Parallel Imports and Exhaustion of Rights: EU or International?
Trade Marks, Copyright and related
The European Court of Justice is now having to
decide whether to uphold international or EU exhaustion of rights.
In recent decisions, in trade mark cases at least, it had seemed to
be heading towards international (or global) exhaustion, which
could have substantial implications for rights owners' global
marketing strategies. Briefly:
- International exhaustion means that once a product has been put
on the market anywhere in the world by a trade mark owner, or with
his consent, the trade mark owner cannot use his trade mark to
prevent its import into a state allowing international exhaustion.
The question in the EU is whether that product may then circulate
freely throughout the EU, even into states which do not allow
- EU exhaustion is limited to the position where the product has
been put on the market within the EU by the trade mark owner or
with his consent. The owner cannot then use his trade mark rights
to stop the circulation of that product throughout the EU.
He can, however, use his rights to stop the import of products into
the EU, even where they are legitimately on the market outside the
- Previous case-law from the ECJ shows that the different levels
of protection offered by national legislation in the different
member states could justify a restraint on parallel imports (see
Keurkoop v Nancy Kean Gifts (Case 144/81), and EMI v Patricia (Case
341/87, para 12). Otherwise, member states applying international
exhaustion would represent wide open back doors through which
parallel imported goods could find their way into the whole EU
- Article 7.1 of the First Trade Mark Directive provides for the
exhaustion of trade mark rights within the EU, but it is not clear
whether that is the whole extent of exhaustion, or merely the
minimum permitted. The question has arisen in cases in Austria,
Sweden, Denmark and France, the Austrian case being the most
(see also the report on harmonisation of Trade Mark Law:
In this ECJ case (Case C355/96, Silhouette
International Schmied v Hartlauer Handelsgesellschaft GmbH)
referred from Austria, the question is whether products may be
imported into an EU member state without the consent of the trade
mark owner, not whether they may then circulate throughout the
The plaintiff, Silhouette, produces fashion
spectacles under the trademark "Silhouette". The defendant,
Hartlauer, sells cut price spectacles in Austria and is not an
approved Silhouette distributor.
In October 1995, Silhouette sold 21,000 "out of
fashion" frames to a purchaser who was instructed to sell them only
in Bulgaria or the states of the former Soviet Union and not to
export them to other countries. Hartlauer subsequently acquired the
frames - it is not clear from whom - and offered them for sale in
Austria. Silhouette sought to stop their sale, and the Austrian
Supreme Court referred the question to the ECJ for a preliminary
ruling as to whether international or EU exhaustion applies.
(Austria has traditionally applied international exhaustion.)
The Advocate General's opinion, issued on 29th
January, recommends that the member states should be obliged to
apply EU/EAA exhaustion, not international exhaustion.
Before its accessions to the EEA and the EC, Sweden
applied international exhaustion of trade mark rights. This
principle was firmly established in case law.
The situation in Sweden contrasts with the position
in Denmark. The Danish High Court has upheld an interim injunction
against a parallel importer of products from the USA carrying
trademarks infringing Danish trademarks. The judgement is not
final, but it is interesting to note that the High Court expressly
refers to the harmonisation aspects of the EU Trademark Directive
as a reason for upholding the injunction given by the Court of
Following this judgement, the principle of
international exhaustion of rights, which has been a cornerstone of
Danish trade mark law for many years, has been replaced by EU
The Danish Court did not even apply EU exhaustion
in a copyright case. It granted an interim injunction to stop the
rental in Denmark of laser video discs imported from the UK because
there was no rental right consent from the rights holder. The
question of whether a rental consent in one EU member state may
have effect in another member state has been referred to the
European Court of Justice for preliminary ruling under Article 177
of the EEC Treaty.
Will member states applying international
exhaustion represent wide open back doors through which parallel
imported goods could find their way into the whole EU market? Would
the ECJ allow import into one member state, but not circulation
from that state to others which did not apply international
exhaustion? What would happen if the importer imported into several
(or all) member states allowing international exhaustion? Will the
ECJ find in favour of Silhouette in the Austrian case, and uphold
purely EU exhaustion?
The answers to these questions may have a significant impact on
global marketing strategy for businesses with global trade marks.
Might the EU single market become, in trade mark terms, part of a
global single market?
[Note the position in the BBS Wheels case in Japan,
a patent case, where the Japanese Supreme Court said that
international exhaustion would be presumed to apply in Japan, but
this presumption could be overcome by restrictions in the contract