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The Aftermath of Silhouette

Written by Michael Coyle on 05 January 2003

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SEBAGO INC. AND S.A ANCIENNE MAISON DUBOIS ET FILS v S.A G-B UNIC  

Has reinforced the decision in the Silhouette case. Sebago is the owner of a number of trade marks  registered for, amongst other things, shoes. Sebago claimed that GB-Unic infringed its trade marks  by purchasing shoes from EL Salvador and selling them in hypermarkets in Europe.

Sebago contended  that it had not consented to the marketing of these shoes within the EEA, and that GB-Unic could  therefore be prevented from selling the shoes. The case was referred to the ECJ for a preliminary  ruling under Article 234 (ex. Article 177) of the EC Treaty. The two main issues were, first,  whether the principle of international exhaustion exists and, secondly, whether a trade mark owner can be deemed to have given his consent to the marketing within the EEA of a batch of products imported from outside the EEA, on the basis that he had consented to the marketing within the EEA  of other batches of identical or similar products. 

The first issue was simply decided following the judgement in the Silhouette case where it was ruled that the Trade Mark Directive provides only for EEA-wide exhaustion, rather than providing  for international exhaustion. Even if the shoes were put into circulation outside the EEA with Sebago's consent (which was in dispute in this case), Sebego could still use its trade mark rights  to prevent further marketing of shoes within the EEA.  The second key issue was whether Sebago had exhausted its trade mark rights in batches of identical  and/or similar goods by consenting to the marketing of one batch of the goods within the EEA. Both  the court and the Advocate General stated that the principle of exhaustion of trade marks in the EEA relates only to the individual goods or batches of goods, not to whole product lines. By  merely putting onto the market a product bearing the trade mark, Sebago did not lose the right to  protect its trade mark on other consignments of identical or similar goods which had not yet been  placed on the market within the EEA.  GB-Unic tried to argue before the Belgian court of Appeal that Sebago could be deemed to have  consented to the marketing of the goods within the EEA, as it had not prohibited its licensee in  El Salvador from exporting its goods into the community.  However, the Belgian Court dismissed the relevance of this argument, as it had not been proven  that Sebago had granted a licence to the EL Salvadorian seller. This question of deemed or implied  consent was given full consideration in the Davidoff case.  

DAVIDOFF:

A Reversal of the Silhouette Judgement?   Raises further doubts about the scope of the principle of exhaustion of rights in relation to  trade marks. Davidoff produces luxury perfumes under the name "cool water" and is the owner of the  trademarks "COOL WATER" and "DAVIDOFF COOL WATER" in relation to such products. Davidoff brought  an action for trademark infringement and passing off against A & G on the basis A & G's  unauthorised importation of Davidoff's perfumes into the EEA from outside. Davidoff applied for  summary judgement. The application for summary judgement was dismissed and the case is now being  referred to the ECJ for a preliminary ruling under Article 234 of the EC Treaty.  Davidoff argued that the perfume was placed on the market in circumstances that allowed Davidoff  effectively to restrain subsequent sale and movement of the perfume. However, Mr. Justice Laddie  held that there was an argument that the terms of the contracts within Davidoff's distribution  chain meant that distributors were free to market perfume anywhere in the world, including the  EEA. If this argument were successful at trial, Davidoff would have implied consent to the  perfumes entering the EEA, thereby losing its right to protect its trademarks within the EEA. The  court decided that A & G had substantial grounds to defend the case based on this consent  argument, and the application for summary judgement was dismissed.  The court considered the terms of the Trade Mark Directive and subsequent case law and set the  following propositions:  

1. The principle of exhaustion of rights applies to goods bearing trademarks which are made  available within the EEA, as it does to other intellectual property rights;  

2. The principle cannot be avoided. It is an automatic legal consequence of having put the goods  on the market or having consented to the marketing of the goods in the EEA;   

3. Goods marketed outside the EEA do not exhaust the trademark owner's right to prevent  exploitation within the EEA;  

4. It is not open to EU member states to introduce a principle of international exhaustion for  trademarks under domestic law by deeming the owner of the trademark to have consented to the  sale and movement of his goods within the EEA, simply because he has consented to their  marketing outside the EEA; and  

5. Trade mark owners still have the right to consent to the marketing of goods within the EEA,  following which they may not prevent the marketing of non-EEA goods within the EEA. In deciding  whether consent has been given, all the relevant circumstances must be considered including the  nature of the goods, the circumstances under which they were put on the market, the terms of any  contract of sale and, in particular, the provisions of any local law. Mr Justice Laddie noted that one of the effects of Article 7 (1), as construed by the ECJ in  Silhouette, was that a proprietor "can put himself in a position to demand that his goods which  have been marked by him with a trademark for the purpose of accurately identifying their origin,  must be stripped of that marking when they enter the EEA? In other words, trademark laws can be  used to prevent the marks from performing their function of telling the truth about the origin of  goods". He noted that, in his view, this illustrated how the Silhouette judgement has bestowed on  a trademark owner a "parasitic right to interfere with the distribution of goods which bears  little or no relationship to the proper functions of trademark rights". This judgement further  demonstrates the state of uncertainty and flux in the legal position over exhaustion and consent.   Davidoff reflects what may prove to be a change in the attitude, of the English courts at least,  to international exhaustion implying that they do not approve of trademark owners attempting to  stop parallel imports of their goods coming in the EEA from non-EEA markets. Mr Justice Laddie  qualified Silhouette, emphasising the case simply meant that national laws could not impose the  doctrine of international exhaustion of trademark rights on the proprietor of a trademark, in  respect of goods sold by or with the consent of the proprietor outside the EEA. This did not, he  thought, mean that a trademark proprietor did not retain the right to consent to such importation  into the EEA of goods initially sold by or with the consent of the proprietor outside the EEA.   The views of Mr Justice Laddie were only handed down during an application for summary judgement  by Davidoff and are therefore not final. However, the decision does imply that Mr Justics Laddie  has great sympathy for the view that the principle of international exhaustion in respect of  trademark rights would be sensible, bearing in the specific subject matter of a trademark, namely,  to identify origin.   The decision of Mr Justice Laddie and its implications are significant. In particular, his  criticism that Article 7 (1) of the Trade Mark Directive bestows on a trademark owner the right to  interfere with the distribution of legitimate goods supports again the cry of parallel importers  for the introduction into the EEA of the principle of international exhaustion of trademark rights.   Although this is so, one must refer back to Advocate General Jacobs in both the Silhouette and the  Sebago case where he decreed that the ECJ couldn't 'stand legislation on its head in order to  achieve an objective, even were it considered? desirable. If the directive is found to have  effects which are unacceptable, the correct remedy is to amend the directive or?enter into  international agreements in order to extend the principle of exhaustion to products put on the  market in non-member countries?'   LEVI v. TESCO THE FINAL SAY!   On the 20th November, the ECJ handed down the judgement in two well-publicised cases Levi v. Tesco  and the appeal of Davidoff v. A&G. the question that were referred to the ECJ was, like the other  cases, to define the meaning of Article 7 of the Directive. The central issue was what was meant  by consent. Again, did consent have to expressed, or could it be implied? If it could be implied,  in what circumstances could it be implied?   The ECJ stated that since the effect of consent is that the trademark proprietor effectively loses  its rights to control the sales of goods bearing the trademark within the EEA, consent had to be  "so expressed that an intention to renounce those rights is unequivocally demonstrated". The did  however, accept that it was possible for an intention to be implied where the circumstances of the  particular case "unequivocally demonstrates that the proprietor has renounced his rights."   Consent could not be inferred from mere silence of a trademark proprietor or the fact that goods  carry no warning of a prohibition on their being placed on the market in the EEA. Consent must be  expressed positively.   The judgement makes it clear that consent to goods being placed on the market in the EEA will only  be implied in exceptional circumstances, where it is clear that the trademark owner intended to  renounce his right.

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