C-414/99

2. The Court is being asked in this connec- tion to interpret the concepts of 'consent' and 'legitimate reasons' in Article 7 of First Council Directive 89/104/EEC of 4. So far as can be ascertained, the ques- 21 December 1988 to approximate the tions submitted in the present cases appear laws of the Member States relating to trade to be based on a critical attitude to the marks 2('the Trade Marks Directive'). In exclusion of international exhaustion of the detailed questions which it has submit- trade mark rights pursuant to the Trade ted, the national court first seeks to ascer- Marks Directive. 5 That exclusion is in tain the circumstances from which consent principle intended to enable trade mark may be inferred. In Case C-414/99 it also proprietors within the European Economic submits questions concerning the 'legiti- Area ('the EEA') to oppose the importation mate reasons' which, under Article 7(2) of the Trade Marks Directive, may prevent exhaustion of the rights conferred by a 3 — Case C-355/96 Silhouette International Schmied [1998] trade mark. ECR I-4799. 4 —Case C-173/98 Sebago and Maison Dubois [1999] ECR I-4103. 5 — See also Article 13 of the similarly worded trade mark regulation, Council Regulation (EC) No 40/94 of 1 — Original language: German. 20 December 1993 on the Community trade mark 2 — OJ 1989 L 40, p. 1. (OJ 1994 L 11, p. 1).

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into the EEA of goods bearing their trade the cosmetics directive, Directive 76/768/ marks which were first placed on the EEC, 6which, it would appear, was imple- market outside the EEA. The scope of the mented in the United Kingdom by the principle of EEA-wide exhaustion is thus Cosmetic Products (Safety) Regulations closely linked to the concept of consent. 1996 (SI 2925/1996).

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11. A & G argue that, having regard to the Communities to give a preliminary ruling manner and circumstances in which the on the following questions: goods were placed on the market in Singa- pore by Davidoff or with its consent, they were, or should be treated as having been, imported and sold with Davidoff's consent. It invokes, with regard to such consent, Articles 7(1) and 5(1) of the Trade Marks '(A)Insofar as the Directive refers to goods Directive. being put on the market in the Com- munity with the consent of the pro- prietor of a mark, is it to be interpreted as including consent given expressly or implicitly and directly or indirectly?

12. Davidoff denies that it consented, or could be treated as having consented, to A & G's activities, submitting, further, that it has legitimate reasons, within the mean- ing of Article 7(2) of the Trade Marks (B) Where: Directive, for opposing importation and sale of the goods. Those reasons are based on the removal or obliteration (in whole or in part) of the batch code numbers.

(F) Is Article 7(2) of the Directive to be interpreted in such a way that legiti- mate reasons for the proprietor to oppose further commercialisation of his goods include the removal or oblit- eration by third parties (in whole or in part) of batch code numbers on the (C) If the answer to Question (B) is in the goods where such removal or oblitera- affirmative, is it for the national courts tion results in the goods in question to determine whether, in all the circum- stances, effective restrictions were imposed on the third party?

(i) offending against any part of the criminal code of a Member State (other than a part concerned with trade marks) or (D) Is Article 7(2) of the Directive to be interpreted in such a way that legiti- mate reasons for the proprietor to oppose further commercialisation of his goods include any actions by a third party which affect to a substantial extent the value, allure or image of the trade mark or the goods to which it is (ii) offending against the provisions of applied? Directive 76/768/EEC?'

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Cases C-415/99 and C-416/99 goods in the United Kingdom, in particular items of clothing.

21. Tesco's and Costco's suppliers had obtained the goods directly or indirectly from authorised retailers in the United 18. Costco UK Ltd, now Costco Wholesale States, Mexico or Canada, and/or from UK Ltd ('Costco'), which is also a company wholesalers who bought the jeans from incorporated under the laws of England 'accumulators', who operate by visiting and Wales, sells a wide range of branded numerous stores and purchasing as many

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items of clothing as possible at the same mark proprietor or with his consent time in order then to sell them on to and those goods have been imported wholesalers. into or sold in the EEA by a third party, is the effect of Directive 89/104/EEC ("the Directive") that the trade mark proprietor is entitled to prohibit such importation or sale unless he has expressly and explicitly consented to 22. In 1998 Levis commenced proceedings it, or may such consent be implied? before the High Court of Justice of England and Wales against Teseo and Costco, claiming that the importation and sale of the Levi jeans in question by the defendants constituted an infringement of their trade mark rights.

(2) If the answer to Question 1 is that consent may be implied, is consent to be implied from the fact that the goods 23. Teseo and Costco argue essentially that have been sold by the proprietor or on they acquired an unrestricted right to his behalf without contractual restric- dispose of the jeans as they wish. Levis, tions prohibiting resale within the EEA on the other hand, point to their sales binding the first and all subsequent policy: in the United States and Canada purchasers? Levis sell their jeans to authorised retailers, who are obliged, on pain of having their supplies cut off, to sell the jeans only to end users. In Mexico, the jeans were in part sold to authorised wholesalers subject to the condition that they would not be exported from Mexico.

(c) the person placing the goods on the market (not being an authorised retailer) does so with the knowledge that the (f) there has or has not been trade mark proprietor objects communication by the proprie- to them being placed on the tor to all subsequent purcha- market by anyone otherwise sers of its goods (i.e. those than an authorised retailer; between the first purchaser and/or from the proprietor and the

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person placing the goods on The proprietor shall be entitled to prevent the market in the EEA) of its all third parties not having his consent from objection to the sale of the using in the course of trade: goods for the purposes of resale; and/or

(a) any sign which is identical with the trade mark in relation to goods or services which are identical with those (g) a contractual restriction has or for which the trade mark is registered; has not been imposed by the proprietor and made legally binding upon the first purcha- ser prohibiting sale for the purposes of resale to anyone other than the ultimate consu- mer?

(3) The following, inter alia, may be pro- hibited under [paragraph 1]: (B) Does the issue of whether or not there was consent by the proprietor to the placing of those goods on the market within the EEA, within the meaning of the Directive, depend on some further or other factor or (a) affixing the sign to the goods or to the factors and, if so, which?' packaging thereof;

27. Given the detailed manner in which the '(1) The trade mark shall not entitle the questions submitted in the national pro- proprietor to prohibit its use in relation to ceedings have been formulated, it seems goods which have been put on the market appropriate to examine them systemati- in the Community under that trade mark cally, rather than in the order presented, the by the proprietor or with his consent. better to address the essential legal issues common to them. Questions A to C in Case C-414/99 and all of the questions in Cases C-415/99 and C-416/99 concern the con- cept of consent in Article 7(1) of the Trade Marks Directive. Although not directly discernible from the questions, this is none the less apparent from the connection with (2) Paragraph 1 shall not apply where there the problem of exhaustion there raised. exist legitimate reasons for the proprietor Questions D to F in Case C-414/99 relate to oppose further commercialisation of the to the interpretation of Article 7(2). Since, goods, especially where the condition of the however, their relevance for the purpose of goods is changed or impaired after they reaching a decision is subject to the answer have been put on the market.' to the first group of questions, this latter group will be examined first.

In accordance with Article 65(2) of the Agreement on the European Economic Area, 7 in conjunction with point 4 of Annex XVII thereto, Article 7(1) of the Trade Marks Directive now reads as fol- 28. The parties to the main proceedings, lows: 'The trade mark shall not entitle the the Federal Republic of Germany, France, proprietor to prohibit its use in relation to Finland, Italy, Sweden, the EFTA Surveil- goods which have been put on the market lance Authority and the Commission have in a Contracting Party under that trade submitted what are in part extremely mark by the proprietor or with his consent'. detailed written observations. All of these parties, with the exception of Finland, Italy and Sweden, took part in the oral proce- 7 — OJ 1994 L 1, p. 3. dure. In what follows, the submissions of

32. The Italian Government, supported in this regard by the French Government, A — The interpretation of Article 7(1) of submits that, subject to the condition that the Trade Marks Directive the goods in issue were first placed on the market outside the EEA by the trade mark proprietors or with their consent, exhaus- tion of the trade mark rights within the 30. The question arises as to whether EEA cannot occur under a rule of Com- consent under Article 7(1) of the Trade munity law. The question whether, in the Marks Directive is to be treated as a given circumstances, consent to placing the concept of national or of Community law. goods on the market within the EEA can be presumed is one which concerns the exis- tence of a commercial right of disposal and falls to be determined under national law. In this regard, Teseo and Costco also argue 31. An examination will first be made of that there is a principle of territoriality those grounds which might argue in favour which requires the Community to leave the

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36. Without placing in question the con- clusive nature of the Trade Marks Directive as a whole, that of Article 7(1) of the Trade 34. According to the Silhouette judgment, 9 Marks Directive was, with regard to the Articles 5 to 7 of the Trade Marks Direc- assessment of whether trade mark rights tive embody a complete harmonisation of had been exhausted in respect of parallel the rules relating to the rights conferred by imports from non-member countries, chal- a trade mark. The Trade Marks Directive lenged by the argument that an action for therefore regulates Community-wide (EEA- infringement of rights conferred by a trade wide) exhaustion of the rights conferred by mark must in the first instance be assessed a trade mark, irrespective of where the in the light of Article 5 of the Trade Marks goods bearing the mark were first placed Directive and the condition of 'lack of on the market. consent' referred to therein; Article 7, in contrast, precludes consent on the part of

8 — Cited in footnote 3, paragraph 20 et seq. 9 — Cited in footnote 3, paragraph 25. 10 — Cited in footnote 3, paragraph 29.

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the trade mark proprietor which would, theory, falls to be determined by reference within the EEA, not extend to the entire to national law or Community law. area — but would not go beyond it.

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OPINION OF MRS STIX-HACKL — JOINED CASES C-414/99, C-41J/99 AND C-416/99

This the basis of a rule of evidence of the lex demonstrates that it is not possible, without fori — English law — under which the providing more detailed reasons, to deter- foreign law is presumed to be identical to mine consent, within the meaning of Arti- English law in so far as the parties do not cle 7(1), in accordance with the national plead that the foreign law differs substan- law which is applicable to the first contract tively, the referring court bases its exam- in the distribution chain. ination, not on the law contractually agreed — German law —, but rather on the lex fori. It may thus be inferred from Question B submitted in Case C-414/99 that the examination of consent is based on the law applicable to the first contract in the distribution chain, while the parallel importers in Cases C-415/99 and C-416/99 submit, without being contradicted in this 42. The wording of Article 7(1) itself regard, that they acquired the property in makes clear that consent within the mean- the trade-marked products without their ing of the Trade Marks Directive cannot be right freely to dispose of those products treated as equivalent to the expression of having been effectively restricted. intent made for the purpose of concluding a contract. The crucial issue in this connec- tion is whether the goods 'have been put on

Were one contracts in the distribution chain, might to go along with this view, however, it have to be taken into consideration. An would not be clear why Article 7(1) draws answer to these questions thus presupposes a distinction between the placing of goods on the market by the trade mark proprietor himself and the placing of goods on the 12 — For the purpose of the argument, the basic concept of a market with his consent, even though there 'contract' is to be understood as meaning any legal is an expression of intent by the trade mark transaction by which the immediate power of disposal over the trade-marked products is transferred. proprietor in both cases. For that reason it

45. As an interim finding, it may be stated that an autonomous interpretation of the 43. Such a submission appears to derive the concept of consent may in any event prove conclusive nature of the law applicable to requisite for resolution of the conflict-of- the contract from the verbal identity, pos­ laws issue of classification. sible purely in conceptual terms, between contractual consent and consent to the placing of goods on the market within the meaning of the Directive, but does not go beyond this mere wording to examine the content and function of consent under Article 7(1). 46. That notwithstanding, other factors would militate against the argument put forward by the parallel importers. Apart from establishment of the conclusive nature of the contractual status for freedom to choose the law governing a contract, it also remains, given what may be the large number of points along the distribution chain, to consider whether and, if so, under what circumstances consent might be infer­ 44. However, interpretation of the concept red at such further points and at which. of consent from a national perspective That, however, would involve the risk of cannot circumvent the prior question of classification necessary for determining the conflict-of-laws rule. Even if that classifica­ 14 — For the established case-law, see, inter alia. Case C-131/97 tion is to follow from the particular lex Carbonari and Others | 1 9 9 9 | ECU 1-1103, paragraph 48: "As is clear from the settled case-law of the Court of 13 fori, it must also, that notwithstanding, Justice, in applying national law and in particular the provisions of a law which, as in the mam proceedings, be made having regard to the Trade Marks were specifically introduced in order to implement a Directive in so far as trade mark protection directive, the national court is required to interpret its national law, as far as possible, in the light of the wording has to that extent been comprehensively and the purpose of the directive in order to achieve the result pursued by the latter and thereby to comply with the third paragraph of Article 189 of the EC Treaty (see Case C-106/89 Marleastng v La Comercial Internacional íle Alimentación | 1 9 9 0 | ECR 1-4135, paragraph 8, and Case 13 — H. Batiffol/P. Lagărele, Droit international prwe. Vol. I, C-334/92 Wagner Miret v Fondo de Garantía Salarial Sth edition 1994, paragraph 293. Į1993] ECR 1-6911, paragraph 20).'

50. This path for reaching a solution may 48. The Ingmar case essentially concerned well be transposable to the cases here under the applicability of Council Directive consideration. The Trade Marks Directive 86/653/EEC of 18 December 1986 on the deals with, inter alia, harmonisation of the coordination of the laws of the Member degree of protection afforded by a trade States relating to self-employed commercial mark, while also serving to ensure the agents 18 to a commercial agency contract operational viability of the internal market. which, by virtue of a choice of law, was From this it may, in accordance with the governed by the law of a non-member Ingmar judgment, be inferred that trade country, in the case where, although the mark protection, harmonised at Commu- self-employed commercial agent pursued its nity level, which limits exhaustion of rights activity in a Member State, the principal conferred by a trade mark to cases where was established in that non-member coun- the goods bearing the trade mark have, under the relevant conditions, been placed on the market within the Community or 15 — See, on this point, the Silhouette judgment, cited in footnote 3. 16 —Judgment of 9 November 2000 in Case C-381/98 Ingmar [2000] ECR 1-9305. 19 — Cited in footnote 16, paragraphs 15 and 16. 17 — OJ 1980 L 266, p. 1. 20 — Cited in footnote 16, paragraphs 17 to 19. 18 — OJ 1986 L 382, p. 17. 21 — Cited in footnote 16, paragraphs 24 and 25.

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ZINO DAVIDOFF AND LEVI STRAUSS

51. As an interim finding, it may therefore be stated that exhaustion of the rights conferred by a trade mark under Arti- 54. Considered in themselves, these com- cle 7(1) of the Trade Marks Directive must ments are not devoid of all basis; in the be determined independently of the ques- present context, however, they may fall tion of the national law governing the short of the mark, being based exclusively contract. on the verbal identity of 'consent' as used in the Trade Marks Directive and 'consent' in national legal systems. 23 However, such an interpretation based purely on wording, without any prior teleological analysis, can only be inconclusive. 52. In the light of this, it is only by way of alternative consideration that there is any need to examine the substance of the legal arguments put forward by the parallel importers. Those arguments raise issues relating to contract law and the law of property. 55. As a fundamental objection, it should first be noted that the German Government bases its submission on the premiss that consent within the meaning of Article 7(1) constitutes a declaration of intent corre- sponding to the general doctrine of legal (b) Effects of national contract law on the acts in German civil law. Such an analysis concept of consent may well depend too much on the particu- lar features of national law: not every legal system is familiar with a general doctrine of

53. From the point of view of contract law, 22 — In this and what follows, 'autonomous' is to he understood as relating to the Community, without regard to how the the submissions touch in particular on the term is construed within national legal systems. lack of Community harmonisation of this 23 — See point 43 above.

58. The parallel importers submit further arguments based on the law of property and point out that this area has not been harmonised at Community level by the Trade Marks Directive. They propose an analogy with retention of title and argue further, particularly in Cases C-415/99 and C-416/99, on the basis of the scope of the rights transferred by way of consent. 56. The assumption that the concept may have a uniform meaning at national level also focuses too much on a domestic construction of the concept which may, in

59. The analogy with retention of title 24 — See, with reference only to France, B. Starck/H. Roland/ L. Boyer, Droit civil: — les obligations, Vol. 2: Contract, essentially proposes that in the law of 6th edition 1998, paragraph 184 and further references therein. property the transfer of rights is, in the 25 — See point 50 above. interest of commercial security, limited only 26 — See point 42 above. if the holder of the rights has expressly

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ZINO DAVIDOFF AND LEVI STRAUSS

reserved the rights to himself. This analogy 61. The argument put forward by the thus implies a restrictive construction of the parallel importers also fails to take account concept of consent under which exhaustion of the fact that commencement of exhaus- would be excluded only where the proprie- tion cannot be contractually excluded. tor of the trade mark has previously Exhaustion is a legal consequence which expressly reserved to himself his rights is linked to the — objective — existence under the trade mark. of factors which include the 'consent' here in issue.

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OPINION OF MRS STIX-HACKL — JOINED CASES C-414/99, C-415/99 AND C-416/99

rights thus guaranteed. 27 There is nothing 65. Regard being had to the foregoing, the to suggest such an infringement of the meaning of consent for the purposes of principle of proportionality by the Trade Article 7(1) therefore falls to be examined Marks Directive, which serves to ensure the from the Community-law angle. viability of the internal market.

3. Consent as a concept of Community law

(d) Interim finding

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OPINION OF MRS STIX-HACKL — JOINED CASES C-414/99, C-415/99 AND C-416/99

71. However, application of the concept of marked products. 35 What is at issue is not consent in the case-law initially lacked to use consent to transfer of the power of uniformity: in his Opinion in Deutsche disposal over the trade-marked goods in Grammophon,32 Advocate General Roe- order to assess the possibility of invoking mer referred to goods 'which the holder of the rights under that trade mark, but rather that protection right or an undertaking to ascertain whether the placing of the dependent on the holder has placed on the goods in question on the market within the market in another Member State' (empha- EEA could be attributed to the trade mark sis added). The Court's judgment, however, proprietor. Consequently, the distinction replaced this criterion of dependency, between the placing of the goods on the which was mentioned in the question in market by the trade mark proprietor him- the order for reference, by the criterion of self and the placing of such goods on the consent. market with his consent means that the goods in question were placed on the market by the trade mark proprietor him- self or that that action can be attributed to him in regard to the legal consequences arising from exhaustion. The Community interpretation of the concept of consent must accordingly have as its object the 72. The judgment in Keurkoop 33 contains search for criteria of attribution. a compromise formulation. The focus there was directed at whether the product in question 'has lawfully been marketed in another Member State by, or with the consent of, the proprietor of the right himself or a person legally or economically dependent on him' 34 (emphasis added).

the market in the Community or the EEA, corresponding case-law, since the scope of invoke his trade mark rights only if his that provision extends beyond trade within previous conduct, having regard to all the the Community. particular circumstances of the case, could not be construed as meaning that he had caused the trade-marked goods to be placed on the market by third parties or had at least approved of the possibility that this might happen. 77. It was along these lines that the Court made clear in Sebago that 'in adopting Article 7 of the Directive, which limits exhaustion of the right conferred by the trade mark to cases where the goods bearing the mark have been put on the 75. It is unnecessary at this point to market in the Community (in the EEA since determine the criteria of attribution by the EEA Agreement entered into force), the which the concept of consent is to be Community legislature has made it clear fleshed out: an answer to that question that putting such goods on the market must take into account the meaning and outside that territory does not exhaust the purpose of the Community law provision. proprietor's right to oppose the importation It need for the moment only be held that of those goods without his consent and the concept of consent has an objective thereby to control the initial marketing in content which will require to be given the Community (in the EEA since the EEA substance in what follows. Agreement entered into force) of goods bearing the mark'. 39

countries will come within the scope of right of exclusivity within the EEA. This is Article 7(1) of the Trade Marks Directive also confirmed by the express function of only because the Directive has comprehen- the principle of international exhaustion as sively harmonised the scope of trade mark evidenced by the legislative history of the protection in the Member States with Directive.42 This finding must now be regard to the exhaustion principle. For that examined in greater detail in line with the reason, the parallel importers' submission meaning and purpose of the exhaustion concerning the need to construe the Trade principle. Marks Directive in the light of the relevant provisions of primary law does not appear to be free from problems. They cite the Court's case-law to the effect that Articles 28 EC to 30 EC do not draw a distinction according to the origin of goods 40 and argue that Community-wide exhaustion41 leads to a correspondingly impermissible (c) Teleological construction distinction. This view, however, fails to take account of the fact that the Commu- nity approximation of trade mark protec- tion pursuant to Article 7(1) produces effects which are not confined to trade within the Community; the free movement of goods within the Community remains 80. In national legal systems the exhaustion unaffected by an application of the princi- principle rests on a balancing of interests in ple of Community-wide exhaustion to the conflict between the exclusivity of the goods initially placed on the market outside rights conferred by a trade mark and the EEA. commercial requirements, particularly with regard to the resale of the goods concerned within a distribution chain. In the case of parallel importation of original goods, the issue is not so much one of misrepresenta- tion of origin or of genuineness of those goods but rather, in particular, of unau- thorised use of the reputation associated with the trade mark. Through the balan- cing of interests, the trade mark proprie- tor's rights to intervene are restricted in the 79. From all of this it will be clear that sense that he cannot oppose the further sale consent of the trade mark proprietor to the of the goods in question in so far as he was placing of trade-marked goods on the in a position adequately to assert his rights market within the EEA is subject to the under the trade mark when the goods were condition that he had, or could have first placed on the market. 43 The exhaus- availed of, an opportunity to exercise his tion principle is thus designed to prevent

the trade mark proprietor's rights of con- of the trade mark has the exclusive right to trol from unjustifiably fettering com- use that trade mark for the purpose of merce. 4 4 putting products protected by the trade mark into circulation for the first time, and is therefore intended to protect him against competitors wishing to take advantage of the status and reputation of the trade mark by selling products illegally bearing that 81. The Community-law expression of the trade mark'. 46 As the result of this evalua- exhaustion principle, as contained in Arti- tion, the Court thus held that invocation of cle 7(1) of the Trade Marks Directive, also the right of exclusivity, in the case of rests on a balancing of interests between parallel imports within the Community by the protection of intangible property rights independent third parties, for the purpose and the dictates of free movement of goods. of safeguarding the rights forming the Community-wide exhaustion is, pursuant specific subject-matter of the rights deriv- to the basic idea of the internal market ing from the trade mark is not covered in so deriving from the Treaty, designed to far as the product in question 'has been put prevent trade between Member States from onto the market in a legal manner', in the being restricted through the invocation of Member State from which it has been trade mark rights. imported, 'by the trade mark owner himself or with his consent', 47 since there can then be no question of abuse or infringement of the right conferred by the trade mark.

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exhaustion — is to be applied for this nity from non-member countries. This assessment since the full harmonisation of necessarily gives rise to different possibili- the laws of the Member States achieved at ties in regard to control over distribution, Community level produces effects on exter- of which appropriate account must be nal trade relations. However, to the extent taken when balancing the requirements of to which it is argued that Article 7 of the trade mark protection against the interests Trade Marks Directive is to be interpreted of free-flowing trade. like Article 30 EC also in regard to parallel imports from non-member countries, on the ground that 'according to the Court's case-law, Article 7 of the Directive, like Article 36 of the Treaty, is intended to reconcile the fundamental interest in pro- 85. It follows that, even though the Court's tecting trade mark rights with the funda- case-law on the compatibility of the exer- mental interest in the free movement of cise of rights over intangible property with goods within the common market', 50 this the basic freedoms is not directly transpo- falls short of the mark, since Article 7 sable to the present cases, regard must be cannot, in the case of parallel imports from had to the evaluations forming the basis of non-member countries, have as its purpose that case-law. At this juncture, however, it to bring the requirements of trade mark must be stated that it is not the starting protection into harmony with those of the point in the evaluation — the specific free movement of goods in the Common subject-matter of the rights conferred by Market, which in this regard is unaffected. the trade mark — but rather the counter- balanced interests that depend on the place in which the goods were first placed on the market.

the reputation of their goods and prevent 87. Thus, according to the cited 52 case-law the theft of their goodwill by unscrupulous on trade within the Community, invocation competitors who might otherwise be of the right conferred by a trade mark will tempted to pass their own goods off as be acceptable in the light of Article 30 EC those of another trader with an established only if the trade mark proprietor thereby reputation and (b) in order to enable seeks to safeguard the exclusive rights consumers to make informed purchasing flowing from the trade mark. Those exclu- choices on the basis of the assumption that sive rights, however, also include the right goods sold under the same name will 'to determine freely the conditions under emanate from the same source and will, which he markets his products'. 53 Consent in normal circumstances, be of uniform under Article 7(1) of the Trade Marks quality. Thus trade mark law seeks to Directive thus relates to this exclusive right protect the interests, not only of the trade of maximum control over marketing: invo- mark proprietor, but also of the consumer. cation of the right conferred by a trade In so far as the trade mark protects the mark in order to counter parallel imports interests of its proprietor by enabling him will be acceptable only if the trade mark to prevent competitors from taking unfair proprietor has not yet exercised his exclu- advantage of his commercial reputation, sive right to control marketing of the goods the exclusive rights conferred on the pro- within the EEA, or has been unable to prietor are said, in the language of the exercise that right. According to the eva- Court's case-law, to constitute the specific luation forming the basis of Article 7(1) of subject-matter of the trade mark. In so far the Trade Marks Directive, the trade mark as the trade mark protects the interests of proprietor's rights would, in contrast, be consumers by acting as a guarantee that all exhausted in the case of parallel imports goods bearing the mark are of the same from non-member countries if he was able, commercial origin, that is known, in the or could have been able, to control the Court's terminology, as the essential func- distribution of the goods in question within tion of the trade mark. Those two aspects the EEA. of trade mark protection are of course two sides of the same coin'.

as follows with regard to trade within the normally occurs only at a late point in time Community: in the distribution chain by way of an independent third party. However, it might well be insufficient to reject the possibility in principle of exhaustion of the trade mark right solely by reference to the — possi- ble — independence of the parallel im- porter. 'This principle, known as the exhaustion of rights, applies where the owner of the trade mark in the importing State and the owner of the trade mark in the exporting State are the same or where, even if they are separate persons, they are economically linked. A number of situations are covered: products put into circulation by the same under- 90. In the Sebago judgment, 56 in contrast, taking, by a licensee, by a parent company, the Court focused conclusively on the by a subsidiary of the same group, or by an possibility for the trade mark proprietor exclusive distributor.' 54 'to control the initial marketing in the Community (in the EEA since the EEA Agreement entered into force) of goods bearing the mark'. The Commission points out in this regard that this does not cover marketing by a parent company or sub- sidiary and, with regard to marketing by a 89. The principle of exhaustion of licensee, is unclear in so far as the trade rights — as a restriction on the rights mark proprietor does not directly control deriving from a trade mark — must there- the marketing by the licensee. fore be narrowly construed and consent for the purpose of exhaustion of the trade mark rights in trade within the Community must be presumed if the trade mark pro- prietor and the person marketing the pro- ducts bearing the trade mark 55 are eco- nomically linked. That criterion, however, appears to be very general and could even 91. Consonant with the meaning and pur- be construed as covering the relationship pose of the concept of consent as outlined between the trade mark proprietor and the above, it must be assumed that both the person acquiring the trade-marked pro- aspect of economic linkage and that of ducts. In regard to parallel imports from control ultimately relate only to one and non-member countries, it thus also appears the same criterion, namely that of control to be of limited assistance inasmuch as over the initial distribution within the EEA. marketing within the EEA in such cases With regard to the control forming the basis of the judgment in Sebago, this is not a direct control but relates rather to the 54 — Case C-9/93 IHT Internationale Heiztechnik, cited in possibility of determining, enforcing or footnote 35, paragraph 34. 55 — Since an independent parallel importer is not the proprie- tor of the trade mark in question, the IHT Internationale Heiztechnik formula for that reason alone appears trans- posable only to a limited extent. 56 — Cited in footnote 4, paragraph 21.

92. At this point it ought to be noted, pursuant to the judgment in Merck and Beecham, 57 that it is not the actual exercise of the right that is determinant, but the 95. Having regard to the differing initial mere possibility that it may be exercised, positions, transposition of the principle since otherwise the trade mark proprietor from the IHT Internationale Heiztechnik could also invoke his rights after the judgment to cases of parallel imports from products have been marketed for the first non-member countries appears problematic time within the EEA, if, for instance, the to the extent to which it here happens 59 products are imported via a Member State that the actual first marketing of the goods in which there is no trade mark protection. in question does not coincide with their initial marketing in the EEA. In such cases the parallel importer will normally have no connection whatever with the trade mark proprietor. From that, however, it does not necessarily follow that exhaustion of the rights deriving from the trade mark must 93. Consent to placing goods on the mar- always be excluded in the case of parallel ket cannot therefore be assumed in so far as imports from non-member countries, in so the trade mark proprietor has not had any far as the trade mark proprietor did not yet opportunity to control the initial marketing have an opportunity in these cases, or could within the EEA of the products bearing the not have had an opportunity, to invoke his trade mark. 58 exclusive rights within the EEA. It corre- sponds much more to the meaning and purpose of the exhaustion principle to balance the requirements of free movement against the need to protect the trade mark and in so doing to examine whether the trade mark proprietor's conduct, under all 94. The question whether the situations the circumstances of the individual case, mentioned in the IHT Internationale Heiz- could not justify any increased grounds for tecbnik judgment are to be treated as subsequent purchasers to believe that he had waived exercise of his trade mark rights on the occasion on which the pro- 57 — Judgment in Joined Cases C-267/95 and C-268/95 Merck ducts were first marketed within the EEA. and Beecham [1996] ECR I-6285. 58 — Pursuant to the judgment in Pharmon v Hoechst, cited above in footnote 53, tile principle of exhaustion of rights does not therefore apply in the case of compulsory licences. 59 — See point 84 above.

97. Consideration must also be paid to the balancing of interests, which forms the basis of the exhaustion principle, under which, regard being had to the interests of 99. In the case of parallel imports from free movement, the right conferred by a non-member countries, the trade mark trade mark may not be exercised to a proprietor's consent to placing the products degree going beyond what is necessary to in issue on the market in the EEA therefore safeguard the rights which form the specific consists of the waiver of his exclusive right subject-matter of the right conferred by the to control distribution within the EEA. It is trade mark. a matter for the national court, having regard to the abovementioned aspects of Community law, to examine whether the trade mark proprietor's conduct can, in the light of all circumstances of the individual case, be construed as constituting a waiver of this kind. 98. Should the trade mark proprietor lose the power to dispose of the goods in question before they are first marketed in the EEA, as in the case of parallel imports from non-member countries, he may possi- bly attempt to control the distribution of his products at the time when they are 100. The result of such an examination actually first placed on the market, whether would, however, require to be brought into by agreeing on sales bans, territorial restric- line with the principle of Community-wide tions on the purchaser's rights of disposal, exhaustion of rights under Article 7(1) of

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101. The Court is being asked in Case C-414/99 also to state its views on the interpretation of Article 7(2) of the Trade Marks Directive. In the event that Davidoff must be treated as if its rights were 104. It must be noted in this connection exhausted under Article 7(1) of the Trade that the placing of goods on the market Marks Directive, the question arises as to within the meaning of Article 7(1) — whether it may be justified in pleading regardless of the issue of consent — does legitimate reasons under Article 7(2), par- not relate to sale to the end user but to the ticularly in view of the removal of the batch transfer of the immediate power to dispose code numbers — ostensibly provided for of the products concerned. In the case of under the cosmetics directive —, in order to parallel imports from non-member coun- be able to oppose parallel imports from tries it is necessary, on the one hand, to non-member countries. examine whether the trade mark proprietor

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107. In such circumstances, therefore, the parallel importer's interest in distribution which is as free as possible — with the 'leaky' position in the distribution chain remaining secret to the maximum degree — stands in opposition to the trade mark proprietor's interest in safeguarding the rights which form the specific subject- matter of the trade mark: for the purpose of balancing these interests, account has to be taken of the essential function of the trade mark, namely to guarantee to the consumer 105. Considered in this light, it may well be or end user the identity of origin of the necessary to examine the interpretation of goods bearing it, by enabling that consumer the term 'legitimate reasons'. It can be or end user, without any danger of confu- deduced from the scheme and purpose of sion, to distinguish those goods from others the provision that Article 7(2) is linked to of different origin. This guarantee of origin the assessment outlined above. 60 In so far means that the consumer or end user can be as the trade-marked products have been certain that a trade-marked product offered placed in circulation in the EEA by the to him has not been subject at a previous trade mark proprietor or with his consent, stage of marketing to interference by a the trade mark proprietor will be in a third party, without the authorisation of position to oppose use of the trade mark the trade mark proprietor, in such a way as under Article 7(2) only if further commer- to affect the original condition of the cialisation would affect the essential func- product. 61 tion of the trade mark in a way which the trade mark proprietor could not be expected to tolerate. 61 — Judgment in Case C-349/95 Loendersloot [1997] ECR 1-6227, paragraph 24, with reference to the judg- ments in Case 102/77 Hoffmann-La Roche [1978] ECR 1139, paragraph 7, and in Joined Cases C-427/93, C-429/93 and C-436/93 Bristol-Myers Squibb and Others, 60 — See point 80 et seq. above. cited in footnote 38, paragraph 47.

109. In its judgment in Parfums Christian Dior61 the Court held that 'the damage done to the reputation of a trade mark may, in principle, be a legitimate reason, within the meaning of Article 7(2) of the Direc- tive, allowing the proprietor to oppose 'Even if the person who carried out the further commercialisation of goods which repackaging is indicated on the packaging have been put on the market in the of the product, there remains the possibility Community by him or with his consent. that the reputation of the trade mark, and According to the case-law of the Court thus of its owner, may nevertheless suffer concerning the repackaging of trade- from an inappropriate presentation of the marked goods, the owner of a trade mark repackaged product. In such a case, the has a legitimate interest, related to the trade mark owner has a legitimate interest, specific subject-matter of the trade mark related to the specific subject-matter of the right, in being able to oppose the commer- trade mark right, in being able to oppose cialisation of those goods if the presenta- the marketing of the product. In assessing tion of the repackaged goods is liable to whether the presentation of the repackaged damage the reputation of the trade mark... product is liable to damage the reputation As regards the instant case, which concerns of the trade mark, account must be taken of prestigious, luxury goods, the reseller must the nature of the product and the market not act unfairly in relation to the legitimate for which it is intended.'

62 — Judgment in Case C-337/95 Parfums Christian Dior 63 — Cited in footnote 62, paragraph 43 et seq. [1997] ECR I-6013. 64 — Cited i nfootnote 38, paragraph 75.

65 — Cited in footnote 62, paragraphs 46 and 47. 66 — Judgment cited in footnote 61, paragraphs 41 and 42.

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115. Here also transposition of the assess- 117. This argument appears to be transpo- ment would appear to merit discussion sable to parallel imports of branded goods since the legal framework in the present from non-member countries. In the conflict cases is to be sought in Article 7 of the between the rights of the trade mark Trade Marks Directive and not in Arti- proprietor and the interest of the person cle 36 of the EC Treaty (now, after amend- purchasing the products, exercise of the ment, Article 30 EC). The Commission trade mark rights would appear to be does not regard this as being an obstacle justified only if it is necessary in order to and refers in this connection to the estab- safeguard the rights which form the specific lished case-law of the Court which has subject-matter of the right conferred by the already been discussed. 67 However, in so trade mark. Consequently, it would also be far as that case-law focuses on the restric- necessary in the present case, in accordance tion of trade between the Member States with the evaluation carried out in the and on the intention artificially to partition Loendersloot judgment, to examine how markets, a direct application of the points far removal or obliteration of the batch there held to be conclusive to the circum- code numbers affects the guarantee of stances obtaining in the present proceed- origin, impacts adversely on the original ings would not appear to be possible. condition of the products concerned, and damages the reputation of the trade mark. As the case-law stands at present, there must in these cases be a corresponding degree of seriousness. 69 Examination as to whether these conditions have been satis- fied in an individual case is, however, a matter for national courts.

obliteration of these numbers was not tation of a trade mark meriting protection accompanied by any further measure, such and a recall of potentially defective or sub- as, for instance, relabelling or repackaging. standard products which is facilitated by the obligation to affix batch code numbers. In the interests of the good reputation of the trade-marked products, the trade mark proprietor has a legitimate interest in being able to remove such products from circula- tion. Consequently, it would also be neces- 119. In his Opinion in Loendersloot, Advo- sary in the national proceedings to examine cate General Jacobs noted: 70 'It is clear whether the damage to the reputation of that the removal of such identification the trade mark is rendered — suffi- numbers cannot be resisted by virtue of ciently — serious by the removal or oblit- trade-mark rights taken alone.' The Court, eration of the prescribed batch code num- however, focused conclusively on the fact bers. An infringement of the cosmetics that the affixing of an identification num- directive 71 would be relevant in the context ber in compliance with a statutory obliga- of trade mark rights only under this aspect. tion or pursuant to some other — from the Community-law perspective — legitimate objective cannot constitute an artificial partitioning of the markets between Mem- ber States.

In Cases C-414/99, C-415/99 and C-416/99

(1) The consent of a trade mark proprietor to the placing on the market of products bearing the trade mark within the meaning of Article 7(1) of the Trade Marks Directive relates to the possibility of the trade mark proprietor's exercising control over the first instance in which those products are placed on the market or distributed within the EEA.

(2) If the first instance in which the products bearing the trade mark are placed on the market and their initial distribution within the EEA do not coincide, the trade mark proprietor may, when those products are first placed on the market, control their initial distribution within the EEA by waiving his exclusive right to control distribution.

(3) It is for the national court, in compliance with the provisos of Community law and having regard to all the circumstances of the individual case, to determine whether, when the products concerned were in fact first placed on I - 8729

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the market, the trade mark proprietor had waived his exclusive right to control distribution within the EEA. In this regard, Article 7(1) of the Trade Marks Directive in principle precludes a national rule which constitutes a general presumption of waiver or is equivalent to such a presumption;