Zino Davidoff SA is the proprietor of two trade marks, 'Cool Water' and 'Davidoff Cool Water', which are registered in the United Kingdom for toiletries and cosmetic products. The products bear batch code numbers and are sold by Davidoff or on its behalf both within and outside the EEA.
A & G Imports Ltd acquired stocks of Davidoff's products which had originally been placed on the market in Singapore by Davidoff or with its consent. A & G imported those stocks into the Community, specifically into England, and commenced selling them there. The only difference between the goods in question and other Davidoff products lay in the fact that the batch code numbers had been removed or obliterated.
The Levi Strauss companies own the trade marks 'Levi's' and '501', which are registered in the United Kingdom for, inter alia, jeans.
The companies Tesco and Costco obtained genuine Levi's 501 jeans from suppliers who imported such jeans into the Community from countries outside the EEA, and sold them in the United Kingdom. Levi Strauss had consistently refused to sell those jeans to Tesco and Costco.
Both Davidoff and Levi Strauss brought proceedings before the High Court of Justice, claiming that the importation of the goods in question into the Community and their sale there constituted an infringement of their registered trade marks.
The defendants in the national proceedings plead exhaustion of the rights deriving from the trade marks.
The exhaustion principle under the Trade Marks Directive precludes a trade mark proprietor from invoking his exclusive rights under the trade mark in the case where the goods bearing that trade mark have been put on the market in the Community (now: the EEA) by him or with his consent. This, however, does not apply where legitimate reasons justify the trade mark proprietor in opposing further commercialisation of the goods.
The questions submitted by the High Court of Justice to the European Court of Justice concern the conditions governing such exhaustion, in particular the concept of 'consent', as well as the construction of the term 'legitimate reasons'.
Advocate General Stix-Hackl first pointed out that, with regard to rights derived from a trade mark, the exhaustion principle under the Trade Marks Directive traces its origin to the Court's case-law on the compatibility of the exercise of rights over intangible property (and thus also rights under trade marks) with the free movement of goods.
Community-wide (now EEA-wide) exhaustion is, pursuant to the basic idea of the internal market deriving from the Treaty, designed to prevent trade between Member States from being restricted through the invocation of rights conferred by a trade mark.
In the case of parallel imports from non-member countries, however, the free movement of goods is not affected.
In her examination of what constitutes 'consent', the Advocate General pointed out that the focus cannot be on how that concept is construed in national legal systems, stating that the objective substance of that concept can be reached only by means of an autonomous Community interpretation.
The rights to exclusivity deriving from a trade mark also include the right of the trade mark proprietor freely to determine the conditions under which he wishes to market his product and control its distribution.
However, this right to control the initial distribution of goods within the EEA, which may, for example, also take the form of sales bans or territorial restrictions on the right of the first purchaser to dispose of the goods, is not unlimited inasmuch as importers have interests which merit protection and which must be taken into account.
In regard to parallel imports from non-member countries, it is therefore a matter for the national court to examine whether, in the circumstances of the individual case, the conduct of the trade mark proprietor can be construed as a waiver of his right to control distribution within the EEA. In such an examination, the national court must proceed on the basis of the principle of EEA-wide exhaustion.
The legitimate reasons which justify the proprietor in opposing further commercialisation of products bearing the trade mark do not include the actions of third parties or circumstances which do not affect the rights constituting the specific subject-matter of the right conferred by the trade mark. With regard to the issue of the absence or obliteration of batch code numbers, the Advocate General expressed the view that it is for the national court to examine whether the damage to the reputation of the trade mark is sufficiently serious in that respect.
N.B. Opinions delivered by the Advocates General are not binding on the Court. The task of the Advocates General is to propose to the Court, in complete independence, a legal solution to the case in question.
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