C-10/89

HAG GF

OPINION OF MR ADVOCATE GENERAL JACOBS delivered on 13 March 1990 *

My Lords, 'Café HAG SA', which was wholly owned and controlled by it. In 1935 it transferred the Belgian and Luxembourg trade marks to the subsidiary. In 1944 the entire assets of the subsidiary, including the trade marks for I — The background to the case Belgium and Luxembourg, were seques­ trated as enemy property. The company was sold en bloc to the Van Oevelen family. In 1971 the trade marks, which had at some 1. This case comes before the Court by way stage been convened into Benelux marks, of a reference for a preliminary ruling from were assigned to Van Zuylen Frères, a firm the Bundesgerichtshof (German Federal based in Liège. Supreme Court). It is concerned primarily with the relationship between the principle of the free movement of goods laid down in Articles 30 to 34 of the EEC Treaty and the exception to that principle laid down in Article 36 thereof with regard to restrictions 'justified on grounds of .. . the protection of industrial and commercial property'. The present case constitutes a sequel to Case 3. When in 1972 HAG Bremen began 192/73 Van Zuylen v HAG [1974] exporting coffee to Luxembourg under the ECR 731. Inevitably, that case and the mark 'Kaffee HAG', Van Zuylen Frères present one will become known as HAG I commenced infringement proceedings and HAG II respectively. These are before a Luxembourg court. Those convenient epithets and I shall use them proceedings led to the preliminary ruling in myself. HAG I, in which the Court held that:

4. The implications of that ruling seem HAG Belgium appealed to the Bundesge­ clear. It was drafted in such wide terms as richtshof, which referred the following to give the impression that, if Van Zuylen questions to the Court for a preliminary could not rely on their Benelux trade mark ruling, under the third paragraph of Article to prevent HAG Bremen from selling coffee 177 of the EEC Treaty: under that mark in Luxembourg (and indeed Belgium), neither could HAG Bremen rely on their German trade mark to prevent Van Zuylen from supplying the German market under the same mark. Van '(1) Is it compatible with the provisions on Zuylen did not, however, attempt to do the free movement of goods (Articles that. For the next decade HAG Bremen 30 and 36 of the EEC Treaty) continued to enjoy undisturbed use of the — having regard also to Article HAG trade mark in Germany. 222 — that an undertaking established in Member State A should, by virtue of its national rights in trade names and trade marks, oppose the importation of similar goods of an undertaking estab­ lished in Member State Bif, in State B, 5. In 1979 the firm Van Zuylen Frères was those goods have legally received a purchased by a Swiss company now called mark which : Jacobs Suchard AG, which is the market leader in coffee products in Germany. According to HAG Bremen's observations, Jacobs Suchard AG disposed of the bulk of Van Zuylen's coffee business, retaining only (a) may be confused with the trade the shell of the firm and the HAG trade name and trade mark reserved in marks. The firm was transformed into a State A to the undertaking estab­ wholly owned subsidiary of Jacobs Suchard lished there, and AG trading under the name SA CNL-SUCAL NV (hereafter 'HAG Belgium').

Would the answer to the above question be different if the mark protected in State A has become a 7. If Question 1 is approached in the light "famous" brand name in that State and of the Court's ruling in HAG I, it may be it is probable that, as a result of the said to raise two points of considerable exceptional prominence which it importance. First, the case squarely raises enjoys, if the same mark is used by a the issue whether the doctrine of 'common third-party undertaking, the task of origin', as it is generally known, which the informing the consumer as to the Court laid down in HAG I, is correct; and commercial origin of the goods could although the situations to which the not be accomplished without adverse doctrine applies are likely to be rare, so that repercussions on the free movement of the implications of maintaining or aban­ goods? doning the doctrine are of relatively limited scope, yet the possibility of directly reversing the previous case-law is a matter of fundamental concern. Secondly, the (3) Alternatively, again if the first question question has implications going beyond the is answered in the negative: doctrine of common origin, which are liable to affect far wider classes of trade mark. For understandable reasons, some of those fundamental issues are not fully addressed by the parties. Having been the successful Does the same answer hold good even party in HAG I, HAG Bremen does not if consumers in State A associate the wish to see the judgment overruled; it mark protected in that State not only merely wishes to curtail its scope. HAG with a certain commercial origin but Belgium, on the other hand, contends that also with certain perceptions as to the the previous judgment should be confirmed characteristics, in particular the quality, and the doctrine applied in the present case. of the marked goods and if the goods As a result, neither party addresses the imported from State B under the same fundamental issues that will determine mark do not meet those expectations? whether the principle laid down in HAG I is valid. Nor have the issues been fully explored by the other participants in the proceedings. Before attempting to resolve (4) If the first, second and third questions those issues, I shall first examine the are all answered in the negative: relevant Treaty provisions and then consider

III — The relevant Treaty provisions and 'The following shall be prohibited as incom­ Community legislation patible with the common market: all agreements between undertakings, decisions by associations of undertakings and 8. Article 30 of the Treaty provides that: concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition 'Quantitative restrictions on imports and all within the common market.' measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between Member States.' 9. Articles 30 and 36 articulate a conflict between two competing interests. On the one hand, Article 30, together with the Article 36 of the Treaty provides in succeeding articles, lays down the funda­ pertinent part that: mental principle of the free movement of goods. On the other hand, Article 36 safe­ guards, amongst other things, intellectual 'The provisions of Articles 30 to 34 shall not property rights, which, owing to their terri­ preclude prohibitions or restrictions on torial nature, inevitably create obstacles to imports, exports or goods in transit justified the free movement of goods. Article 36 itself on grounds of ... the protection of goes some of the way towards explaining industrial and commercial property. Such how that conflict is to be resolved. It is clear prohibitions or restrictions shall not, from the wording of the article that not all however, constitute a means of arbitrary restrictions on trade created by intellectual discrimination or a disguised restriction on property rights are excluded from the trade between Member States.' prohibition laid down by Article 30. In order to be excluded from the prohibition, a restriction must, in the first place, be 'justified' within the meaning of the first Article 222 of the Treaty provides that: sentence of Article 36. Secondly, it must not constitute a 'means of arbitrary discrimi­ nation or a disguised restriction on trade 'This Treaty shall in no way prejudice the between Member States' within the meaning rules in Member States governing the of the second sentence of Article 36. system of property ownership.'

a skeleton. The task of putting flesh on the the purpose of safeguarding the rights bones falls to the Community legislature that constitute the specific subject-matter and to the Court of Justice. In the field of of the type of intellectual property in trade mark law the legislature has not been question (Deutsche Grammophon, loc. as active as it might have been, having cit). Perhaps the main advantage of this undertaken only two major initiatives, one formula, apart from the fact that it of which — the proposed Council Regu­ narrows the scope of the exceptions lation on the Community trade mark permitted by Anicie 36, is that it allows (Official Journal 1984 C 230, p. 1) — has subtle distinctions to be made depending not yet come to fruition. The one measure on the type of intellectual property in that has so far been adopted is Council issue. Directive 89/104/EEC of 21 December 1988 approximating the legislation of Member States on trade marks (Official Journal 1989 L 40, p. 1), hereafter 'the trade mark directive'. The relevance of that directive to the present case is a matter that (iii) The exclusive right conferred on the I shall deal with later. owner of intellectual property is exhausted in relation to the products in question when he puts them into circu­ lation anywhere within the common IV — The principles established by the market. Spelt out more fully, 'the Court's case-law proprietor of an industrial or commercial property right protected by the legis­ lation of a Member State may not rely 11. In view of the modest scale of legislative on that legislation in order to oppose the activity in relation to trade marks and to importation of a product which has intellectual property in general, the task of lawfully been marketed in another reconciling the competing interests Member State by, or with the consent enshrined in Articles 30 and 36 of the of, the proprietor of the right himself or Treaty has fallen mainly to the Court. It has a person legally or economically worked out three fundamental principles, dependent on him' (see, for example, which have played a central part in the Case 144/81 Keurkoop v Nancy Kean entire field of intellectual property, and all Gifts [1982] ECR 2853, at p. 2873, one of which have their origin in Case 78/70 of many cases confirming a principle Deutsche Grammophon v Metro [1971] first developed in the Deutsche Gram- ECR 487. mophon case).

[1985] ECR 363, at p. 385). The exercise of The dichotomy between existence and such rights must not result from agreements exercise embodied in the first principle or concerted practices that have as their follows from the wording of Articles 36 object or effect the isolation or partitioning and, perhaps, 222. It matters little in this of the common market, contrary to the context whether, as is sometimes suggested, terms of Article 85 of the Treaty (see Case Article 222 provides a property guarantee 51/75 EMI Records v CBS United Kingdom akin to those found in many national [1976] ECR 811). In particular, the constitutions, with the result that proprietor of a trade mark may not use it to Community law cannot threaten the erect 'impenetrable frontiers between the existence of intellectual property rights. Member States' by assigning the mark to That is in any case confirmed by Article 36, different persons in different Member States which expressly safeguards such rights, and (Case 40/70 Sirena v Eda [1971] ECR 69, it is unnecessary, in my view, to consider at p. 83, paragraph 10). Article 222 independently. But it is equally clear from the limited nature of the dero­ gation accorded by Article 36 that there are circumstances in which the prohibition laid down by Article 30 will none the less apply to the exercise of the right. The concept of 13. It is against that background that there specific subject-matter embodied in the falls to be considered the doctrine of second principle is an essential concomitant common origin, under which, where similar of the existence/exercise dichotomy, or identical trade marks that have a because it makes it possible to determine, in common origin are owned by different relation to each type of intellectual persons in different Member States, the property, the circumstances in which the proprietor of one of the marks cannot rely exercise of the right will be permissible on it to prevent the importation of goods under Community law. The third principle, lawfully marketed under the other mark by namely the principle of the exhaustion of its proprietor in another Member State. The rights, is also firmly anchored in Articles 30 doctrine of common origin was laid down and 36. Without it traders could, as the by the Court in HAG I and confirmed in Court observed in Deutsche Grammophon, Case 119/75 Terrapin v Terranova [1976] isolate national markets and indulge in ECR 1039. To a large extent, the outcome practices that would be 'repugnant to the of HAG II will depend on whether that essential purpose of the Treaty'. A measure doctrine is to be recognized as a legitimate safeguarding such practices would clearly child of Community law. not be 'justified' within the meaning of the first sentence of Article 36. As for the fourth principle mentioned above, it is a straight­ forward application of Article 85.

for the proposition that the proprietor of a nature, to say the least, as that which trade mark should not be allowed to prevent humanity owes to the discoverer of peni­ the importation of goods produced by the cillin.' proprietor of a parallel trade mark in another Member State simply because the two marks have a common origin. Without wishing to prejudge the issue at this stage, The Court echoed those remarks in the I must point out that a principle of judgment (paragraph 7): Community law for which there is no obvious basis in the Treaty is of somewhat dubious pedigree. 'The exercise of a trade mark right is particularly apt to lead to a partitioning of markets, and thus to impair the free V — The nature and function of trade movement of goods between States which is essential to the common market. Moreover, marks a trade mark right is distinguishable in this context from other rights of industrial and commercial property, inasmuch as the interests protected by the latter are usually 16. Before going any further into the more important, and merit a higher degree question what, if any, justification can be of protection, than the interests protected by found for the doctrine of common origin an ordinary trade mark.' laid down in HAG I, I must first make one preliminary observation about the approach of the Court in the earlier cases to the nature and function of trade marks. With 17. It is noteworthy that this conception of the benefit of hindsight, one can see there the relative merits of trade marks and other were in the previous case-law signs of an forms of intellectual property was based on unduly negative attitude to the value of an invidious comparison between a rather trade marks. Thus Advocate General trivial trade mark and one of the most Dutheillet de Lamothe observed in Case important discoveries in the history of 40/70 Sirena [1971] ECR 69, at p. 88: medicine. Different comparisons might have produced different results, more favourable to trade marks. The truth is that, at least in economic terms, and perhaps also 'from the 'Both from the economic and from the human point of view', trade marks are no human point of view the interests protected less important, and no less deserving of by patent legislation merit greater respect protection, than any other form of intel­ than those protected by trade marks. lectual property. They are, in the words of one author, 'nothing more nor less than the fundament of most market-place compe­ tition' (W. R. Cornish, Intellectual property: patents, copyright, trade marks and allied rights, 2nd edition, 1989, p. 393).

Whereas patents reward the creativity of the recognized the twin functions of trade inventor and thus stimulate scientific marks as defined above — namely to protect progress, trade marks reward the manu­ the proprietor's goodwill and to save the facturer who consistently produces high- consumer from confusion and deception: quality goods and they thus stimulate see Case 16/74 Centrafarm v Winthrop economic progress. Without trade mark [1974] ECR 1183. I will turn in due course protection there would be little incentive for to the later case-law. However, the earlier, manufacturers to develop new products or more negative, approach to trade marks to maintain the quality of existing ones. may well help to explain the decision in Trade marks are able to achieve that effect HAG /itself. because they act as a guarantee, to the consumer, that all goods bearing a particular mark have been produced by, or under the control of, the same manufacturer and are therefore likely to be of similar VI — The failure to justify the doctrine of quality. The guarantee of quality offered by common origin in HAG I a trade mark is not of course absolute, for the manufacturer is at liberty to vary the quality; however, he does so at his own risk and he — not his competitors — will suffer the consequences if he allows the quality to 21. Since there is so little authority in the decline. Thus, although trade marks do not Treaty for the doctrine of common origin provide any form of legal guarantee of and nothing in the previous case-law to quality — the absence of which may have suggest the existence of such a doctrine, one misled some to underestimate their signif­ might perhaps have expected to find in the icance — they do in economic terms provide Court's judgment in HAG I a detailed, such a guarantee, which is acted upon daily convincing statement of the reasons that led by consumers. it to give birth to this new principle of Community law. But that is not the case. The reasoning is condensed into 10 short paragraphs (paragraphs 6 to 15):

8. nevertheless, it is shown by this very 13. such a prohibition, which would article, in particular its second sentence, as legitimize the isolation of national markets, well as by the context, that whilst the would collide with one of the essential Treaty does not affect the existence of objects of the Treaty, which is to unite rights recognized by the legislation of a national markets in a single market; Member State in matters of industrial and commercial property, yet the exercise of these rights may nevertheless, depending on the circumstances, be affected by the 14. whilst in such a market the indication of prohibitions in the Treaty; origin of a product covered by a trade mark is useful, information to consumers on this point may be ensured by means other than such as would affect the free movement of 9. inasmuch as it provides an exception to goods; one of the fundamental principles of the common market, Article 36 in fact only admits derogations from the free movement of goods to the extent that such derogations 15. accordingly, to prohibit the marketing are justified for the purpose of safeguarding in a Member State of a product legally rights that constitute the specific subject- bearing a trade mark in another Member matter of this property; State, for the sole reason that an identical trade mark having the same origin exists in the first State, is incompatible with the provisions providing for free movement of 10. thus the application of the legislation goods within the common market.' relating to the protection of trade marks at any rate protects the legitimate holder of the trade mark against infringement on the part of persons who lack any legal title; 22. I must confess that I do not find this reasoning at all convincing. It is, with respect, flawed in a number of ways. 11. the exercise of a trade mark right tends to contribute to the partitioning off of the markets and thus to affect the free (i) First, the emphasis is placed at the outset movement of goods between Member on the second sentence of Article 36, States, all the more so since — unlike other which was not relevant, since it could rights of industrial and commercial not seriously be argued that Van property — it is not subject to limitations in Zuylen's use of its trade mark amounted point of time; to 'a means of arbitrary discrimination or a disguised restriction on trade between Member States'. 12. accordingly, one cannot allow the holder of a trade mark to rely upon the exclusiveness of a trade mark right — which may be the consequence of the territorial (ii) Second, the reasoning is deficient limitation of national legislations — with a because, having stated in paragraph 9 view to prohibiting the marketing in a that Article 36 only admits derogations Member State of goods legally produced in that are justified for the purpose of safe­ another Member State under an identical guarding the rights that constitute the trade mark having the same origin; specific subject-matter of the type of

intellectual property in question, it fails mark — that is to say, its belonging to to define the specific subject-matter of a different persons in different Member trade mark. In fact, it was not until States — tends to partition off the several months later, in its judgment in markets. But that nefarious consequence Case 16/74 Centrafarm v Winthrop, ensues in any case from divided already cited, that the Court first ownership (or indeed from the coex­ defined the specific subject-matter of istence of separate but similar marks), trade mark rights. regardless of whether the trade marks had a common origin. Why then did the Court attach such importance to that element? In fact, the principal defect of the judgment in HAG lis that the Court nowhere explained why the mere fact (iii) Third, the statement in paragraph 11 that the trade marks were of common that 'the exercise of a trade mark right origin should be relevant, in the absence tends to contribute to the partitioning of any market-sharing agreement. It off of the markets' does not assist the should be noted in this regard that the argument because the statement applies Court held in paragraph 5 of the equally to any intellectual property right judgment that Article 85 did not apply, limited to the territory of a Member since there was 'no legal, financial, State. As for the point that trade mark technical or economic link' between the rights are not subject to limitations in undertakings. point of time, it is true that in that respect those rights are potentially more permanent in their effects. Against that, however, must be set the fact that in another respect trade marks are less detrimental to the free movement of goods and competition than certain other forms of intellectual property, such VII — The attempt to justify the doctrine of as patents, copyright and industrial common origin in Terrapin v Terranova designs. Whereas the latter entitle the proprietor of the right to exclude a competitor's goods from the market altogether, a trade mark merely entitles its owner to exclude goods bearing that mark; a competitor has unrestricted access to the market, provided he uses a different mark. 23. It was not until two years later, in Case 119/75 Terrapin v Terranova, already cited, that the Court, provoked perhaps by the chorus of criticism that greeted its judgment in HAG I, attempted to explain ex post facto why it attached such importance to the (iv) Fourth, the reasoning is defective common origin of the trade marks. That because it states in paragraph 12 a case concerned a German and a British conclusion that simply does not follow trade mark, of independent origin, which from the premises. What was presumably the German courts found to be confusingly meant by the previous paragraph was similar. The Court stated, in paragraph 6 of that the divided ownership of a trade the judgment, that:

' . . . the proprietor of an industrial or may or may not have been detected by commercial property right protected by the consumers in Belgium and Luxembourg. But law of a Member State cannot rely on that that is of no consequence, for the owner of law to prevent the importation of a product a mark is in any event at liberty to modify which has lawfully been marketed in the quality of his goods. What matters is another Member State by the proprietor that throughout its history (until 1974, that himself or with his consent. It is the same is) the mark had, in each territory, been in when the right relied on is the result of the the exclusive ownership of a single person subdivision, either by voluntary act or as a who had the power either to build up the result of public constraint, of a trade mark goodwill associated with it by maintaining right which originally belonged to one and the quality of the product or to destroy that the same proprietor. In these cases the basic goodwill by allowing the quality to dete function of the trade mark to guarantee to riorate. Once the owner of the mark is consumers that the product has the same deprived of his exclusive right to its use, he origin is already undermined by the sub loses the power to influence the goodwill division of the original right'. associated with it and he loses the incentive to produce high-quality goods.

But none of fallacious. It is true that the essential those consequences ensued from the frag function of a trade mark is 'to guarantee to mentation of the HAG trade mark in 1944; consumers that the product has the same they ensued from the Court's judgment in origin'. But the word 'origin' in this context HAG I. does not refer to the historical origin of the trade mark; it refers to the commercial origin of the goods. The consumer is not, I think, interested in the genealogy of trade marks; he is interested in knowing who made the goods that he purchases.

company. Nor had it been undermined in its function as a guarantee of origin must Belgium and Luxembourg until the Court's be examined, not with reference to the judgment in HAG I. Admittedly, the mark situation existing in separate national underwent a change of ownership in 1944 in markets, but from a Community-wide Belgium and Luxembourg. That may or may viewpoint. One author points out that not have led to a change in quality, which millions of German tourists spend their

(i) first, the transnational consumer will in VIII — The conclusion that there is no any event be confused and misled, even rational basis for the doctrine of common if both types of HAG are available in all origin the countries concerned. There is in fact no way in which such people can be spared confusion so long as the mark continues in divided ownership in the various countries that they visit (unless of course one accepts that the products can be differentiated by the use of 26. The unpalatable but inescapable additional distinguishing matter, a conclusion that emerges from the above subject that I shall deal with shortly). I analysis is that the doctrine of common can see no merit in the proposition that, origin is not a legitimate creature of because a minority of transnational Community law. There is no clear basis for consumers are confused and misled as to it in the Treaty and no explanation of its the origin of certain goods, we must, as necessity was put forward in HAG I. The a matter of Community law, require the attempt to legitimize it ex post facto in domestic consumers of the entire Terrapin v Terranova failed for the reasons Community to be similarly confused and that I have explained. While the problems misled; caused by the divided ownership of identical or confusingly similar trade marks should not be underestimated, there is, so far as I can see, no rational basis for making the solution to such problems depend on whether the marks have a common origin. Moreover, any fears that the abandonment of the doctrine would open the way for (ii) secondly, the confusion suffered by attempts to partition the market by transnational consumers in such cases assigning trade marks to different persons in does not depend on whether the two different Member States are illusory. Such marks have a common origin. The attempts could always be defeated either by German consumer who goes to Belgium recourse to Article 85 or by application of

the principle of the exhaustion of rights. In 28. There have been two main devel­ fact, the four principles that I described opments since HAG I. First, there was the in paragraphs 11 and 12 above (namely, articulation of the specific subject-matter of (i) the existence/exercise dichotomy, (ii) the the trade mark right. Secondly, there was confinement of protection to the specific the further refinement of the exhaustion subject-matter of the right in question, principle first laid down in Deutsche Gram- (iii) the principle of the exhaustion of rights mophon and the fundamental importance and (iv) the applicability of Article 85 to attached to consent on the part of the market-sharing assignments of trade marks) owner of intellectual property rights. constitute a complete system that allows the requirements of a unified market to be balanced against the interests of the owners of intellectual property and those of the consumer. There was no lacuna needing to be filled by the doctrine of common origin. 29. As regards the first development, I have already mentioned that the Court recognized the twin functions of trade marks: protecting the proprietor's goodwill and saving the consumer from confusion and deception. In the terminology adopted by the Court, the former is described as the IX — The difficulty of reconciling the specific subject-matter of the right and the doctrine of common origin with subsequent latter as its essential function. The specific developments in the case-law subject-matter was first defined in Case 16/74 Centra/arm v Winthrop [1974] ECR 1183, paragraph 8. The case-law was further developed in later judgments: see Case 102/77 Hoffmann-La Roche v Centrafarm [1978] ECR 1139, at p. 1164; Case 3/78 Centra/arm v American Home Products Corporation [1978] ECR 1823, at 27. As regards subsequent developments in p. 1840; Case 1/81 Pfizer v Enrim-Pharm the case-law, it must be remembered that [1981] ECR 2913, at p. 2925 et seq. In the HAG I was decided at a time when the American Home Products case the Court Court's case-law on intellectual property stated (at paragraphs 11 to 14): was in its infancy. There had been only a handful of cases in that field and some of the basic principles had not been fully worked out. Most of the cases had been dealt with on the basis of the rules on competition, the exception being the Deutsche Grammophon case, which could be 'In relation to trade marks, the specific disposed of relatively easily on the basis of subject-matter is in particular the guarantee the exhaustion principle. It is unfortunate to the proprietor of the trade mark that he that the Court had to resolve such a difficult has the exclusive right to use that trade case as HAG I at a time when it had had mark for the purpose of putting a product little chance to define the relationship into circulation for the first time and [is] between the free movement of goods and therefore his protection against competitors the protection of intellectual property rights. wishing to take advantage of the status and That factor alone weakens the value of reputation of the mark by selling products HAG I as a precedent. illegally bearing that trade mark.

In order to establish in exceptional circum­ 31. HAG Bremen relies heavily on the stances the precise scope of that exclusive Pharmon judgment, arguing that the victim right granted to the proprietor of the mark of an expropriation may be equated with the regard must be had to the essential function patent holder against whom a compulsory of the trade mark, which is to guarantee the licence is granted. There is much force in identity of the origin of the trade-marked that argument. In both cases a coercive act product to the consumer or ultimate user. of the public authorities deprives the property owner of the power to determine, of his own volition, what use he wishes to make of his property. I have already indicated that I consider trade marks to be This guarantee of origin means that only no less worthy of protection than patents. I the proprietor may confer an identity upon find it very difficult to understand why the product by affixing the mark. Community law should afford less protection to a trade mark holder who is the victim of an expropriation than it does to a patent holder whose patent is the subject of a compulsory licence, especially when the The guarantee of origin would in fact be expropriation occurs without compensation jeopardized if it were permissible for a third and a royalty is paid under the compulsory party to affix the mark to the product, even licence. Moreover, it might be argued that to an original product.' the patent-holder who obtains a parallel patent in a country where provision is made for the granting of compulsory licences does at least accept the risk that such a licence may be granted, whereas it can hardly be 30. As regards the exhaustion principle, the said that a trade mark owner who registers Court held in Case 187/80 Merck v Stephar his mark in a foreign land accepts the risk [1981] ECR 2063, that the holder of a that the mark may one day be expropriated. national patent in one Member State who markets the patented product in another Member State where it is not patentable cannot rely on his patent in order to prevent parallel imports. The fact that he had not enjoyed the patent-holder's ordinary 32. The conclusion which I draw from this privilege of marketing his product under survey of subsequent developments in the monopoly conditions and thus had to accept case-law is that the doctrine of common a lower profit was considered irrelevant. All origin is indeed difficult, if not impossible, that mattered was his consent. The over­ to reconcile with those developments. riding importance of consent was further emphasized, again in relation to patents, in Case 19/84 Pharmon v Hoechst [1985] ECR 2281, in which the Court held that X — The general problem of trade mark a patent proprietor may prevent the conflicts in Community law importation of a product which has been manufactured in another Member State under a compulsory licence granted in respect of a parallel patent held by the same proprietor, irrespective of whether he has 33. I have expressed the view that the accepted or refused royalties payable under problems caused by the divided ownership the compulsory licence. of identical or confusingly similar trade

34. That view does at least have the virtue of emphasizing what is at stake. Although there may not be many cases of identical trade marks being owned by different persons in different Member States (as in 35. Consequently, if the Court's ruling in HAG), there are very many cases in which a HAG II follows the approach adopted in trade mark protected in one Member State Terrapin v Tenanova, it will affect not only is found to be confusingly similar to a trade the limited number of cases in which mark owned by someone else in another identical marks clash but also the far more Member State (as in Terrapin v Terranova). numerous cases in which similar marks are Trade mark law does not generally held to be confusing. It has been suggested distinguish between these two types of case; that the number of confusingly similar the owner of the trade mark may rely on it marks within the Community amounts to to prevent other persons from purveying several hundred thousand (apparently this goods under an identical or confusingly figure was put forward by the German similar mark. That much is confirmed by Government in its observations in Terrapin v Article 5(1) of the trade mark directive, Tenanova: F. K. Beier, 'Trade mark which provides as follows: conflicts in the common market: Can they

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be solved by means of distinguishing XI — The arguments in favour of the co- additions?', IIC 1978, p. 221). Even if that existence of conflicting marks: examples estimate is too high, it is obvious that trade from national law mark conflicts can constitute a considerable hindrance to intra-Community trade.

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HAG CF

The General Electric Co. Ltd All E. R. acceptable in Community law. Moreover, 1972 2, p. 507, at p. 519, Lord Diplock). even if concurrent registrations are The doctrine is now embodied in Section permitted, each owner of the mark will still 12(2) of the Trade Marks Act 1938, under be able to succeed in an action for which the competent authorities are 'passing-off' if he can show that in his part empowered to permit the registration of of the country the goodwill attaching to the identical or confusingly similar marks in mark belongs to him and that the other case of honest concurrent user, subject to owner's goods would be mistaken for his such conditions and limitations as they think (see Cornish, op. cit., p. 452). The result is fit. that if the doctrine of honest concurrent user were applied to the present case HAG Bremen and HAG Belgium might still be able to exclude one another from their respective territories.

XII — The use of additional distinguishing 40. Attractive though these precedents from matter national law may be, I do not think that either of them is suitable for resolving trade mark conflicts in Community law. As regards the doctrine of honest concurrent user, one must be careful not to overes­ 42. The possibility of differentiating timate its significance. In its modern form it between conflicting trade marks by means simply amounts to a discretionary power, of additional markings is alluded to directly conferred on the Registrar of Trade Marks in the second question referred by the and on the competent courts, to permit the Bundesgerichtshof. It is, however, of general registration of identical or confusingly importance and could affect the answer to similar marks subject to certain conditions. the first question referred. If the Court were The conditions imposed frequently involve considering replying to that question in the territorial limitations (see Kerly's Law of negative, i.e. to the effect that HAG Bremen Trade Marks and Trade Names, 12th edition cannot oppose the imports in question, then 1986, by T. A. Blanco White and R. Jacob, serious consideration would have to be p. 159), which might not be considered given to this aspect of the case. Two

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OPINION OF MR JACOBS —CASE C-10/89

It would, it is argued, be illogical to maintain that such a requirement is contrary to the provisions on the free movement of goods but that a requirement for him to apply a sticker to his wares disclaiming any connection with those of the other trader 43. With regard to the first of the two would be compatible with those rules, since questions that I have formulated, everything both measures would be equally must of course depend on the facts. Where burdensome and would interfere with the the conflicting marks are identical, as in the free movement of goods to the same degree. present case, the initial impression conveyed There is much force in that argument.

the same firm. As regards marks that are frankness, the latter would, I think, tend to confusingly similar but not identical, the excite suspicion that there was something problem may not be quite so insuperable. wrong with the goods. Moreover, the For instance, it would, I think, be possible consumer might feel deceived if he were to to overcome any confusion between remove the sticker after purchasing the

goods and discover that the goods appeared additional distinguishing matter. Such a to have a different origin from that which conclusion is justified from the point of he had assumed. Rather than risk damaging view both of the trade mark owner and of his goodwill in this way, the manufacturer the consumer. From the owner's point of might prefer to put up the goods in view, the specific subject-matter of the completely different packaging, which right — namely, his exclusive right to use would be more costly than the simple the mark in the territory concerned and thus expedient of adding a sticker. to protect himself against unfair compe­ tition — would be affected and the existence of the right would be threatened if he were obliged to tolerate the use of the mark by a competitor. From the consumer's point of view, the essential function of the trade 45. The conclusion that follows from the mark, which is to prevent him from being above considerations is that there are confused and misled as to the origin of the circumstances in which it might be practical goods that he purchases, would be to distinguish between conflicting trade undermined. It would be highly undesirable marks by means of additional markings, but for Community law to promote the coex­ that such circumstances constitute the istence, on the same market, of identical or exception rather than the rule. I doubt confusingly similar trade marks. whether that method would ever be effective in the case of identical trade marks used for identical products. Above all, it must be stressed that it is not a panacea to all the 47. The conclusion reached above confirms problems posed by trade mark conflicts, as my belief that the approach followed in the Court seemed to imply in HAG I. Terrapin v Terranova (subject to my reser­ vations about the genuineness of the risk of confusion and the possibility of eliminating it by means of additional information) was correct and that HAG I was wrongly decided. I could not, however, recommend XIII — The conclusion: the trade mark that view unreservedly without first owner may rely on his right against the satisfying myself that there is some means of owner of a parallel right in another Member preventing the worst excesses that may State ensue from the divergent interpretation given in national law to the concept of confusingly similar marks. But such means are certainly available.

51. I must deal at some length with the possible implications of the trade mark directive already referred to, because a great deal of weight was put on it in argument. The German Government contends that the present case should be resolved on the basis of its provisions. It recognizes that the directive cannot have direct effect as between individuals and that in any case the 49. Furthermore, in that judgment the period for its implementation has not yet Court did not rule out the possibility that it expired, but maintains that account should might legitimately be called upon to rule on none the less be taken of the directive, the issue of similarity and the risk of because it contains a definitive statement of confusion, at least as regards the impli­ the legislature's opinion as to what limi­ cations thereof in Community law. That tations of the free movement of goods are possibility has been strengthened by the justified for the protection of industrial and trade mark directive because the concept of commercial property. By deliberately confusingly similar marks is now a concept omitting to incorporate the doctrine of of Community law (see Articles 4(l)(b) and common origin into the directive, the 5(l)(b) of the directive). Although the Council has tacitly indicated that there is no directive cannot produce direct effect as place for such a doctrine in Community law. against an individual (Case 152/84 Marshall Moreover, the provisions of German law v relied on by HAG Bremen fully accord with Area Health Authority [1986] ECR 723), the the directive and cannot therefore be national courts will, after the expiry of the considered incompatible with Community period for its implementation, be required to law. interpret national law, in particular national provisions implementing the directive, in the light of the directive's wording and purpose (Case 14/83 Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 52. From the Court's point of view, that 1891). They will be empowered, or obliged, might appear an attractive solution because to request preliminary rulings and the Court it would avoid the need to admit that will, by ensuring a uniform — and perhaps HAG I was wrongly decided. It would be restrictive — interpretation of the concept of possible to say that HAG I was correctly confusingly similar trade marks, be able to decided but that the legal basis for the eliminate the abuses and discrepancies that I decision has been destroyed by subsequent have alluded to above. legislation. However, before embracing that

solution, the Court must be satisfied that the intended to confer on trade mark owners directive does indeed have the effect for the power to create such disguised which the German Government contends. I restrictions on trade. But that would be the am not convinced that it does. logical consequence of the German Government's argument; for we cannot construe the Council's silence on that point as implicitly confirming the rule laid down by the Court, and yet draw exactly the opposite conclusion from its silence in 53. In the first place, one must be wary of relation to the doctrine of common origin. reading too much into the silence of the

The German Government assumption only if it were clear that the attempts to surmount that difficulty by directive purported to codify the Court's arguing that the principles worked out by case-law on the relationship between the the Court governing the relationship free movement of goods and the protection between Articles 30 and 36 cease to be of trade mark rights and that it sought to relevant once the substantive law of the deal with that subject exhaustively. That is Member States has been harmonized. not however the case.

There may be some truth in that Home Products case the Court held that, if a argument as regards a directive that manufacturer uses different marks in harmonizes national rules on, for example, different Member States for the purpose of the composition of animal feedingstuff, as in artificially partitioning the market, he may the Tedeschi case cited by the German lose the right to prevent unauthorized use of Government (Case 5/77 [1977] ECR 1555), the marks by third parties, since he would because in such a case the source of the be exercising his right in such a way as to impediment to free movement — namely, create a disguised restriction on trade. I the discrepancies in national legislation — is should be reluctant to infer from the removed by the directive. But the argument

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HAG GF

stronger position legally than they were. 60. The arguments can also be understood They, however, consented to the subdi­ as leading to a different conclusion, namely vision of the mark and acquired their that, if the doctrine of common origin is rights in it with full knowledge that abandoned, HAG Bremen would still be outside Belgium and Luxembourg it was entitled to use its mark in Belgium and owned by a third party; Luxembourg on the basis of some other legal principle. That may well be so, but it would not be appropriate to express a view on that question in these proceedings, where it does not arise: the fate of HAG Bremen in Belgium and Luxembourg is plainly not a (ii) secondly, it contends that to allow matter to be resolved by the German courts HAG Belgium to use the HAG mark in in these proceedings. I must nevertheless Germany would be tantamount to consider the arguments, in case they should giving extraterritorial effect to the be regarded as relevant. expropriation that took place in 1944, thus violating an established principle of international law;

61. If the argument relating to consent were used in order to justify the decision in HAG I, it would involve changing the entire basis of the decision. It would amount (iii) thirdly, it maintains that, although the to saying that the decision in HAG /should trade mark's essential function of indi­ not have been based on the spurious cating the origin of goods was impaired doctrine of common origin; instead it in Belgium and Luxembourg, as a result should have been based either on the of the expropriation, it has never been principle laid down in relation to Article 85 impaired in Germany, where it has in Case 40/70 Sirena v Eda, already cited, throughout remained in the same or on a rather unusual application of the ownership. exhaustion-of-rights principle. Both of those solutions are fraught with difficulty.

restrictive practices arose before the Treaty HAG Belgium and HAG Bremen and the entered into force, it is both necessary and effects of the putative 'assignment' do not sufficient that they continue to produce exceed those flowing from the mere exercise their effects after that date'. In HAG I of the national trade mark rights. the Court held that Article 85 was not applicable in the absence of any link — legal, financial, technical or economic — between the holders of the mark. It might, however, have been possible to argue that, although HAG Bremen did not surrender the mark by agreement, Van 63. The alternative solution, consisting in Oevelen and their successors in title the application of the exhaustion-of-rights acquired the mark in that way. It would not principle, is equally problematical.

Logically it should, even though the assignee of the subdivided mark could hardly be said to have exhausted his right; it would be more 'An agreement is only regarded as accurate to say that he acquired a right that continuing to produce its effects if from the was already exhausted. But once again the behaviour of the persons concerned there matter, is complicated by the fact that the may be inferred the existence of elements of subdivision of the mark took place in 1944, concerted practice and of coordination 14 years before the entry into force of the peculiar to the agreement and producing the Treaty. The essence of the exhaustion same result as that envisaged by the theory is that the owner of an intellectual agreement. property right in a Member State exhausts that right throughout the Community by consenting to the marketing of the product in question in another Member State.

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decision in HAG I on the ground that Van it was not impaired, before 1974, in Belgium Oevelen and their successors consented to and Luxembourg any more than in the subdivision of the right. Germany. Hence, that argument cannot justify distinguishing between HAG I and HAG II.

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where the Court expressly reconsidered a relied on not only with a certain commercial previous ruling. That the Court should in an origin but also with certain perceptions as to appropriate case expressly overrule an the quality of the goods. For the sake of earlier decision is I think an inescapable completeness, Question 4 asks whether the duty, even if the Court has never before conditions set out in Questions 2 and 3 expressly done so. In the present case the might together change the answer to arguments for expressly abandoning the Question 1, even though neither of them doctrine of common origin are exceptionally would by itself have such an effect. strong; moreover, the validity of that doctrine is already, as I have suggested, in doubt as a result of the intervening case-law. To answer Question 1 in the affirmative without abandoning the doctrine, or to seek to rationalize such an answer on some other ground, would be a 70. The two additional factors referred to recipe for confusion. in Questions 2 and 3 are of course important — so important, in fact, that I have been unable to deal with Question 1 without already touching upon them. I need add very little to what I have already said. XVII — The remaining questions

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consumers familiar with a mark does not function as a guarantee of origin lies none increase or decrease in proportion to their the less in the fact that the trade mark number. conveys to the consumer certain perceptions as to the quality of the marked goods. The consumer is not interested in the 72. As regards the tendency of a particular commercial origin of goods out of idle trade mark to convey to consumers certain curiosity; his interest is based on the perceptions as to the quality of the marked assumption that goods of the same origin goods, I have already pointed out that that will be of the same quality. That is how tendency is bound up with the essential trade mark protection achieves its funda­ function of trade marks in general. It is mental justification of rewarding the manu­ sometimes said that the essential function of facturer who consistently produces high- the trade mark is to act as a guarantee of quality goods. To answer Question 1 in the origin but not as a guarantee of quality. negative would be to ignore this aspect of That is true in the limited sense that the the trade mark's essential function. It is not manufacturer is not under an obligation to therefore possible to answer Question 1 in ensure that all goods sold under a particular the negative but then say that the answer mark are of the same quality. But, as I have might be different if the factor referred to in suggested, the relevance of the trade mark's Question 3 were present.

XVIII — The reply to the questions referred