Perfume Testers and Exhaustion
A discussion of the judgment of the Court in preliminary
relief proceedings in The Hague, dated 29 January 2009
(Davidoff/Doddema)
The well-known producer of cosmetic products Zino Davidoff has
attempted to take action in preliminary relief proceedings against
a wholesaler (Doddema) who had sold so-called perfume testers to a
retailer, who in turn offered them on the Internet. Davidoff sells
its products in a system of selective distribution. The official
distributors regularly receive testers with perfume to be placed in
their shops. Of course, the idea is that customers can try the
product and then decide to buy a regular bottle. Davidoff invoked
its DAVIDOFF trademarks against Doddema and asked for a prohibition
on sale. Doddema's defense was that the trademark rights had
been exhausted because Davidoff itself had put the products on the
market within the EEA. Thus the interesting question comes up as to
when exactly exhaustion occurs; after all, the testers have not
been sold by Davidoff.
Origin of Goods?
The trademark right is exhausted if the goods have
been put on the market in the European Economic Area either by the
trademark proprietor or with his consent. In that case, he cannot
oppose further commercialization. This rule is set forth in Article
7 of the Trademarks Directive and implemented into Article 2.23 (3)
of the Benelux Treaty on Intellectual Property ("BTIP").
In a judgment in which the same Davidoff was a party - ECJ, 20
November 2001, C-414/99 - it was ruled that the alleged infringer
in principle has to demonstrate that such consent was given.
A position that is often taken by the trademark proprietor is
that he has never brought the relevant products into the EEA, so
that there can be no question of consent for that reason alone. In
this case, Davidoff had explained in the summons that the testers
are provided to distributors under a specific contract called the
Authorised Retailer Contract, which also included a retention of
title. It was not until the hearing that the argument was put
forward that the specific testers at issue here had been provided
to distributors outside the EEA. The Court in preliminary relief
punished Davidoff for this. Fundamental arguments must already be
given in the summons, not during the pleadings. Furthermore, it
appeared from the contract that it was intended for distributors
within the EEA, and from the print on the testers (in three
Community languages) that these were intended for the EEA. Thus the
Court assumed that Davidoff had acknowledged that it had provided
the testers to its European distributors. It is therefore no longer
relevant that the burden of proof as to the facts is actually on
the defendant.
Putting on the Market?
The subsequent key question is whether what
Davidoff did can be qualified as "putting on the market".
Davidoff's counsel argued that in the BTIP, the words
"putting on the market" mean more than bringing into
circulation, namely bringing into circulation for the purpose of
commercialization. Davidoff did not do the latter, because it did
not want to sell the testers. The Court did not follow this
reasoning. In the various language versions of the Trademarks
Directive (that was implemented into the BTIP), both variants are
used (for example "mis dans le commerce" and "put on
the market"), so that apparently no difference in meaning was
intended. The usual term is "putting into circulation"
(in Dutch: "in het verkeer brengen")
But does the provision of testers qualify as putting into
circulation? The most relevant judgment seems to be that in
Peak/Axolin, which dealt with the question of whether the
trademark right of goods that were offered in shops, but were
eventually taken back, had been exhausted (ECJ, 30 November 2004,
C-16/03). The Court rightly latched on to the key considerations of
this judgment. What the trademark proprietor is entitled to, in the
words of the ECJ, is the right to control the first putting on the
market of the goods in the EEA. Through sale he can realize the
economic value of his trademark; after that, the trademark right is
exhausted. This is not the case if the trademark is merely offered,
since in that case the trademark holder has not realized the
economic value, a third party cannot yet dispose of the goods, and
the trademark proprietor maintains full control over them.
In the Davidoff case, Davidoff has de facto assigned
the power to dispose of the goods, because it has authorized its
distributors to use the perfume for the benefit of random third
parties. The economic value of the trademark is also realized:
after all, the testers are an instrument in the marketing of the
goods. The possibility to control further sale has been lost by the
provision of the testers. The retention of title does not alter
this, and may at most lead to a claim for breach of contract.
This seems to be a correct analysis. The importance of the
ruling is that clarity is given with regard to a specific situation
(the resale of samples or testers) about the precise moment of
exhaustion. Of course, it remains to be seen whether the higher
courts will agree with this analysis.