C-355/96

OPINION OF MR JACOBS — CASE C-355/96

OPINION OF ADVOCATE GENERAL JACOBS delivered on 29 January 1998

1. The Court's case-law on Articles 30 and stein and Norway on the other hand. But 36 of the EC Treaty established for trade can the trade-mark owner prevent a third marks, as well as for other forms of intellec­ party from using the mark in the Commu­ tual property, a principle of Community- nity or in the EEA for goods which have wide exhaustion: 1thus the sale in the Com­ been put on the market under that mark, by munity of the trade-marked goods, by or or with the consent of the owner, outside the with the consent of the trade-mark owner, EEA? The question comes by way of a exhausts the trade-mark rights throughout request for a preliminary ruling from the the Community, and he cannot, other than in Oberster Gerichtshof (Supreme Court), Aus­ exceptional circumstances, oppose the use of tria. the mark by others in subsequent transac­ tions anywhere in the Community.

'Whereas the trade mark laws at present applicable in the Member States contain dis­ 6. In summary, the Directive harmonises the parities which may impede the free move­ general 'conditions for obtaining and con­ ment of goods and freedom to provide ser­ tinuing to hold a registered trade mark' (sev­ vices and may distort competition within the enth recital) and the rights conferred by a common market; whereas it is therefore nec­ trade mark (Articles 5, 6 and 7). Thus it essary, in view of the establishment and specifies signs of which a trade mark may functioning of the internal market, to consist (Article 2), the grounds for refusing approximate the laws of Member States; to register or invalidating a trade mark (Articles 3 and 4), the consequences of acqui­ escence in the use of a later trade mark (Article 9) and of failure to use a registered trade mark (Articles 10 to 12), and the grounds for revocation of a trade mark (Article 12).

Whereas it does not appear to be necessary at present to undertake full-scale approxima­ tion of the trade mark laws of the Member States and it will be sufficient if approxima­ tion is limited to those national provisions of 7. However, in certain areas Member States law which most directly affect the function­ are given a discretion to decide whether to ing of the internal market; adopt the rules provided for in the Directive: for example, there are certain optional grounds for refusing to register or invalidat­ ing a trade mark (Articles 3(2) and 4(4)) and an option as to whether or not to provide protection in certain specified circumstances for a trade mark with a reputation concern-

8. The most important provisions in relation to the present case are Articles 5 and 7, entitled, respectively, 'Rights conferred by a trade mark' and 'Exhaustion of the rights conferred by a trade mark'.

3 — See also Articles 3(4), 9(2), and 15(2).

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3. The following, inter alia, may be prohib­ the Community under that trade mark by ited under paragraphs 1 and 2: the proprietor or with his consent.

(a) affixing the sign to the goods or to the 2. Paragraph 1 shall not apply where there packaging thereof; exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.'

OPINION OF MR JACOBS — CASE C-355/96

The Directive was one of the legislative acts State) acceded to the Community on 1 Janu- incorporated into EEA law by the Agree- ary 1995. ment establishing the EEA, 5 which entered into force on 1 January 1994. 6 Annex XVII to the Agreement amends Article 7(1) of the Directive 'for the purposes of the Agree- ment' so as to refer to marketing within the EEA rather than the Community: it replaces The facts the words 'in the Community' with the words 'in a Contracting Party'. 7 Moreover, a protocol to the Agreement, Protocol 28 on intellectual property, contains an article, Article 2, headed 'Exhaustion of rights'. 8 Article 2(1) provides: 14. The plaintiff, Silhouette International Schmied Gesellschaft m b H & Co. KG ('Sil- houette'), is an Austrian company which produces fashion spectacles in the higher price ranges. It distributes the spectacles worldwide under the word and picture trade mark 'Silhouette', which is registered in Aus- tria and in most countries of the world, as 'To the extent that exhaustion is dealt with in well as internationally. In Austria Silhouette Community measures or jurisprudence, the supplies the spectacles to specialist opticians; Contracting Parties shall provide for such in other countries it has subsidiary compa- exhaustion of intellectual property rights as nies or distributors. laid down in Community law. Without prejudice to future developments of case-law, this provision shall be interpreted in accord- ance with the meaning established in the rel- evant rulings of the Court of Justice of the European Communities given prior to the signature of the Agreement.' 15. The defendant, Hartlauer Handelsgesell- schaft m b H ('Hartlauer'), sells spectacles in numerous branches in Austria and solicits customers mainly by its low prices. It is not supplied by Silhouette because Silhouette considers sales by Hartlauer to be harmful to the image which Silhouette has created for its products as fashionable spectacles of special 13. N o issue under that Protocol arises in quality. the present case, the facts of which occurred after Austria (previously an EEA Member

19. Hartlauer contends that Silhouette did not sell the frames subject to the instruction that any import into the Community was excluded and that Silhouette's application 17. Silhouette delivered the goods to Union should be dismissed. Trading in Sofia in November 1995. Hart- lauer subsequently acquired the goods (according to the Oberster Gerichtshof, it has not been possible to ascertain from whom) and offered them for sale in Austria from December 1995. It announced in a press campaign that, although it had not been supplied by Silhouette, it had succeeded 20. Silhouette's action failed before the in purchasing 21 000 Silhouette frames from Landgericht Steyr (Steyr Regional Court) abroad. In its observations, Hartlauer main­ and on appeal to the Oberlandesgericht Linz tains that when it acquired the products it (Linz Higher Regional Court). The current was assured that there would be no obstacle reference is made in the context of an appeal to importing them into Austria. by Silhouette to the Oberster Gerichtshof against the decision of the Oberlandesgericht Linz.

18. Silhouette objects to the sale of its frames by Hartlauer in Austria and seeks an order prohibiting Hartlauer from marketing 21. Article 7 of the Trade Marks Directive under its trade mark spectacles or spectacle was implemented into Austrian law almost frames which were not put on the market in word for word by the 1992 amendments to the EEA by it or with its consent. It argues the Markenschutzgesetz. Paragraph 10a of that it has not exhausted its trade-mark the Markenschutzgesetz provides that the rights because the Directive provides that trade mark does not entitle the owner of the such rights can be exhausted only by reason trade mark to prohibit a third party from

9 — SZ 43/219. 10 — 669 BlgNR 18. GP5. 11 — See Article 2(c) of the EEA Agreement.

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sider what the position would be in relation stated that Silhouette gave directions for the to goods marketed within the EEA and sub­ sale of the goods there and delivered them to sequently imported into the Community. the purchaser in Sofia. The question should For convenience I shall refer in what follows accordingly be addressed on the assumption to importing into the Community goods that the trade-mark owner consented to the marketed outside the EEA. marketing of his products outside the EEA.

27. It should also be assumed for present 25. Written observations have been submit­ purposes that Silhouette did not consent to ted by Silhouette, Hartlauer, the Austrian, its products being resold within the EEA. French, German, Italian, Swedish, and That is so even though the national court United Kingdom Governments, and the expresses some doubt as to whether the Commission. At the hearing oral submis­ restrictions upon resale were passed on to sions were made by Silhouette, Hartlauer, the purchaser. If Silhouette had consented to the Italian Government, and the Commis­ marketing in the EEA, the answer to the first sion. question referred would clearly be that Sil­ houette could not oppose the import of its products into Austria.

Question 1

The terms of the Directive

33. As to whether the Directive precludes international exhaustion, or leaves that open, the language of Article 7(1) inclines me to the former view. Article 7(1) spells out the circumstances in which the trade-mark rights 30. Article 7(1) of the Directive provides for are exhausted: it is naturally read as doing so exhaustion only where the goods have been exhaustively. In providing that the rights are put on the market in the Community: it pro- exhausted when the goods are marketed in vides therefore only for Community-wide, the Community, Article 7(1) is naturally not for international exhaustion. understood as meaning that the rights are not exhausted when the goods are marketed in a third country. It is true that the Direc- tive does not specifically preclude interna- tional exhaustion, but that effect can reason- ably be inferred from the language. I accept that there are arguments which go the other way, but those arguments derive little sup- 31. It is accepted on all sides, and with good port from the language of the Directive. reason in my view, that the Directive does not require Member States to provide for international exhaustion: at most, it leaves that open as an option for Member States. If the Directive had sought to impose interna- tional exhaustion, Article 7(1) would not have referred only to marketing in the Com- munity. 34. My view of the effect of the language of Article 7(1) is supported by the structure of the Directive. Article 7(1) is a derogation from the rights conferred on the trade-mark owner by Article 5(1). In general derogations should not be construed broadly. Here

37. Moreover, they argue that the intention of Article 7 was simply to codify the Court's existing case-law on the exhaustion of rights The aims and scope of the Directive since the Court has stressed that Article 7 is to be interpreted in the same way as the Court's case-law on Articles 30 and 36. They contend that, prior to implementation of the Directive, Member States had a discretion as to whether or not to adopt the principle of international exhaustion; and that, in the absence of express language to the contrary, that should remain the position under the 35. Since the terms of the Directive are not Directive. conclusive, the aims and scope of the Direc­ tive are of crucial significance in interpreting its provisions. The indications in the pre­ amble, however, do not all point in the same direction. O n the one hand, it will be recalled that the Directive does not purport to 'undertake full-scale approximation of the 38. The opponents of international exhaus­ trade-mark laws of the Member States' but tion, relying on the wording of the third aims to approximate 'those national provi­ recital of the preamble to the Directive, 14 sions of law which most directly affect the argue that, whilst it is true that the Directive functioning of the common market'. O n the is not a measure of total harmonisation, the other hand, the Directive seeks to ensure, application by a Member State of the prin­ with certain limited exceptions, that trade ciple of international exhaustion is one of the marks 'enjoy the same protection under the provisions which 'most directly affect the legal systems of all the Member States'. functioning of the internal market' and is accordingly the type of issue which the Directive sought to harmonise. Moreover, the purpose of the Directive was to ensure that trade marks 'enjoy the same protection under the legal systems of all the Member States'. Although the protection afforded by the Directive does not impose a totally uni- 36. Those who favour international exhaus­ tion point to the limited nature of the har­ monisation attempted by the Directive and 14 — Cited at paragraph 5 above.

39. As regards the scope and effects of the Directive, it can in my view be argued that the Directive has transformed the impact of Community law on trade-mark protection. Previously the only issue under Community law was that of the impact of Articles 30 to 36 of the Treaty on national trade-mark law. The Directive harmonises the essential con- ditions and consequences of trade-mark pro- tection. Although in an internal Community context the Court has treated Article 7 of the 42. It is above all on that ground that the Directive as codifying the previous case-law, Austrian, French, German, Italian and it cannot be assumed that that is the sole United Kingdom Governments and the function of Article 7. The Directive regulates Commission all submit that the Directive the substance of trade-mark rights, and its should be interpreted as precluding the prin- provisions are designed to be substituted for ciple of international exhaustion. Essentially the diverse national laws across the whole they argue that, if the Member States were range of its provisions. free to determine whether trade-mark own- ers could prevent imports from third coun- tries, then the same products could be the subject of parallel imports into one Member State but not into another, a result incompat- ible with the internal market. It is of course no answer to that submission to suggest that once goods were imported into one Member State which did provide for international exhaustion they could then benefit from free movement throughout the Community, since 40. If the Directive is seen as establishing the that suggestion would have the effect of essential terms and effects of trade-mark pro- imposing international exhaustion on all tection, it is difficult to argue that it leaves Member States which, as has been seen Member States free to opt for international above, would be contrary to the Directive. exhaustion. The scope of the exhaustion The submission of the five Member States principle is after all central to the content of and of the Commission has in my view trade-mark rights. much force.

The abovementioned differences between the 45. In the present case the Swedish Govern­ Community and the EEA will have to be ment, in contrast to the other Governments, reflected in the application of the principle of contends that the Directive leaves the issue

15 — Case E-2/97, advisory opinion of 3 December 1997. 16 — Paragraphs 25 and 26 of the advisory opinion.

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tee the consumer the possibility of identify­ 51. There is of course a powerful argument ing the origin of the product. It is no part of based on the concern for free trade at the the function of a trade mark to enable the international level. To some commentators owner to divide up the market and to exploit the exclusion of international exhaustion will price differentials. The adoption of interna­ appear protectionist and therefore harm­ 19 tional exhaustion would bring substantial ful. Commercial policy considerations advantages to consumers, and would pro­ may however be more complex than they mote price competition. allow for. I have already alluded to concern about the possible lack of reciprocity if the Community were unilaterally to provide for international exhaustion. In any event it is no part of the Court's function to seek to evalu­ ate such policy considerations.

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exclude the possibility that Articles 85 and which provides for a single Community 86 of the Treaty may apply to agreements mark valid throughout the Community, was between undertakings, or to unilateral drafted concurrently with the Directive and behaviour by a dominant undertaking, seek­ it contains a virtually identical provision on ing to divide up the markets. 2 0 exhaustion.

54. Finally, it should be recalled that some Member States, and some third countries, do 56. Article 1(2) provides that a Community not practise international exhaustion, and trade mark has 'a unitary character' and that: that that has not been held to be contrary to the General Agreement on Tariffs and Trade (the GATT). The situation is not changed in that respect by the W T O Agreement. Annex 1C, the Agreement on Trade-related aspects of Intellectual Property Rights (the TRIPs), 2 1 provides by Article 6 that, for the 'It shall have equal effect throughout the purposes of dispute settlement under that Community: it shall not be registered, trans­ Agreement, nothing in the Agreement (sub­ ferred or surrendered or be the subject of a ject to certain provisions) shall be used to decision revoking the rights of the proprietor address the issue of the exhaustion of intel­ or declaring it invalid, nor shall its use be lectual property rights. 2 2 prohibited, save in respect of the whole Community. This principle shall apply unless otherwise provided in this Regu­ lation.'

The Community Trade Mark Regulation

57. Article 13, entitled 'Exhaustion of the 55. Further guidance on the interpretation of rights conferred by a Community trade the Directive is provided by the Community mark', provides as follows: Trade Mark Regulation. 2 3 The Regulation,

61. It therefore seems impossible to contend that the Trade Mark Regulation confers a discretion on Member States to opt for inter­ 59. As in the case of the Directive, the Com­ national exhaustion. The question then is mission's original proposal for the Regu­ whether the provisions on exhaustion in the lation would have provided for international Regulation and Directive, notwithstanding exhaustion, but again the proposal was their common origin and their identical amended and the Regulation provides for wording, can be construed differently. There exhaustion only for goods which have been are of course well-known examples of identi­ put on the market 'in the Community'. Once cal provisions being construed differently in again, therefore, it is impossible to read the different contexts, notably in the context of Regulation as imposing international exhaus­ the EC Treaty on the one hand and in the tion. The choice would then be between pre­ context of a Free Trade Agreement on the cluding international exhaustion or leaving other, as in Polydor ν Harlequin Record the issue to the Member States. Shops. 2 4 The advisory opinion of the EFTA Court cited above 2 5 provides a further illus­ tration of the reasons for adopting a different approach, justified by the different context, to the very provision in issue in the present case. In the present case however the context 60. In the case of the Regulation, however, it is, both for the Regulation and for the Direc­ seems scarcely possible to contend that the tive, the Community's internal market. Member States have a discretion. Whereas Although an argument can be advanced that the Directive, as has been seen, is a partial the objectives of the two instruments are dif­ measure of harmonisation of national laws, ferent, since the Directive only aims to the Regulation governs comprehensively the achieve a limited measure of harmonisation, incidents and effects of a Community trade it must be accepted that the Regulation mark. Moreover Article 14(1) provides that: 'The effects of Community trade marks shall be governed solely by the provisions of this 24 — Case 270/80 [1982] ECR 329. Regulation'; leaving only infringement 25 — Cited in note 15.

65. Under Austrian trade-mark law there is 63. Thus, in answer to the first question, no right to a prohibitory injunction in Article 7(1) of the Directive is to be inter- respect of trade-mark infringement: an preted as meaning that the proprietor of a injunction to cease a trade-mark infringe- trade mark is entitled to prevent a third ment can however be sought under Para- party from using the mark for goods which graph 9 of the U W G (the law on unfair com- have been put on the market under that petition). Under Paragraph 9(1) of the mark outside the territory of the EEA. UWG, a prohibitory order may be made Member States are accordingly precluded against a person who in the course of busi- from adopting the principle of international ness uses a name, a trading name or the par- exhaustion. ticular designation of an undertaking in a manner which is liable to cause confusion with the name, trading name or particular designation which another person makes use of with authority. A registered trade mark qualifies as a 'particular designation' within Question 2 the meaning of that provision (Paragraph 9(3) of the UWG). However, it appears that under Austrian law injunctions cannot be obtained on the basis of Article 9 of the U W G to prevent parallel imports since the Oberster Gerichtshof states that the market- 64. By its second question the Oberster Ger- ing of genuine goods cannot cause confusion ichtshof seeks to ascertain whether Article within the meaning of that provision when 7(1) of the Directive can alone constitute the the goods in issue are original products of basis for the grant of an injunction in sup- the trade-mark owner.

66. Although there are two other bases in almost verbatim into Austrian law. Rather it Austrian law upon which a prohibitory wishes to elucidate the correct interpretation injunction may be based, the Oberster Ger­ of that provision. Although it is Article 5 of ichtshof appears to consider that neither is the Directive, rather than Article 7, which applicable to the present case. Those addi­ confers the substantive rights upon the tional provisions are Paragraph 1 of the trade-mark owner, it appears that the Ober­ U W G and Article 43 of the ABGB (Civil ster Gerichtshof is considering only the Code). Pursuant to the former, a prohibitory interpretation of the latter provision since order may be made against a person who in Article 5(1 )(a) has not been implemented in the course of business for purposes of com­ Austrian law. petition performs acts which are against pub­ lic policy. A breach of the law may be against public policy within the meaning of that provision. However, the breach must be subjectively reprehensible and liable to give the person acting illegally an advantage over his law-abiding competitors. Article 43 of 68. It is well established that, whether or not the ABGB allows a claim for a prohibitory the specific provisions of a directive have injunction where a person's right to use his been implemented in national law, and inde­ name is disputed or where he is adversely pendently of the possible direct effect of affected by the unauthorised use of his name those provisions — which, if not imple­ (or pseudonym). mented, can be invoked only against the State or a public body — the national courts are under a duty to take account of all provi­ sions of national law so as to ensure, wher­ ever possible, that the result prescribed by the directive is attained. 2 6 That duty applies as regards not only national legislation spe­ cifically introduced in order to implement a directive but also other provisions of national law, including those adopted before the directive. As the Court stated in relation to the very provision in issue in the present 67. Since the Oberster Gerichtshof considers case: that none of the above provisions provides the foundation for an injunction in the present case, it believes that it will be unable to grant an injunction to Silhouette unless the right to an injunction flows from the wording of Article 7(1) of the Trade Marks Directive. It reasons that, if Article 7(1) can 'when applying national law, whether be interpreted in that way, it will be able to adopted before or after the directive, the issue an injunction on the basis of Paragraph national court that has to interpret that law 10 a of the Markenschutzgesetz since the two must do so, as far as possible, in the light of provisions are in virtually identical terms. It the wording and the purpose of the directive observes that the issue is not whether that provision of the Directive can have direct effect, since the provision has been copied 26 — Case C-106/89 Marleasing [1990] ECR 1-4135.

69. It follows that, whether or not the national legislation relating to trade marks has been amended to give effect to all the provisions of the Directive, that legislation 71. Moreover the case-law of the Court of must be interpreted consistently with the Justice recognises, as a general principle of Directive. Provided that the legislation is law, that the national courts must provide capable of being interpreted in that way, the effective remedies for the enforcement of national courts are under a duty to give trade Community rights. The case-law has estab­ marks the same protection as if each of the lished two principles in particular: first that provisions of the Directive had been specifi­ national rules governing remedies for the cally and explicitly transposed into national exercise of Community rights must not be law. less favourable than those available for rights arising under national law; and secondly that the exercise of Community rights must not in any event be rendered impossible in prac­ tice or excessively difficult. 2 8 It may well be that the refusal of the remedy which is in issue in the present case, namely an injunc­ 70. Thus although in the present case it tion, would, in the circumstances of this case, appears that Article 5(1 )(a) of the Directive, contravene both those requirements. which confers exclusive rights on the trade­ mark owner, has not been implemented in Austrian law, nevertheless the courts are required, as far as possible, to interpret the Austrian legislation in the light of Article 5(l)(a). Article 5(1) states that the proprietor of the mark 'shall be entitled to prevent all third parties not having his consent' from using the mark. The terms of Article 5(1) thus envisage that he shall be entitled to a 72. So far as interlocutory injunctions are court order prohibiting the use of the mark. concerned, the Court has held that national Where such an order is available under courts may be required to afford interim national legislation, whether under the legis­ relief for the protection of Community lation on trade marks or under other legisla­ rights even in cases where they would be

(1) Article 7(1) of t h e First C o u n c i l Directive (89/104/EEC) of 21 D e c e m b e r 1988 t o a p p r o x i m a t e t h e laws of t h e M e m b e r States relating t o t r a d e m a r k s m u s t be i n t e r p r e t e d as m e a n i n g t h a t t h e p r o p r i e t o r of a t r a d e m a r k is entitled t o p r e ­ vent a t h i r d p a r t y f r o m using t h e m a r k for g o o d s w h i c h have b e e n p u t o n t h e m a r k e t u n d e r t h a t m a r k outside t h e E E A .

(2) E v e n w h e r e Article 7(1) alone of t h e relevant provisions of t h e Directive has b e e n specifically t r a n s p o s e d i n t o n a t i o n a l law, t h e p r o p r i e t o r of t h e t r a d e m a r k is entitled t o o b t a i n an o r d e r p r o h i b i t i n g t h e t h i r d p a r t y f r o m using t h e m a r k for g o o d s w h i c h have b e e n p u t o n t h e m a r k e t u n d e r t h a t m a r k o u t s i d e t h e EEA.

29 — Case C-213/89 Factortame and Others [1990] ECR I-2433. 30 — Paragraph 21 of the judgment.

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