Principle of exhaustion of rights clarified

European Union
In Coty Prestige Lancaster Group GmbH v Simex Trading AG (Case C-127/09, June 3 2010), a reference for a preliminary ruling from the Oberlandesgericht Nürnberg, Germany, the Court of Justice of the European Union (ECJ) has clarified the principle of exhaustion of rights under Article 13(1) of the Community Trademark Regulation (40/94) and Article 7(1) of the First Trademarks Directive (89/104/EEC).
Perfume company Coty Prestige Lancaster Group GmbH manufactures various perfumes under its own trademarks and under third-party marks, including DAVIDOFF. Coty uses a selective distribution system and its distributors are called ‘authorized specialist dealers’. Each of the dealers must sign a contract, which includes a provision (Article 5) stating that promotional material provided by Coty to the dealers cannot be used commercially or sold.

In September 2007 Coty obtained two ‘testers’ containing Davidoff Cool Water Man perfume from a test purchase made in a shop of the Sparfümerie chain in Ingolstadt, Germany. Coty then discovered that the testers had been delivered to one of its authorized specialist dealers in Singapore. Subsequently, the proprietor of the Sparfümerie chain informed Coty that he had obtained the testers from Simex Trading AG, which is not part of Coty’s network of dealers, for the chain’s principal outlet in Nuremberg. Coty sued Simex, arguing that the testers had been introduced in the European Union or the European Economic Area (EEA) without the authorization of the trademark owner.

This case was different from Peak Holding (Case C-16/03) (for further details please see "ECJ rules on PEAK time for exhaustion"), as the contracts provided that the testers remained the property of the trademark owner: they could be used only for advertising purposes and could not be sold.
First, the ECJ referred to previous case law on the exhaustion of rights - in particular, Makro (Case C-324/08) (for further details please see "ECJ clarifies doctrine of implied consent"), Van Doren (Case C-244/00) (for further details please see "Parallel importer to prove exhaustion of rights, rules ECJ") and Sebago (Case C-173/98), which stated that the trademark owner must be able to control the entry of its goods into the EEA.
In the present case, the issue was whether the testers had been put on the market in the EEA by the trademark owner itself, or by a third party with the trademark owner's consent. The ECJ found that the act of first putting the testers on the market in the EEA was carried out not by the trademark owner, or an operator economically linked to it, but by a third party, since this first act was the sale by Simex to the Sparfümerie chain of testers that Simex had obtained from an authorized specialist dealer established in Singapore.

Therefore, according to the aforementioned case law, neither the provision of testers by Coty to its dealer in Singapore, nor the supply by Coty of equivalent products to its dealers in the EEA, could be said to have exhausted Coty's trademark rights.

The ECJ then pointed out that the exhaustion of the trademark owner's rights could occur only as the result of the owner's consent - whether express or implied, as explained in Makro. The ECJ specifically quoted the decision in Zino Davidoff (Joined Cases C-414/99 to C-416/99), which stated that:
  • implied consent cannot be inferred from certain circumstances (Paragraph 60); and
  • certain factors are irrelevant with regard to the exhaustion of rights (Paragraph 66).
In the present case, the ECJ explained that it was for the national court to assess, in light of these factors and circumstances, whether there was consent, either express or implied. Nevertheless, the ECJ held that certain of these factors and circumstances did not argue in favour of a renunciation by the trademark owner of the exclusive rights provided by Article 5 of the directive. It pointed out that the goods at issue were bottles of perfume presented in packaging that included not only the word ‘demonstration’, but also the statement ‘not for sale’. According to the ECJ, this clearly demonstrated the intention of the trademark owner that the testers should not be sold, whether inside or outside the EEA. This led to the conclusion that the trademark owner had not consented to a putting on the market in the EEA within the meaning of Article 7(1) of the directive.
The ECJ added that, even if the reference for a preliminary ruling were to be understood as covering the supply of the testers by Coty to one of its authorized specialist dealers within the EEA, the use of the statement ‘not for sale’ precluded a finding that the trademark owner had exhausted its rights. The ECJ further held that, because the wording of Article 7(1) of the directive is similar to that of Article 13(1) of the regulation, the interpretation of Article 7(1) also applied to Article 13(1).
The ECJ concluded as follows:
"In circumstances such as those of the main proceedings, where ‘perfume testers’ are made available, without transfer of ownership and with a prohibition on sale, to intermediaries who are contractually bound to the trademark proprietor for the purpose of allowing their customers to test the contents, where the trademark proprietor may at any time recall those goods, and where the presentation of the goods is clearly distinguishable from that of the bottles of perfume normally made available to the intermediaries by the trademark proprietor, the fact that those testers are bottles of perfume which bear not only the word ‘demonstration’, but also the statement ‘not for sale’, precludes, in the absence of any evidence to the contrary, which it is for the national court to assess, a finding that the trademark proprietor impliedly consented to putting them on the market."
This case is significant, as it clarifies the doctrine of express and implied consent in a borderline situation. It is also interesting in that the ECJ left almost no room for manoeuvre to the national court, and basically dictated what the national court should conclude.

Richard Milchior, Granrut Avocats, Paris

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