103 crossing borders - the in-house counsel bar … · acc europe 2008 corporate counsel university...

ACC Europe 2008 Corporate Counsel University March 2-4, Amsterdam Radisson Hotel

103 Crossing Borders

Panagiotis PERYSINAKIS – The Body Shop International Plc

Orijit DAS – Genpact


103.1 Exhaustion of Rights in the EU - Tensionbetween IP and Competition Law

Panagiotis PERYSINAKIS –


Contents1. Exhaustion Doctrine - General 1.1 Geographical Scope 1.2 Exhaustion in the EU

2. Early Cases 2.1 Establishment 2.2 Disparities in National Laws 2.3 Control -v- Reward / Compulsory Licenses

3. Legislative Enshrinement & Recent Cases 3.1 Geographic Scope 3.2 Consent (specific, explicit, burden of proof) 3.3 Repackaging – Relabelling 3.4 Advertising

4. Conclusions


Exhaustion DoctrineCONTENTS

1. ExhaustionDoctrine -General

1.1 GeographicalScope

1.2 Exhaustion in theEU

2. Early Cases2.1 Establishment2.2 Disparities in

National Laws2.3 Control -v- Reward

/ CompulsoryLicenses

3. LegislativeEnshrinement &Recent Cases

3.1 Geographic Scope3.2 Consent (specific,

explicit, burdenof proof)

3.3 Repackaging –Relabelling

3.4 Advertising

4. Conclusions

exhaustion of IP rights means that the rightsholder cannot use the exclusivity powersconferred by these rights in order to opposethe further commercialisation of (genuine)products incorporating (or protected by)such rights, once these products have beenplaced in the market by him or with hisconsent.

Article 28/30: Free Movement of Goods

Article 81/82: Anticompetitive Agreements

Abuse of Dominance


Geographical Scope of ExhaustionCONTENTS











3.4 Advertising

4. Conclusions

Unlimited ScopeInternational Exhaustion

Limited ScopeNational Exhaustion

Regional Exhaustion

world

“The Second bite of the cherry”(Pumfrey, J. )


Exhaustion in the EU:CONTENTS











3.4 Advertising

4. Conclusions

Regional Exhaustion

Scope: the EEA (EC + Norway, Iceland & Liechtenstein)

Originally Acknowledged by the Court’sinterpretation of the Treaty.

Later enshrined in specific legislation aboutIP rights (through limited harmonisation)

Free cross-border trade


EC Treaty ProvisionsCONTENTS











3.4 Advertising

4. Conclusions

PROHIBITION OF QUANTITATIVE RESTRICTIONS BETWEEN MEMBERSTATES

Article 28/29

[rule] Quantitative restrictions on imports/exports and all measureshaving equivalent effect shall be prohibited between Member States.

Article 30

[exception] The provisions of Articles 28 and 29 shall not precludeprohibitions or restrictions on imports, exports or goods in transit justifiedon grounds of public morality, (…) or the protection of industrial andcommercial property.

[exception to exception return to rule] Such prohibitions or restrictionsshall not, however, constitute a means of arbitrary discrimination or adisguised restriction on trade between Member States.


ECJ dilemma:CONTENTS











3.4 Advertising

4. Conclusions

When to apply the first and when the lastpart of Article 30?

ECJ – Solution:Existence -v- Exercise of IP rights

Core -v- Peripheral

“Specific subject matter”or

“Essential function”


ECJ dilemma:CONTENTS











3.4 Advertising

4. Conclusions

When to apply the first and when the lastpart of Article 30?

ECJ – Solution:Existence -v- Exercise of IP rights

Core -v- Peripheral

Article 30 (1st part)

Article 30 (2nd part) /28


Exhaustion – early ECJ cases:CONTENTS











3.4 Advertising

4. Conclusions

Deutsche Grammophon v Metro [1971] – copyright

Centrafarm BV v Winthrop BV [1974] – trademarks

Centrafarm BV v Sterling Drug Inc [1974] – patents

Keurkoop BV v Nancy Kean Gifts BV [1982] - design


Exhaustion – early ECJ cases:

CONTENTS











3.4 Advertising

4. Conclusions

Deutsche Grammophon v Metro [1971] – copyrightsound recordings - in France through the French subsidiary of a Germanmanufacturer who tried on basis of German copyright to prohibitimportation in Germany by a third party, who had purchased therecordings legitimately in France.

‘(…) although the Treaty does not affect the existence of rightsrecognized by the legislation of a Member State with regard to industrialand commercial property, the exercise of such rights may neverthelessfall within the prohibitions laid down by the Treaty’

‘Article 30 only admits derogations from [the free movement of goods] tothe extent to which they are justified for the purpose of safeguardingrights, which constitute the specific subject-matter of [IP]’.

use of IP which would legitimise the isolation of national markets ‘wouldbe repugnant to the essential purpose of the Treaty, which is to unitenational markets into a single market’.













3.4 Advertising

4. Conclusions

Centrafarm BV v Winthrop BV [1974] – trademarks

Centrafarm BV v Sterling Drug Inc [1974] - patentsCentrafarm, relying on its exclusivity rights in order to prohibit the furthercommercialisation of pharmaceuticals in Netherlands, imported by paralleltraders, who had lawfully bought them in another Member State, wherethey had initially been marketed by the rights owner or with his consent.

Derogations from free movement of goods only justified to protect thespecific subject matter of IP rights:

TRADEMARKS: ‘the guarantee that the owner of the trademark has theexclusive right to use it for the purpose of putting products protected by thetrademark into circulation for the first time, and is therefore intended to protecthim against competitors wishing to take advantage of the status and reputationof the trademark by selling products illegally bearing that trademark’;

PATENTS: the guarantee that the patentee, to reward the creative effort of theinventor, has the exclusive right to use an invention with a view tomanufacturing industrial products and putting them into circulation for the firsttime, either directly or by the grant of licences to third parties, as well as the rightto oppose infringement .













3.4 Advertising

4. Conclusions

Coditel v Ciné Vog [1981] – performance right

Film transmitted in Germany reproduced without license in Belgium.

Performance right: a service not goods

specific subject matter of performance right: commercialisation, by wayof repeat performance

No exhaustion upon first performance.

Principle also affirmed in relation to renting right by anumber of cases following the introduction of CouncilDirective 92/100/EEC on rental right and lending right andon certain rights related to copyright in the field of IP


Disparities in National LawsCONTENTS











3.4 Advertising

4. Conclusions

Rule: Goods lawfully first marketed in lower thresholdmarket, can circulate freely in other (higher threshold)markets in the EU. (e.g. cheese, alcohol, chocolate etc)

Exception: above does not apply in the event ofdisparities in IP law, if the specific subject matter of IPrights is prejudiced.













3.4 Advertising

4. Conclusions

Merck. v Stephar [1981] (patents)Holder of a Dutch pharmaceuticals patent, who marketed the same in Italywhere the law at the time did not allow patent protection on drugs latertried to oppose their parallel importation in Netherlands unsuccessfully.

Rights owner had consented to first marketing in Italy (lowerthreshold market)

“Reward”: NO –“Control”: YES: Specific Subject Matter notcompromised. Rights exhausted

Parke, Davis and Co. v Probel [1968] (patents)Holder of a Dutch pharmaceuticals patent, whose products were lawfullymanufactured in in Italy by 3rd party without his consent, where the law atthe time did not allow patent protection on drugs later was successful inopposing their parallel importation in Netherlands.

Rights owner had not consented to first marketing in Italy (lowerthreshold market)

“Reward”: NO –“Control”: NO: Specific Subject Mattercompromised. Rights NOT exhausted













3.4 Advertising

4. Conclusions

EMI v Patricia [1989] (copyright)Cliff Richards recordings, which had fallen in the public domain inDenmark (where copyright had expired) but were still protected inGermany (where copyright had a longer duration), were first lawfullymarketed in Denmark without EMI’s consent (who was the holder of thecopyright); re-imported in Germany, where EMI sought to rely on itscopyright under German law to prevent importation and furthercommercialisation in Germany .

Rights owner had NOT consented to first marketing in Denmark(lower threshold market)

“Reward”: NO –“Control”: NO: Specific Subject Mattercompromised. Rights not exhausted


Control v Rewardcompulsory license

CONTENTS





National Laws2.3 Control -v-

Reward /CompulsoryLicenses





3.4 Advertising

4. Conclusions

Pharmon BV v Hoechst AG [1985] (patents)H, held pharmaceutical patents, in Germany, Netherlands, and the UK. Hsought to rely on its Dutch patent in order to prohibit P from importing amedicine in the Netherlands, from the UK where it had beenmanufactured and marketed (otherwise than by H or with its consent) onthe basis of a compulsory license under UK law, (granted without H’sconsent).

P argued: compulsory license substitutes consent – H acceptedthe risk when applying for UK patent – H received reward(reference to Sterling Drug definition of specific subject matterfor patents).

Decided: no consent in relation to commercialisation in UK(specific subject matter compromised) – reward is not thedefining element – control over reward – rights not exhausted.


Control v Rewardcompulsory license

CONTENTS





National Laws2.3 Control -v-

Reward /CompulsoryLicenses





3.4 Advertising

4. Conclusions

Musik-Vertrieb v GEMA [1981] (copyright)copyright management society sued for copyright infringement followingimportation in Germany of sound recordings which had previously beenmarketed elsewhere, including the UK, where the manufacturer of theserecordings had paid a statutory royalty (compulsory license), which waslower than the royalty payable in Germany, whereby GEMA was claimingthe difference.

Decided: rights owner had consented in relation tocommercialisation in UK (specific subject matter NOTcompromised) – inadequate reward not the issue – rights holderhad exercised control and chose to commercialise recordings inlower threshold market - rights exhausted.

NOTE: performance rights


Exhaustion- legislative enshrinementCONTENTS











3.4 Advertising

4. Conclusions

Article 7 of the Trade Marks Directive 1988

Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computerprograms

Council Directive 92/100/EEC of 19 November 1992 on rental right and lending right andon certain rights related to copyright in the field of intellectual property

Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rulesconcerning copyright and rights related to copyright applicable to satellite broadcastingand cable retransmission

Council Directive 93/98/EEC of 29 October 1993 harmonizing the term of protection ofcopyright and certain related rights

Council Directive 87/54/EEC of 16 December 1986 on the legal protection oftopographies of semiconductor products

Council Regulation (EC) No. 2100/94 of 27 July 1994 on Community plant variety rights

Directive 98/44/EC of the European Parliament and of the Council of the 6 July 1998 onthe legal protection of biotechnological inventions

Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 onthe legal protection of designs

Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs


Exhaustion- legislative enshrinementCONTENTS











3.4 Advertising

4. Conclusions

Article 7 of the Trade Marks Directive 1988provides that:

1. The trademark shall not entitle the proprietor to prohibitits use in relation to goods, which have been put on themarket in the Community under that trademark by theproprietor or with his consent.

2. Paragraph 1 shall not apply where there exist legitimatereasons for the proprietor to oppose furthercommercialisation of the goods, especially where thecondition of the goods is changed or impaired after theyhave been put on the market.


Exhaustion: Recent ECJ DecisionsThe Geographic Scope of Exhaustion

CONTENTS











3.4 Advertising

4. Conclusions

Silhouette v Hartlauer [1998] (trademarks)manufacturer of prestigious spectacles, sold old-fashioned framesin Bulgaria, where they were sourced by the defendant whoimported them in Austria.

Austrian law provided for international exhaustion

ECJ held that articles 5/7 should be construed as providingcomplete harmonisation

regional exhaustion within the EEA

No Member State can have international exhaustion

Criticism (free trade v partitioning)


Exhaustion: Recent ECJ DecisionsThe Scope of Consent(specific)

CONTENTS











3.4 Advertising

4. Conclusions

Sebago Inc v GB-Unic SA [1999] (trademarks)The defendant marketed in Benelux branded shoes. The particular batch hadnot been marketed in the EEA by the brand owner or with his consent, theirorigin traced in El Salvador. The defendant argued that since identical goodswere, with Sebago’s consent, in lawful circulation within EEA and Benelux,Sebago should be deemed to have consented in general to the marketing ofthis type of goods, given also that there was no harm to the essentialguarantee of origin function of the trademark right .

ECJ held that consent must apply to specific goods

Guarantee of origin secondary to control (exclusivity)

Specific subject matter


Exhaustion: Recent ECJ DecisionsThe Scope of Consent(explicit – not implied)

CONTENTS











3.4 Advertising

4. Conclusions

Zino Davidoff SA v A & G Imports Ltd and

Levi Strauss v Tesco Stores [2001] (trademarks)Davidoff placed certain cosmetics in the Singapore market through itsselective distribution network imposing a prohibition on further marketingoutside the assigned territory. A&G Imports Ltd sourced these goods withoutnotice of the restriction.

The defendants in the Levi case, sourced and imported Levi branded jeans inthe UK from a variety of sources outside the EEA, on terms containing no(territorial or other) restrictions against the further commercialisation of thosegoods.

Argued (unsuccessfully) failure to impose restrictions amounted to impliedconsent

ECJ held that absent explicit consent rights were not exhausted(burden on parallel trader to prove consent)

Guarantee of origin secondary to control (exclusivity)


Exhaustion: Recent ECJ DecisionsThe Scope of Consent (explicit)

CONTENTS











3.4 Advertising

4. Conclusions

Davidoff v A & G Imports Ltd and Levi v Tesco [2001]English High Court gave judgement for parallel traders

Laddie, J.:‘Silhouette bestowed on a trade-mark owner a parasitic right tointerfere with the distribution of goods which bears little or no relationship tothe proper function of the trademark right’

ECJ: implied consent only if it is unequivocally demonstrated fromfacts and circumstances that the trademark proprietor has waivedhis exclusive rights

Stark disagreement between High Court and ECJ on the meaningof “Specific subject matter” of trademarksAG Jacobs: ‘In so far as the trademark protects the interests of its proprietor by enablinghim to prevent competitors from taking unfair advantage of his commercial reputation, theexclusive rights conferred on the proprietor are said, in the language of the Court'scase-law, to constitute the specific subject-matter of the trademark. In so far as thetrademark protects the interests of consumers by acting as a guarantee that all goodsbearing the mark are of the same commercial origin, that is known, in the Court'sterminology, as the essential function of the trademark. Those two aspects of trademarkprotection are of course two sides of the same coin’.


Exhaustion: Recent ECJ DecisionsThe Scope of Consent(burden of proof)

CONTENTS











3.4 Advertising

4. Conclusions

Van Doren v Lifestyle sports [2003] (trademarks)

Brand owner must prove that the goods were marketed outside the EEA

(following which the parallel trader would then need to prove consent underDavidoff/Levi)


Exhaustion: Recent ECJ DecisionsRepackaging – relabelling

CONTENTS











3.4 Advertising

4. Conclusions

Eurim-Pharm / Paranova [1996] (trademarks)Parallel imports of repackaged pharmaceuticals

Exhaustion applies on the right to affix the mark

Conditions for repackaging:Avoid artificial partitioning of Common Market (effect regardless of intention)

No adverse effect on condition of goods

Give notice to brand owner

State on packaging who has repackaged

No damage to reputation

Supply the brand owner with samples (on demand)

NECESSITY for effective market access but not commercial advantage (Pharmacia& Upjohn SA v Paranova A/S [1999] )


Exhaustion: Recent ECJ DecisionsRepackaging – relabelling

CONTENTS











3.4 Advertising

4. Conclusions

Glaxo Group v Dowelhurst [2000] (trademarks)Laddie J (High Court): reverse necessity (pro-parallel trader)

brand owner can rely on his rights only to the extent necessary toprotect specific subject matter

Specific subject matter = essential function (guarantee of origin)

Boehringer v Swingward [2002]ECJ: (pro-brand owner)

Repackaging always prejudicial

Permitted exceptionally subject to necessity (for effectivemarket access)

Repackaging not allowed if re-labelling sufficient.Burden of proof (presumption of harm to IP right fromrepackaging)


Exhaustion: Recent ECJ DecisionsAdvertising

CONTENTS











3.4 Advertising

4. Conclusions

Parfums Christian Dior SA v Evora BV [1997](trademarks)

Evora outside Dior’s exclusive distribution network

Parallel Import of luxury goods in Holland (bought in France)

Advertising prejudicial to prestigious image of Dior

ECJ:Exhaustion applies to advertising

T.M. Directive 7.2: can refer to the mental condition of luxurygoods

Circumstances of each case

Comment: specific/abstract advertising? Necessity?


So what is the Core of IP rights?CONTENTS











3.4 Advertising

4. Conclusions

SpecificSubject Matter

Essential Function

Control

Reward

Guaranteeof Origin

Proprietary ------ Social

In what order?


ECJ view:CONTENTS











3.4 Advertising

4. Conclusions

SpecificSubject Matter

EssentialFunction

1. Control

2. Reward

3. Guaranteeof Origin


In what order?


The English Courts view:CONTENTS











3.4 Advertising

4. Conclusions

NonEssentialFunction

EssentialFunction

3. Control

2. Reward

1. Guaranteeof Origin


In what order?


1 0 3 . 1 E x h a u s t i o n o f R i g h t s i n t h e E U - T e n s i o n b e t w e e n I P

a n d C o m p e t i t i o n L a w

P a n a g i o t i s P E R Y S I N A K I S –

Q U E S T I O N S

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103 crossing borders - the in-house counsel bar … · acc europe 2008 corporate counsel university...

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