Does the sale of goods in Turkey lead to exhaustion of EU trade mark rights?

The European Economic Area (‘EEA’) consists of Iceland, Norway, Liechtenstein and the EU. It seems obvious that trade mark rights regarding goods placed on the Turkish market by the trade mark owner are not exhausted under Art. 15 EUTMR. According to this provision,

An EU trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the European Economic Area under that trade mark by the proprietor or with his consent.

However, Turkey and the EU have concluded several trade-related agreements over time. The Higher Regional Court of Nuremberg ruled on the question if these agreements affect the principle of exhaustion and extend it to the territory of Turkey.

Background

The plaintiff produces Turkish coffee and owns the following International Registration no. 997056:

It was accepted for protection in the EU, inter alia, for ‘coffee’.

The defendant is a German food wholesaler, who imported coffee placed on the Turkish market by the plaintiff (shown below) into Germany without the plaintiff's consent.

The plaintiff sought to prevent the defendant from selling the coffee in Germany, arguing that its trade mark rights were not exhausted by the first sale of the coffee in Turkey.

The District Court ruled in favour of the plaintiff, ordering the defendant to cease the import and sale of the coffee in Germany.

The defendant appealed.

The Higher Regional Court's Decision

The Higher Regional Court of Nuremberg dismissed the appeal (3 U 881/24).

1. The only question in dispute between the parties was whether the trade mark rights in the imported goods were exhausted under Art. 15 EUTMR.

The defendant relied on Art. 21 and Art. 22(1) of the Supplementary Protocol to the Agreement of 12 September 1963 establishing an Association between the European Economic Community and Turkey (‘Protocol’).

According to Art. 21 Protocol,

Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between the Contracting Parties.

Art. 22(1) Protocol states:

The Contracting Parties shall refrain from introducing any new quantitative restrictions on imports or measures having equivalent effect.

The defendant argued that the ‘standstill clause’ in Art. 22(1) Protocol should lead to trade mark exhaustion. The reason was that, prior to the implementation of the 1988 Trade Mark Directive (89/104/EEC), German courts applied the principle of international exhaustion. This meant that German trade mark rights were exhausted if the original product was placed on the market anywhere in the world, including Turkey.

The defendant claimed that the change of German trade mark law from international exhaustion to EU/EEA exhaustion (due to the implementation of the first EU Trade Mark Directive) constituted a ‘new restriction’ within the meaning of Art. 22(1) Protocol.

By referring to the Court of Justice of the EU (‘CJEU’) decision in Soysal and Savatli (case C-228/06), the Court found that the Protocol was directly applicable and that the defendant could rely on it.

The judges also mentioned Silhouette (C-355/96 at paras. 26 to 31) and Coty Prestige (C-127/09 at para. 30), in which the CJEU held that Member States are not allowed to provide for the principle of international exhaustion of trade mark rights. This is so to safeguard the functioning of the internal market.

2. On that basis, the Court found that the limitation of the principle of exhaustion to goods placed on the market in the EEA constituted a quantitative restriction on imports or measures having equivalent effect within the meaning of Art. 21 Protocol.

Further, the judges considered that international agreements such as the Protocol superseded national and EU law. This was due to the EU’s obligations as stemming from these international agreements, which could only be performed if the national and EU law was not applied if it was contrary to such an agreement.

3. However, Art. 29 Protocol provides that Art. 22 Protocol shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of industrial and commercial property provided that such prohibitions or restrictions do not constitute a means of arbitrary discrimination or a disguised restriction on trade.

The Court found that the principle of exhaustion, which is limited to the Member States of the EEA, is justified under Art. 29 Protocol. In order to reach this conclusion, the judges drew on the CJEU’s case law on Artt. 34, 36 TFEU, whose wording is very similar to Artt. 21, 22, 29 Protocol.

a. While the purpose of the EU was to establish an internal market free from barriers to trade, the purpose of the Protocol was to strengthen the trade relations between the EU and Turkey.

b. Moreover, the Protocol was meant to prepare the accession of Turkey to the EU but not to grant Turkey the status of a Member State. The Protocol did not provide the same instruments to reduce barriers to trade as the EU treaties and did, likewise, not establish common institutions.

c. The Court also held that the limitation of the principle of exhaustion to goods placed on the market in the EEA pursued a legitimate goal (the protection of intellectual property) and was a proportionate measure. It strengthened the rights of trade mark owners because they can control the first placement of the goods on the market.

d. Limiting the principle of international exhaustion to the EEA was considered not to constitute an arbitrary discrimination or a disguised restriction on trade. EU-wide harmonization of the conditions of exhaustion prevented barriers to trade within the EEA.

e. In order to support the conclusion that the Protocol did not override Art. 15 EUTMR, the Court also referred to Art. 10(2) of Annex 8 of the Decision No 1/95 of the EC-Turkey Association Council of 22 December 1995. This decision was made by the EC-Turkey Association Council, which consisted of members from the contracting parties of the Protocol and was applicable besides the Protocol. Said Art. 10(2) was interpreted by the Court to suggest that the principle of exhaustion shall not be affected by the Protocol.

f. Eventually, the court emphasized the importance of allowing trade mark holders to control the first sale of their products within the EEA. This control was deemed essential for maintaining the quality and reputation of trade marked goods. 

Comment

The judgment deals with fundamental principles of international public and trade mark law, which is why the Court admitted the appeal to the German Supreme Court. An appeal by the defendant would be a good chance for a reference for a preliminary ruling to the CJEU to get clarity on the scope of association agreements between the EU and third countries.

Internation agreements between members and non-members of the EU have been the subject of CJEU decisions in the past. In 2022, for instance, Germany terminated an agreement with Switzerland from 1892. It provided, inter alia, that use of a German trade mark in Switzerland only was sufficient to establish genuine use of a German trade mark and vice versa. The reason for the termination was the CJEU’s Ferrari judgment (case C‑720/18 and C‑721/18, IPKat here), in which the court held that the Swiss-German agreement was applicable because it was concluded before the EU/EC was founded but Germany was required to terminate it.

The last picture is by Diogo Miranda and used under the licensing terms of pexels.com.