No exhaustion for demonstration products
Court of Justice of the EU 3 June 2010, case C 127/09 (Coty
Prestige / Simex Trading)
In the
newsletter of February 2009 we have
discussed a judgment of the Court of The Hague in preliminary
relief proceedings about the question of whether the trademark
proprietor could stop the trading of perfume testers. This was
denied by the Court in preliminary relief proceedings because it
was of the view that the rights of the trademark proprietor had
been exhausted. A similar case was presented to the Court of
Justice of the EU and the Court has opted for a different
approach resulting in an opposite outcome.
Coty Prestige is wholesale in perfumery goods of its own trademarks
Lancaster and Joop! and third-party trademarks such as Davidoff,
Jil Sander and Calvin Klein, by means of a selective distribution
system. In the agreements with its distributors it has been
stipulated, inter alia, that Coty Prestige will make
available to its distributors advertising material free of charge,
which material remains, in so far as it is not intended to be
passed on to consumers, the property of Coty Prestige, may be used
only for the specified advertising purposes and may not be
commercially used. The latter specifically means that samples,
testers and miniatures may not be sold.
Simex Trading, which is not part of Coty Prestige's network
of authorized specialist dealers, markets perfumery goods. As
appears from an investigation, Simex Trading bought testers
containing perfume of the Davidoff Cool Water brand from a
distributor, which it resold to a store chain in Germany, which
store sold the testers concerned. This concerned original bottles,
containing original perfume and labeled "Demonstration".
The box (different from the original, commercial product) is of
white card on which statements appear in black which, on the
original box, generally appear in color. Furthermore, the word
'Demonstration' appears on the front of the tester box and
the statement 'Not for Sale' appears on one side.
While relying on its trademark rights, Coty Prestige requested
the German Court to prohibit Simex Trading from further selling the
testers. Simex Trading, however, was of the view that it was
entitled thereto because the trademark rights with regard to the
testers concerned had been exhausted because they had been put on
the market within the European Economic Area (EEA) with the consent
of the trademark proprietor. According to Coty Prestige this could
already not have been the case because the testers were supplied
exclusively to its authorized specialist dealers, whereby Coty
Prestige retained the ownership of the testers. Moreover, Coty
Prestige brought forward that the testers were advertising material
and, as such, not meant to be passed on to customers, which
explains why the testers were clearly marked as not for sale.
After the Court in first instance ruled that the testers
concerned were brought into the EEA with the consent of the
trademark proprietor, notwithstanding the retained ownership of the
bottles, the Court in the appeal presented preliminary questions to
the Court of Justice of the EU. More specifically, the
Oberlandesgericht Neurenberg wished to know whether there
was bringing into the market of the testers of which the ownership
was not transferred, the sale of which was prohibited, but of which
the intermediaries were able to allow potential customers to use
the contents of the goods for test purposes.
The Court of Justice already ruled in various judgments on
exhaustion and the question of which party has the burden of proof.
The Court of Justice, however, has never before had to adjudicate
marked goods for the benefit of demonstration and advertising
purposes, for which there is a retention of title.
The Court pointed out that exhaustion of the exclusive right
results either from the proprietor's consent, whether express
or implied, to a putting on the market in the EEA by the proprietor
himself or by an operator with economic links to the proprietor,
such as, in particular, a licensee. According to fixed case law of
the Court of Justice, this consent may not be assumed too lightly.
Unlike in the Peak/Axolin judgment, invoked by Simex
Trading, which discussed whether the trademark right of goods that
were actually offered for sale in shops, but were withdrawn in the
end, was exhausted (ECJ 30 November 2004, C-16/03), in this case it
is not the trademark proprietor or a party that is economically
linked with the trademark proprietor that has put the testers on
the market in the EEA, but the not economically linked Simex
Trading. That is the reason why the Court of Justice has deemed
that which it decided in the Peak/Axolin case about the
concept of "putting in the market" is not relevant. In
this case it must be determined whether the trademark proprietor
has given consent, whether express or implied, to a third
party (namely Simex Trading) to put the bottles in the market
in the EEA.
It is an established fact that Simex Trading has not obtained
explicit consent and the Court of Justice has ruled before that
implicit consent may not be easily assumed, for instance because it
is not mentioned on the goods that it is prohibited to put them in
the market in the EEA or because the trademark proprietor has
transferred the ownership of the goods concerned without imposing
contractual restrictions, while the trader who imports the marked
goods into the EEA can also not rely on the absence of knowledge
that the trademark proprietor objected against the putting in the
market of the marked products (ECJ 20 November 2001, C 414/99 C
416/99, Zino Davidoff and Levi Strauss).
Although it is left to the court deciding questions of fact to
adjudicate whether there are concrete circumstances that justify
that there is implicit consent of the trademark proprietor, in this
case there are perfume bottles on the packaging of which besides
the mentioning of "Demonstration" also the statement
"not for sale" appears. According to the Court of
Justice, that statement clearly reflects the intention of the
trademark proprietor that the goods bearing it should not be sold,
whether inside or outside the EEA, and therefore constitutes, in
itself and in the absence of concrete evidence to the contrary, a
decisive factor precluding a finding that the proprietor consented
to a putting on the market in the EEA of the bottles.
The Court of Justice of the EU therefore has attached great
evidentiary value to the print that the goods were not for sale
when answering the question of whether there was exhaustion. This
seems to apply not only to perfume testers, but also to other
products that have been made available by trademark proprietors to
distributors for use inside or outside of the EEA for demonstration
purposes, such as, for instance, software and video games, provided
that an explicit contractual retention of title is made and it is
mentioned explicitly on the product - and, to the extent relevant,
its box - that the products concerned are not for sale.