A Recent Case Strengthens Rights of Trademark Holders in the European Union

Author:Ms Paola Sangiovanni
Profession:Studio Legale Bernascone & Soci in association with Squire Sanders & Dempsey LLP

The Recent Decision

On November 20, 2001 the European Court of Justice ruled upon an important case concerning the interpretation of trademark law. The Court's decision shed light on controversial issues, which had sparked heated political debate at Community and national levels.

In the Levi Strauss vs. Tesco and Costco cases, the defendants, two British chains of department stores, bought Levi's 501 jeans from authorized dealers in the United States, Mexico and Canada and sold them at substantially reduced prices in the UK. While Tesco and Costco maintained that they were not bound by any specific restriction on the importation of goods in Europe, Levi Strauss had not in fact expressed its consent to the importation of such goods in the European Union ("EU"). Could such consent be implied?

The Legal Framework.

A brief overview of the legal framework surrounding this issue will provide a better understanding of the implications of this case. The European Directive on Trademarks of 19891 establishes an exclusive right of the proprietor of a trademark to use his mark and consequently a right to prohibit third parties from using the trademark for any purpose, including the importation of original goods bearing his trademark. However, such an exclusive right of the proprietor is limited by the doctrine of "trademark exhaustion", which is embodied in Article 7 of the Directive and according to which the proprietor of a trademark is not entitled to prohibit its use in relation to goods put on the market in the EU by the proprietor himself or with his consent. In other words, once the trademarked goods have been imported into the EU by the proprietor or with his consent, then the trademark holder's rights to control the use of its trademark are considered exhausted and the goods can freely circulate within the EU.

This particular regime is also referred to as the "European exhaustion" of trademark rights, as not any sale of trademarked goods by the trademark holder or with his consent exhausts his rights (such as in "international exhaustion"), but only sales within the EU trigger the exhaustion of trademark rights. In previous cases (e.g. Case C-355/96, the Silhouette case) the European Court of Justice had clarified that European exhaustion had to be adopted by every Member State, even by those whose legal systems had traditionally provided international exhaustion and where there was a strong presence of parallel traders taking advantage of...

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