1. Trademark licensing and assignment Parallel imports Luigi Mansani University of Parma Lovells Milan

2. Licenses n Art. 21 TRIPs n Art. 8 EC Directive 89/104

3. Art. 21 TRIPs Members may determine conditions on licensing and assignment of trademarks, it being understood that the compulsory licensing of trademarks shall not be permitted and that the owner of a registered trademark shall have the right to assign the trademark with or without the transfer of the business to which the trademark belongs.

4. Art. 8 EC Directive 89/104 1. A trade mark may be licensed for some or all the goods or services for which it is registered and for the whole or part of the Member State concerned. A license may be exclusive or non- exclusive. 2.The proprietor of a trade mark may invoke the rights conferred by that trade mark against a licensee who contravenes any provision in his licensing contract with regard to:

5. n its duration n the form covered by the registration in which the trademark may be used n the scope of the goods or services for which the licence is granted n the territory in which the trademark may be affixed n the quality of the goods manufactured or the services provided by the licensee

6. Is it necessary a quality control by the licensor on the licensee’s products or services? n Art. 15 TML (I) n § 11.1.1 WZG (D) n § 35 TML (S); § 36 TML (DK, SF,N) n Sec. 28 TM Act (UK) n E, GR, F, B, NL, LUX n Sec. 5 Lanham Act (USA)

7. Ideal-Standard (ECJ June 22, 1994, C-9/93) 37. As it was held in HAG II: "For the trade mark to be able to fulfil [its] role, it must offer a guarantee that all goods bearing it have been produced under the control of a single undertaking which is accountable for their quality" (paragraph 13). In all the cases mentioned, control was in the hands of a single body: the group of companies in the case of products put into circulation by a subsidiary; the manufacturer in the case of products marketed by the distributor; the licensor in the case of products marketed by a licensee. In the case of a licence, the licensor can control the quality of the licensee' s products by including in the contract clauses requiring the licensee to comply with his instructions and giving him the possibility of verifying such compliance. The origin which the trade mark is intended to guarantee is the same: it is not defined by reference to the manufacturer but by reference to the point of control of manufacture.

8. 38. It must further be stressed that the decisive factor is the possibility of control over the quality of goods, not the actual exercise of that control. Accordingly, a national law allowing the licensor to oppose importation of the licensee' s products on grounds of poor quality would be precluded as contrary to Articles 30 and 36: if the licensor tolerates the manufacture of poor quality products, despite having contractual means of preventing it, he must bear the responsibility. Similarly if the manufacture of products is decentralized within a group of companies and the subsidiaries in each of the Member States manufacture products whose quality is geared to the particularities of each national market, a national law which enabled one subsidiary of the group to oppose the marketing in the territory of that State of products manufactured by an affiliated company on grounds of those quality differences would also be precluded. Articles 30 and 36 require the group to bear the consequences of its choice.

9. Assignment n No provisions in the EC Directive 89/104 n TRIPs: Freedom to transfer the trademark with or without the transfer of the related business n Art. 17 EC Regulation 40/94

10. Art. 17 (Transfer) 1. A CTM may be transferred, separately from any transfer of the undertaking, in respect of some or all the goods or services for which it is registered. (…) 4. Where it is clear from the transfer documents that because of the transfer the CTM is likely to mislead the public concerning the nature, quality or geographical origin of the goods or services in respect of which it is registered, the Office shall not register the transfer unless the successor agrees to limit the registration of the CTM to goods or services in respect of which it is not likely to mislead.

11. Ideal-Standard 40. (If) the trade mark has been assigned, for one or several Member States only, to an undertaking which has no economic link with the assignor, (…) 41. (t)hat situation must be clearly distinguished from the case where the imported products come from a licensee (…): a contract of assignment by itself, that is in the absence of any economic link, does not give the assignor any means of controlling the quality of products which are marketed by the assignee and to which the latter has affixed the trade mark.

12. Parallel imports n Exhaustion of IPR n First sale doctrine n Origin function of trademarks n Art. 7.1 EC Directive 89/104 n Art. 13.1 EC Regulation 40/94

13. Art. 7 EC Directive 89/104 (Art. 13 EC Regulation 40/94) 1.The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the EU under that trade mark by the proprietor or with his consent. 2.Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialization of the goods, especially where the condition of goods is changed or impaired after they have been put on the market.

14. Paranova (ECJ July 11, 1996, C-427/93) 40. Article 7 of the directive, like Article 36 of the Treaty, is intended to reconcile the fundamental interest in protecting trade mark rights with the fundamental interest in the free movement of goods within the common market, so that those two provisions, which pursue the same result, must be interpreted in the same way.

15. Paranova 42. The Court' s case-law shows that Article 36 allows derogations from the fundamental principle of the free movement of goods within the common market only in so far as such derogations are justified in order to safeguard the rights which constitute the specific subject-matter of the industrial and commercial property in question. 43. Trade mark rights, the Court has held, constitute an essential element in the system of undistorted competition which the Treaty is intended to establish. In such a system, undertakings must be able to attract and retain customers by the quality of their products or services, which is possible only thanks to the existence of distinctive signs allowing them to be identified. For the trade mark to be able to fulfil that function, it must constitute a guarantee that all products which bear it have been manufactured under the control of a single undertaking to which responsibility for their quality may be attributed.

16. 44. Thus, as the Court has recognised on many occasions, the specific subject-matter of a trade mark is in particular to guarantee to the owner that he has the exclusive right to use that trade mark for the purpose of putting a product on the market for the first time and therefore to protect him against competitors wishing to take advantage of the status and reputation of the trade mark by selling products bearing it illegally. 45. It follows that, as mentioned above, the owner of a trade mark protected by the legislation of a Member State cannot rely on that legislation in order to oppose the importation or marketing of a product which was put on the market in another Member State by him or with his consent.

17. Repackaging of original trademarked goods n Repackaging (Bristol Myers/Paranova) n Rebranding (Upjohn/Paranova) n Relabelling (Ballantine) n Use of the trade mark in advertising (Dior)

18. Interpretation of art. 7.2 EC Directive (Paranova) Article 7(2) of Directive 89/104 must be interpreted as meaning that the trade mark owner may legitimately oppose the further marketing of a pharmaceutical product where the importer has repackaged the product and reaffixed the trade mark unless: n reliance on trade mark rights by the owner would contribute to the artificial partitioning of the markets between Member States; n the repackaging cannot affect the original condition of the product inside the packaging; n the new packaging clearly states who repackaged the product and the name of the manufacturer; n the presentation of the repackaged product is not such as to be liable to damage the reputation of the trade mark; n the importer gives notice to the trade mark owner before the repackaged product is put on sale, and, on demand, supplies him with a specimen of the repackaged product.

19. Rebranding (Pharmacia & Upjohn/Paranova) 37. There is no objective difference between reaffixing a trade mark after repackaging and replacing the original trade mark by another which is capable of justifying the condition of artificial partitioning being applied differently in each of those cases.

20. Protection of the reputation of the trademark in relabelling n Ballantine: “A third party who relabels the product must ensure that the reputation of the trade mark - and hence of its owner - does not suffer from an inappropriate presentation of the relabelled product. The national court must take into account in particular the interest in protecting the luxury image and the considerable reputation they enjoy”.

21. Protection of the reputation of the trademark in advertising Dior: “The reseller must endeavour to prevent his advertising from affecting the value of the trade mark by detracting from the allure and prestigious image of the goods and from their aura of luxury, (as it happens where) the use of the trade mark in the reseller's advertising seriously damages the reputation of the trade mark”.

22. International vs. EU exhaustion n Directive - Proposal (1980): whereas 8 n Regulation - Proposal (1980): official notes on art. 11 n Opinion of the Economic and Social Committee (1981) n Opinion of the Parliament (1983) n Directive - Proposal (1984)

23. EU exhaustion: Silhouette 26. The Directive cannot be interpreted as leaving it open to the Member States to provide in their domestic law for exhaustion of the rights conferred by a trade mark in respect of products put on the market in non-member countries. 27. This, moreover, is the only interpretation which is fully capable of ensuring that the purpose of the Directive is achieved, namely to safeguard the functioning of the internal market. A situation in which some Member States could provide for international exhaustion while others provided for Community exhaustion only would inevitably give rise to barriers to the free movement of goods and the freedom to provide services.

24. EU exhaustion: Sebago 18. The national court is asking essentially whether there is consent within the meaning of Article 7 of the Directive where the trade-mark proprietor has consented to the marketing in the EEA of goods which are identical or similar to those in respect of which exhaustion is claimed or if, on the other hand, consent must relate to each individual item of the product in respect of which exhaustion is claimed. 19. The rights conferred by the trade mark are exhausted only in respect of the individual items of the product which have been put on the market with the proprietor's consent in the territory there defined. The proprietor may continue to prohibit the use of the mark in pursuance of the right conferred on him by the Directive in regard to individual items of that product which have been put on the market in that territory without his consent.

25. EU exhaustion: ECJ in Davidoff Question referred by the UK High Court of Justice to the ECJ: - determine the circumstances in which exhaustion occurs and more specifically, to clarify the concept of "consent". ECJ’s Decision on 10 Nov. 2001: The Court considered that consent constitutes the decisive factor in the extinction of the exclusive right of the proprietor to prevent imports.

26. ECJ in Davidoff n Consent must be expressed in such a way that an intention to renounce those rights is unequivocally demonstrated. This intention will normally be gathered from an express statement of consent. Nevertheless, it may in some cases be inferred from facts and circumstances prior to, simultaneous with or subsequent to the placing of the goods on the market outside the EEA which unequivocally demonstrate that the proprietor has renounced his rights. n Consent must be expressed positively; the factors taken into consideration in finding implied consent must unequivocally demonstrate that the trade mark proprietor has renounced any intention to enforce his exclusive rights. It follows that it is not for the trade mark proprietor to demonstrate absence of consent, but rather for the trader alleging consent to prove it.

27. Conclusion of ECJ in Davidoff Implied consent to the marketing within the EEA of goods put on the market outside that area cannot be inferred from the mere silence of the trade mark proprietor. Furthermore, implied consent cannot be inferred from the fact that contractual reservations were not imposed at the time of the transfer of ownership of the goods bearing the mark, or from the fact that the trade mark proprietor has not communicated his opposition to marketing within the EEA or from the fact that the goods carry no warning of a prohibition on their being placed on the market within the EEA.

28. Merck / Paranova re-labeling (C-433/99 - 2002) 17. The national court states that Austrian consumers are not accustomed to being offered pharmaceutical products which have clearly been put on the market in another State, where a different language is used. It states that it is perfectly conceivable that a significant number of consumers would regard such a product with the same suspicion as products with untidy or poor-quality packaging. Even attaching labels, in particular in the case before it, would scarcely mitigate that suspicion. If it were to emerge that a significant proportion of consumers would in fact be suspicious in that way, it would be entirely possible, in the view of the national court, to consider that prohibition of the repackaging would contribute to artificial partitioning of the markets.

29. Merck / Paranova Replacement packaging of pharmaceutical products is objectively necessary within the meaning of the Court's case-law if, without such repackaging, effective access to the market concerned, or to a substantial part of that market, must be considered to be hindered as the result of strong resistance from a significant proportion of consumers to relabelled pharmaceutical products.

30. Boehringer Repackaging (C-143/00 – 2002) Replacement packaging of pharmaceutical products is objectively necessary within the meaning of the Court's case-law if, without such repackaging, effective access to the market concerned, or to a substantial part of that market, must be considered to be hindered as the result of strong resistance from a significant proportion of consumers to relabelled pharmaceutical products.

31. Boehringer advance notice 61. According to the Court's case-law, a parallel importer which repackages a trade-marked pharmaceutical product must give prior notice to the trade mark proprietor that the repackaged product is being put on sale (see Hoffmann-La Roche, paragraph 12). At the request of the trade mark proprietor, the importer must also supply it with a sample of the repackaged product before it goes on sale. That requirement enables the proprietor to check that the repackaging is not carried out in such a way as directly or indirectly to affect the original condition of the product and that the presentation after repackaging is not such as to damage the reputation of the trade mark. It also affords the trade mark proprietor a better possibility of protecting himself against counterfeiting (see Bristol-Myers Squibb and Others, paragraph 78).

32. Boehringer advance notice 62. The purpose of the requirements set out in the preceding paragraph is to safeguard the legitimate interests of trade mark proprietors. As the claimants point out, satisfying those requirements scarcely poses any real practical problems for parallel importers provided that the proprietors react within a reasonable time to the notice. Adequate functioning of the notice system presupposes that the interested parties make sincere efforts to respect each other's legitimate interests.

33. Boehringer advance notice A parallel importer must, in any event, in order to be entitled to repackage trade-marked pharmaceutical products, fulfil the requirement of prior notice. If the parallel importer does not satisfy that requirement, the trade mark proprietor may oppose the marketing of the repackaged pharmaceutical product. It is incumbent on the parallel importer himself to give notice to the trade mark proprietor of the intended repackaging. In the event of dispute, it is for the national court to assess, in the light of all the relevant circumstances, whether the proprietor had a reasonable time to react to the intended repackaging.

34. Van Doren (C-244/00 – 2003) burden of proof n Van Doren has exclusive distribution rights in respect of Stussy Inc.'s products in Germany. Lifestyle markets in Germany Stussy articles which it has not acquired from Van Doren. n Van Doren brought proceedings against Lifestyle before the German courts. It maintained that the articles distributed by Lifestyle were products which had originally been put on the market in the United States, and that their distribution in the Federal Republic of Germany and other Member States had not been authorised by the trade mark proprietor..

35. Van Doren burden of proof n Lifestyle contended that those claims should be dismissed, arguing that the rights conferred by the trade mark in respect of the goods in question were exhausted. The clothing purchased from Lifestyle as a test purchase had been acquired by it in the EEA from an intermediary who, Lifestyle assumed, had purchased it from an authorised distributor. n Lifestyle submitted that it was not required to name the suppliers until such time as Van Doren proved the imperviousness of its distribution system.

36. Van Doren burden of proof n Under German law, the exhaustion of the trade mark right constitutes a plea in defence for a third party against whom the trade mark proprietor brings an action, so that the conditions for such exhaustion must, as a rule, be proved by the third party who relies on it. Such a rule of evidence is consistent with Community law and, in particular, with Articles 5 and 7 of the Directive.

37. Van Doren burden of proof n However, the requirements deriving from the protection of the free movement of goods enshrined, inter alia, in Articles 28 EC and 30 EC may mean that that rule of evidence needs to be qualified. This must be so where that rule would allow the proprietor of the trade mark to partition national markets and thus assist the maintenance of price differences which may exist between Member States. As the referring court observes, there is a real risk of partitioning of markets, for example, in situations where, as in the main proceedings, the trade mark proprietor markets his products in the EEA using an exclusive distribution system.

38. Van Doren burden of proof n If the third party were required to adduce evidence of the place where the goods were first put on the market by the trade mark proprietor or with his consent, the trade mark proprietor could obstruct the marketing of the goods purchased and prevent the third party from obtaining supplies in future from a member of the exclusive distribution network of the proprietor in the EEA, in the event that the third party was able to establish that he had obtained his supplies from that member.

39. Van Doren burden of proof Accordingly, where a third party against whom proceedings have been brought succeeds in establishing that there is a real risk of partitioning of national markets if he himself bears the burden of proving that the goods were placed on the market in the EEA by the proprietor of the trade mark or with his consent, it is for the proprietor of the trade mark to establish that the products were initially placed on the market outside the EEA by him or with his consent. If such evidence is adduced, it is for the third party to prove the consent of the trade mark proprietor to subsequent marketing of the products in the EEA

40. Van Doren: conclusion A rule of evidence according to which exhaustion of the trade mark right constitutes a plea in defence for a third party against whom the trade mark proprietor brings an action, so that the conditions for such exhaustion must, as a rule, be proved by the third party who relies on it, is consistent with Community law and, in particular, with Articles 5 and 7 of the Directive. However, the requirements deriving from the protection of the free movement of goods, enshrined, inter alia, in Articles 28 EC and 30 EC may mean that this rule of evidence needs to be qualified.

41. Van Doren: conclusion Accordingly, where a third party succeeds in establishing that there is a real risk of partitioning of national markets if he himself bears that burden of proof, particularly where the trade mark proprietor markets his products in the EEA using an exclusive distribution system, it is for the proprietor of the trade mark to establish that the products were initially placed on the market outside the EEA by him or with his consent. If such evidence is adduced, it is for the third party to prove the consent of the trade mark proprietor to subsequent marketing of the products in the EEA

42. Peak Holding (C-16/03 – 2004) n Where the proprietor imports his goods with a view to selling them in the EEA or offers them for sale in the EEA, he does not put them on the market within the meaning of Article 7(1) of the Directive. n Such acts do not transfer to third parties the right to dispose of the goods bearing the trade mark. They do not allow the proprietor to realise the economic value of the trade mark. Even after such acts, the proprietor retains his interest in maintaining complete control over the goods bearing his trade mark, in order in particular to ensure their quality.

43. Peak Holding (C-16/03 – 2004) n Moreover, it should be noted that Article 5(3)(b) and (c) of the Directive, relating to the content of the proprietor’s exclusive rights, distinguishes inter alia between offering the goods, putting them on the market, stocking them for those purposes and importing them. The wording of that provision therefore also confirms that importing the goods or offering them for sale in the EEA cannot be equated to putting them on the market there

44. Peak Holding Putting on the market in the EEA by the proprietor presupposes a sale of the goods by him in the EEA. In the event of such a sale, Article 7(1) of the Directive does not make exhaustion of the rights conferred by the trade mark subject in addition to the proprietor’s consent to further marketing of the goods in the EEA.

45. Peak Holding Exhaustion occurs solely by virtue of the putting on the market in the EEA by the proprietor. Any stipulation, in the act of sale effecting the first putting on the market in the EEA, of territorial restrictions on the right to resell the goods concerns only the relations between the parties to that act. It cannot preclude the exhaustion provided for by the Directive

46. Peak Holding Article 7(1) must be interpreted as meaning that goods bearing a trade mark cannot be regarded as having been put on the market in the European Economic Area where the proprietor of the trade mark has imported them into the European Economic Area with a view to selling them there or where he has offered them for sale to consumers in the European Economic Area, in his own shops or those of an associated company, without actually selling them.

47. Peak Holding The stipulation, in a contract of sale concluded between the proprietor of the trade mark and an operator established in the European Economic Area, of a prohibition on reselling in the European Economic Area does not mean that there is no putting on the market in the European Economic Area within the meaning of Article 7(1), and thus does not preclude the exhaustion of the proprietor’s exclusive rights in the event of resale in the European Economic Area in breach of the prohibition.

48. For International exhaustion n Opinion of Mr. Jacobs (Silhouette) n EFTA Court, Dec. 3, 1997 (MAG) n UK High Court, May 18, 1999 (Davidoff) n NL, DK, CH (Chanel), JAP (Parker), CAN, Indonesia, SAF, AUS, NZ, Mercosur n TRIPs - GATT? n Economic reasons (NERA report)

49. Parallel imports in U.S.A. n Third Restatement of the Law of Unfair Competition (1995); Trademark Counterfeiting Act (1984) n Sec. 42 Lanham Act; Sec. 526 Tariff Act n The protection against deception n The need of sufficient information in U.S.A. (and in Europe: Revlon)