Sebago Case: Exhaustion of trade mark rights

The doctrine of the exhaustion of rights is a limitation on an intellectual property right. Once a product has initially been marketed in the Community, Community law will impinge on the exercise of the right. The holder of the right cannot prevent his goods from being bought by a third party in a country where the right holder himself has marketed the goods (or given his consent to this), and then being sold into another country. In such a case the holder’s intellectual property rights are said to have been exhausted.

In a preliminary ruling, the ECJ confirmed its judgment in the Silhouette case by ruling that trade mark rights are exhausted only if the products have been put on the market in the EEA and that national rules providing for exhaustion of rights in respect of products marketed outside the EEA by the proprietor or with his consent are contrary to Article 7(1) of the Trade Mark Directive (Directive 89/104). The ECJ also ruled that, for there to be exhaustion of trade mark rights, the marketing by the trade owner, or his consent to marketing, must relate to each individual unit or batch of the product for which exhaustion is claimed.

Sebago is a company owning trade marks registered, inter alia, for shoes. Maison Dubois is the exclusive distributor in Benelux of shoes bearing Sebago’s trade marks. GB Unic sold in 1996 shoes manufactured in El Salvador bearing the Sebago marks. Sebago and Maison Dubois claim that, since they had not authorised the sale of the shoes in the EC, GB Unic had no right to sell them there.

After having confirmed the Silhouette judgment, the ECJ held that the proprietor may continue to prohibit the use of the mark for those individual items of that product which have been put on the market in the EEA by another party without his consent. The purpose of Article 7(1) is to allow the further marketing of an individual item of a product bearing a trade mark that has been marketed with the consent of the proprietor and to prevent him from opposing such marketing. This interpretation is also confirmed by Article 7(2) of the Directive which, in its reference to the “further commercialisation” of goods, shows that the principle of exhaustion concerns only specific goods which have first been put on the market in the EEA with the consent of the trade mark proprietor. (Sebago and Maison Dubois/GB Unic, Case C-173/98, judgment of 21.07.99, opinion of AG 25.03.99)