Claims brought by Davidoff against A&G Imports in relation to the Cool Water range of toiletries, and by Levi Strauss against Tesco and Costco over 501 jeans have acquired a certain familiarity. In these cases, Davidoff and Levi's are relying on their UK- registered trade marks to restrain the sale of parallel (or "grey") imports of their products from countries outside the European Economic Area (EEA).
A sense of deja vu arises from the fact that these issues were dealt with by the European Court of Justice (ECJ) in the widely publicised Silhouette and Sebago cases well over a year ago. But they were not dealt with conclusively.
Then, the ECJ confirmed the extent to which trade mark owners may use their trade marks to restrict the import and sale of their products into the EEA. It was established that a trade mark owner, in placing its goods on the market (or allowing its goods to be placed on the market) outside the EEA did not exhaust its trade mark rights within the EEA; that is, there was no international exhaustion or the owner's rights and it was entitled to exercise its EEA registered trade marks against third parties importing such goods into the area.
However, those cases did not resolve whether, and if so when, the trade mark owner's original "consent" to subsequent marketing of goods within the EEA could restrict its ability to later enforce its EEA trade mark rights against such goods.
Both the Davidoff and Levi's cases raised this very issue. In the Levi's case, Tesco and Costco purchased 501 jeans from authorised retailers or wholesalers in the USA, Mexico or Canada and argued that they had acquired an unrestricted right to dispose of the jeans as they wished. Levi's replied that in the USA and Canada its authorised retailers were obliged, on pain of having their supplies cut off, to sell jeans only to end-user customers; in Mexico, the jeans were sold to authorised wholesalers subject to the condition that they would not be exported from Mexico.
On the other hand, in the Davidoff case, the importer, A&G Imports, bought the goods from Singapore where they had been put on the market by, or with, Davidoff's consent. However, at some stage in the supply chain, someone had additionally removed or obliterated the batch-code numbers on the products. A&G argued that, having regard to the manner and circumstances in which the goods were placed on the market in Singapore, they were, or should be treated as having been, imported and sold in the UK with Davidoff's consent.
Davidoff of course denied this. It additionally relied on the exception contained in art.7(2) of the Trade Marks Directive that it had "legitimate reasons" to oppose such import and sale, on the basis that the removal or obliteration of the batch-code numbers changed or impaired the goods. (This article addresses only the "consent" issues common to both cases.)
In both cases the English High Court referred a number of questions to the European Court of Justice for preliminary ruling.
In particular it wanted to establish: did consent to the placing of the goods on the market in the EEA have to be express or it could it be implied; and if it could be implied, could a lack of prohibition on resale in the EEA binding the first and all subsequent purchasers imply such consent?
The Advocate General (AG) of the ECJ has now given her opinion on these matters, and though this is not binding on the full court, it is very often followed all the same. However, it normally takes the ECJ at least six months to deliver a judgment after such an opinion.
So, what is the AG's view? While her opinion is long and thoroughly reasoned, it is by no means conclusive, and this is borne out by the f fact that both sides have since claimed victory.
She has concluded that if the first time the trade mark owner places his products on the market is not in the EEA, the proprietor may be considered to control initial distribution within the EEA in so far as it has not waived its exclusive right to control such distribution.
Furthermore, it is up to the national courts to decide (applying community law), and having regard to the particular circumstances of the case in question, whether, at the time when the goods were first placed on the market, the proprietor had indeed waived its exclusive right to control distribution in the EEA. It has been stressed, though, that any presumption of such a waiver or any national rule which is equivalent to such presumption should be precluded.
It is worth noting, however, that the AG additionally stated that the right of a trade mark owner to control the initial distribution of trade marked goods within the EEA was not unlimited, and a trade mark owner "may not act at variance with its own conduct when the goods were first placed on the market".
The prospect of international exhaustion by the back door is a real one. While national courts will not be able to presume that a trade mark owner has waived his exclusive right to control distribution in the European Economic Area, the facts of each case are likely to be closely scrutinised to determine whether any waiver has occurred.
Accordingly, trade mark owners should, if they are not doing so already, make sure that strict territorial restrictions are placed on distributors of their products outside the EEA and ensure that such restrictions are imposed on all subsequent parties in the distribution chain.
First published in Brand Strategy in July 2001.