There is an increasing perception amongst consumers that they are paying too much for high quality branded goods. Unsurprisingly, therefore, there has been a great deal of interest in the recent legal developments relating to parallel imports.
The ability to maintain global differential pricing policies is of great importance to brand owners and the recent decisions of the courts have also been followed by them with keen interest. The Silhouette decision (Legal Update July 1998) was welcomed by brand owners as providing a means of preventing the importation of branded goods into the EEA, that had previously been placed on the market outside the EEA with the brand owner's consent.
In March 1999, the Advocate-General delivered his opinion in the case of Sebago and Maison Dubois v GB-Unic. This case concerned the importation and sale of designer shoes into Belgium. Maison Dubois had an exclusive distribution agreement with Sebago to distribute Sebago's designer shoes throughout the Benelux countries. GB-Unic advertised Sebago's shoes for sale, under Sebago's trade mark DOCKSIDES, in its hypermarkets. The shoes in question had been manufactured in El Salvador and purchased from a Belgium company specialising in parallel imports.
Sebago did not dispute that the shoes were genuine goods. However, it argued that since it had not authorised the sale of the shoes within the EEA, GB-Unic had no right to sell them there. GB-Unic argued that since Sebago had been selling identical shoes within the EEA it could not use its trade mark to prevent them from importing the shoes into the EEA. It was their case that Sebago had consented to that type of branded good being sold within the EEA by allowing the sale of the shoes by Maison Dubois. The Advocate-General rejected GB-Unic's argument on the grounds that allowing parallel importation on this basis would amount to all parallel imports being allowed into the EEA and would deprive the Court's limitation of the exhaustion principle of much of its practical effect. Thus the same result was reached as in Silhouette.
Then came a blow for UK brand owners with the decision of Mr Justice Laddie in Davidoff (Legal UpdateJune 1999). Substantially the same issues arose in this case as were seen in Sebago. Davidoff made an application for summary judgment for trade mark infringement, which was dismissed by Mr Justice Laddie.
Mr Justice Laddie held that unless each purchaser of the branded goods outside the EEA was clearly informed that there was a restriction on the importation of the branded goods into the UK, the brand owner could not use its trade mark rights to prevent such importation. Although he agreed with the decisions in Silhouette and Sebago, Mr Justice Laddie chose instead to rely on English contract law to support his decision to refuse to grant the injunction sought. In the absence of an express restriction on the purchaser of the product, that purchaser was free to do as he saw fit with the product. This included importing the goods into the UK from outside the EEA.
The practical implication of the Davidoff judgment is that, for the time being at least, a brand owner who markets its goods worldwide may now find it impossible to prevent parallel imports from entering the UK. The judgment was unclear as to how a brand owner should seek to ensure that at every stage of the supply chain the purchaser of the branded goods was aware of the restriction on importation into the UK and this will prevent difficulties in practice.
In July 1999 the ECJ gave some renewed hope to brand owners when it handed down its decision in the Sebago case. The Judgment first of all confirmed the decision in Silhouette before turning to the issue of "consent". The Court ruled that consent must relate to each item of the product in respect of which exhaustion is pleaded. This means that just because a brand owner had consented to one consignment of branded goods being sold within the EEA it did not prevent him from objecting to other consignments of similar or identical goods being imported into the EEA. However the contractual argument raised in Davidoff was not addressed.
The ability of a brand owner who uses two or more trade marks across the EEA for one product, to prevent the re-branding of its goods with one of those marks was considered by the Advocate-General in Upjohn v Paranova (Legal Update May 1999). The recent ECJ judgement in this case largely follows his findings and it was held that a parallel importer can re-brand goods to match the particular brand in the country of import, if it was necessary for the marketing of that product. The ECJ did not go quite as far as the Advocate-General however and provided brand owners with some hope by ruling that re-branding was not "necessary" where the only reason for doing so was to seek a commercial advantage.
The Davidoff case has been referred to the ECJ, but a decision is not expected for about 18 months. Until such decision, there will continue to be a lack of certainty on the issue of parallel imports and brand owners attempting to maintain differential pricing policies face an uphill struggle.