Big news for brand owners: TM rights may, or may not, be impliedly exhausted

It nearly sneaked past everyone without being spotted, but the European Court of Justice ruling in Case C-324/08 Makro Zelfbedieningsgroothandel CV, Metro Cash & Carry BV and Remo Zaandam BV v Diesel SpA, a reference for a preliminary ruling from the Hoge Raad der Nederlanden (Netherlands), was handed down earlier today. The IPKat caught a glimpse of it and is pleased to serve it up to his readers.

In short Diesel owns the trade mark mark Diesel in the Benelux countries. A Spanish business called 8 Distributions Italian Fashion SA ('Difsa') was the distributor of Diesel branded goods in Spain, Portugal and Andorra. In September 1994 Difsa entered into an exclusive distribution agreement with another Spanish company Flexi Casual SA (‘Flexi’), under which Flexi received exclusive selling rights in Spain, Portugal and Andorra for Diesel shoes. Under Article 1.4 of this agreement Flexi was permitted to conduct ‘market tests’ on Diesel shoes, offering them for sale to its customers with a view ‘to reliably determining market requirements’. Two months later Difsa granted to Flexi a licence to make and sell shoes of its own design in order to test the market, so that those goods could be offered to Diesel for distribution or for the ‘assignment of the manufacturing licence’.

The plot thickened in October 1997 when a manager of Flexi licensed another company, Cosmos World SL (‘Cosmos’), to make and sell shoes, bags and belts bearing the Diesel trade mark. Under this agreement Cosmos could thus make and sell Diesel brand shoes without the express approval of any kind from Difsa or Diesel. At this point one suspects that the story may not have a happy ending.

In the summer of 1999 pile-them-high-and-sell-them-cheap retailers Makro offered for sale a quantity of shoes bearing both the word and figurative marks Diesel. These shoes came via two Spanish undertakings which had bought them from Cosmos. Diesel, claiming that it had never consented to the marketing of the shoes in question by Cosmos, sued Makro and one of its partners for trade mark and copyright infringement, seeking both injunctive and financial relief. The trial court (the Rechtbank te Amsterdam) granted most of Diesel's requests in a judgment that was affirmed on appeal by the Gerechtshof te Amsterdam. The defendants then appealed to the Hoge Raad, claiming that the rights conferred by the Diesel trade mark were exhausted because Cosmos had marketed the shoes in question with Diesel’s consent, within the meaning of Article 2.23(3) of the Benelux Convention on intellectual property and Article 7(1) of Directive 89/104. Was there implied consent on Diesel's part to the manufacture and sale of these shoes? It wasn't clear to the Hoge Raad so that court asked the Court of Justice of the European Communities to rule on the following questions:

‘(1) ... where goods bearing a trade mark proprietor’s mark have first been placed on the market within the EEA, but not by him or with his express consent, must the same criteria be applied in determining whether this has occurred with the (implied) consent of the trade mark proprietor, within the meaning of Article 7(1) of [Directive 89/104], as are applied in the case where such goods have previously been placed on the market outside the EEA by the trade mark proprietor or with his consent?

2) If the answer to Question 1 is in the negative, what criteria – whether or not derived (in part) from the judgment of the Court of Justice in Case C-9/93 IHT Internationale Heiztechnik and Danzinger [1994] ECR I‑2789 – must be applied in the first case referred to in that question in order to determine whether the trade mark proprietor has given (implied) consent within the meaning of the First Directive relating to trade marks?’

The Court today ruled as follows:

"Article 7(1) ... must be interpreted as meaning that the consent of the proprietor of a trade mark to the marketing of goods bearing that mark carried out directly in the European Economic Area by a third party who has no economic link to that proprietor may be implied, in so far as such consent is to be inferred from facts and circumstances prior to, simultaneous with or subsequent to the placing of the goods on the market in that area which, in the view of the national court, unequivocally demonstrate that the proprietor has renounced his exclusive rights".

The IPKat admires the clarity and succinct nature of the way in which the Court, just five years after the proceedings were instituted, simply summarises the existing law without either adding to or subtracting from it. Oh, and this is a wonderful example of how-not-to-do-it brand management too ...

Merpel says, did you think the Court would do anything else? Once it dispenses with the Advocate General's Opinion, you know the judges are not about to hatch some brand new doctrine or issue any earthshaking pronouncements.

How Diesels work here