Brands ECJ cases: Silhouette International Schmeid v Hartlauer - the Advocate General's opinion

Silhouette International Schmeid v Hartlauer

The Advocate General has given his opinion in an important case involving exhaustion of rights which could be of great assistance to brand owners. The question was whether Member States may (or must) provide for international exhaustion of rights under their national laws. Of course EEA exhaustion is already a fundamental principle of law which prevents brand owners from enforcing their trade mark rights in respect of genuine product placed on the market in the EEA by themselves or with their consent. However if a genuine product from, for example, the United States is imported into the UK, can the brand owner take any action? The position is unclear in both the UK and many other Member States.

The Advocate General decided that the principle of international exhaustion was incompatible with EU law, having regard to the purpose and wording of the Trade Mark Harmonisation Directive and the Community Trade Mark Regulation. Although the arguments in favour of free trade were strong, particularly the benefits to consumers, it could not be left to individual Member States to decide whether or not to adopt the principle of international exhaustion under their own laws. This would give rise to unacceptable differentials and market distortions within the Community which would defeat the concept of an internal market.

This case, if followed by the ECJ, would constitute a major change to English law, which (arguably) endorses the principle of international exhaustion. In that event, brand owners would be able to take action to prevent the sale of their products in supermarket outlets and elsewhere which had been obtained on the grey market outside the EEA. The Court's judgment is expected imminently.