Apple and Eve, but no exhaustion says ECJ

A veritable rose among the thorns, last week's ruling of the Court of Justice in Case C‑140/10, Greenstar-Kanzi Europe NV v Jean Hustin, Jo Goossens is that rarest of treasures, a ruling on the law governing the Community plant variety right.  This decision arose from a reference for a preliminary ruling under from the Hof van Cassatie (Belgium) which was made as recently as February 2010 -- a sure sign either that the case was a really easy one or that the Court of Justice has suddenly accelerated the pace at which it turns national questions into Community principles.

But what is this all about? Let the Kat explain. Nicolaï was the ‘breeder’, within the meaning of Article 11(1) of Regulation 2100/94 on Community plant variety rights, of a new variety of apple tree, the Nicoter. Nicoter was the only variety to produce apples which, subject to quality requirements, were marketed under the KANZI trade mark. For the sake of quality control both for the trade mark and for the apple, a system equivalent to a selective distribution network was introduced, involving specifications containing restrictions on the production of the trees and on the production, preservation, selection and marketing of the fruits.

In April 2001 Nicolaï applied to register its Nicoter apple trees as a protected variety. The application was published in the Official Gazette of the Community Plant Variety Office in June 2001. In 2002 Nicolai transferred the plant variety right to Better3fruit -- the proprietor of the KANZI trade mark for apples. The next year, Better3fruit and Nicolaï concluded a licensing contract under which Nicolaï acquired an exclusive right to grow and market Nicoter apple trees which obliged Nicolaï not to ‘… dispose of or sell any product covered by the licence unless the other party signs in advance the grower’s licence referred to in Annex 6 (where the other party is a grower) or the marketing licence referred to in Annex 7 (where the other party is a trader)’.

On Christmas Eve 2004, when most folk are turning their thoughts to another type of tree entirely, Nicolaï sold 7,000 Nicoter apple trees to Hustin -- who did not undertake to comply with any particular conditions with regard to the growing of the apples or the sale of the harvest. These trees bore fruit, in that, three Christmases later, it was established that one Mr Goossens (nothing to do with the Christmas goose) was selling KANZI apples which Hustin had supplied to him.

In January 2005, following the termination of the Nicoter/Better3fruit licence, the plaintiff in these proceedings, Greenstar-Kanzi Europe NV (GKE) acquired the exclusive Community plant variety exploitation right for Nicoter apple trees. GKE sued Messrs Hustin and Goossens. In January 2008 the president of the Antwerp Commercial Court, hearing an application for interim measures, decided that both Hustin and Goossens had infringed GKE’s Community plant variety right. The Antwerp Court of Appeal however disagreed and reversed that decision three months later. That court conceded that Nicolaï had not complied with its commitments under the licensing contract, but still decided that there had been no infringement since the limitations referred to in the licensing contract between Better3fruit and Nicolaï were not enforceable against Hustin and Goossens who were not party to it.

GKE appealed to the Court of Cassation which, uncertain as to the scope to be given to the rule of exhaustion laid down in Article 16 of Regulation 2100/94, decided to stay the proceedings and to refer the following two questions to the Court of Justice for a preliminary ruling:

‘1. Should Article 94 of … Regulation No 2100/94 …, read in conjunction with Articles 11(1), 13(1) to (3), 16, 27 and 104 of [that r]egulation … be interpreted in such a way that the holder or the person enjoying the right of exploitation may bring an action for infringement against anyone who effects acts in respect of material which was sold or disposed of to him by a licensee of the right of exploitation if the limitations in the licensing contract between the licensee and the holder of the Community plant variety right that were stipulated to apply in the event of the sale of that material were not respected? 

2. If so, is it of significance for the assessment of the infringement that the person effecting the aforementioned act is aware or is deemed to be aware of the limitations thus imposed in the said licensing contract?’

Last week the Court of Justice ruled as follows:

"In circumstances such as those at issue in the main proceedings, Article 94 of Council Regulation 2100/94 ... on Community plant variety rights, as amended ..., read in conjunction with Articles 11(1), 13(1) to (3), 16, 27 and 104 ..., must be interpreted as meaning that the holder or the person enjoying the right of exploitation may bring an action for infringement against a third party which has obtained material through another person enjoying the right of exploitation who has contravened the conditions or limitations set out in the licensing contract that that other person concluded at an earlier stage with the holder to the extent that the conditions or limitations in question relate directly to the essential features of the Community plant variety right concerned.[This seems so obvious, says the IPKat, since classic exhaustion theory dictates that goods placed on the market in breach of a stipulation imposed by the IP rights owner can't be said to be placed in the market with his consent. In other words, this is a bit of a Case C-59/08 COPAD v Dior, isn't it?]  It is for the referring court to make that assessment [that's a shame, says Merpel, who was hoping the court would say that she could make it]. 

2. It is of no significance for the assessment of the infringement that the third party which effected the acts on the material sold or disposed of was aware or was deemed to be aware of the conditions or limitations imposed in the licensing contract".

Eve and apple here and here