C-96/75

EMI RECORDS v CBS SCHALLPLATTEN

In Case 96/75

Reference to the Court under Article 177 of the EEC Treaty by the Landgericht Köln for a preliminary ruling in the action pending before that court between

EMI RECORDS LIMITED, Middlesex,

and

CBS SCHALLPLATTEN GMBH, Frankfurt-am-Main,

Facts

The order making the reference and the the United States operating in the sphere written observations submitted under of the production and use of Article 20 of the Protocol on the Statute graphophones. In 1894 this company of the Court of Justice of the EEC may purchased the 'Columbia Phonograph be summarized as follows: Company General' which at the time was the subsidiary of another American company. In the course of the period I — Facts and written procedure prior to the First World War that company registered a certain number of 1. In May 1887 the 'American trade-marks comprising (not exclusively) Graphophone Company' was formed in the word 'Columbia' in the United States

JUDGMENT OF 15. 6. 1976 - CASE 96/75

which it carried on directly through or been carried on (except Austria-Hungary) from the London branch with the save so far as the Vendors shall as a exclusive right to the name or style member of the Company be interested or 'Columbia Graphophone Company' be employed by the Company in the together with the trade-marks registered business of the Company.' in several countries in Europe and elsewhere. 2. 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 any other person or persons or company Company in the Columbia Graphophone directly or indirectly carry on or be Company Limited. It is probable that the engaged or concerned or interested in Columbia Graphophone Company also carrying on within the territory of any became a subsidiary of the new part or parts thereof in which the undertaking. In 1920 the American business hereby assigned has hitherto Graphophone Company was wound up. been carried on (save and except Austria-Hungary) any business similar to 3. In 1932 the holding of the Columbia or identical with the business hereby Graphophone Manufacturing Company assigned except so far as the Vendors in the Columbia Graphophone Company

Limited was assigned to the English EMI Records Limited (hereinafter company, Constructive Finance referred to as 'EMI Records') is the Company Limited, through a tripartite proprietor of the trade-marks which form agreement concluded between the three the subject-matter of the present companies on 16 November 1922. proceedings and of the other marks Pursuant to this agreement, which was including or consisting of the name supplemented by an agreement of 12 'Columbia' in all the Member States of April 1923, the ownership of the the Community except France where American and European Columbia those marks are the property of another trade-marks was separated since there no subsidiary of EMI Limited. Furthermore longer existed any connexion between EMI Records manufactures records in the the two Columbia undertakings. United Kingdom under various marks including the Columbia mark. Records At a certain point between 1922 and bearing this mark are also manufactured 1925 the American marks containing the by other subsidiaries of EMI Limited in word 'Columbia' became the property of most of the Member States of the another American company, named the Community. Columbia Phonograph Company Incorporated. In 1925 the Columbia 5. In 1934 Grigsby-Grunow, the Graphophone Company Limited American undertaking which had in acquired a controlling interest in this 1931 purchased the holding of Columbia undertaking which thus became its Graphophone Limited in Columbia subsidiary. Phonograph Company Incorporated, sold by auction this holding which was first of 4. In 1931 a new company, named all purchased by Sacro Enterprises Inc. Electric and Musical Industries Limited, and subsequently by the American was formed in England. In the course of Record Corporation. In 1938 Columbia 1931 this undertaking, today known as Broadcasting System Inc. purchased the EMI Limited acquired the shares of the shares in the latter undertaking including Columbia Graphophone Company its holding in the Columbia Phonograph Limited and the shares of another Company Incorporated. Through a series English company called the of assignments effected over a number of Gramophone Company Limited. 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

A proportion of those records is On the other hand CBS states that the manufactured from American Columbia principles of Community law, especially recordings and then sold under the CBS the provisions of the free movement of mark. However, this is only so if the goods and on competition, prevent the demand for an American recording plaintiff from exercising the right which reaches a certain figure. In a relatively it claims. limited number of cases when the The mark referred to in the present case demand in the United Kingdom for records originally manufactured in the is the word-mark 'Columbia' registered in 1931 in Germany by the Columbia United States did not appear to justify

Germany. CBS Schallplatten GmbH is the defendant in the main action. members of the Community, (c) the predecessors in title of A and B were initially associated and A's 7. It is in fact the importation and sale of the abovementioned records on which predecessor in tide purchased trade-mark X from one of B's the Columbia mark was visible which predecessors in title, but trade-mark has given rise to the present proceedings. X belonging to B changed hands several times and for more than 40 EMI Records maintains that the importation and sale in the United years there have been no legal, economic, financial or technical links Kingdom, in Denmark and the Federal Republic of Germany of the records of between the two groups, (d) that under national law A is entitled CBS Inc. bearing the Columbia mark constitute an infringement of the to restrain B from using trade-mark

mark. X?'

8. A copy of the order for reference was of the Court of Justice received at the Court of Justice on 5 September 1975. Owing to the connexion between the present cases and the two other parallel In the two parallel cases 51/75 and proceedings the statements lodged may be summarized as follows: 86/75, the orders for reference were received at the Court on 9 June 1975 A — Written observations submitted and 1 August 1975 respectively. by EMI Records Limited Written observations were submitted in EMI Records recalls that the trade-mark accordance with Article 20 of the relied upon in Case 86/75 is based upon Protocol on the Statute of the Court of a Danish trade-mark registered in 1960 Justice of the EEC by the undertaking and explains that none of the EMI Records Limited represented by Mr assignments which took place in 1917 C.C. Marriott (Case 51/75), by Mr Kaj and in 1923 concerned a Danish ■ Holm-Nielsen (Case 86/75) and by Mr registration of this mark. H. Rasner (Case 96/75); and by the undertakings CBS United Kingdom The rights of EMI in Denmark prior to Limited represented by Mr F. P. Neill, 1960 comprised, inter alia, the Q. C, and Mr Antony Watson, instructed registration in 1922 of a device-mark by Messrs McKenna & Co.; the containing the name 'Columbia'. In the undertaking CBS Grammofon A/S present case it is unnecessary to settle the represented by Mr Eskil Trolle; the question whether EMI had in Denmark undertaking CBS Schallplatten GmbH, an exclusive right to the 'Columbia' represented by Mr Dietrich Ohlgart; the word-mark. Belgian Government, the Danish Government, the Government of the Furthermore, with regard to the Federal Republic of Germany, the Columbia marks relied on in Case 96/75, French Government, the Irish that is to say, the marks registered in Government, the Netherlands Govern­ Germany in 1924 and in 1931, EMI was ment and the Government of the United not aware that at the time another mark Kingdom represented by their Agents; existed in Germany under No 101.424. and the Commission of the European This mark was registered on 6 August Communities represented by its Legal 1907 by the Columbia Phonograph Co. Advisers, Mr John Temple Lang and Mr GmbH, Berlin, and expired definitively Antony McClellan (Case 51/75), Mr Sven on 10 December 1937. The existence of Ziegler (Case 86/75) and Mr Erich this mark has no effect on the main Zimmermann (Case 96/75). action. The questions put, taking account of their wording, may also cover the On hearing the report of the assignment of this mark. Judge-Rapporteur and the views of the Advocate-General the Court decided to After setting out those statements of fact open the oral procedure without any EMI Records observes on the one hand preparatory inquiry. that there is no identity between CBS

present dispute. Secondly the argument, EMI and CBS are engaged in fierce according to which the name 'Columbia' competition both on the European and also forms part of the name or style, American markets. The exercise by EMI 'Columbia Broadcasting System', of its trade-mark right does not impede abbreviated to 'CBS' and also conjures up CBS's 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 1. On the rules of the Treaty relating to so far as competition is concerned. Any the free movement of goods trader using trade-marks to which he has no title in the market to which he (a) The provisions of the Treaty on the exports his products can also complain free movement of goods have as their that he does not have free access to this objective the abolition of quantitative market. Furthermore, although it is true restrictions and measures having

equivalent effect but only with regard to international agreements on a basis of 'trade between Member States'. This reciprocity. interpretation is corroborated not only by the very wording of these rules and by (c) Finally, CBS is not justified in the 'Preamble' and by the 'Principles' of invoking Article 10 of the Treaty in the Treaty but also by the case-law of the order to provide a basis for its claim. Court. Article 10 of the Treaty relates solely to discerning the conditions under which It is consequently clear that the products coming from a third country provisions of Articles 30 to 36 of the may be considered, with regard to Treaty do not exclude the right of EMI to customs, to be in free circulation in the prohibit the importation of the products Community and may obtain the same in dispute. Furthermore, by exercising its treatment as that of products coming right in the trade-mark for the purpose from the Community. This provision in of obtaining this prohibition, EMI is no way concerns the private rights of merely inferring from the very existence third parties. If this were not so any of the right, which the Treaty cannot undertaking whatsoever, having no right affect, the consequences laid down by the to the Columbia mark in any country, national legislation of the Member States. could infringe the trade-mark right of EMI is not creating 'an arbitrary EMI by obtaining customs clearance in discrimination or a disguised restriction the Community for records imported on trade between Member States' within under this mark. the meaning of the second sentence of

The English court is unfounded for, at the latest from the correct in its statement on this point in years 1922/1923, when the American Case 51/75 as to the absence of predecessor of CBS finally severed its ties connexions between CBS and EMI in so with its English subsidiary, the marks far as the word 'connexion' indicates and the commercial organization relations other than normal commercial surrounding them in all the States which relations. If this word must be today make up the Community became understood as indicating any contractual the property of the predecessors of EMI relation whatsoever, apart from an and subsequently the property of EMI. isolated sale, there were certain contractual connexions between the (b) In those circumstances only the relevant undertakings until 1970 at the provisions of the common commercial latest At all events whatever policy could possibly call for interpretation is adopted there is at consideration.

JUDGMENT OF 15. 6. 1976 - CASE 96/75

market. This would be the case in the and in addition such agreements are situations referred to in Article 30 and in no longer in force. the second sentence of Article 36 of the Treaty or if the unity of the common It is clear from the provisions of all those market had to be protected. If, as in the agreements subsequent to 1946 present case, no basic principle of the considered more particularly by CBS Community is called in question the Schallplatten that the CBS and EMI exercise of the trade-mark right, even if it groups at no point maintained had been acquired under an assignment, agreements in restraint of competition to could not fall under the prohibition set which Article 85 of the Treaty could out in Article 85 of the Treaty.

common market. In the present case: effected were implemented in the — since the agreements of 1917 were meantime and have no further legal concluded between a parent company effect. and a subsidiary they do not constitute agreements in restraint of This is precisely the case in the present competition. Furthermore they have proceedings, since the agreements of not established a division of markets 1917, of 1922/23 and all the other 'within the common market'; agreements between EMI and CBS or — those agreements and the subsequent their predecessors have long since ceased agreements of 16 November 1922, 5 to produce effects, as has already been

EMI RECORDS v CBS SCHALLPLATTEN

In the present case the goods were of a identical marks are of a 'common origin' different manufacture and there was no for the purposes of the Treaty only if the agreement between the two undertakings markets for the products bearing the regarding their marketing. mark also have a common origin. None of those conditions is met in this (e) Nor may the objection be made case. Ultimately, any consideration regarding EMI's right that since the regarding the 'common origin' of the products in dispute were legally covered marks is only of limited relevance in this by the same mark in the country of case since the provisions of the Treaty on origin they might, in accordance with the the free movement of goods in the case-law of the Court, move freely in the context of which this principle was laid common market First of all the down in the Hag judgment does not judgments from which such a principle apply to trade with third countries. is deduced relate solely to cases regarding the preservation of the unity of the (g) Finally, in all the cases where the common market, whereas in this case the Court has prohibited the proprietor of

JUDGMENT OF 15. 6. 1976 - CASE 96/75

the mark. This principle is nowhere to by an undertaking which in such country be found in the present case since CBS is entided to use the trade-mark. Article prevents EMI from using the Columbia 85 of the Treaty cannot apply where mark in the United States. there are no agreements or concerted practices in force between the (ii) On Article 86 of the Treaty undertakings in question. The Treaty does not affect national trade-mark This provision is not applicable in the rights, and the exercise of such rights present case for the simple reason that does not in itself restrict competition. EMI does not enjoy a dominant position Similarly Article 85 cannot apply to the either within the national market of each mere assignments of trade-mark rights. Member State or within the common The proprietor of a trade-mark does not market considered as a whole. In fact hold, merely by reason of his right as EMI is exposed to strong competition proprietor, a dominant position under not only from the CBS group in the Article 86 of the Treaty.' Community but also from other important groups such as Philips, B — Written observations submitted Deutsche Grammophon, Teldec, ACA by CBS United Kingdom Limited, and several other smaller undertakings.

After describing suggests that a negative reply should be the situation currently obtaining in this given to questions put in Case 51/75. sphere it produces a series of agreements More explicitly it suggests that the reply made between 1917 and 1967 between in Case 96/75 should be: American and English Columbia undertakings, in order to prove the The principles of Community law 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

This indicates the interdependence CBS UK then recalls that the CBS group between the disputed mark and the said possesses factories in various Member device-mark, the proprietor of which (the States of the Community and that the Columbia Graphophone Company records produced by those factories are Limited) was at the time owned by the sold in the common market under marks American company, the Columbia other than the Columbia mark, the Graphophone Company. majority under the CBS mark. A substantial number of those records are CBS Grammofon states in addition that produced from American CBS according to the information it obtained recordings, very often bearing the in 1972 the various EMI subsidiaries sold Columbia mark but for economic reasons on a number of occasions CBS records they are only produced if the demand for bearing the Columbia mark without them exceeds 2 000 copies of each covering this mark by an adhesive label recording. within the common market (in Denmark, one instance in 1972; in the Furthermore, within the Community Federal Republic of Germany, five there is also a substantial and ofter very instances in 1972 and 11 instances in urgent demand for American CBS 1973). However, since EMI on the one records which do not appear in European hand claims that CBS should respect its catalogues. To meet this demand many trade-mark whilst on the other it permits record importers import such records its own subsidiaries to sell CBS records directly from the United States where bearing the Columbia mark without they are mostly marketed under the adhesive labels over it, it is clear that the Columbia mark. EMI Limited itself has subsidiaries of EMI enjoy a competitive for some years participated in the

distribution of those records through its records, CBS were required to cease such subsidiaries and retail dealers. It is imports to the common market owners neither technically possible nor of SQ reproducers in the common commercially conceivable, for those market would in future only be able to relatively modest sales within the obtain records manufactured by EMI. common market, to print stickers This would considerably impair the designed to obliterate the name competitive capacity of CBS in the 'Columbia' appearing on those records, Community as compared to EMI.

Records manu of EMI. They have lost their particular factured in accordance with one of those function which is to indicate the specific systems cannot be used on reproducing origin of the product. This is further equipment designed for the other system borne out because the quality of CBS so that owners of reproducing equipment recordings by all accounts meets the are obliged to buy only recordings highest standards. manufactured by a particular system. CBS has manufactured such Having set out this information the three quadraphonic records for approximately CBS companies consider the legal aspect three years essentially for the American of the problem on the basis of the market but some months ago it also provisions of the Treaty on the free 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.

States. If, following the action by EMI States this does not, however, preclude

the principles relating to the exercise of to trade with third countries should be the trade-mark right from also applying created by private persons in so far as it by analogy to imports from third cannot be claimed that they are necessary countries. In fact Articles 30 and 36 of for the protection of lawful private the Treaty pursue the same objective as interests. that referred to by Article 85: the unity of the common market and the abolition Furthermore when a mark which of obstacles to trade between Member originally had a single proprietor

In States' with which the second sentence of applying this judgment to the present Article 36 of the Treaty is concerned. case the Court does not threaten the 'existence' of the mark in dispute. The (b) Furthermore, once products coming EMI group is attempting to increase for from a third country have been imported its own benefit the individuality of the into the Community and all relevant marks in dispute and such an endeavour charges paid they must be regarded as is not covered by Article 36 of the being in free circulation in the Treaty. Community within the meaning of Article 10 of the Treaty and are thereby (d) It is also not disputed that interests subject to the provisions on the free protected by other industrial and movement of goods on the same basis as commercial property rights very often products originating in Member States. have a higher status than those protected by a trade-mark and the use of the latter (c) Nor is there anything to preclude is particularly liable to contribute to the the application by analogy of the partitioning of the market and to affect principle laid down by the Court in the adversely the free movement of goods.

JUDGMENT OF 15. 6. 1976 - CASE 96/75

assigned cannot be invoked in order to markets concluded between CBS and impede the import into a Member State EMI or their predecessors were of products to which that mark has been terminated in 1956 or 1968. The

applied. Every assignment of a mark application of Article 85 does not results in a partitioning of markets and necessarily require that at the time when thereby constitutes a restriction of the trade-mark right is asserted its competition if the exclusive right is proprietor should still maintain exercised to impede the import of goods contractual relationships. When the mark originating either from the original was assigned as part of an agreement the proprietor of the mark or from a third aim of which was to share markets the

(c) It is furthermore of little importance (e) Furthermore the fact that in the whether the agreements to share the present case the mark in dispute is

EMI RECORDS v CBS SCHALLPLATTEN

invoked to impede imports from a 'third finds in favour of EMI, it ought at least to country' is not sufficient to prevent the state that the exercise of the trade-mark application of Article 85 (1) of the Treaty. right in dispute is only permissible to the Agreements having as their object or extent that EMI ensures that its own effect the prevention of imports from subsidiaries cease such marketing. third countries may also involve a restriction on competition within the On the basis of those observations CBS common market and affect trade between UK concludes that the following reply Member States. Consequently the should be given to the questions put: creation of hindrances to these imports may likewise result in obstacles to the 'The exercise by EMI of its right to the 'trade between Member States' with mark "Columbia" (1) so as to prevent which the second sentence of Article 36 CBS from importing into one or more of the Treaty is concerned. Member States of the EEC records manufactured by it outside the EEC and (f) Finally the fact that under American bearing the mark "Columbia" and (2) so law CBS can prohibit EMI from as to prevent CBS from applying the importing its Columbia records into the mark "Columbia" to records United States is irrelevant in this case. manufactured by CBS outside the EEC is The application on Article 85 of the in contravention of the provisions of Treaty is not subject to a condition of Community law relating to the free 'reciprocity'. The competition policy movement of goods and to competition intended by the Treaty does not depend contained in Articles 30, 36 and 85 of as regards its objectives and its basis on the Treaty establishing the European whether the same policy is pursued in Economic Community.' countries outside the Community. CBS Grammofon suggests the following (ii) On Article 86 of the Treaty reply: 1. where a trade-mark is invoked in a

JUDGMENT OF 15. 6. 1976 - CASE 96/75

By which in another State situated outside laying down rules designed to ensure the the European Communities are lawfully free movement of goods and free given an identical trade-mark having the competition, the Treaty also made same origin by undertaking B and are provision for a reservation, contained in there put into circulation. Article 36, whereby prohibitions or restrictions on imports are permissible in This applies in particular if A draws his relation to the normal exercise of trade-mark rights from agreements which industrial and commercial property had as their objective a partitioning of rights, including the case of infringement the markets.' of trade-marks. It is thus impossible to reserve privileged treatment for imports C — Written observations submitted by of products manufactured in a country the Belgian Government (Case where another company enjoys the right 96/75) to use the mark since, in the absence of a means of preventing such infringement, The Belgian Government takes the view the protection afforded by the mark that in the present case the exercise of would be purely illusory. the trade-mark right is not restricted and that the imports in dispute may be D — Written observations submitted prohibited by means of national by the Danish Government procedures for the infringement of 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

States, is inspired by the need to protect present case, that is to say, that the the principal objective of the common dominant position affects trade between Member States and that the dominant market that is to say, the abolition of obstacles to the free movement of goods position is abused. However, the within the Community. Since the Treaty proprietor of a trade-mark who takes does not pursue a similar objective to action against imports of goods bearing that indicated above in the Community's the same mark is merely making normal external relations, this case-law cannot be use of his right and is not abusing it transposed to imports from a third Furthermore, the Court held in its country. Furthermore it must not be judgment in the Sirena case that the forgotten that, according to the express proprietor of a trade-mark does not enjoy wording of the orders for reference, for a dominant position within the meaning many years there has been no link of Article 86 of the Treaty by the mere between the two companies in question. fact of his exclusive right. In those circumstances the application to import from a third country of the On the basis of those considerations the principles laid down by the Court, in Danish Government concludes that a particular in Sirena judgment ([1971] negative reply must be given to the ECR 69) and the Hag judgment ([1974] questions put in the three cases. ECR 731), would result in unfairness to the proprietor of a mark in the E — Written observations submitted Community since Community law does by the Government of the Federal not provide for the latter a system of Republic of Germany 'reciprocity' on the market of the relevant third country and would imply the The Government of the Federal Republic sacrifice of the interests of European of Germany makes inter alia the consumers because of the risk of following observations: confusion thereby created as to the origin — Although it is true that in principle of the goods. Article 85 of the Treaty also applies to restrictions on competition arising Having set out these general from the actions of undertakings considerations the Danish government established outside the common market it is none the less true that considers more particularly 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;

does not require the abolition of its proprietor to prohibit others from quantitative restrictions and measures manufacturing a specific product but having equivalent effect; merely entitles him to prohibit the use of — If in relations with third countries a certain appellation or sign identifying there is no general prohibition of it. The question put must thus be read as quantitative restrictions and measures asking whether, in certain circumstances, having equivalent effect there cannot A may prevent B from applying to be any prohibition limited to a certain goods the mark which A holds in specific sector. Under Article XX (d) a Member State and from distributing of GATT the Member States are not such goods under this mark in the same obliged to prohibit as an obstacle to State. In replying to such a question it trade the exercise of trade-mark must be considered:

— In the present case the mark is not regarding trade-mark law, considers the used by A in order to partition scope of the provisions of the EEC national markets within the Treaty in this sphere and then points out Community; that in its case-law the Court has — Even assuming that Article 30 could endeavoured to control the exercise of apply to the present case, the exercise trade-mark rights without affecting the by A of his trade-mark rights would existence as such of this right, as is be covered by the derogation defined and protected by national contained in Article 36 of the Treaty. legislation. The solution adopted by the Community law does not prohibit Court in particular in the Sirena the right of the proprietor of a mark judgment ([1971] ECR 69) and the Hag in a Member State to prohibit third judgment ([1974] ECR 731) essentially parties, even if in another Member consists in refusing to consider the State they are proprietors of an competing marks as territorially identical mark having' the same independent and in re-establishing, in origin, from affixing this mark to a the. person of the current proprietors, the product and from marketing it on the community of interests which originally territory of the first State; existed. However, in order to define the — On the other hand Community law scope of this solution it must be borne in prohibits the proprietor of a mind trade-mark from preventing the — that the marks considered by the importation of products bearing the Court in those two judgments were same mark, coming from another purely national marks of Member Member State and manufactured by a States; third party who is the proprietor in — that the aim of the Teaty consists in the latter State of an identical mark merging the national markets of the having the same origin. However, this Member States into a single market is not so in the present case since in and not to assist under abnormal or all the Member States in the illegal conditions the penetration of Community the mark in dispute those markets by persons from third belongs to one and the same countries; proprietor (the plaintiff in the main — that in the present case the exercise action). by A of his trade-mark right against B does not affect trade between The German Government ends by Member States. Furthermore, the suggesting the following reply to the present disputes do not originate in second question: an open conflict between the national 'The owner of a trade-mark in a Member systems of trade-mark law and State of the Community is not disentitled Community legislation but from a by the provisions of Community law conflict arising between those from prohibiting, on the basis of his systems and the action of a third trade-mark right, goods, in respect of party from outside the common market which the trade-mark is protected, from being marked with the trade-mark in this Member State and from being put into After setting out those general considerations the French Government circulation when so marked.' in addition observes

country and, on the other hand, to G — Written observations submitted the dispute existing between a local by the Irish Government manufacturer and the proprietor of a local trade-mark; The Irish Government finds first of all — the rules on competition are likewise that the trade-mark legislation of the inapplicable. In fact in the said Member States does not create rights the judgments in the Hag and Sirena exercise of which in general conflicts cases the Court acknowledged that with the provisions of Article 2 of the Article 85 of the Treaty does not Treaty.

In those into circulation, on the territory of a circumstances to grant B the protection Member State, products bearing the which it claims would not only result in same trade-mark. Such a position allowing it to use the disputed mark only comes about if, inter alia, the within the Community but would also proprietor exercises his right in such permit this to be done by any a way as to impede the maintenance undertaking other than A. Such an of effective competition over a outcome is not justified under Article 2: considerable part of the relevant it cannot be reconciled with the task of market; the Community and is contrary to the — it is clear from the statement of facts principles on which the customs union is in the orders for reference that those based. conditions are wholly lacking in the present case; Having made this point the Irish — in addition an affirmative reply to the Government considers the implications questions put would without any of the provisions of the Treaty on the justification favour B at the expense free movement of goods (Article 30 et of A since the latter would be unable seq.) and on competition (Article 85). to call Community law in aid in the third country where B has registered (a) The Irish Government considers the mark in dispute and he would be that since the provisions on the free' 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.

EMI RECORDS v CBS SCHALLPLATTEN

— in the Hag judgment ([1974] ECR trade-mark right resulted in 731) the facts on which the Court partitioning the markets. In the adjudicated differ from those in this present case neither have the case. In the Hag case the products in dispute been marketed in undertaking alleged to have used the a Member State with the consent of disputed mark was also the proprietor the proprietor of the mark nor has of that mark within the Community the exercise of the trade-mark right whereas in the present case neither B by its proprietor in the Community nor any part of B has any legal right partitioned national markets within to use the mark in dispute within the the common market. Community. Likewise in the Hag case the products which it was sought (b) With regard to the rules on to prohibit from being marketed in a competition the Irish Government Member State, to the extent that they considers that the conditions for the bore the mark in dispute, were application of Article 85 of the Treaty are lawfully marketed in another Member likewise absent in the present case. The State whereas in the present case B only undertaking which is entitled to use has not lawfully marketed them in the mark in dispute in the Community any part of the Community. It is has neither concluded an agreement nor futile for B to endeavour to seek to participated in any conceited practice rely on Article 9 (2) of the Treaty. regarding this mark with another This provision does not accord to undertaking 'within' the Community. products imported into a Member Furthermore there does not presently State from a third country more exist and never has existed any legal, favourable treatment than that finanical, technical or economic links reserved for products originating in a between the proprietor of the mark in Member State: both are subject to the the Community and the proprietor of the national laws of each Member State, mark in a third country; nor is there any including trade-mark law. Fur­ indication of concerted action between

JUDGMENT of 15. 6. 1976 - case 96/75

commercial property. In the In addition the Irish Government further abovementioned Hag case the Court suggests that a negative reply should be found, however, that such derogations given in Cases 86/95 and 96/75. are not justified if the exercise of the trade-mark right tends to contribute to the partitioning of the markets and H — Written observations submitted if the right is asserted in order to by the Netherlands Government prohibit the marketing in a Member State of goods legally produced in The Netherlands Government considers another Member State under an the problem in dispute in the light of the identical trade-mark having the same provisions of the Treaty on competition origin. Those conditions are absent in (Articles 85 and 86) and on the free this case.

mark. As is clear from the statement put would result in discrimination 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 69) that the accustomed to associate a mark with proprietor of a mark does not enjoy a a specific product and would deprive dominant position merely because he the mark itself of its particular is in a position to prevent third function. parties from putting into circulation in a Member State products bearing On those grounds the Netherlands

EMI RECORDS v CBS SCHALLPLATTEN

In fact, according to the decisions of the I — Written observations submitted by Court, Article 85 does not refer to the Government of the United agreements or practices existing Kingdom between undertakings, such as a parent company and its subsidiary, The Government of the United which form an economic unit within Kingdom considers that any restriction which the subsidiary does not enjoy on the exercise of trade-mark rights must any real independence. not be imposed lightly. Consumers and — The assignment took place long users gradually establish a connexion before the Treaty entered into force; between products bearing a mark and the the ownership of the mark now held trader who holds such a mark. The by B has changed hands on a number purpose of the trade-mark is thus both to of occasions and there has never been protect the interests of the trade and of any legal, financial, technical or consumers. economic link between A and B as now constituted. Although the Sirena Furthermore, in the absence of express judgment ([1971] ECR 69) greatly provision to the contrary, and there is no extended the scope of the provisions such provision in the present case, the of the Treaty on competition it must EEC Treaty must not be interpreted so as not be forgotten that a mere to favour the proprietors of trade-marks assignment does not of itself suffice in a third country as compared to those to render applicable Article 85 of the who own trade-mark rights recognized Treaty. For this there must exist other

Having made the above points the — Whilst it is true that an agreement Government of the United Kingdom concluded before the entry into force considers the implications of the of the Treaty may fall under Article provisions of the Treaty on competition 85 it is nevertheless necessary that and on the free movement of goods and the parties should have concluded in particular makes the following such an agreement with the purpose observations: 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 agreements, practices or decisions Member States of the Community.

JUDGMENT OF 15. 6. 1976 - CASE 96/75

This body other than those prohibited by Articles of rules is intended to protect the unity 85 and 86 of the Treaty, also apply solely to trade between Member States. The fact of the common market by prohibiting two different methods of partitioning the that in the present case undertaking B market. owns a subsidiary within the Community is irrelevant since Article 30 of the Treaty Article 85 applies to restrictions on relates exclusively to the fact of competition which constitute the subject, importation and does not take into the means or the consequence of an consideration connexions which may agreement, or concerted practice or, less exist between the importer and his frequently, of a decision by an supplier who is established in a third association.

Articles 30 to 37 of the Treaty prevent The British Government indicates the the use of the trade-mark to partition the common market. On the other hand this differences existing between this dispute and the situation referred to in the Hag question retains its importance in other judgment ([1974] ECR 731), emphasizes specific situations, in particular when, in the special and restricted scope of this a case of imports coming directly from third countries and not of trade between judgment and goes on to propose that

either: whether and to what extent the (i) the sale thereby of goods bearing abovementioned rules are applicable to the mark X manufactured and the present case. marked with the mark X by B 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;

(a) The provisons of Articles 30 to 36 of by no means implies that the regularity the Treaty apply solely to trade 'between of their marketing has been verified in Member States' and prohibit the relation to the national provisions of the partitioning of national markets within importing State regarding industrial and the Community. The underlying reasons commercial property rights. for this prohibition do not exist in cases like the present which relate to trade A differing interpretation of the concept with third countries. To concede the of goods 'in free circulation', such as that contrary view would be to place in put forward by CBS, is not only contrary jeopardy the specific purpose of the to the wording of Article 10 of the Treaty trade-mark law in the common market, but puts domestic goods at a and render useless from a practical point disadvantage in relation to goods of view the creation of a European mark imported from third countries.

This private interests, are also applied to concept can in no way be employed to products originating from the said State. allow the parent company to import spurious products into a Member State It is clear from Article 10 (1) of the with the intention of selling them within Treaty that the conditions relating to the Community. If this were not so, then, 'free circulation' consist in completing since goods originating in the common the import formalities and paying any market may not be treated less favourably customs duties and charges having than those from third countries, the equivalent effect which are due. Since the parent company could also affix the imported goods have complied with spurious mark to products imported those conditions the fact that they are in without a mark or manufactured by its free circulation in the Community subsidiary, thus infringing the mark merely has the effect of exempting them protected by the legislation of the from the application of other taxation Member State where the subsidiary and from other customs formalities but carries on business.

(e) Furthermore the principle stated by commercial policy, the questions put the Court in the Hag judgment ([1974] should be answered in the negative. ECR 731) does not apply to the present case. This principle: 2. The Commission next considers the — relates to à case where the proprietors rules on competition. It states that at the of two identical marks having the time when it lodged its written same origin own those marks within observations in Case 51/75 it was only the Community whereas in the aware of the facts indicated by the court present case one of the two making the reference, that is to say, of proprietors owns the mark in dispute the agreements of 1917.

Community, — entitles each of the two proprietors of This examination relates in particular to the mark to sell his goods on the the following documents: other's market and thus establishes a — the agreements of 27 April 1917 system of 'reciprocity' which cannot between the American company, be established under Community law Columbia Graphophone Company, since one of the two proprietors of and its English subsidiary the the mark owns it in a third country. Columbia Graphophone Company Limited;

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,

Columbia Records Inc., and towards the end of the sixties or at the Columbia Graphophone Company beginning of the seventies. Limited; — the agreement of 15 November 1962 In the light of these circumstances the between Columbia Broadcasting Court should, in accordance moreover System Inc. and Electrical and with its case-law and in order to provide Musical Industries Limited; the national court with an answer which — the agreement between CBS Records will assist it, read the questions put as Limited and EMI Records (the asking whether the exercise by A of his Gramophone Company Limited) trade-mark right also infringes the which is regarded as having been provisions of the Treaty on competition made de facto on 18 February 1966. because the predecessors in title of A acquired this mark through an agreement These agreements as a whole show that within the framework of a partitioning of in the course of the years 1917 to 1956 markets which reserved to them the competition was completely eliminated entire territory of the Community and between the American and British because restrictions on competition were

The American and British Columbia companies only limited the scope of Accordingly, there can be no doubt that, their contractual relations through the with the possible exception of the agreement of 18 December 1952 which agreements of 1917 which were expired on 31 December 1956. However concluded at a time when the American by the agreement of 15 November 1962 company held the entire capital of its they resumed those relations after an British subsidiary, the other above- interruption of six years. Under this mentioned agreements come within the agreement Columbia records produced ambit of Article 85 of the Treaty since by the American company were they have restrictive effects on manufactured and distributed in Europe competition within the common market. by the British company whilst the Columbia records produced by the latter With regard to the problem of whether company were manufactured and and to what extent this provision is in distributed by the American company on fact applicable to the situation in dispute its own market The exclusive contracts it should be recalled that, according to concluded by each of the two companies the principles laid down by the Court in with performers also benefited the other. its case-law:

and commercial property they may transfer) of the mark on the one hand nevertheless affect the exercise of and 'a licencing agreement' on the other such rights; hand is not conclusive. If on the one — the exercise of a trade-mark right is hand it is too much to claim that any particularly apt to lead to a assignment of a mark fulfils the partitioning of markets, and thus to conditions for the application of Article impair the free movement of goods 85 of the Treaty, on the other hand it is between States (Sirena judgment in fact difficult to draw a precise [1971] ECR 69); distinction between a case where the — in relation to trade-marks, the 'simple' assignment does not constitute specific subject-matter of the an agreement in restriction of trade and industrial property is the guarantee to one where it involves an agreement of the proprietor of the exclusive right this nature. of the opportunity of using that trade-mark for the purpose of putting This problem is of little importance a product into circulation thus regarding assignments of national marks protecting him against competitors within the common market since in such wishing to take advantage of the cases the provisions of the Treaty on the status and reputation of the free movement of goods are already trademark by selling products il­ sufficient by themselves to prohibit the legally bearing that trade-mark exercise of the trade-mark right. On the (Centrafarm/Winthrop judgment, other hand, it has important [1974] ECR 1194); consequences regarding assignments of — to prohibit the marketing in a marks effected at international level Member State of a product legally which thereby escape the said provisions. bearing a trade-mark in another However, although such a problem Member State, for the sole reason that merits careful consideration its solution an identical trade-mark having the does not appear necessary in the present same origin exists in the first State, is case since in this instance the exercise by incompatible with the provisions EMI of its trade-mark right falls under providing for free movement of goods Article 85 of the Treaty for other reasons: within the common market (Hag in particular, because the assignment of judgment [1974] ECR 744). the mark in dispute is embodied in a group of agreements creating a cartel This case-law is inspired by a basic formed for the purpose of sharing concern to avoid in the first instance that markets. In fact, the transfer in 1917 of the proprietor of a trade-mark might by the European marks by the American availing himself of the exclusive right company to the British company was conferred upon him by the various intended to bring about a partitioning of national legal systems, impair the unity the international markets between those of the common market. The same two companies. This partitioning of the considerations may be raised with regard markets was re-enforced and con­ to the trade with third countries. Here, solidated on several occasions by the too, trade-mark rights may be used in successive agreements concluded be­ order to partition the markets at tween 1922 and 1956 so that it is correct

has expired if it appears that the agreement continues to produce its Nor can it be objected that the effects after it has ceased to be in force. application of Article 85 of the Treaty is This is precisely the situation in the excluded in the present case owing to the present case. fact that Community law cannot ensure for EMI any reciprocity vis-a-vis CBS on The fact that an agreement providing for the market controlled by the latter under a division of the markets and technical the Columbia mark as the provisions of cooperation has ceased to be in force Articles 85 and 86 of the Treaty have as does not by itself imply that the their sole object to protect the system of agreement has ceased to have any competition in the common market. restrictive effect on competition.

the same mark. If one or other of those it possible to avoid restrictions on conditions is not fulfilled the exercise of competition arising from the exercise of the trade-mark right constitutes the rights created by the national system of result of a restrictive agreement intended industrial and commercial property. to partition markets which, although it has expired, continues to produce effects by reason of the possibilities available The Commission finally observes in under national law on industrial and passing that if, contrary to its contentions, the Court considered that it commercial property.

It is incorrect to say that the prohibition records have already been put on the applied to CBS against using the market by CBS in the United States does Columbia mark in the common market not imply that owing to the identity of is not capable of having an appreciable the mark they are to be considered as affect on competition in that market marketed also by EMI, or with its since CBS is not prevented from selling consent, in the common market In other its records there by using other marks words the principle of the 'exhaustion' of than the Columbia mark. In view of the the right, recognized by the Court in the international reputation of this mark and Deutsche Grammophon Case ([1971] taking into account the size of the ECR 487) cannot be extended generally undertakings which claim the right to to cases where the products are put on use it, such a prohibition would on the the market in a third country by the contrary have appreciable restrictive proprietor of an identical mark.

dispute. expressly stated by the courts making the references.

EMI Records also emphasized the fact that CBS was capable of maintaining They further emphasized the difference active competition in the common of substance existing, with regard to the market by the sale of records bearing the abolition of barriers to trade with third CBS mark, manufactured in Europe or countries, between the provisions of by the introduction of records, bearing Articles 30 to 36, 85 and 86 of the Treaty the Columbia mark, manufactured in the on the one hand and the rules which the United States since the stickering of the Member States are free to adopt vis-à-vis latter category of records presents no third countries within the framework of major technical or financial difficulties. the common commercial policy.

'On the assumption that

(a) an economic unit A (parent and subsidiary companies) is the owner of a trade-mark X in all the Member States of the Community,

(b) an economic unit B with a parent company outside the Community and subsidiary companies within the Community is the owner of the same trade-mark X in respect of the same goods in States which are not members of the Community,

(c) the predecessors in title of A and B were initially associated and A's predecessor in title purchased trade-mark X from one of B's predecessors in title, but trade-mark X belonging to B changed hands several times and for more than 40 years there have been no legal, economic, financial or technical links between the two groups,

(d) that under national law A is entitled to restrain B from using trade-mark X,

do the principles of Community law on free movement of goods and unrestricted competition prohibit the exercise of the right under national law and may B not be ordered to refrain from selling in Member States goods with the trade-mark X manufactured in a country outside the Community in which country it is entitled to use trade-mark X?'

4 The essential purpose of the question submitted is to ascertain whether the proprietor of a mark in a Member State of the Community may exercise his exclusive right to prevent the importation or marketing in that Member State of products bearing the same mark coming from a third country.

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

5 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'.

Article 36, in particular, after stipulating that Articles 30 to 34 shall not preclude restrictions on imports, exports or goods in transit justified inter

EMI RECORDS v CBS SCHALLPLATTEN

According to Article 9 (2) of the Treaty the provisions of Chapter 1, Section 1 and of Chapter 2 of Title I of Part Two shall apply to products coming from third countries which are in free circulation in Member States.

9 Since those provisions only refer to the effects of compliance with customs formalities and paying customs duties and charges having equivalent effect, they cannot be interpreted as meaning that it would be sufficient for products

JUDGMENT OF 15. 6. 1976 - CASE 96/75

bearing a mark applied in a third country and imported into the Community to comply with the customs formalities in the first Member State where they were imported in order to be able then to be marketed in the common market as a whole in contravention of the rules relating to the protection of the mark.

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

ii The arrangements concluded by the Community in certain international agreements such as the ACP-EEC Convention of Lome 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.

2. With regard to competition

14 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.

A trade-mark right, as a legal entity, does not 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 if it were to manifest itself as the subject, the means, or the consequence of a restrictive practice.

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.

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.

18 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'.

19 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.

20 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.

21 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 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 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

On those grounds,

THE COURT

in answer to the question referred by the Landgericht Köln by order of 16 July 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 the Community from exercising his trade-mark rights, recognized by the national laws of each Member State, in order to prevent the sale 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.

OPINION OF MR WARNER — CASE 96/75

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.

(see case 51/75, p. 852)