The European Court of Justice (ECJ) gave an important judgment on 30 November 2004 in case C-16/03 which concerns the meaning of "putting goods on the market" for the purposes of exhaustion of trade mark rights. The Trade Marks Directive states that a registered trade mark is not infringed by use of the mark in relation to goods which have been put on the market in the European Economic Area (EEA) under that trade mark by the proprietor or with his consent.
Peak Holding A.B. -v- Axolin-Elinor A.B., European Court of Justice, 30 November 2004
Peak Holding A.B. (Peak) was a Danish company selling clothing under the registered trade mark PEAK PERFORMANCE. It imported a consignment of branded clothing from outside the EEA and offered it for sale in Denmark. A quantity remained unsold which was then purchased by a French company. Peak alleged that the contract with the French company stated that only 5% of the goods could be sold in France with the remainder not to be sold within Europe other than Russia and Slovenia. The goods were sold on and eventually purchased by a predecessor of the defendant, a Swedish retailer, which advertised them for sale in Sweden.
Peak brought trade mark infringement proceedings in Sweden which were defended on the grounds that the trade mark rights had been exhausted, either when the goods were first imported into the EEA, alternatively when they were offered for sale by Peak within the EEA, or when they were sold to the French company. Peak denied that their rights had been exhausted, and that even if they had been exhausted after importation and/or offer for sale, the rights had been "restored" after the unsold goods were returned to warehouses. The case was then referred to the ECJ by the Swedish Court, asking at what point goods were to be regarded as having been put on the market in the EEA, whether exhaustion could be "interrupted" by returning goods to a warehouse and the effect of contractual restrictions.
The ECJ decided that there had to be an actual sale in the EEA to constitute exhaustion. Exhaustion did not occur where goods had been imported into the EEA or even offered for sale there. However where there had been a sale, there was exhaustion notwithstanding any contractual restrictions to the contrary entered into between parties in the chain of supply. It was said that "exhaustion occurs solely by virtue of the putting on the market in the EEA by the proprietor" and that any contractual restrictions operated only as between the contracting parties.
There were several reasons for these conclusions. Firstly the trade mark owner had an interest in keeping control over the goods until the point of sale when he realised their economic value, so as to ensure quality, and it was logical that exhaustion should not occur before then. Also looking at the language in the Directive, the acts of infringement in Article 5 were listed (inter alia) separately as offering goods, stocking them, importing and putting on the market. There was therefore a logical reason for saying that importation or offering for sale should not also be construed as putting on the market.
Benefit for trade mark owners
This case offers some useful clarity and is of particular benefit to trade mark owners who will be able to import their branded goods into the EEA, offer such goods for sale and thereafter sell on unsold stock to buyers outside the EEA, knowing that re-importation of such goods can be prevented.