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More news on Silhouette

Written by Michael Coyle on 06 January 2003

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Silhouette manufactured and marketed high quality fashion sunglasses under the trade mark  'Silhouette' in Austria. They sought to change such sunglasses seasonally. Silhouette refused to  sell their glasses to Hartlaur who sell spectacles in numerous branches in Austria at low prices.  Silhouette felt that selling to them would jeopardise their reputation of fashionable, quality  products.   Silhouette consented to the sale of outdated sunglasses in non-member states, especially Bulgaria  at low prices that are affordable in that country. Hartlaur brought Silhouette glasses in Bulgaria  and re-imported them into Austria for re-sale in their shops. The Austrian Court applied  International exhaustion. The case was sent to the ECJ with the following questions:   1. 'Is Article 7 (1) of the Directive 89/104/EEC to be interpreted as meaning that the trademark  entitles its proprietor to prohibit a third party from using the mark for goods which have been  put on the market under the state which is not a contracting state?'   2. ' May the proprietor of the trademark on the basis of article 7 (1) of the Directive alone seek  an order that the third party cease using trademark goods which have been put on the market under  that mark in a state which is not a contracting state?'   Firstly, the ECJ noted that the directive does not prescribe international exhaustion. If so, as  the Advocate General pointed out , the directive would have referred only to marketing in the  community. The view of Hartlaur was that Article 7 would nevertheless allow a member state to  provide international exhaustion. The reason being that the Article would be limited to require  the member state to provide for trademark exhaustion within the community.   According to this view, the Directive does not comprehensively resolve the question of exhaustion,  but leaves it open for a member state to adopt rules going further than those explicitly laid  down. However, the court found this interpretation contrary to the Directive. Not only the wording  of Article 7, but also the purpose and the scheme of the Directive points out, that it fully  harmonises the question of exhaustion, not leaving it open for member states to provide for  international exhaustion.   The court continued that interpretation is fully capable to safeguard the functioning of the  internal market. A situation, in which some member states could provide for international  exhaustion, while others provided for community exhaustion, would give rise to trade barriers  between member states. The commission and some of the member states in the proceedings further  elaborated argument: if a member state were free to determine whether trademark owners could  prevent importation from third countries, the same products could be subject of parallel imports  into one member state but not in another.   It would be no solution to this, to let goods once imported into a member state providing for  international exhaustion to benefit from the free movement on the internal market. Finally the  court pointed out that the community authorities always could extend the exhaustion to products  put on the market in non-member countries by entering into international agreements, as already  had been done through the EEA.   The judgement might at first glance seem contrary to some aspects of the court's case law. The  court has a number of times, emphasised that the function of trademarks is to point out the origin  of the product to the consumer. As Sweden argued during proceedings, it is no part of that  function to enable the trademark owner to divide the market. This argument was answered by the  General Advocate, which on the one hand agreed on the Swedish point, but on the other hand, he  added that the case law in which the function of origin has been discussed, was developed in the  context of the community market, not the world market, and that Articles 28 and 36 do not regulate  the relationship between the community and third countries.   The consequence of Silhouette is that regional, community-wide exhaustion now is compulsory to all  members of the European Union. While some countries already applied it before the judgements,  others like Sweden have to adapt. Parallel importers cannot continue the importation of  trademarked products from third countries without risking litigation. Parallel importation form  other member states can, however, continue as usual, and there seems to be no reason not to allow  the parallel importation of a trademarked product form a third country, if it sold in the EU under  another trademark.
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