Legal Updates on Exhaustion Of Rights

Intellectual Property Law -  Trade Marks - Exhaustion of Rights

Advocate General Francis Jacobs has rendered an interesting Opinion for trade mark law owners in case C-405/03, Class International BV v. Unilever NV and others.

The case concerned a container-load of toothpaste products bearing the defendants', Unilever, figurative AQUAFRESH trade marks. The goods had been shipped from outside the European Economic Area (EEA)1 to the Netherlands by the external transit procedure and placed in a customs warehouse in the Netherlands at the request of the claimant, Class International. Although the products were genuine trade marked goods, Unilever had not consented to their entry into the EEA.

At the time of the import, Unilever believed that the goods were counterfeit and applied successfully for the goods to be detained by the customs authorities. The goods were found to be counterfeit, and Class International pursued legal action to obtain the release of the goods from customs and compensation. Class International's claims were initially dismissed. On appeal, the Regional Court of Appeal in the Hague stayed proceedings and referred a question to the European Court of Justice (ECJ)2.
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The questions referred were:-

• Is bringing non-European Community (EC)3 goods bearing a genuine trade mark into the EEA by the external transit procedure, storing such goods in a EC customs warehouse or offering for sale or selling the goods so stored, in all cases without the consent of the trade mark proprietor, regarded as 'using [a sign] in the course of trade' within the meaning of Article 5 of the Trade Marks Directive?; and
• Unilever's consent to the transactions was relevant because of the principle of exhaustion of trade mark rights. This principle holds that a trade mark owner may not assert his rights in relation to goods which have been placed on the market in the EC under that mark by him or with his consent.

The Advocate General Jacob gave his opinion and he held that in the case of genuine trade marked, non EC goods, which have been imported into the EC without the consent of the proprietor of the trade mark:-

• Trade mark owners cannot oppose their entry into the EC on the basis that such entry alone would constitute 'using [the mark] in the course of trade' within the meaning of Article 5 if they are subject to the external transit procedure;

• For as long as such goods conserve their status as non-EC goods, offering for sale or selling them would not constitute 'using [the mark] in the course of trade' within Article 5; and
• Storing the goods in an EC Customs warehouse would not constitute 'using [the mark] in the course of trade' within the meaning of Article 5 unless the final specified destination of the goods is, or is highly likely to be, within the EEA.

Advocate General Jacob came to these conclusions because he was convinced that the essential function of a trade mark is to guarantee to consumers the origin of the goods and he believed that this was not compromised in this case. However, where the final specified destination of the goods is, or is highly likely to be, within the EEA, the trade mark proprietor can prevent a release under Article 5 of the Trade Marks Directive.

The ECJ is not obliged to follow the Advocate General's decision. A judgment can be expected before the end of the year.

1A free trade zone covering the countries of the European Union, Iceland, Norway and Liechtenstein.

2The Court of Justice rules on disputes over EU Treaties and other EU legislation.

3An organisation currently comprised of 12 Western European nations (Belgium, Germany, France, Italy, Luxembourg, the Netherlands, Denmark, Greece, Ireland, Portugal, Spain, and the United Kingdom). The EC attempts to unify and integrate member countries by establishing common economic policies.

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© RT COOPERS, 2005. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.