other owns it in third countries the Member States of their particular outside the Community, function since such marks no longer — is based on Articles 30 to 37 of the

trade-mark right' recognized by certain turing Company, and the English national legal systems and which the companies, Constructive Finance Court applied at Community level. Company and Columbia Although the trade-mark is thus Graphophone Limited; 'exhausted' when goods lawfully bearing — the agreement of 5 January 1932 the mark are distributed within the between the American company, common market by the proprietor Columbia Phonograph Company himself or with his consent it is Inc., and Columbia Graphophone nevertheless impossible purely and Company Limited which had in the simply to extend this principle to a case meantime become wholly-owned where the proprietor of an identical mark subsidiary of Electrical and Musical markets in a third country goods Industries Limited; originating from that country. — the agreement of 31 December 1946 between the American company, On the basis of these considerations the Columbia Recording Corporation and Commission takes the view that, with Columbia Graphophone Company regard to the rules relating to the free Limited; movement of goods, including those of — the agreement of 18 September 1952 Article 10 and of the common between the American company, commercial policy, the questions put Columbia Records Inc., and should be answerd in the negative.

Those observations formulated in the two undertakings had effected a partition of abovementioned cases required to be the world market, accompanied by an supplemented and where necessary assignment of the mark, so that the corrected. national markets of all the Member States of the Community as it then was were This examination relates in particular to the preserve of the British partner. This the following documents: partitioning was supplemented by — the agreements ot 27 April 1917 collaboration regarding the manufacture between the American company, and distribution of records involving in Columbia Graphophone Company, particular the exchange of matrices and and its English subsidiary the records and the obligation on the part of Columbia Graphophone Company each partner to reserve to the other Limited; partner, too, the benefit of exclusive — the agreement of 22 November 1922 contracts concluded with performers. between the American company, The American and British Columbia Columbia Graphophone Manufac

JUDGMENT OF 15. 6. 1976 - CASE 51/75

it should be recalled that, according to distributed by the American company on its own market. The exclusive contracts the principles laid down by the Court in its case-law: concluded by each of the two companies — although the rules on competition do with performers also benefited the other. According to the statements made by the not affect rights which constitute the specific subject-matter of industrial parties in the course of the main action their collaboration was terminated and commercial property they may nevertheless affect the exercise of towards the end of the sixties or at the

point of view. Judgment [1974] ECR 744). Accordingly, there can be no doubt that, This case-law is inspired by a basic with the possible exception of the concern to avoid in the first instance that

'simple' assignment does not constitute cooperation has ceased to be in force an agreement in restriction of trade and does not by itself imply that the one where it involves an agreement of agreement has ceased to have any this nature. restrictive effect on competition. If such agreement incorporated an assignment of This problem is of little importance a mark it is necessary for example either regarding assignments of national marks that the mark should be re-assigned to within the common market since in such the original proprietor or that each party cases the provisions of the Treaty on the should undertake to refrain from closing free movement of goods are already his own market — by means of his sufficient by themselves to prohibit the exclusive right — against products exercise of the trade-mark right. On the coming from the other party and bearing other hand, it has important the same mark. If one or other of those consequences regarding assignments of conditions is not fulfilled the exercise of marks effected at international level the trade-mark right constitutes the which thereby escape the said provisions. result of a restrictive agreement intended However, although such a problem to partition markets which, although it merits careful consideration its solution has expired, continues to produce effects does not appear necessary in the present by reason of the possibilities available case since in this instance the exercise by under national law on industrial and EMI of its trade-mark right falls under commercial property. Article 85 of the Treaty for other reasons: in particular, because the assignment of Having regard to these considerations the the mark in dispute is embodied in a Commission takes the view that under group of agreements creating a cartel conditions such as those described above formed for the purpose of sharing Article 85 of the Treaty prevents the markets. In fact, the transfer in 1917 of exercise by EMI of the trade-mark right the European marks by the American in dispute.

Nor can it be objected that the At the hearing on 24 February 1974 the application of Article 85 of the Treaty is undertakings EMI Records Limited, CBS excluded in the present case owing to the UK Limited, CBS Grammofon A/S and fact that Community law cannot ensure CBS Schallplatten GmbH, the for EMI any reciprocity vis-à-vis CBS on Governments of the Federal Republic of the market controlled by the latter under Germany and of the United Kingdom the Columbia mark as the provisions of together with the Commission of the Articles 85 and 86 of the Treaty have as European Communities further ex­ their sole object to protect the system of pounded their arguments. competition in the common market. This is such a vital objective for the EMI Records particularly emphasized Community that the application of those that there were no legal, economic, provisions to restrictions created outside financial or technical links between the the Community but producing effects English and American Columbia within the common market cannot undertakings as presently constituted. depend on whether reciprocity is ensured. Furthermore it must not be It denied that the assignment of the forgotten that the United States has well- Columbia mark in 1917 was intended to established legislation which makes it support or reinforce a division of the possible to avoid restrictions on markets and stressed the special features competition arising from the exercise of of British trade-mark law then in force rights created by the national system of which had necessitated the assignment in industrial and commercial properly. dispute.

and developed the arguments set out in an agreement of 19 December 1967 their written observations. which were in force until 30 April 1974 between CBS Broadcasting System, In addition they reaffirmed that there is a Electrical and Musical Industries and the cartel between the English and American Gramophone Company Limited. Columbia undertakings which infringes Article 85 of the EEC Treaty since it is On the basis of those agreements, intended to establish a division of the together with the other agreements markets; this is confirmed by the concluded since 1932 and produced in argreements applied until 1974 and the course of the written procedure the which continue to produce effects at the Commission insisted that in the present

GATT. 1974, and it continues to produce its effects at the present time. It is clear from those provisions and principles that the Community intends The Advocate-General delivered his to subject the system of trade with third opinion at the hearing on 31 March countries to arrangements approximating 1976. as closely as possible to those applicable to the system of trade between Member By a letter of 30 April 1976 CBS United States. Kingdom Limited requested the Court, pursuant to Article 61 of the Rules of

references. EMI and bearing the Columbia mark. They further emphasized the difference of substance existing, with regard to the Whatever those circumstances may be abolition of barriers to trade with third neither the existence of the said dispute countries, between the provisions of nor any possible outcome thereof can in Articles 30 to 36, 85 and 86 of the Treaty any way constitute factors determining on the one hand and the rules which the the reply to be given to the questions Member States are free to adopt vis-à-vis submitted by the national court. third countries within the framework of the common commercial policy.

JUDGMENT OF 15. 6. 1976 - CASE 51/75

Law

1 By an order of 22 May 1975 which was received at the Court Registry on 9 June 1975 the High Court of Justice, London, submitted, pursuant to Article 177 of the EEC Treaty, the following question for a preliminary ruling:

'Should the provisions of the Treaty establishing the European Economic Community and in particular the provisions laying down the principles of Community law and the rules relating to the free movement of goods and to competition be interpreted as disentitling A from exercising its rights in the trade-mark under the appropriate national law in every Member State to prevent:

(i) the sale by B in each Member State of the goods bearing the mark X manufactured and marked with the mark X by B outside the Community in a territory where he is entitled to apply the mark X, or

(ii) the manufacture by B in any Member State of goods bearing the mark X?'

7 This is why the national court asks the Court of Justice to examine the question submitted in the light of the principles and rules of Community law relating to the free movement of goods and to competition.

(1) With regard to the free movement of goods

8 Within the framework of the provisions of the Treaty relating to the free movement of goods and in accordance with Article 3 (a), Article 30 et seq. on the elimination of quantitative restrictions and of measures having equivalent effect expressly provide that such restrictions and measures shall be prohibited 'between Member States'.

9 Article 36, in particular, after stipulating that Articles 30 to 34 shall not preclude restrictions on imports, exports or goods in transit justified inter alia on grounds of the protection of industrial and commercial property, states that such restrictions shall in no instance constitute a means of arbitrary discrimination or disguised restriction on trade 'between Member States'.

10 Consequently the exercise of a trade-mark right in order to prevent the marketing of products coming from a third country under an identical mark, even if this constitutes a measure having an effect equivalent to a quantitative restriction, does not affect the free movement of goods between Member States and thus does not come under the prohibitions set out in Article 30 et seq. of the Treaty.

JUDGMENT OF 15. 6. 1976 - CASE 51/75

17 Furthermore the provisions of the Treaty on commercial policy do not, in Article 110 et seq., lay down any obligation on the part of the Member States to extend to trade with third countries the binding principles governing the

EMI RECORDS v CBS UNITED KINGDOM

free movement of goods between Member States and in particular the prohibition of measures having an effect equivalent to quantitative restrictions.

18 The arrangements concluded by the Community in certain international agreements such as the ACP-EEC Convention of Lomé of 28 February 1975 or the agreements with Sweden and Switzerland of 22 July 1972 form part of such a policy and do not constitute the performance of a duty incumbent on the Member States under the Treaty.

19 The binding effect of commitments undertaken by the Community with regard to certain countries cannot be extended to others.

20 Furthermore with regard to the provisions of Regulation No 1439/74 of 4 June 1974 (OJ L 1974, L 159, p. 1) introducing common rules for imports, these provisions relate only to quantitative restrictions to the exclusion of measures having equivalent effect.

(2) With regard to competition

25 Under Article 85 (1) of the Treaty there shall be prohibited as incompatible with the common market 'all agreements between undertakings, decisions by associations of undertakings and concerted practices' which may affect trade between Member States and which have as their object or effect to affect adversely competition within the common market.

26 A trade-mark right, as a legal entity, does not possess those elements of contract or concerted practice referred to in Article 86 (1).

27 Nevertheless, the exercise of that right might fall within the ambit of the prohibitions contained in the Treaty if it were to manifest itself as the subject, the means, or the consequence of a restrictive practice.

28 A restrictive agreement between traders within the common market and competitors in third countries that would bring about an isolation of the common market as a whole which, in the territory of the Community, would reduce the supply of products originating in third countries and similar to those protected by a mark within the Community, might be of such a nature as to affect adversely the conditions of competition within the common market.

29 In particular if the proprietor of the mark in dispute in the third country has within the Community various subsidiaries established in different Member States which are in a position to market the products at issue within the common market such isolation may also affect trade between Member States.

35 Furthermore under Article 86 of the Treaty 'any abuse by one or more undertakings of a dominant position within the common market or- in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between the Member States.'

36 Although the trade-mark right confers upon its proprietor a special position within the protected territory this, however, does not imply the existence of a dominant position within the meaning of the abovementioned article, in particular where, as in the present case, several undertakings whose economic strength is comparable to that of the proprietor of the mark operate in the market for the products in question and are in a position to compete with the said proprietor.

37 Furthermore in so far as the exercise of a trade-mark right is intended to prevent the importation into the protected territory of products bearing an identical mark, it does not constitute an abuse of a dominant position within the meaning of Article 86 of the Treaty.

38 For those reasons it must be concluded that the principles of Community law and the provisions on the free movement of goods and on competition do not

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prohibit the proprietor of the same mark in all the Member States of the Community from exercising his trade-mark rights, recognized by the national laws of each Member State, in order to prevent the sale or manufacture by a third party in the Community of products bearing the same mark, which is owned in a third country, provided that the exercise of the said rights does not manifest itself as the result of an agreement or of concerted practices which have as their object or effect the isolation or partitioning of the common market.

in answer to the questions referred to it by the High Court of Justice, London, by order of 22 May 1975, hereby rules:

1. The principles of Community law and the provisions on the free movement of goods and on competition do not prohibit the proprietor of the same mark in all the Member States of

EMI RECORDS v CBS UNITED KINGDOM

the Community from exercising his trade-mark rights, recognized by the national laws of each Member State, in order to prevent the sale or manufacture in the Community by a third party of products bearing the same mark, which is owned in a third country, provided that the exercise of the said rights does not manifest itself as the result of an agreement or of concerted practices which have as their object or effect the isolation or partitioning of the common market.

2. In so far as that condition is fulfilled the requirement that such third party must, for the purposes of his exports to the Community, obliterate the mark on the products concerned and perhaps apply a different mark forms part of the permissible consequences of the protection which the national laws of each Member State afford to the proprietor of the mark against the importation of products from third countries bearing a similar or identical mark.

Lecourt Kutscher O'Keeffe