C-258/78

NUiNGESSER v COMMISSION

In Case 258/78

1. L. C. NuNGESSER KG, Darmstadt, 2. KURT EISELE, Darmstadt, represented by Jürgen Gündisch, Rechtsanwalt, Hamburg, with an address for service in Luxembourg at the office of Jeanne Jansen-Housse, Huissier, 21 Rue Aldringen,

applicants, v

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Adviser, Erich Zimmermann, acting as Agent, assisted by Hans Ulrich, Rechtsanwalt' Munich, with an address for service at the office of Oreste Montalto, a Member of the Commission's Legal Department, Jean Monnet Building, Kirchberg,

defendant, with the participation of:

JUDGMENT OF 8. 6. 1982 — CASE 258/78

APPLICATION for a declaration that Commission Decision N o 78/823/EEC of 21 September 1978 relating to a proceeding under Article 85 of the EEC Treaty (IV/28.824 — breeders' rights — maize seed) (Official Journal 1978, L 286, p. 23) is void,

T H E COURT

composed of: J. Mertens de Wilmars, President, G. Bosco, A. Touffait and O. Due (Presidents of Chambers), Lord Mackenzie Stuart, A. O'Keeffe, T. Koopmans, U. Everling and A. Chloros, Judges,

Advocate General: S. Rozès Registrar: H. A. Rühi, Principal Administrator

gives the following

under the terms of which Mr Eisele Clause 2 undertook to represent INRA before the Bundessortenamt [the German institution responsible for registering breeders' Mr Eisele undertakes to supply seeds rights] for the purpose of securing the to every German undertaking or registration of the maize varieties cooperative which offers the necessary developed by INRA (Clause 1). Mr assurances, technical and other; the Eisele also undertook to keep INRA prices quoted to such undertakings up to informed of all matters relating to the the level of agricultural cooperatives marketing of those varieties in the shall be fixed in agreement with INRA; Federal Republic of Germany (Clause 4). such prices are to take into account the selling prices of French exporters ( . . . ) . By declarations dated 19 January and 8 February 1961 INRA assigned to Mr Eisele, with effect from 14 December Clause 3 I960, breeder's rights in the Federal Republic of Germany for four varieties of maize seeds. Those declarations Mr Eisele undertakes to import at least included the following clause: "To the two thirds of the German market's seed extent to which the contents of this requirements from France through the declaration amend the agreement entered intermediary of the French organization into, that agreement is hereby amended responsible for centralizing and coordi- by common accord." nating maize exports (...). On payment of a royalty Mr Eisele is authorized to produce or cause to be produced under Mr Eisele then had the maize varieties his own responsibility the balance, that is which had been developed by INRA to say no more than one third of the registered with the Bundessortenamt and seeds necessary to satisfy the German thus became the owner in the Federal market. Republic of Germany of breeder's rights over those varieties. Clause 4 4. On 5 October 1965 INRA and Mr Eisele entered into a new agreement relating to six varieties of maize seed, Mr Eisele undertakes to enforce INRA's which stated as follows : proprietary rights in its varieties, in particular against passing-off; he is auth- orized to use the INRA trade mark, "Clause 1 which is internationally protected, and shall have all powers to take such action as may be necessary. INRA confers on Mr Eisele the exclusive right to organize sales in the Federal Republic of Germany of its maize varieties (...). It is agreed that the Clause 5 exclusive rights granted to Mr Eisele are limited to the organization of sales and do not imply exclusive selling rights. INRA undertakes to ensure that the relevant organization shall take all necessary steps to prevent INRA maize Mr Eisele undertakes to refrain from varieties from being exported to the organizing the sale of maize varieties Federal Republic of Germany otherwise other than INRA varieties. than by way of Mr Eisele."

5. That agreement thus conferred on seeds for export. Its 18 shareholders are Mr Eisele the exclusive right to produce all suppliers of maize seed operating in and distribute INRA varieties in the France; more than 60% of its share Federal Republic of Germany. Mr Eisele capital is held by the four main suppliers, assigned those exclusive rights to one of which is Limagrain. Nungesser. That company was thus subrogated to Mr Eisele's rights under the contraa with INRA, save as regards the registration of varieties with the 7. In accordance with Article 4 of Bundessortenamt, which is always Regulation No 17 of the Council of performed in Mr Eisele's name. 6 February 1962, the First regulation implementing Articles 85 and 86 of the EEC Treaty, (Official Journal, English Special Edition, 1959 to 1962, p. 87) the It is thus Nungesser which carries out contraa of 5 Oaober 1965 was notified the transactions arising out of the per- to the Commission on 1 November 1965. formance of the contract of 5 October 1965. Until 1973/74 approximately 20% of that company's total sales in the Federal Republic of Germany were 8. In application of the agreements in accounted for by INRA varieties. The question importation and resale in the INRA seeds sold by Nungesser from Federal Republic of Germany by third 1960 to 1972 accounted for more than parties were prevented by threats of legal 50% of the German market in each year. action by Fraserna and by Mr Eisele. Since 1974 that proportion has diminished but Mr Eisele has kept his total share of the German market above 25% because in the meantime, without Thus the undertaking Louis David KG any objection from INRA, he has had to conclude a settlement on 14 become the exclusive licensee of the September 1973 before the Landgericht French cooperative Limagrain. [Regional Court] Bad Kreuznach. Under that settlement it was to pay the sum of DM 4 000 damages for importing from France and re-selling in the Federal Republic of Germany, without Mr 6. For its part, INRA, which, because Eisele's authorization, 15 tonnes of of its status as a body established under certified seed of INRA varieties. Fur- public law, is not empowered to exploit thermore, it undertook to refrain from its own varieties commercially, granted selling or putting into circulation in the an exclusive licence for that purpose to future seeds of INRA varieties without Fraserna, a French company trading in Mr Eisele's consent. maize seeds. To that effect it transferred to Fraserna, by agreement of 13 August 1973, responsibility for the performance of all contracts which it had previously entered into. 9. Similarly, the undertaking Robert Bomberault, of Argent-sur-Sauldre (Cher), which had inserted an advertisement in the journal "Ernäh- Fraserna, which was set up on 18 June rungsdienst", published in Hanover by 1973, is responsible, inter alia, for the the Alfred-Strothe-Verlag, offering for production and sale of basic INRA seeds sale for the first time certified INRA and for the sale and purchase of INRA seed which it had lawfully acquired in

B — The decision (b) in the contract of 5 October 1965:

On 21 September 1978 the Commission Clause 1 : adopted Decision No 78/723/EEC relating to a proceeding under Article 85 the exclusive nature of the licence of the EEC Treaty (IV/28.824 — granted by INRA to propagate and breeders' rights — maize seed) (Official Journal 1978, L 286, p. 23). That decision forms the subject-matter of 1 — Translator's noie: The English translation of the decision published in the Official Journal is no: these proceedings. authentic and has not been followed in all respects.

JUDGMENT OF 8. 6. 1982 — CASE 258/78

sell maize seed of its own varieties territory, and to import the balance that has been officially certified, to from France; the extent that this exclusivity is interpreted and applied by the parties as entailing: Clause 5:

The obligation upon INRA or those the obligation upon INRA to ensure deriving rights through INRA to that all exports of its varieties to refrain from having the relevant Germany are prevented, in so far as seeds produced or sold in Germany this obligation concerns seed that has by other licensees; been officially certified; The obligation upon INRA or those deriving rights through INRA to (c) the settlement of 14 November 1973: refrain from producing or selling the relevant seeds in Germany themselves; Clause 1:

The obligation upon INRA or those the obligation upon Louis David KG deriving rights through INRA to to refrain in future from selling '">r prevent third parties from exporting marketing seeds of INRA varieties :n the relevant seeds into Germany Germany without permission from without the licensee's authorization, the German licensee. for use or sale there; Mr Eisele's concurrent use of his Article 2 exclusive contractual rights and his own breeder's rights to prevent all imports into Germany or exports to The application for exemption under other Member States of the relevant Article 85 (3) of the EEC Treaty made seeds; by Mr K. Eisele is rejected.

territory. By undertaking not to produce (ii) The agreements are not necessary or sell the product itself in the territory for the attainment of the objectives covered by the contract the licensor set out in Article 39 of the Treaty. likewise eliminated itself, and also The means necessary for that Frasema and its members, as suppliers in purpose were defined in Regulation that territory. (EEC) No 2358/71 of the Council of 26 October 1971 on the common organization of the market in seeds Furthermore, the fact that third parties (Official Journal, English Special may not, without authorization from Edition 1971, (III) p. 894), and the INRA or Mr Eisele, import the seeds in agreements cannot in any way be question into Germany or export them considered to all within the from Germany leads to market sharing provisions of that regulation. and deprives German farmers of any real room for negotiation since those seeds are supplied by one supplier only. Particular characteristics of seeds

JUDGMENT OF 8. 6. 1982 — CASE 258/78

satisfied the tests for exemption under C — Procedure Article 85 (3). There are even circum- stances in which exclusive selling rights linked with prohibitions against It is against that decision, which was exporting might also be exempted, for notified to them on 27 September 1978, example, when the exlusivity is needed to that the applicants brought the present protect small or medium-sized under- application. The application was lodged takings in their attempts to penetrate a at the Court Registry on 27 November new market or promote a new product, 1978. provided that parallel imports are not restricted at the same time. By orders of 19 April 1979, 24 July 1979, 12 September 1979 and 30 January 1980 respectively the Court allowed the In the present case, however, the United Kingdom, the French Republic, Commission left open the assessment the Caisse de Gestion des Licences under Article 85 (3) of the exlusive Végétales and the Federal Republic of propagation rights granted to Mr Eisele, Germany to intervene in the proceedings. since, in its opinion, the tests for exemption of the exclusive selling rights and the accompanying export prohib- On hearing the repon of the Judge- itions are in any event not satisfied. This Rapporteur and the views of the is for the following reasons: Advocate General, the Court, by letters dated 2 October 1980, invited the parties to supply further information on certain (i) There is no question of a new questions of fact, namely: market being penetrated or a new product being launched; (a) the varieties of maize seed at issue in the present case, (ii) In any event, Mr Eisele enjoys absolute territorial protection. All (b) the price levels prevailing for those imports through other channels are seeds in France and Germany during prevented, notwithstanding a per- the years prior to the Commission's sistent demand for such imports in decision, and Germany, so that there is no question of an improvement in the production or distribution of goods (c) the services which Nungesser in as required by the first condition laid practice provided in order to make down by Article 85 (3). the varieties of maize seed in question usable in Germany.

II — C o n c l u s i o n s of t h e p a r t i e s comparable. The contested decision was also founded on that assumption. It is, The applicants claim that the Court however, erroneous. In particular, it should: disregards the considerable services which Mr Eisele had to provide to adapt Declare the decision of the Commission the French seeds to the requirements of of 21 September 1978 void, with the the German market. exception however of that part of Article 1 (b) of the decision which provides that To illustrate that problem, the applicants the licensee may not, for the duration of begin by explaining the requirements laid the contract, produce or sell seeds of a down in Germany as regards the germi- variety which competes with those of nating capacity ("Keimfähigkeit") and INRA and also that part which relates to germinating energy ("Triebkraft") of Clauses 2 and 3 of the contract of maize seeds. 5 October 1965. Germinating capacity is the maximum The defendant contends that the Court capacity of a seed to germinate in the should: most favourable, laboratory conditions possible. Germinating energy is the Dismiss the application as unfounded capacity of the same seed to grow under and order the applicants to pay the costs. difficult cultivating conditions, for example in a cold or dry climate. Ill — Submissions and argu- It is possible for a maize seed which m e n t s of the p a r t i e s achieves a high germinating capacity to possess a low germinating energy. The applicants make the following According to the applicants, the Com- submissions: mission is overlooking the differences which exist in this respect between Infringement of Articles 30, 36 and 85 France and Germany. In France, where (1) and (2) of the Treaty; the conditions for growing maize are Infringement of Regulation No 17, and more favourable, germinating energy is in particular Articles 4 and 8 thereof, not governed by any special regulations. and of Regulation Ño 26; Community rules relating to germinating Misuse of powers, inasmuch as the capacity are laid down by Directive Commission did not accurately establish 66/402 of the Council of 14 June 1966 the facts and departed from the on the marketing of cereal seed (Official consistent administrative practice which Journal, English Special Edition, 1965- it had followed previously. 1966, p. 143). In respect of maize seed the minimum germinating capacity for marketing is fixed at 90 % of pure seed. A — The facts However, on account of the poor climatic conditions prevailing in 1. Services performed by Mr Eisele: Germany, German legislation requires, in (a) Germinating capacity and germi- addition to a germinating capacity of nating energy 90 %, a minimum germinating energy of 85 % (Saatgutverordnung-Land- The applicants maintain that the wirtschaft [Regulation relating to seeds Commission based its assessment of the in agriculture] of 2Julv 1975, BGBl, I, effects of the contracts in question on p. 1659). the assumption that the batches of maize seed marketed in France and those INRA maize seeds imported from exponed to Germany are broadly France, although having a germinating

In reply to the questions raised by the It observes that the right reserved to Court, the applicants stated that the 1966 Member States bv Article 5 of Directive directive had laid down for maize seeds 66/402 to lay d( n more stringent sup- a minimum germinating capacity of plementary conditions is confined to 90 % of pure seed. Under the terms of seeds produced within the national Article 4 of the directive Member Sutes territory. Therefore trade in seeds from may reduce that figure to 85 %. Article 5 another Member State of the of the directive permits Member States to Community may not be made subject to impose additional or more stringent legislative or administrative restrictions requirements, in particular as regards on the part of the German authorities. In germinating capacity, in respect of seeds the present case, moreover, trade was produced in their own territory. not restricted.

Therefore the requirement of a minimum The rants stated that German germinating energy provided for under legisla had since 31 May 1968 German law (since 1977 85 %, pre- requir a minimum germinating ca- viously 75 °/o) merely concerned seeds pacity 85 % of pure seed. Moreover, produced in Germany. a supplementary requirement of a germi- nating energy not less than 75 % of pure seed is laid down for maize. As from Moreover, Article 23 (2) of the Saatgut- 23 May 1977 those requirements have verkehrsgesetz [Law on the marketing of been modified. The minimum germi- seeds] of 1 July 1975 (BGBl. I, p. 1453) nating capacity has been increased to defines those cases in which seeds are 90 % to conform with Community not required to be certified for impor- standards and the supplementary require- tation. The second sentence of that ment relating to germinating energy has provision states that: been fixed at 85 %.

The applicants stress that since 1968 all the controls carried out on the imported the requirements relating to the properties seeds showed that, in spite of a germi- of seeds, thus including germinating nating capacity of 90 % or more, that energy, have had to be supervised by germinating energy required by German official bodies (Article 12 (1) (2) in legislation (75 % and 85 %) had not conjunction with Article 10 of the been achieved. Getreidesaatgut-Verordnung of 31 May 1968, BGBl. I, p. 566). (h) Chemical treatment Before 1968 German law did not provide for any control of germinating energy The applicants observe that in France except where the minimum germinating seeds are treated with chemical subs- capacity had not been achieved. tances the use of which is not authorized in Germany. That fact prevented seeds officially certified and marketed in The applicants observe also that France from freely crossing the border Nungesser produced a part of its seeds into Germany. of INRA varieties in Germany and imported another part. If the germinating energy of the imported seeds had not The Commission disputes that assertion. been tested there would have been a risk Although in France a different product is that the imported varieties and the used, that product contains the same varieties produced by Nungesser might chemical agent (Anthraquinone), in show different levels of quality. respect of which French legislation Nungesser could not accept such allows the same dosage for the differences because users legitimately disinfection of seeds. expected that all the INRA varieties of maize seed marketed by it should show the same levels of quality. In reply to the questions raised by the Court, the applicants state that plant treatment products may only be The Commission affirms that the imported into Germany if they have been applicant's statements are correct as approved by the Biologische Bundes- regards German and Community anstalt für Land- und Forstwirtschaft legislation. It acknowledges that in order [Federal Biological Institute for Agri- to comply with the German regulations culture and Forestry]. The product laid down in 1968 it was always Anthraquinone does not appear in the necessary to check the germinating list of products permitted in Germany. energy as well as the germinating capacity of maize seeds. The Commission replies by stating that it is not a question in the present case of the importation of treatment products. It maintains however that, according to Article 23 (2) of the Saatgurverkehrs- gesetz of 1 July 1975, for the seed to be On the other hand, as regards the imported it is sufficient that it be problem of seeds imported from another certified or admitted in another Member Member State and treated with plant State of the EEC. protection products, Article 23 (2) of the Saatgutverkehrsgesetz of 1 July 1975 permits the importation of seeds which Furthermore, it is of the opinion that the satisfy the conditions applicable in applicants have not demonstrated that another Member State of the EEC.

1972 1973 1974 1975

Prices in France according to the Com- miísion FF 3.00 FF 3.00 FF 3.10 FF 4.00 Prices in France according to the appli- _ , „ cantt FF 7.00 FF 3.55 FF 3.90 FF 4.20 1972 1973 1974 1975

Prices in Germany according to the _ Commission DM2.70 DM2.80 DM2.85 DM2.90 Prices in Germany according to the _ applicants DM2.51 DM2.65 DM2.70 DM2.80

NĽNGESSER v COMMISSION

The Commission states that the prices between a quarter and a third of the which it based itself upon are average total distribution of seeds in France. prices charged for 1 kg of Inrakorn (258) exclusive of VAT, at the same In reply to the questions raised by the stage of distribution. The French prices Court, the applicants conceded that, as were calculated on the basis of figures regards the prices charged in Germany, originating from 10 of the main regional the difference between their figures and agricultural cooperatives. those put forward by the Commission is not of such a nature as to influence the The German prices were calculated by decision which the Court is called upon the Commission on the basis of infor­ to take. On the other hand, as to the prices charged in France, the differences mation supplied by Nungesser and by the between the parties remained consider­ firm Stroetmann in application of Article able. 11 of Regulation No 17.

In support of their arguments in that In the applicant's view, the prices which connection the applicants submitted a the Commission based itself upon as study by the Institut de Gestion et regards France are not representative. d'Economie Rurale [Institute for Rural The Commission carried out its inquiries Management and Economy] of May largely in the vicinity of Paris and did not take account of the main areas of 1980 which gives the average costs per demand for maize seeds. Furthermore, hectare of maize seeds for the vears the Commission simply calculated the 1971-72 and 1974 to 1977. The resulting average of the prices gathered, without figures for the prices of maize seeds were carrying out any weighting. as follows:

1972: FF 460 prices but merely the prices recommended by the seed producers. 1973: FF 355 1974: FF 390 The information submitted by the 1975: FF 420. applicants as regards the respective shares of cooperatives and private traders in the total volume of transactions As regards the strutture of the maize- carried out in France on the maize-seed seed market in France, the applicants market consists of mere assertions. observe that there are many more private Against those assertions the Commission traders selling maize seed (1 393) than submits an article published in the cooperatives (523). The share of the specialized press ("La distribution des market held by the private sector is in semences de maïs", appearing in the order of 65 to 70 %, whilst the share Semences et Progrès No 22, October/ held by cooparatives may be estimated at December 1979, pp. 21 to 23) which between 30 and 35 %. Therefore the shows that 57 % of sales to fanners were information supplied by the Commission effected by cooperatives and 43 % by is not representative. The applicants add private traders. The average figures for that the market for seed in France sales to fanners are 617 quintals per reveals considerable fluctuations in price cooperative and 126 quintals per trader. and that those fluctuations are due to the activities of the private sector, the Under those circumstances the cooperatives confining themselves as a Commission adheres to the information general rule to the regular supplying of on prices which it gave previously. It also their clients. observes that it based its calculations on figures supplied by the 10 most important cooperatives of the French The Commission considers that the departments where the production of documents submitted by the applicants maize is highest. reveal nothing about the retail prices charged by private traders in general nor Moreover, it claims that the French sub- about the prices of INRA varieties in sidiary of Nungesser in Strasbourg particular. The study undertaken by the charged the following prices: Institut de Gestion et d'Economie Rurale does not constitute an inquiry into price 1972: FF 3.20-3.35 formation on the French maize-seed market but an investigation into the prof- 1973: FF 3.20-3.30 itability of the cultivation of maize in 1974: F 3.50-3.55 general. The study cites no prices and 1975: FF 4.20-4.30 merely mentions costs without any indication as to the way in which the so that there were considerable prices which form the basis for the calcu- differences from the prices charged in lation of those costs were ascertained. Nor does it say anything about the Germany. considerable fluctuations observed by the applicants in prices paid by users. B — Legal appraisal

and 16 December 1960. That contract The assignment was merely a formal was substantially nullified by the assignment intended to obviate the declarations of 19 January and 9 obstacles then posed by German legis- Februar}· 1961. An assignment of lation which impeded the registration of breeders' rights took the place of the foreign varieties in the German list of representation of INRA by Mr Eisele for varieties. It was necessary to transform a the purpose of registering the varieties foreign variety into a national variety by with the Bundessortenamt. That was means of an assignment of the variety to necessary because entry in the German a German national. Registration then list of varieties was only possible through enabled a formal legal position to be the intermediary of a German breeder. acquired permitting absolute territorial protection. Thus the assignment, whilst formally valid, ought not however to be regarded, from an economic point of view, as constituting anything other than Therefore Mr Eisele cannot claim any one aspect of the selling rights conferred breeders' rights under the contract of 14 on Mr Eisele. and 16 December I960, which no longer exists. To declare that contract contrary to Article 85 (1) amounts to a misuse of powers. Mr Eisele may, however, continue to assen his breeders' rights by The Commission stresses, moreover, that virtue of the assignment dated 19 the decision states in Article 1 thereof January and 9 February 1961, which is that it relates to "the c o n t e n t . . . of the not affected by the Commission's contract of 14 and 16 December 1960 by decision. which INRA assigned to Mr Eisele the breeder's rights in Germany". Therefore the decision also relates to the assignment. The Commission maintains that the contract of ' 4 and 16 December was not supersedec uy the subsequent decision. The assignment merely amended that 2. Community rules on competition and contract, which was to continue in force. breeders' rights It is for that reason that the declarations of assignment were antedated to 14 December 1960 and the preamble to the agreement of 1965 still referred to the The applicants state that under the terms contract of 1960. of Article 12 of the Sortenschutzgesetz [Law on the protection of plant species] of 20 May 1968 (BGBl. I p.. 429) breeders' rights belong to the person The retroactive attachment of the entitled. That person is the person who is declarations of assignment of January responsible for the cultivation or the 1961 to the contract of December 1960 discovery of the variety in question or his indicates that those declarations were to successor in title. By virtue of the be used to organize sales in Germany of agreement of 19 January and 9 February INRA maize varieties for which the 1961 Mr Eisele is the successor in title to contract of 1960 had prepared the way. the producer, INRA. By virtue of the Thus they did not confer an first paragraph of Article 15 of the economically autonomous status as aforementioned Law Mr Eisele became owner of breeder's rights on Mr Eisele. the owner of the exclusive right to

According to the applicants, the first Secondly, hybrid seeds must constantly paragraph of Article 15 of that Law also be reproduced by a biological process in entitles the owner of breeders' rights to order to maintain them. prohibit the importation, without his authorization, of seeds of the protected variety into Germany. That is the in- Thirdly, the introduction of a new terpretation which the Bundesgerichtshof variety of seed and the care it must [Federal Court of Justice] gave to receive will require, in contrast to an Articles 6 and 35 of the former Law on industrial patent, more intensive efforts, seeds, which was similar in terms to the which must be tailored to the individual present Law, in a judgment delivered on characteristics of a country. 29 February 1968 (GRUR 1969, p. 195) concerning the potato variety "Voran". The Commission first reviews the The Bundesgerichtshof founded its previous decisions of the Court, which judgment on the principle of territo- has laid down the principle that the grant riality, which applies as much to the law of exclusive rights with the purpose of on the protection of plant species — and protecting absolutely the marketing of with greater justification — as to the law products within a particular territory on patents. against the importation of identical products constitutes a breach of the rules designed to protect free competition The Commission, in the contested (judgment of 13 July 1966 in Cases 56 decision, sought to circumvent the legal and 58/64 Consten and Grundig v consequences arising from German law Commission [1966] ECR 299; judgment by applying competition law. That of 18 February 1971 in Case 40/70 application is, however, incompatible Sirena v Eda [1971] ECR 69; judgment with the interpretation generally given to of 15 June 1976 in Case 51/75 EMI the laws on the protection of new plant Records v CBS United Kingdom [1976] varieties in force in most Member States. ECR 811; judgment of 20 June 1978 in Those laws were adopted in implemen- Case 28/77 Tepea v Commission [1978] tation of the International Convention ECR 1391). signed in Paris on 2 December 1961 for the Protection of New Varieties of Plants (United Nations Treaty Series, The contested decision is based on those Vol. 815 p. 89;. That Convention also same principles. The adverse effects on adopted the principle of territoriality. trade between the Member States is a direct consequence of the absolute territorial protection established for The applicants submit that the principles France and Germany. As the decision enunciated bv the Court as regards indicates the applicants have, in collab- possible breaches of Community law by oration with INRA or Fraserna, the exercise of industrial property rights infringed Article 85(1) of the EEC may not be applied to the present case Treaty because, in the first place, Mr because breeders' rights have specific Eisele, on the basis of a contraa characteristics which demand a strict granting him exclusive selling rights application of the principle of territo- acquired breeders' rights which enabled riality. him to receive absolute territorial

protection on the national market on relationship manifests itself in the which he enjoyed those exclusive rights structure of the two rights of propert}·, in and, secondly, he actually exploited the same way that any divergencies those rights, in agreement with the other between them may be explained by the party to the contract, in such a way as to natural differences existing between their protect his market by giving additional respective subject-matter. Thus both contractual protection to those rights German law and French law grant the against exports. same opportunities of exploiting those rights to the holder of the patent and to the registered breeder, save as regards As regards the objections which the the "utilization" of seeds because it applicants have raised, based on the would then be prohibited to use them for nature of breeders' rights, the the purposes for which they are ordi- Commission stresses that the judgments narily intended. For similar reasons the of the Court make a clear distinction opportunity of creating derived varieties between two different cases; first, the must remain open.

In fact in the latter hypothesis, which corresponds to the present case, the objective of Moreover, national laws governing exclusivity ceases to be legitimate to the breeders' rights, like national laws on extent to which the exclusivity is relied patents, recognize the principle of the upon to further a practice or agreement exhaustion of rights as soon as the restricting competiton. holder or any person authorized by him markets for the first time the protected article. Nor does Community law tolerate obstacles to parallel imports in the case of breeders' rights (judgment of 31 In the Commission's view, that means in October 1974 in Case 15/74 Centrafarm particular — and this is generally v Sterling Drug [1974] ECR 1147; consistent with the purpose of breeders' judgment of 29 February 1968 in Case rights — that the protection conferred by 24/67 Parke, Davis & Co. v Probei and exclusive rights covers only the identity Others [1968] ECR 55; judgment of 8 of the variety as it appears in the June 1971 in Case 78/70 Deutsche definition of its distinct character. Grammophon v Metro [1971] ECR 487).

JUDGMENT OF 8. 6. 1982 — CASE 258/78

NUNGESSER v COMMISSION

That pan of the Commission's decision to Nungesser in respect of the territory refers to two matters: first, the use by of the Federal Republic of Germany. Mr Eisele of his exclusive contractual That provision of the Community Patent rights and, secondly, the use of his own Convention demonstrates that Member breeder's rights to prevent all imports of States were and remain of the opinion INRA products. Both are declared to be that it is possible by means of a patent contrary to Community law. licence to grant exclusive exploiting rights delimited as to territory.

JUDGMENT OF 8. 6. 1982 — CASE 258/78

Thev balance which should exist between the did not prejudge the validity of such protection of patents or new varieties licences under the law relating r.o and freedom of competition, that is to concerted practices. say promotion of technical progress, on the one hand, and the dissemination of the technical progress thus encouraged, In their reply, the applicants maintain on the other hand. that the possibility of granting an exclusive licence is an integral part of breeders' rights. The economic reason, and thus the justification, for making To avoid misunderstandings, the such rights assignable is to be found in Commission states that an exclusive the faa that it is often only by an licence may not escape examination assignment of his rights that the inventor under Article 85 (1) by the mere fact that or the breeder is able to exploit them it resembles an assignment and so merely economically. In faa inventors or displaces or transfers to the licensee the breeders are often not in a position to owner's right to preclude third parties exploit their rights themselves.

NUNGESSER v COMMISSION

as the Commission is stating, does not licence demonstrate with abundant justify the application of Anicie 85 (1) clarity that the Commission regards an of the EEC Treaty. In principle, exclusive licence itself as an unlawful Community rules on competition do not restriction on competition constituting by in fact override the traditional rights its very nature a breach of Articles 85 (1) protecting industrial property. Any of the Treaty. patent right or breeder's right constitutes in itself a restriction on competition since the right of exclusive user which is reserved to the inventor or the breeder precludes the invention or the new In its rejoinder, the Commission states variety from being exploited by third that an assignment constitutes a simple parties. Assignments are likewise transaction which does not establish any restrictions on competition since the lasting contractual relationship between inventor or the breeder who assigns his the assignor and the assignee. It is rights is precluded from exploiting his different in the case of a licence because invention or new variety thereafter. But the profits deriving from that licence are the Commission is surely not of the divided in accordance with the obligation opinion that any assignment of industrial to pay a royalty. Furthermore, the property rights constitutes an infringe- licensor and the licensee continue to be ment of Article 85 (1). contractually bound.

JUDGMENT OF 8. 6. 1982 — CASE 258/78

NU.NGESSER v COMMISSION

JUDGMENT OF 8. 6 1982 — CASE 258/78

NUNGESSER v COMMISSION

exemption are not applied in such a way market was lost for INRA varieties that they would run counter to those produced in France, these being replaced conditions. on the market by other comparable varieties.

JUDGMENT OF 8. 6. 1982 — CASE 258/78

restriction on competition was a continuing commercial relationship appreciable. The Caisse de Gestion, in between the parties must be treated in the Commission's view, ignores the fact the same way as an exclusive licence. that it is not merely a question of Typically an exclusive licence is restrictions on competition with other conferred by virtue of a contraa under varieties (inter-brand competition) but which the licensee may exercise the that even restrictions on competition industrial or commercial property right with products of the same variety (intra- in a given territory, in which the owner brand competition) are sufficient to bring refrains from exploiting the right, and into play Article 85 (1) of the Treaty. the licensee acquires the right to bring proceedings for any infringement of his rights. Moreover, that article comes into play not merely where competition is "compromised" but from the moment The application of Article 85 (1) to when it is in one way or another exclusive licences would have the result restricted or distorted appreciably. If that of making owners of industrial property is the object of the agreement there is no rights reluctant to exploit those rights by need to examine its effects in practice. way of exclusive licences. They could of Having established that the agreements course apply for an exemption under entered into between Fraserna and the Article 85 (3) but the risk that such an applicants were restrictive of competition application might be refused would be simply by reason of their object, the too great to allow major investments. Commission had no reason to support its Thus the Commission would be obliging decision with any further arguments. operators to take a complete bundle of rights under a licence covering the whole Community; that would favour the growth of large pan-European com- panies trading throughout the common 2. The application of Article 85 (1) of the market to the detriment of small and Treaty to exclusive licences medium-sized undertakings.

(a) In holding that the fact that the licensor "deprives himself . . . of the The products covered by the plant ability to issue licences to other breeders' rights are not mechanically undertakings" causes the exclusive reproducible and their production licence to fall within Article 85 (1); involves a considerable financial commitment. It follows that the assignee must be protected throughout the (b) In holding that the fact that the duration of the risk due to the fragility licensor undertakes not to make or of the seed. sell in the licensed territory causes the exclusive licence to fall within Anicie 85 (1); The Caisse de Gestion submits that the right to grant exclusive licences forms part of the specific subject-matter of the (c) In holding (by implication) that it is protection of plant varieties. It takes the not pan of the specific subject- view that exclusive licences increase matter of plant breeders' rights that competition because a market is being they may be transferred to another supplied on which the owner of the party; breeders' rights could not operate himself. (d) In holding (in so far as goods put in free circulation by or with the consent of INRA are concerned) that Competition is not restricted by the fact the effect of the agreements was that that the owner, by granting an exclusive "third parties may not import . . . licence, deprives himself of the right to from other Community countries"; grant licences to others. The owner is also entitled not to grant any licence, a factor which has never been analvsed as (e) In holding that obligations imposed to its restrictive effects on competition. in France upon licensees in France not to expon directiv to Germany fall within Article 85 ('l); The owner's undertaking not to compete with the licensee in the territory covered by the licence is justified by necessity. (f) In holding that the application of Licensees must be able to exercise their Anicie 85 (1) in the present case rights undisturbed. The effect of does not "jeopardize rights granted removing that restriction would be to by national laws . . . either in relating confine the exercise of incorporeal rights to the existence of those rights or in solely to undertakings capable of relation to their specific subject- exploiting those rights over the whole matter". area of the common market.

The Caisse de Gestion emphasizes that Community law either in their existence, the Court defined the substance of their substance, their specific subject- industrial property rights in its judgment matter or their main function. However, of 31 October 1974 in Case 15/74 individual cases revealing a certain (Centralfarm v Sterling Drug [1974] ECR manner of exercising those rights might 1147, at paragraph 9). The grant of constitute an infringement of Com- licences to third parties forms part of the munity law. In its judgment of 31 specific subject-matter of industrial October 1974 in Centrafarm v Sterling property rights, the exclusive right Drug the Court recognized that the right granted to the owner of that right being of a patentee to exploit his invention by intended to reward creative effort. If the granting licences to third parties forms issue of ordinary licences were part of the specific subject-matter of the considered to form pan of the specific patent. subject-matter of the right whilst the issue of an exclusive licence were not covered by that concept the exclusive right of the owner would lose its true purpose. The owner would then be In the present case it must therefore be deprived of his just remuneration ascertained whether the right to grant whenever a right could be exploited prof- licences also forms part of the specific itably only by means of the grant of an subject-matter of other industrial or exclusive licence. commercial property rights, in particular breeders' rights, and whether a different answer is called for in the case of an exclusive licence. The Caisse de Gestion is of the opinion that the Commission in its analysis did not distinguish between the contracts which it condemned, with the result that it disregarded the difference between the The German Government observes in rights conferred by those contracts on that connection that the specific subject- the applicants. As far as the Commission matter of an industrial property right is is concerned, the assignment of breeders' composed of the aggregate of the rights rights under the system established has conferred on the owner of the right by no purpose other than to reinforce the national legislation. Those include the exclusive rights already granted. The right to deal with the property right by Commission thus treated on the same assigning it, wholly or in part. The grant footing two different rights: breeders' of licences is one of the ways of rights and exclusive distribution rights. assigning certain rights, whether by ordinary or exclusive licence. Such granu may be explained by the concern of national laws to stimulate innovative tendencies by conferring on industrial and agricultural innovations protection by means of breeders' rights and patent rights. In line with those ideas, it was The Government of the Federal Republic decided by national legislatures, having of Germany first points out that, regard to the economic interests in according to the decisions of the Court, question, that exclusive rights limited those industrial property rights which are in time constitute an additional defined by the national laws of the encouragement to innovative efforts, h Member States are not affected by may be deduced from Article 2 of the

The obligation imposed on the owner of the right not to grant licences to other The German Government considers that, undertakings and to refrain from if exclusive licences were to be exploiting the invention or the protected considered unlawful in general, and not variety himself, cannot constitute a merely in cases of abuse, undertakings restriction on competition. At issue in the would show less interest in licences and present case is a mere assignment which that would give rise to harmful involves a change in the identity of the consequences on the market for the person exercising the powers associated products covered by industrial property with the breeders' rights. That rights. Such an interpretation — which assignment finds its justification in the seems to be the one favoured by the freedom of action of the owner of the Commission — would prejudice the right and thus there can be no question dissemination of knowledge and of a restriction on competition. Further- techniques within the Community. more, it does not involve a restriction on Besides, it would have unfavourable competition greater than that auto- consequences on small and medium- matically arising from the exclusive sized undertakings, which do not effects of industrial property rights and is normally have a sufficiently strong the consequence of the latter and not of financial base to be able to set up an agreement. production facilities or sales organ- izations. If those undertakings were deprived of the power to grant exclusive The German Government is of the licences they could no longer make use opinion that the same considerations are of the exclusive powers which belong to valid against the argument thai, since the them as forming pan of their rights. agreement has the effect of granting a Thus the view that exclusive licences are licence to a single undertaking alone, unlawful would, from an economic point other potential licensees are denied of view, merely tend to favour the access to the property right because they concentration of undertakings since only are no longer able to obtain licences and the financial and commercial giants thus create competition on the market would economically be in a position to for the invention or the protected set up their own production facilities and variety. Added to that is the fact, at least sales organizations. in the case of breeders' rights, that the

different varieties are interchangeable granting an assignment thereof by means and therefore the freedom of choice of of an exclusive licence to a third party in licensees is not prejudiced since they can consideration of a payment. To exclude fall back on other varieties. Furthermore, assignability would seriously prejudice the principle of the exhaustion of rights breeders'rights.The competition rules of ensures an adequate degree of the Treaty apply to transactions competition on the market in question. transferring rights only in so far as the agreements or practices in question have as their object or effect consequences going beyond that specific subject- The German Government maintains that matter. it is for the owner of the right to decide what he considers to be the full value of his industrial property right. The Replying to the Government of the Commission is not in a position to United Kingdom, the Commission states determine what should be the remuner- that it has a duty to intervene ation of the owner of the right. spontaneously to ensure the observance of competition rules in the general interest and thus to ensure that persons in a weak bargaining position are As regards the application of the rules on protected. free competition to agreements granting exclusive licences of breeders' rights, the German Government sutes in the first place that breeders' rights are of a The definition of an exclusive licence particular nature inasmuch as they given by the British Government is involve biological material. In particular, incomplete. A licence is not merely the the owner of the right must have certain right granted to a licensee to make use possibilities of disposing thereof; of the industrial property right in a given otherwise the breeders' rights would be area. It is much more a contract by affected in their very existence. The virtue of which a single licensee is auth- German Government adds that the scope orized to exercise the property right. It is of breeders' rights in national law is not the exclusivity of the property right characterized by the fact that, on the one but the exclusivity of the licence which is hand, exclusive licences are expressly decisive. included therein (Article 17 (3) of the Sortenschutzgesetz) and that, on the other hand, they are narrower in scope than patent rights. Breeders' rights The Commission maintains that the merely cover propagating products; the views put forward by the United protection which they give is limited to Kingdom would have the effect of propagation for sale on a commercial reducing the scope of Article 85 (1) of basis and to that sale itself (Article 15 (1) the Treaty to nothing or at least treating of the Sortenschutzgesetz). favourably certain restraints on competition. Indeed, the reasons invoked by the intervener could also justify other restrictions on competition, for example In conclusion, the German Government rationalization agreements, exclusive maintains that the specific subject-matter distribution agreements or joint sub- of breeders' rights encompasses the sidiaries. These, however, may be power of the owner to realize the rendered lawful only by an exemption economic value of these rights by under Article 85 (3). They are of no less

As regards the "liberalizing effect" of exclusive licences, the Commission states It states that the reasons underlying the that such an effect may only be brought grant of exclusive breeders' rights are not about by means of ordinary licences. It sufficient by themselves to justifv an emphasizes that an exclusive licence exclusive licence. In order to justify' the cannot be equated with an assignment. choice of an exclusive licence in pre- ference to an ordinary licence, other reasons must be found which go further Replying to the French Government and than those which justify in a general the Caisse de Gestion, the Commission manner the protection of plant varieties. refers to the explanations in which it Such reasons are not to be found merely demonstrated that nothing other than in the assignability of the property right, exclusive distribution rights accompanied since the assignment of a right and an by an absolute territorial protection had exclusive licence are two different things. been granted to Mr Eisele and that he had not acquired, by virtue of a mere assignment, the status of an independent Furthermore, although the granting of owner of breeders' rights. In fact the licences forms part of the specific Caisse de Gestion fails to explain why it subject-matter of industrial property was necessary or indeed possible to grant rights, that does not mean that the exclusive distribution rights to Mr Eisele granting of exclusive licences must be in 1965 when, since 1961, he had been permitted without control.

In the Commission's view, he needed a special right of distri- bution in Germany only if in reality he The Commission states, in reply to the was dependent upon Fraserna and was its German Government, that the specific licensee because that body continued to subject-matter of industrial property control the exploitation of all INRA rights may not be defined absolutely maize varieties. by the national legislature since the latter must take into consideration requirements of Community law. Indeed industrial property rights and free The Commission maintains that it did competition are not diametrically not affect the specific subject-matter of opposed to each other since they pursue the breeders' rights by refusing to the same objective, namely technical recognize the assignment thereof in the progress. Although the effect of exclus- circumstances of the case. On the ivity does not guarantee the remuner- contran-, it duly took note of the ation of the inventor, the amount of thai assignment and did not in any way remuneration depends on the value of declare it incompatible as such with the invention on the markei.

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other undertakings may be encouraged. thereafter subject to contractual coordi- Industrial property rights, in particular nation. If the owner were not prohibited patent rights, are thus a feature of free from granting other licences under the competition. It follows that the terms of the licensing agreement, the utilization of the exclusive right in licensees could enter into competition conditions of free competition is alone with each other, which would lead to an able to satisfy the objectives of the EEC increase in competition on the market in Treaty. question.

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even in German law, to the requirement system of plant breeders' rights. Before a of compatibility with Article 20 of the variety of an agricultural crop species Gesetz gegen Wettbewerbsbeschrän- may be sold within any Member State it kungen [Law against restrictions on must be entered on the national list of competition]. Thus it must also comply that State or be in the Community with the requirement imposed by Common Catalogue. To be entered on Community law of compatibility with the national list, the variety has to Article 85 of the Treaty. Moreover, undergo trials to establish its distinctness, Article 17 (3) of the Sortenschutzgesetz uniformity, stability and value for culti- merely provides that contracts granting vation or use. exclusive licences must be in writing.

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On the one ECR 487 and judgment of 21 February hand, it was not at liberty to strike down 1973 in Case 6/72 Europemballage and the whole of the agreements in question; Continental Can v Commission [1973] it would have been more appropriate to- ECR 215. limit its intervention to certain provisions. On the other hand, the striking down of the agreements was not However, in the present case the appropriate; the improved competition Commission did not examine whether on the market in question which that similar varieties or varieties which could decision was designed to encourage, has be substituted were able to compete. not come about and INRA varieties have Apart from the existence of a number disappeared from the market, whilst of other competitors, INRA itself competing varieties continue to be the constantly sold to German undertakings subject of exclusive agreements. INRA hybrids intended, after crossing and propagation, for sale on the German The Commission states, in reply to the market under the label or brand of the United Kingdom Government, that an German purchaser.

tute a restriction within the meaning of arguments are only valid as regards Article 85 (1) it should have investigated propagation licences and not as regards whether that provision was indispensable for the well-organized distribution of the licences conferring selling rights. seed; if so, it should have granted an exemption. It is clear from Council Directive No 66/402 of 14 June 1966 on the marketing of cereal seeds (Official If such a contractual provision could not Journal, English Special Edition, 1965- be judged indispensable the Commission 1966, p. 143) and from Council Directive should have given the parties the oppor- No 70/457 of 29 September 1970 on the tunity of deleting or amending it before common catalogue of varieties of agri-

cultural plant species (Official Journal, The protection of breeders' rights is, English Special Edition, 1966-1972, p. however, intended to reward the breeder 36) that seeds produced and accepted in and not the distributor authorized to one Member State may be marketed in market the product. Admittedly, all Member States if the variety in marketing has a bearing on the size of question appears in the Common the return but does so directly only Catalogue of Varieties. where the grant of particular and exclusive distribution rights over the variety does not intervene between the The maintenance breeding carried out cultivation of the variety and its sale.

The views of law and entry on the descriptive list of the Commission and the United varieties is not necessary; in Germany in Kingdom Government differ merely on any event it is a "descriptive list" and not the question how exclusivity is to be an official recommendation. Inclusion in assessed as regards distribution. For its that list does not involve supplementary part, the intervener made no distinction expenses in excess of the expenses which between the exclusive licence for propa- may be involved in gaining official gation and the exclusive sales licence; it acceptance of varieties. The role of that considered that the two types of list is to give official information exclusivity must be assessed in the same regarding the characteristics and the way as far as their effects are concerned. dissemination of the varieties. The The Commission considers that it is Commission further points out that it is necessary to distinguish between pro- not necessary in Germany to append to duction and sale; if exclusive propagation the request for acceptance the results of rights are granted in respect of a trials carried out on the national particular territory, that means that the territory. licensor undertakes not to grant any other licence in respect of the territory in question which would allow a third party In conclusion, entry on national lists is to propagate the same seed within that not particularly complicated. Nor is it territory; if, on the other hand, exclusive necessary for an undertaking to have selling rights are granted, that means that itself registered in each Member State as the licensee may only market the seed agent for the owner. Development and propagated by him *· ihin the territory maintenance breeding costs of the variety covered and that the Haiders of exclusive are only borne once and only the cost of licences for other territories are introducing the variety on the market prohibited, in common with the licensor, must be borne afresh in each Member from supplying seeds of that variety Sute. within the territory of the licensee.

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As to the principle of legal certainty, that V — Oral procedure cannot be construed as meaning that the parties may obtain, after a lapse of time, At the sitting on 28 October 1981 the the right to an exemption even if parties presented oral argument. essential parts of their agreement do not The Advocate General delivered her satisfy the conditions laid down for that opinion at the sitting on 3 February purpose. 1982.

Decision

1 By an application lodged at the Court Registry on 27 November 1978, the limited partnership L. C. Nungesser KG [hereinafter referred to as "Nungesser"] and Kurt Eisele, sole active partner and majority shareholder of that firm, both carrying on business in Darmstadt, brought an action under the second paragraph of Article 173 of the EEC Treaty for a declaration that the Commission's Decision of 21 September 1978 relating to a proceeding under Article 85 of the EEC Treaty (IV/28.824 — breeders' rights — maize seed), notified to the applicants on 27 September 1978 and published in the Official Journal 1978, L 286, p. 23, is void.

2 Under Article 5 of the International Convention for the Protection of New Varieties of Plants of 2 December 1961 (United Nations Treaty Series, Vol. 815 p. 89), upon which the legislation of Member States is based, breeders' rights are those rights conferred on the breeder of a new plant variety or his successor in title pursuant to which the production, for purposes of commercial marketing, of the reproductive or vegetative propagating material, as such, of the new variety and the offering for sale or marketing of such material are subject to the prior authorization of the breeder.

Second submission: The contested decision is in breach of Regulation N o 26/62 of the Council of 4 April 1962 applying certain rules of competition to production of and trade in agricultural products (Official Journal, English Special Edition, 1959 to 1962, p. 129), the provisions of which preclude the application of Anicie 85 of the Treaty to the contracts at issue.

Third submission: The contested decision is in breach of Anieles 85 (1) and (2), 30 and 36 of the Treaty inasmuch as: A. The Commission failed to take into account the particular nature of plant breeders' rights, the exercise of which demands strict observance of territorial protection; and

B. The Commission was wrong to consider that every exclusive licence of breeders' rights by definition falls within the terms of Article 85 (1) of the Treaty.

Fourth Submission .The contested decision is in breach of Anicie 85 (3) of the Treaty, since the conditions for the grant of an exemption under the terms of that provision are satisfied in the present case and, in any event, the reasons given for refusing such an exemption are vitiated by errors of faci and law.

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Fifth submission: The contested decision is unlawful for misuse of powers in so far as it relates to the settlement reached between Louis David KG and Mr Eisele, since, under German law, that settlement must be treated as an order of the court.

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inates from basic lines previously bred and developed by INRA following research activity and which is intended for sale to farmers. Reliance on Anicie 90 (2) of the Treaty is therefore not relevant to the present case.

First s u b m i s s i o n : The contracts covered by the contested decision

10 The contract of 1960 marked the beginning of cooperation between INRA and Mr Eisele. Under the terms of that contract, Mr Eisele undertook to represent INRA before the Bundessortenamt, the German authority responsible for breeders' rights, for the purpose of registering the varieties of maize seed developed by INRA which were already protected by the registration of breeders' rights under French legislation. Mr Eisele also undertook to keep INRA informed of all matters relating to the marketing of those varieties in the Federal Republic of Germany.

n The parties to the contract discovered that under the German legislation in force at the time an owner of breeders' rights established outside German territory was not able to have those rights registered with the Bundes- sortenamt. In order to overcome that difficulty INRA assigned to Mr Eisele its breeders' rights over four varieties of INRA maize seed in respect of German territory by four declarations made in January and February 1961, but effective from the date of signature of the contract of 1960.

i2 Article 1 (a) of the contested decision describes the content and application of certain provisions of the contract of 1960 as being in breach of Article 85 (1) of the Treaty, without referring to the contracts of 1961. The applicants' first submission is that the decision is nugatory to the extent to which it refers to the 1960 contract, that contract having been "substantially superseded" by the assignments.

Second submission: T h e applicability of Regulation No 2 6 / 8 2

.; Under the terms of Article 2 of Regulation No 26/82, adopted pursuant to Article 42 of the Treaty, Article 85 (1) of the Treaty does not apply to agreements, decisions or practices relating to the production or sale of agri- cultural products, if they form an integral part of a national market organ- ization or are necessary for the attainment of the objectives of the common agricultural policy set out in Article 39 of the Treaty.

is In that connection the decision contains the following observations: the agreements between INRA and Mr Eisele do not form an integral part of, or an extension of, a national market organization for maize seed (II, No 5, first indent); as from 1973 INRA entrusted the commercial exploitation of its

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maize seed in France and elsewhere to Frasenia, a French private company the shareholders of which are the main suppliers of certified seed of every variety used by French agriculture; INRA maize seed is not of such a special nature as to permit the organization of that market to be distinguished from the organization of the market for maize seed in general; as a result the agreements between INRA and Fraserna cannot be regarded as constituting a national organization of the market in maize seed; moreover, the market for maize seed is governed by the provisions of Regulation No 2358/71 of the Council of 26 October 1971 on the common organization of the market in seeds (Official Journal, English Special Edition, 1971 (III) p. 894).

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productivity to be increased by promoting technical progress, which leads to an increase in the individual earnings of persons engaged in agriculture (Article 39 (1) (a) and (b)); on the other hand, only an exclusive licensee is able, in concert with the licensor, to operate a long-term policy aimed at satisfying the demand for seed within the territory reserved to him and thus to ensure market stability and the availability of supplies (Article 39 (1) (c) and (d)).

2i It appears therefore that the second submission is based on the argument that the contracts at issue, by granting an exclusive licence over breeders' rights for INRA maize seeds in respect of Germany, constitute the most appro­ priate means of attaining the objectives of the common agricultural policy, having regard to the particular requirements inherent in the production and marketing of those seeds. That argument will be examined in the context of the third submission.

22 It is therefore not necessary to examine separately the second submission.

T h i r d submission

A — The particular nature of plant breeders' rights

26 The applicants and the two interveners infer from those arguments that the contested decision is unlawful in so far as it considers that the contracts at issue are intended to bring about a partitioning of the markets, whereas the territorial protection enjoyed by Mr Eisele is merely the result of the legitimate exercise of the breeders' rights which he owns in Germany.

27 It should first be noted that the contested decision expressly condemns the content and application of the contract of 1960 to the extent to which it enabled Mr Eisele "to invoke his own breeders' rights to prevent all imports into Germany or exports to other Member States of maize seed of INRA varieties" (Anicie 1 (a)).

2s It should then be remembered that, as the Court held in the judgment of 15 June 1976 in Case 51/75 (EMI Records v CBS United Kingdom [1976] ECR 811), an industrial or commercial property right, as a legal entity, does not possess those elements of contract or concerted practice referred to in Article 85 (1) of the Treaty, but 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 an agreement.

29 As the Court emphasized in its judgment of 20 June 1978 in Case 28/77 (Tepea v Commission [1978] ECR 139), there is such an exercise of an

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industrial or commercial property right prohibited by the provisions of the Treaty, in particular by Article 85 (1), where an agreement granting exclusive rights to utilize an industrial or commercial property right in a certain territory, in conjunction with an agreement appointing the licensee sole distributor for that territory, has the effect of ensuring absolute territorial protection for the licensee by preventing parallel imports.

34 T h e certified seeds which form the subject-matter of the contracts at issue are hybrid maize seeds, a seed variety w h o s e stability can only be g u a r a n t e e d if the seeds are cultivated again every time from basic lines. According to the applicants, the r e p r o d u c t i o n of those seeds poses a special problem in comparison with the reproduction of products protected by trade mark or patent rights, in particular because the p r o c e d u r e t o achieve it is m o r e complicated and r e p r o d u c t i o n depends t o a very marked degree on the h a z a r d s of climate and soil.

35 That line of argument fails to take into account, however, that many products capable of forming the subject-matter of a trade mark or a patent, in particular certain food or pharmaceutical products, are in a similar situation. Although the reasons put forward by the applicants are based on correct findings of fact, they are not sufficient to justify a special system for breeders' rights in relation to other industrial or commercial property rights.

36 The main argument which the applicants put forward in support of their contention is that the owner of breeders' rights in Germany is the guarantor, as regards the Bundessortenamt, of the stability of the protected variety. It is argued that the responsibility thus imposed on that owner demands that he exercise an absolute control over all marketing of seeds of the protected variety in Germany. According to the applicants, it is precisely for that reason that the very nature of breeders' rights under the German legislation relevant to .the present case prevents parallel imports from being carried out outside the control of the owner.

39 By virtue of Article 38 (1) of the Saatgutverkehrsgesetz a variety may only be included in the list of varieties if it is distina, sufficiently homogeneous and stable, and if it is of agricultural value and is designated by a variety name which is capable of registration. It is the duty of the Bundessortenamt to examine whether the requirements laid down for the registration of the variety have been met (Article 57 (1)). The entry of a variety may be struck off by the Bundessortenamt if one of the five conditions mentioned above is not or is no longer being fulfilled (Article 62 (2)).

40 T h e Saatgutverkehrsgesetz also provides that the breeder w h o has registered the variety o n the list of varieties is required to conserve that variety as it w a s w h e n he registered it, and that t h e Bundessortenamt is to supervise the conservation of registered varieties (Articles 67 and 68).

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•1 That synopsis of the German legislation shows that seeds certified and approved for marketing are subject to quality control on the part of the public authorities and that that control extends to the stability of the variety. However, breeders' rights are not intended to substitute for controls carried out by the competent authorities, controls carried out by the owner of those rights, but to confer on the owner a kind of protection, the nature and effects of which all derive from private law. From that point of view the legal position of a breeder of seeds is not different from that of the owner of patent or trade mark rights over a product subject to strict control by the public authorities, as is the case with pharmaceutical products.

45 This contention is supported by the G e r m a n and British Governments and by the Caisse d e Gestion des Licences Végétales. In particular, the two governments claim that t h e general character of the reasons given for the contested decision is incompatible with the terms of Article 85 of the T r e a t y and conflicts with a sensible competition policy. T h e reasons given for the decision a r e said t o be based o n t h e ill-conceived premise that every exclusive licence of an industrial o r commercial property right, whatever its nature, must be regarded as an agreement prohibited by Article 85 (1) a n d that it is therefore for t h e Commission to judge whether, in a given case, the conditions for the grant of an exemption under Article 85 (3) are satisfied.

46 During the co -re of the proceedings objection was made to the use of the expression "e ;sive licence" on the ground that, in the present case, the applicants' ext. jive right to market the seeds at issue in Germany derived from breeders' rights of which Mr Eisele was the owner in that Member State. Therefore, it was argued, that exclusive right was founded neither on the grant by INRA of an exclusive right to use, within German territory, industrial or commercial property rights vesting in INRA, nor on the contract of 1965 which appointed Mr Eisele sole distributor of the seeds in question for that territory.

47 However, that argument disregards the fact that, from the point of view of Community law, the contract of 1960 initiating the cooperation between INRA and Mr Eisele, the "assignments" of breeders' rights in 1961 and the contract of 1965 organizing the distribution of INRA seeds in Germany make up an indivisible whole. In economic terms, Mr Eisele's position on the German market was that of an exclusive licensee, since the authorization given by INRA to Mr Eisele to have registered in his name in Germany breeders' rights of which INRA was the owner in France was due to the fact

sc Corresponding to that pan of the statement of reasons is Article 1 (b) of the decision, which in its first and second indents declares the exclusive nature of the licence granted by the 1965 contract to be contrary to Article 85 (1) of the Treaty in so far as it imposes:

An obligation upon INRA or those deriving rights through INRA to refrain from having the relevant seeds produced or sold by other licensees in Germany, and

An obligation upon INRA or those deriving rights through INRA to refrain from producing or selling the relevant seeds in Germany themselves.

si The second set of circumstances referred to in the decision is described as follows:

"The fact that third parties may not import the same seed [namely the seed under licence] from other Community countries into Germany, or export

I — Translator'« note The English translation ol the decision published in the Official Journal is not authentic and has not been t'oiiowec in all respects.

54 That point having been clarified, it is necessary to examine whether, in the present case, the exclusive nature of the licence, in so far as it is an open licence, has the effe« of preventing or distorting competition within the meaning of Article 85 (1) of the Treaty.

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55 In that respect the Government of the Federal Republic of Germany emphasized that the protection of agricultural innovations by means of breeders' rights constitutes a means of encouraging such innovations and the grant of exlusive rights for a limited period, is capable of providing a further incentive to innovative efforts.

From that it infers that a total prohibition of every exclusive licence, even an open one, would cause the interest of undertakings in licences to fall away, which would be prejudicial to the dissemination of knowledge and techniques in the Community.

56 The exclusive licence which forms the subject-matter of the contested decision concerns the cultivation and marketing of hybrid maize seeds which were developed by INRA after years of research and experimentation and were unknown to German farmers at the time when the cooperation between INRA and the applicants was taking shape. For that reason the concern shown by the interveners as regards the protection of new technology is justified.

57 In fact, in the case of a licence of breeders' rights over hybrid maize seeds newly developed in one Member Sute, an undertaking established in another Member State which was not certain that it would not encounter competition from other licensees for the territory granted to it, or from the owner of the right himself, might be deterred from accepting the risk of cultivating and marketing that product; such a result would be damaging to the dissemination of a new technology and would prejudice competition in the Community between the new product and similar existing products.

63 However, that view fails to take into account the fact that one of the powers of the Commission is to ensure, pursuant to Article 85 of the Treaty and the regulations adopted in implementation thereof, that agreements and concerted practices between undertakings d o not have the object or the effect of restricting or distorting competition, and that that power of the Commission is not affected by the fact that persons or undertakings subject to such restrictions are in a position to rely upon the provisions of the Treaty relating to the free movement of goods in order to escape such restrictions.

NUNGESSER v COMMISSION

M It is clear from the documents in the case that the contracts in question were indeed intended to restrict competition from third parties on the German market. In fact under Clause 5 of the 1965 contract INRA promises that it and those deriving rights through it will do "everything in their power to prevent the expon" of the varieties of seeds in question to Germany.

65 In the contested decision that clause is interpreted as seeking to prevent third parties who purchase INRA seeds in France from exporting them to Germany (II, No. 3 (b)). It may be inferred from the obstructions which the parties to the contracts have placed in the way of the efforts of Louis David KG and Roben Bomberault to sell INRA seeds in Germany that that in- terpretation is correct.

66 Anicie 1 (b) of the decision expressly refers to Clause 5 of the 1965 contract and to the exercise of breeders' rights by Mr Eisele so as to prevent the marketing of INRA seeds in Germany by third panies. Therefore, to that extent P a n B of the third submission is unfounded.

product being launched and because Mr Eisele enjoyed absolute territorial protection in Germany. According to the applicants, those t w o reasons are incorrect: o n the o n e hand, the very purpose of the 1965 contract, at the time of its notification to the Commission, was t o open up a new market and to introduce a n e w product; secondly, the exclusivity established by that contract did not g o beyond what was necessary for the distribution of the varieties which could be grown outside their country of origin and thus for the improvement of the production and distribution of goods.

69 In support of that submission, the Government of the United Kingdom observed that only the benefit of the protection afforded by an exclusive licence is capable of encouraging the licensee to exploit the breeders' rights in question and that that protection thus serves to improve the production and distribution of goods and promote technical and economic progress within the meaning of Article 85 (3). It was therefore submitted that the criteria applied by the contested decision were excessively severe.

70 T h e Caisse de Gestion des Licences Végétales argues that these proceedings concern a fragile and technically advanced product and that in such a case availability of supplies can only be achieved by the establishment of a selective system for planning and stabilizing the market. In refusing to grant an exemption the Commission disregarded the specific nature of the contracts in question.

7i It should first be stated that the contested decision left open the assessment under Article 85 (3) of the exclusive production and propagation rights granted to M r Eisele und that it confined itself to stating that the conditions for the exemption of the exclusive selling rights and the accompanying export prohibitions were not satisfied (III, N o 1 (b)).

76 It must be r e m e m b e r e d that u n d e r the terms of Article 85 (3) of the T r e a t y an exemption from the prohibition contained in Article 85 (1) m a y be granted in the case of any agreement between undertakings which contributes to improving the production or distribution of goods or to promoting technical progress, and which does not impose on the under- takings concerned restrictions which are not indispensable to the attainment of those objectives.

77 As it is a question of seeds intended to be used by a large number of farmers for the production of maize, which is an important product for human and animal foodstuffs, absolute territorial protection manifestly goes beyond what is indispensable for the improvement of production or distribution or

JUDGMENT OF 8. 6. 1982 — CASE 258/78

the promotion of technical progress, as is demonstrated in particular in the present case by the prohibition, agreed to by both parties to the agreement, of any parallel imports of INRA maize seeds into Germany even if those seeds were bred by INRA itself and marketed in France.

78 It follows that the absolute territorial protection conferred on the licensee, as established to exist by the contested decision, constituted a sufficient reason for refusing to grant an exemption unter Article 85 (3) of the Treaty. It is therefore no longer necessary to examine the other grounds set out in the decision for refusing to grant such an exemption.

79 Therefore the fourth submission must be rejected.

83 From that the applicants infer that the Commission was not able t o declare such a settlement void without encroaching upon the jurisdiction of the G e r m a n courts; but in view of the automatic nullity decreed by Anicie 85 (2) of the T r e a t y the Commission did declare the settlement void w h e n it held that a part of it was contrary to Article 85 (1).

84 The Commission replies that under German law a settlement concluded for the purpose of disposing of a legal dispute must comply with the requirements of substantive law applicable to every civil contract, and in particular with those deriving from competition law. A judicial settlement is a contract of civil law as well as an act of the court and the nullity of the contract nullifies the whole settlement.

ss The Commission adds that decisions of the German courts, in particular the Bundesgerichtshof [Federal Supreme Court], have confirmed that view. According to those decisions, a party to a judicial settlement may not validly invoke clauses of that settlement which conflict with the German law on monopolies. There is no reason why a settlement which offends against Community rules on competition should be viewed differently.

86 The settlement at issue was submitted to the Court, which was able to find that it was indeed a judicial settlement within the meaning of Article 974 1(1) of the German Code of Civil Procedure, namely a settlement concluded before a German court in order to dispose of a legal dispute pending before it.

87 Whilst it is true, as the applicants maintain, that the judicial settlement is enforceable, it does not have the authority of res judicata under German law and is therfore not effective against other courts, public authorities or third parties. Furthermore, as the Commission emphasized, the decisions of the German courts are based on the premise that a judicial settlement, to be

Costs

92 Under Article 69 (3) of the Rules of Procedure the Court may order that the parties bear their own costs in whole or in part where each party succeeds on some and fails on other heads. In the present case the parties and the interveners must bear their own costs.

NUNGESSER v COMMISSION

On those grounds,

THE COURT

hereby:

Mackenzie Stuart O'Keeffe Koopmans Everling Chloros

Delivered in open court in Luxembourg on 8 June 1982.

P. Heim J. Mertens de Wilmars Registrar President

JUDGMENT OF 8. 6. 1982 — CASE 258/78

INDEX

Facts and Issues

First submission: The contracts covered by the contested decision 2057 Second submission: The applicability of Regulation No 26/62 2058 Third submission: A — The particular nature of plant breeders'rights 2060

N'UNGESSER v COMMISSION

Third submission: B — The application of Anicie 85 of the EEC Trean- to exclusive l'«nces ' 2065 Fourth submission: The grant of an exemption under Article 85 (3) of the EEC Treaty . . 2071 Fifth submission : The settlement concluded between Louis David KG and Mr. Eisele . . . 2074 Costs 2076 Operative part 2077

OPINION OF MRS ADVOCATE GENERAL ROZÈS DELIVERED ON 3 FEBRUARY 1982 '

Summary

I — Origin of the case 2081 Definitions: (a) Hybridization 2081 (b) Plant breeding 2082 (c) Basic seed and certified seed 2083 (d) Propagation 2083 (e) Open varieties 2084 The Institut National de la Recherche Agronomique (INRA) 2084 The Société des Semences de Base de Maïs 2085 Establishment of INRA varieties in Germany 2086 Kurt Eisele and L. C Nungesser KG 2086 Agreement of 12 and 14 December 1980 and supplementarv declarations of 19 January and 8 February 1961 .' 2086 German denominations of INRA varieties 2086 National legislation and international conventions 2086 German Law of 1953 2087 Paris Convention of 1961 2088 Other national legislation 2088 German-legislation of 1968 2089 Agreement of 5 October 1965 2090 The Caisse de Gestion des Licences Végétales 2091 Fraserna 2092 Notification and request for exemption 2092 Community provisions 2093 Directive No 66/402 2093