The ECJ has delivered a landmark ruling which allows trade mark owners to block the sale of goods bearing their trademarks within the EU, where the goods have been obtained on the so-called ‘grey market’ from suppliers outside the EU.

United Kingdom

European Court favours EU trademark holders over parallel importers

The ECJ has delivered a landmark ruling which effectively allows trade mark owners to block the sale of goods bearing their trademarks within the EU, where the goods have been obtained on the so-called 'grey market' from suppliers outside the EU. The ruling means that the holder of a trade mark in the UK, or other EU country, can prevent the sale of parallel-imported goods from outside the EU even though such goods have been legitimately sold abroad in the first place. This means, in practice, that a trade mark holder can prevent retailers from obtaining goods bearing its trade mark cheaply from markets such as Asia or the US and selling them at a discount within Europe without its authorisation.

The ruling centred on the interpretation of the Trade Marks Directive, which says that a trade mark does not entitle the proprietor to prohibit its use in relation to goods which have been put on the EU market under the trade mark by the proprietor or with its consent. In effect, the trade mark holder's consent to the marketing of its products within the EU 'exhausts' the trade mark holder's rights in relation to such products.

The question referred to the ECJ was whether:


  • EC law requires Member States to provide for exhaustion only when the goods have been marketed in the EU; or
  • Member States may (or even must) provide for a trade mark holder's rights to be 'exhausted' when its goods have been marketed outside the EU by the trade mark holder or with its consent (the so-called principle of international exhaustion of rights).

The issues arose in a reference for a preliminary ruling from the Austrian courts. The applicant was an Austrian company which produces fashion spectacles in the higher price ranges. It distributes them world-wide under the word and picture trade mark "Silhouette", which is registered in Austria and in most countries of the world.

In 1995, Silhouette sold 21,000 out-of-fashion spectacle frames to a Bulgarian company, on the condition that they be sold in Bulgaria or former USSR countries. The defendant subsequently acquired the goods and offered them for sale in Austria from December 1995. Silhouette sought an order prohibiting the defendant from marketing under its trade mark spectacles or spectacle frames which were not placed on the market in the EU by it or with its consent.

The ECJ found that the Directive does not allow Member States to provide in their domestic law for international exhaustion of trade mark rights. Exhaustion under the Directive occurs only where the products have been put on the market in the Community or in the EU. To allow Member States to provide for international exhaustion would mean that Member States would be able to adopt rules on exhaustion going further than those explicitly laid down in the Directive. Such an interpretation is contrary to the wording of the Directive and to the scheme and purpose of the rules of the Directive concerning the rights which a trade mark confers on its proprietor.

An additional question referred to the ECJ was whether the Directive can constitute the sole basis for the grant of an injunction in support of a trade mark owner seeking to prohibit sale of its goods which are circulating in the EC without its consent. The Court ruled that, according to settled case law, a Directive cannot of itself impose obligations on an individual and cannot be relied upon as such against an individual. Therefore the Trade Mark Directive could not be interpreted as meaning that the proprietor of a trade mark is entitled, on the basis of that provision alone, to obtain an order restraining a third party from using its trade mark.

Thus, whilst the Court upheld the principle that Silhouette should be able to prevent the sale of goods bearing its trade mark by the defendant in the EU, Silhouette could not obtain an injunction on the basis of the directive alone. Trademark holders will therefore have to look to their domestic legal provisions for appropriate remedies, such as the ability to obtain injunctions.