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Exhaustion of Rights – European Court of Justice Ruling

Exhaustion of Rights – European Court of Justice Ruling

21/11/01

The concept of the exhaustion of rights in relation to goods marketed under the trade mark by the proprietor, or with his consent, within the European Economic Area (EEA) has long been established by Article 7 (1) Trade marks – Directive 89/104/EEC.

However guidance was sought by the English High Court - in cases involving Davidoff's "Cool Water" toiletries and Levi Strauss's jeans - from the European Court of Justice (ECJ), with regard to the meaning of "consent", in circumstances where such goods are first placed on the market outside the EEA but then find their way on the market within the EEA.

In its judgement of 20 November 2001, the ECJ has answered the question of whether such consent must be express, or whether it may also be implied. In deciding in favour of the trade mark proprietor, the ECJ's judgement states that while consent need not be express, it may be implied but only where the facts and circumstances unequivocally demonstrate that the proprietor has renounced his right to oppose placing the goods on the market within the EEA. It is thus for the trader alleging consent to prove it, and not for the proprietor to demonstrate its absence

Further, implied consent is not to be inferred from the mere silence of the proprietor. In particular the judgement states that consent cannot be inferred from:

- the failure of the proprietor to communicate to all subsequent purchasers of goods outside the EEA his opposition to marketing within the EEA;

- the failure to mark goods with a warning prohibiting their marketing within the EEA; nor

- the failure to impose any contractual reservations when transferring he ownership of products bearing the trade mark.

The ECJ's decision therefore provides proprietors of trade marks in the EEA with strong basis for preventing the undesired re-sale of their branded goods sourced from outside the EEA.