By Aurélien CONDOMINES
Avocat à la Cour

This article follows an important judgment of the European Court of Justice (ECJ) dated November 20, 2001, in a matter concerning brand names owned by Zino Davidoff and Levi Strauss. This matter, arising from several distinct disputes, had been referred to the ECJ by an English court for a preliminary ruling on the interpretation of the European Directive 89/104 on trademarks.

The disputes essentially concerned the right of the owner of a trademark to use his trademark to prohibit the sale - within the EEA - of certain goods bought in non-EEA countries, where the trademark owner had sold them to distributors. To make a long story short, the issue at stake can be illustrated in the following way: Levi Strauss has sold goods bearing its trademark to distributors in the USA (let’s call them the “US goods”), and British retail chains have bought these goods from the US distributor in order to resell them in Great-Britain – can Levi-Strauss oppose the sale of the “US” goods in Great Britain on the basis of its trademark?

The answer of the ECJ in its decision of November 20, 2001 is protective of trademark owners: (i) the Directive 89/104 gives Levi-Strauss the right to oppose the sale of “US” goods in Great Britain unless it is demonstrated that Levi-Strauss had consented to the resale in the EEA, (ii) the consent of Levi-Strauss must have been either explicit, or implicit (however implicit consent must be inferred from unequivocal circumstances), (iii) it is the British distributors’ task to prove that Levi-Strauss consented to the resale of the “US goods” in the EEA.

The principle that the owner of a trademark in a country A can block imports from a country B of goods bearing his trademark is a basic principle of trademark law. It is written into the text of the European “trademark” Directive 89/104. However, the Directive also provides for an exception to that principle:

“The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.”

This is called the “exhaustion” of the rights conferred by a trademark. As the European Union’s objective is to promote the creation of a fully integrated European market, this rule aims at hindering companies from using trademarks to artificially recreate barriers to trade between member states of the Union. Thus, once a product has been marketed by the trademark owner – or with his consent - in the European Community, that product should be free to circulate within the Community.   It further should be noted that the scope of this ‘exhaustion rule’ has been extended to the whole of the European Economic Area (EEA).

In the Levi Strauss example discussed above, the “US” goods had been initially sold in the US, not in the European Community or the EEA. Therefore, the issue at stake was to determine whether Levi Strauss had consented to the resale of these goods in Great Britain. More precisely, as Levi-Strauss had clearly not consented to this explicitly, the question was whether – and to what extent - an implicit consent would be sufficient to meet the conditions of the “exhaustion rule”.

The ECJ considered that, given the importance of the effects of this “consent” issue for the trademark owner, an implicit consent could only be inferred from unequivocal circumstances. It is up to national courts to decide which circumstances are “unequivocal”.

Importantly, the burden of proof of these unequivocal circumstances is borne by the trader alleging that the trademark owner consented to the sale of the goods in the EEA.

The ECJ finally specified that the mere silence of the trademark owner could not be interpreted as an implicit consent to the resale in a member state of the EEA of products initially sold outside the EEA. For instance, the trademark owner does not have to write into his contracts with buyers in non-EEA country\ies that he does not want the goods concerned to be resold for export into an EEA country.

In conclusion, the court’s decision offers a good protection for trademark owners, from the import of products initially sold in non-EEA countries. As many distribution contracts contain provisions prohibiting the sale of the distributed goods for the purpose of exports outside of the distributors allocated territory, it will be almost impossible for companies specialized in the import of branded products from outside the EEA to prove that the trademark owner implicitly consented to such imports. Sadly, as the products in question are usually cheaper than in the EEA, this will deprive European consumers from lower priced products.

(December 2001)

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