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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Levi Strauss & Co & Anor v Tesco Stores Ltd & Ors  EWHC 1625 (Ch) (31 July 2002)
Cite as:  Eu LR 610,  ETMR 95,  EWHC 1625 (Ch),  3 CMLR 11,  RPC 18
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CH 1998 T No 5667
Strand, London, WC2A 2LL
B e f o r e :
| (1) LEVI STRAUSS & CO
(2) LEVI STRAUSS (UK) LTD
|- and -
|(1) TESCO STORES LIMITED
(2) TESCO STORES PLC
(2) COSTCO WHOLESALE UK LIMITED
Henry Carr QC, David Anderson QC and Hugo Cuddigan (instructed by Baker & Mckenzie) for the Claimants
Hearing dates : 21,22 May 2002
Crown Copyright ©
Mr Justice Pumfrey:
The provisions of the Directive
'1. The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:
(a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;
(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.
2. Any Member State may also provide that the proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical with, or similar to, the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
3. The following, inter alia, may be prohibited under paragraphs 1 and 2:
(a) affixing the sign to the goods or to the packaging thereof;
(b) offering the goods, or putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder;
(c) importing or exporting the goods under the sign;
(d) using the sign on business papers and in advertising.
4. Where, under the law of the Member State, the use of a sign under the conditions referred to in 1 (b) or 2 could not be prohibited before the date on which the provisions necessary to comply with this Directive entered into force in the Member State concerned, the rights conferred by the trade mark may not be relied on to prevent the continued use of the sign.
5. Paragraphs 1 to 4 shall not affect provisions in any Member State relating to the protection against the use of a sign other than for the purposes of distinguishing goods or services, where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.'
'1. The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade,
(a) his own name or address;
(b) indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services;
(c) the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts;
provided he uses them in accordance with honest practices in industrial or commercial matters.
2. The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade, an earlier right which only applies in a particular locality if that right is recognized by the laws of the Member State in question and within the limits of the territory in which it is recognized.'
'1. 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.
2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialization of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.'
The Community law relating to exhaustion before the present case
'1. Is Article 7(1)…to be interpreted as meaning that the trade mark entitles its proprietor to prohibit a third party from using the mark for goods which have been put on the market under that mark in a State which is not a Contracting State?
2. May the proprietor of the trade mark on the basis of Article 7(1)…alone seek an order that the third party cease using the trade mark for goods which have been put on the market under that mark in a State which is not a Contracting State?'
The answers given by the Court were as follows:
'1, National rules providing for exhaustion of trade-mark rights in respect of products put on the market outside the EEA under that mark by the proprietor or with its consent are contrary to Article 7(1)…
2. Article 7(1)…cannot be interpreted as meaning that the proprietor of a trade mark is entitled, on the basis of that provision alone, to obtain an order restraining a third party from using his trade mark for products which have been put on the market outside the European Economic Area under that mark by the proprietor or with his consent.'
'28. To say that once a trade-mark proprietor has consented to the marketing of one particular batch of products within the EEA he must be deemed to have consented to the marketing of other identical (or similar) batches would accordingly deprive the Court's limitation of the exhaustion principle to EEA-wide exhaustion of much of its practical effect. It would for most practical purposes effectively impose a rule of international exhaustion since, in the absence of a legitimate reason, all parallel imports would necessarily have to be admitted into the EEA.
29. Such a limitation upon the effect of the Directive as interpreted in the court's judgment in Silhouette may seem desirable and would no doubt be welcomed in many circles. However, as the Court observed in Silhouette, no argument has been presented to the Court that the Directive could be interpreted as imposing a rule of international exhaustion. The dispute centred only on whether the Directive left the matter to the discretion of the Member States. The imposition of international exhaustion in the way suggested by GB-Unic does not follow easily from the wording of Article 7(1). Nor does it appear to have been the intention of the Community legislature.'
The questions referred in the present case
'(1) Where goods bearing a registered trade mark have been placed on the market in a non-EEA country by the trade mark proprietor or with his consent and those goods have been imported 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 it, or may such consent be implied?
(2) If the answer to Question 1 is that consent may be implied, is consent to be implied from the fact that the goods have been sold by the proprietor or on his behalf without contractual restrictions prohibiting resale within the EEA binding the first and all subsequent purchasers?
(3) Where goods bearing a registered trade mark have been placed on the market in a non-EEA country by the trade mark proprietor:
(a) to what extent is it relevant to or determinative of the issue 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, that:
(i) the person placing the goods on the market (not being an authorised retailer) does so with the knowledge that he is the lawful owner of the goods and the goods bear no indication that they may not be placed on the market in the EEA; and/or
(ii) the person placing the goods on the market (not being an authorised retailer) does so with knowledge that the trade mark proprietor objects to those goods being placed on the market within the EEA; and/or
(iii) the person placing the goods on the market (not being an authorised retailer) does so with the knowledge that the trade mark proprietor objects to them being placed on the market by anyone otherwise than an authorised retailer; and/or
(iv) the goods have been purchased from authorised retailers in a non-EEA country who have been informed by the proprietor that the proprietor objects to the sale of the goods by them for the purposes of resale, but who have not imposed upon purchasers from them any contractual restrictions on the manner in which the goods may be disposed of; and/or
(v) the goods have been purchased from authorised wholesalers in a non-EEA country who have been informed by the proprietor that the goods were to be sold to retailers in that non-EEA country and were not to be sold for export, but who have not imposed upon purchasers from them any contractual restrictions on the manner in which the goods may be disposed of; and/or
(vi) there has or has not been communication by the proprietor to all subsequent purchasers of its goods (i.e. those between the first purchaser from the proprietor and the person placing the goods on the market in the EEA) of its objection to the sale of the goods for the purposes of resale; and/or
(vii) a contractual restriction has or has not been imposed by the proprietor and made legally binding upon the first purchaser prohibiting sale for the purposes of resale to anyone other than the ultimate consumer?
(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 factors and, if so, which?'
'1. On a proper construction of Article 7(1) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, as amended by the Agreement on the European Economic Area of 2 May 1992, the consent of a trade mark proprietor to the marketing within the European Economic Area of products bearing that mark which have previously been placed on the market outside the European Economic Area by that proprietor or with his consent may be implied, where it follows from facts and circumstances prior to, simultaneous with or subsequent to the placing of the goods on the market outside the European Economic Area which, in the view of the national court, unequivocally demonstrate that the proprietor has renounced his right to oppose placing of the goods on the market within the European Economic Area.
2. Implied consent cannot be inferred:
—from the fact that the proprietor of the trade mark has not communicated to all subsequent purchasers of the goods placed on the market outside the European Economic Area his opposition to marketing within the European Economic Area;
—from the fact that the goods carry no warning of a prohibition of their being placed on the market within the European Economic Area;
—from the fact that the trade mark proprietor has transferred the ownership of the products bearing the trade mark without imposing any contractual reservations and that, according to the law governing the contract, the property right transferred includes, in the absence of such reservations, an unlimited right of resale or, at the very least, a right to market the goods subsequently within the European Economic Area.
3. With regard to exhaustion of the trade mark proprietor's exclusive right, it is not relevant:
—that the importer of goods bearing the trade mark is not aware that the proprietor objects to their being placed on the market in the European Economic Area or sold there by traders other than authorised retailers, or
—that the authorised retailers and wholesalers have not imposed on their own purchasers contractual reservations setting out such opposition, even though they have been informed of it by the trade mark proprietor. '
'53. It follows from the answer to the first question referred in the three cases C-414/99 to C-416/99 that consent must be expressed positively and that the factors taken into consideration in finding implied consent must unequivocally demonstrate that the trade mark proprietor has renounced any intention to enforce his exclusive rights.
54. It follows that it is for the trader alleging consent to prove it and not for the trade mark proprietor to demonstrate its absence.
55. Consequently, implied consent to the marketing within the EEA of goods put on the market outside that area cannot be inferred from the mere silence of the trade mark proprietor.
56. Likewise, implied consent cannot be inferred from the fact that a trade mark proprietor has not communicated his opposition to marketing within the EEA or from the fact that the goods do not carry any warning that it is prohibited to place them on the market within the EEA.
57. Finally, such consent cannot be inferred from the fact that the trade mark proprietor transferred ownership of the goods bearing the mark without imposing contractual reservations or from the fact that, according to the law governing the contract, the property right transferred includes, in the absence of such reservations, an unlimited right of resale or, at the very least, a right to market the goods subsequently within the EEA.
58. A rule of national law which proceeded upon the mere silence of the trade mark proprietor would not recognise implied consent but rather deemed consent. This would not meet the need for consent positively expressed required by Community law.'
The defendants' complaints about the judgment of the ECJ
—to create a presumption of infringement (see paragraph 54 of the judgment above);
—to require that the presumption be rebutted by evidence that in the majority of cases the defendant will not be able to provide, that is, evidence of unambiguous consent (paragraph 53 of the judgment); and
—to condemn genuine goods of the proprietor to the status of counterfeit goods (see paragraph 57 of the judgment).
The relationship of the domestic law of trade marks to Community law
'An Act to make new provision for registered trade marks, implementing Council Directive No. 89/104/EEC of 21st December 1988 to approximate the laws of the Member States relating to trade marks; to make provision in connection with Council Regulation (EC) No. 40/94 of 20th December 1993 on the Community Trade Mark; to give effect to the Madrid Protocol Relating to the International Registration of Marks of 27 June 1989, and to certain provisions of the Paris Convention for the Protection of Industrial Property of 20th March 1883, as revised and amended; and for connected purposes.'
'…it should be observed that, as the Court pointed out in its judgment in Case 14/83 Von Colson and Kamann v Land Nordrhein–Westfalen  ECR 1891, paragraph 26, the Member States' obligation arising from a directive to achieve the result envisaged by the directive and their duty under Article 5 of the Treaty [now Article 10 EC] to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of Member States including, for matters within their jurisdiction, the courts. It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article 189 of the Treaty [now Article 249 EC].'
'In my judgment (as will now be clear) the correct analysis of that relationship [sc. between EU and domestic law] involves and requires these following four propositions. (1) All the specific rights and obligations which EU law creates are by the ECA [European Communities Act] incorporated into our domestic law and rank supreme: that is, anything in our substantive law inconsistent with any of these rights and obligations is abrogated or must be modified to avoid the inconsistency. This is true even where the inconsistent municipal provision is contained in primary legislation. (2) The ECA is a constitutional statute: that is, it cannot be impliedly repealed. (3) The truth of (2) is derived, not from EU law, but purely from the law of England: the common law recognises a category of constitutional statutes. (4) The fundamental legal basis of the United Kingdom's relationship with the EU rests with the domestic, not the European, legal powers. In the event, which no doubt would never happen in the real world, that a European measure was seen to be repugnant to a fundamental or constitutional right guaranteed by the law of England, a question would arise whether the general words of the ECA were sufficient to incorporate the measure and give it overriding effect in domestic law. But that is very far from this case.'
'Nothing in the preceding provisions of this section shall be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor or licensee.
But any such use otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark if the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.'
11 Limits on effect of registered trade mark
(1) A registered trade mark is not infringed by the use of another registered trade mark in relation to goods or services for which the latter is registered (but see section 47(6) (effect of declaration of invalidity of registration)).
(2) A registered trade mark is not infringed by—
(a) the use by a person of his own name or address,
(b) the use of indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of services, or other characteristics of goods or services, or
(c) the use of the trade mark where it is necessary to indicate the intended purpose of a product or service (in particular, as accessories or spare parts),
provided the use is in accordance with honest practices in industrial or commercial matters.
(3) A registered trade mark is not infringed by the use in the course of trade in a particular locality of an earlier right which applies only in that locality.
For this purpose an "earlier right" means an unregistered trade mark or other sign continuously used in relation to goods or services by a person or a predecessor in title of his from a date prior to whichever is the earlier of—
(a) the use of the first-mentioned trade mark in relation to those goods or services by the proprietor or a predecessor in title of his, or
(b) the registration of the first-mentioned trade mark in respect to those goods or services in the name of the proprietor or a predecessor in title of his;
and an earlier right shall be regarded as applying in a locality if, or to the extent that, its use in that locality is protected by virtue of any rule of law (in particular, the law of passing off).
12 Exhaustion of rights conferred by registered trade mark
(1) A registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market in the European Economic Area under that trade mark by the proprietor or with his consent.
(2) Subsection (1) does not apply where there exist legitimate reasons for the proprietor to oppose further dealings in the goods (in particular, where the condition of the goods has been changed or impaired after they have been put on the market).'
The corresponding provisions of the Directive are to the found in Articles 6 and 7.
Section 10(6) in the domestic context
'Section 10(6) is not derived directly either from the [Directive] or from the Paris Convention, neither of which expressly exempts comparative advertising from infringement. The result is that the first half of section 10(6) is home–grown. However the first half of the proviso can be traced back to Article 10bis(2) of the Paris Convention, dealing with unfair competition and from there to Article 6(1) of the Directive. The latter has been adopted, with minor and, for present purposes, irrelevant changes in wording as section 11(2) of the Act…
The language used in the second part of the proviso is to be found in Articles 4(3), 4(4) and 5(2) of the Directive and in section 10(3) of the Act…'
Section 10(6) in the context of the Directive
'23. In that respect, although the third recital in the preamble to the Directive states that "it does not appear to be necessary at present to undertake full-scale approximation of the trade mark laws of the Member States", the Directive none the less provides for harmonisation in relation to substantive rules of central importance in this sphere, that is to say, according to that same recital, the rules concerning those provisions of national law which most directly affect the functioning of the internal market, and that that recital does not preclude the harmonisation relating to those rules from being complete.
24. The first recital in the preamble to the Directive notes that the trade mark laws applicable in the Member States contain disparities which may impede the free movement of goods and freedom to provide services and may distort competition within the common market, so that it is necessary, in view of the establishment and functioning of the internal market, to approximate the laws of Member States. The ninth recital emphasises that it is fundamental, in order to facilitate the free movement of goods and services, to ensure that registered trade marks enjoy the same protection under the legal systems of all the Member States, but that this should not prevent Member States from granting at their option extensive protection to those trade marks which have a reputation.
25. In the light of those recitals, Articles 5 to 7 of the Directive must be construed as embodying a complete harmonisation of the rules relating to the rights conferred by a trade mark. That interpretation, it may be added, is borne out by the fact that Article 5 expressly leaves it open to the Member States to maintain or introduce certain rules specifically defined by the Community legislature. Thus, in accordance with Article 5(2), to which the ninth recital refers, the Member States have the option to grant more extensive protection to trade marks with a reputation.' (Case C–355/96 Silhouette International Schmied GmbH & Co KG v Hartlauer Handelsgesellschaft mbH  ECR I–4799, hereinafter 'Silhouette')
'The concept of "consent" in Article 7 of the Directive … should … be interpreted so as to give full and fair effect to the purchaser's rights of resale and should not be interpreted so as to permit trade mark proprietors to derogate from rights of property which they (or persons whose acts are binding upon them) have lawfully conferred upon purchasers of goods bearing their trade marks.'
The supporting arguments were substantially identical to those advanced in the present case. It was said that it is clear from Marckx v Belgium (1979) 2 EHRR 330 and from Sporrong and Lönnroth v Sweden (1983) 5 EHRR 35 that the right to use and dispose of property is central to the private right of property, and although the right to respect for property may be subject to restrictions in the public or general interest, such restrictions must be proportionate to the public or general interest to be secured. It is, the defendants contend, a disproportionate and intolerable interference, impairing the very substance of the property rights guaranteed, if the claims for infringement of the trade mark were to be upheld in the circumstances of this case.
'The second paragraph [sc of Article 1 of the First Protocol] reserves to States the right to enact such laws as they deem necessary to control the use of property in accordance with the general interest. Such laws are especially called for and usual in the field of housing, which in our modern societies is a central concern of social and economic policies.
In order to implement such policies, the legislature must have a wide margin of appreciation both with regard to the existence of a problem of public concern warranting measures of control and as to the choice of the detailed rules for the implementation of such measures. The Court will respect the legislature's judgment as to what is in the general interest unless that judgment be manifestly without reasonable foundation.'
No doubt the question of the economic effect of a prohibition on parallel importation from outside the EEA of trade marked goods can arouse strong passions. But it cannot in my judgment be said that such a prohibition is without reasonable foundation.
'Finally, the arguments concerning guarantee of title and freedom of expression do not really appear to be cogent. The right to property and the right freely to express one's views do, it is true, feature, as basic rights, among the general principles of Community law. Since these must, according to established case-law, also be viewed in relation to their social function, it cannot be ruled out that their exercise may be restricted, provided that any such restrictions do in fact correspond to Community objectives of general interest and do not constitute in relation to the aim pursued a disproportionate and intolerable interference, impairing the very substance of the rights thus guaranteed. There is nothing to suggest such an infringement of the principle of proportionality by the Directive, which serves to ensure the viability of the internal market.'
The Advocate General referred in this context to the decision of the ECJ in Case C-200/96 Metronome Musik  ECR I-1953, which was concerned with the introduction of the rental right in respect of copyright works and its effect on established rental businesses, and the rights of the latter freely to pursue a trade or profession, and their rights of property. This is yet another case that demonstrates the wide discretion enjoyed when the maintenance of the single market and the protection of intellectual property rights are under consideration. I cannot discern any reason for supposing that the Community and domestic legislators have failed properly to hold the balance where international exhaustion of trade mark rights is concerned. I can see no justification for the suggestion that section 3 of the HRA would, all other things being equal, require me to place a construction on section 10(6) which would permit the defendants to sell the Levi's jeans purchased outside the EEA.
The Community law arguments
'26. Inasti, the Belgian Government and the Council dispute the admissibility of the questions referred. In essence, they argue that the Court interpreted Article 14c(b) of and Annex VII to the Regulation in its judgment in Hervein I and in Case C-340/94 De Jaeck  ECR I-461, without declaring them invalid, although the Advocate General had urged it to do so and it could have done so of its own motion. The Court thus accepted the validity of those provisions and, in the absence of any new matters coming to light in the meantime, the questions of the Tribunal du travail, Tournai, amount to calling into question decisions which are res judicata.
27. Those arguments must be rejected. If the Court, when dealing with a question referred to it for a preliminary ruling, does not rule on a point of law on which no question has been referred and which, moreover, has not been raised by the parties or other participants in the proceedings before it, that does not mean that it has given a definitive ruling on the point in question. Moreover, nothing prevents the Court, at the request of a national court and in the context of the Court's collaboration with that court pursuant to Article 234 EC, from ruling on the validity of a measure taken by the Community institutions, which it has already had occasion to interpret. '
'Article 28 (ex Article 30)
Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.
Article 29 (ex Article 34)
Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States.
Article 30 (ex Article 36)
The provisions of Articles 28 and 29 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.'
'13 Trade mark rights are, it should be noted, an essential element in the system of undistorted competition which the Treaty seeks to establish and maintain . Under such a system, an undertaking must be in a position to keep its customers by virtue of the quality of its products and services, something which is possible only if there are distinctive marks which enable customers to identify those products and services . For the trade mark to be able to fulfil this role, it must offer a guarantee that all goods bearing it have been produced under the control of a single undertaking which is accountable for their quality .
14 Consequently, as the Court has ruled on numerous occasions, the specific subject-matter of trade marks is in particular to guarantee to the proprietor of the trade mark that he has the right to use that trade mark for the purpose of putting a product into circulation for the first time and therefore to protect him against competitors wishing to take advantage of the status and reputation of the trade mark by selling products illegally bearing that mark . In order to determine the exact scope of this right exclusively conferred on the owner of the trade mark, regard must be had to the essential function of the trade mark, which is to guarantee the identity of the origin of the marked product to the consumer or ultimate user by enabling him without any possibility of confusion to distinguish that product from products which have another origin ( see, in particular, the judgments in Case 102/77 Hoffmann-La Roche v Centrafarm  ECR 1139, paragraph 7, and in Case 3/78 Centrafarm v American Home Products Corporation  ECR 1823, paragraphs 11 and 12 ).
15 For the purpose of evaluating a situation such as that described by the national court in the light of the foregoing considerations, the determinant factor is the absence of any consent on the part of the proprietor of the trade mark protected by national legislation to the putting into circulation in another Member State of similar products bearing an identical trade mark or one liable to lead to confusion, which are manufactured and marketed by an undertaking which is economically and legally independent of the aforesaid trade mark proprietor.' (Case C-10/89 CNL-SUCAL v Hag  ECR I-3711)
'8 Within the framework of the provisions of the Treaty relating to the free movement of goods and in accordance with Article 3(a), Article 30 et seq. on the elimination of quantitative restrictions and of measures having equivalent effect expressly provide that such restrictions and measures shall be prohibited "between Member States".
9 Article 36, in particular, after stipulating that Article 30–34 shall not preclude restrictions on imports, exports or goods in transit justified inter alia on grounds of the protection of industrial and commercial property, states that such restrictions shall in no instance constitute a means of arbitrary discrimination or disguised restriction on trade "between Member States".
10 Consequently the exercise of a trade-mark right in order to prevent the marketing of products coming from a third country under an identical mark, even if this constitutes a measure having an effect equivalent to a quantitative restriction, does not affect the free movement of goods between Member States and thus does not come under the prohibitions set out in Article 30 et seq. of the Treaty.'
This could hardly be clearer. It has formed, with the principle of exhaustion, the basis for the application of the principles of free movement in the context of trade marks and other intellectual property rights.
'12 Furthermore, if the same proprietor holds the trade-mark right in respect of the same product in all the Member States there are no grounds for examining whether those marks have a common origin with an identical mark recognised in a third country, since that question is relevant only in relation to considering whether within the Community there are opportunities for partitioning the market.'
This is a reference to the now-disapproved doctrine of common origin. The principle, however is still good, since the Court is here deciding that ownership throughout the Community prevents the second sentence from coming into play. Thus, the Court refuses to deal with imports from third countries on the same footing as goods moving between the Member States:
'13 It is impossible to avoid these conclusions by relying on Articles 9 and 10 of the Treaty [now, after amendment, Articles 23 and 24 EC].
14 According to Article 10(1) of the Treaty, products coming from a third country shall be considered to be in free circulation in a Member State if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in the importing Member State.
15 According to Article 9(2) of the Treaty the provisions of Chapter 1, Section 1 and of Chapter 2 of Title I of Part Two shall apply to products coming from third countries which are in free circulation in Member States.
16 Since those provisions only refer to the effects of compliance with customs formalities and paying customs duties and charges having equivalent effect, they cannot be interpreted as meaning that it would be sufficient for products bearing a mark applied in a third country and imported into the Community to comply with the customs formalities in the first Member State where they were imported in order to be able then to be marketed in the common market as a whole in contravention of the rules relating to the protection of the mark.'
'48. The Swedish government also relies on the Court's case law on the function of trade marks. That function is essentially to guarantee the consumer the possibility of identifying the origin of the product. It is no part of the function of a trade mark to enable the owner to divide up the market and to exploit price differentials. The adoption of international exhaustion would bring substantial advantages to consumers, and would promote price competition.
49. I confess to finding those arguments extremely attractive. However it must be remembered that the Court's case-law on the function of trade marks was developed in the context of the Community, not the world market. Indeed in EMI v CBS the Court held that its case-law under Articles 30-36 could not be transposed to imports from third countries. Circumscribing the protection of trade-mark rights by defining their essential function was considered necessary to prevent restrictions on trade between Member States.' [my emphasis]
The need for a reference
Judgment under CPR 24