EU law adequate to prevent trademark abuses

European Union

The European Commission has concluded in a report requested by the European Parliament that existing EU legal provisions are sufficient to deal with any potential abuse of trademark rights. Parallel importers had alleged that the lack of an international exhaustion system within the European Union restricts their right to trade freely - that is, trademark owners may prevent the importation into the European Union of goods placed on the market outside the European Union with their consent.

The report investigated three main areas of concern and found the following:

  • The rights holders' use of selective distribution systems is not illegal as they are exempt under Commission Regulation 2790/99. However, agreements drawn up between rights holders and the selected distributors are not exempt if their provisions are restrictive (eg, they restrict sales between the chosen wholesalers). Such abuses can be prevented under Article 81 of the EC Treaty.

  • A dominant company that (i) refuses to provide a licence to distribute its branded goods to a particular distributor, or (ii) demands high prices for branded goods may damage competition in the relevant market. This abuse of trademarks is regulated by Article 82 of the EC Treaty.

  • Article 7(1) of the Community Trademark Directive, Article 13(1) of the Community Trademark Regulation, and Articles 28 and 30 of the EC Treaty provide an effective means to prevent trademark owners from alleging trademark infringement for the sole purpose of forcing the parallel trader to reveal the origin of branded goods, thus resulting in the restriction of the free movement of goods within the European Union. However, alleging trademark infringement to prevent the importation of branded goods from outside the European Union is not an abuse, but an inevitable consequence of the lack of international exhaustion under the EU regime.

These findings led the commission to conclude that it had "not found any deficiencies in current legal provision relating to the possible abuses of trademarks within the [European Union]". This conclusion highlights the EU inclination in favour of trademark owners, and their right to select and manage distribution networks. There appears to be no move towards a global exhaustion of trademarks system, which parallel traders argue would encourage a more competitive environment and result in lower prices for branded goods.

Nick Rose, Field Fisher Waterhouse, London

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