TRADE MARK NOT EXHAUSTED AFTER PEAK PERFORMANCE

The European Court of Justice (ECJ) ruled yesterday, in Case C-16/03 Peak Holding AB v Axolin-Elinor AB on when goods for sale are subject to exhaustion of trade mark rights ("first sale" doctrine, as it's known in the US).

Peak Holding, who own the PEAK PERFORMANCE trade mark, granted an associated company, Peak Performance Production (PPP) the right to use it; PPP then made and sold PEAK PERFORMANCE clothing and accessories in Sweden. Another Swedish company, Factory Outlet, sold clothing that consisted mainly of branded goods which were parallel imports or reimports. In 2000 Factory Outlet marketed a consignment of 25,000 PEAK PERFORMANCE garments, having advertised them in the press at half price. Those clothes, which had been manufactured for PPP outside the European Economic Area (EEA), were originally imported into the EEA for sale to final consumers in a Danish store run by one of PPP's sister companies; the clothes sold by Factory Outlet were those that remained unsold by the Danish store. Peak Holding claimed that Factory Outlet was infringing its trade mark and sued for damages, injunctive relief and delivery up of the unsold clothes for destruction. The trial court dismissed the application, taking the view that the goods had in fact been marketed by reason of being made available to consumers in the Danish store and that the rights conferred by the trade mark, once exhausted by offering the goods for sale, could not be restored. Peak Holding appealed, following which the following questions were put to the ECJ for a preliminary ruling:

1. Are goods to be regarded as having been put on the market by virtue of the fact that the proprietor of the trade mark:

(a) has imported them into the common market and paid import duty on them, with the intention that they be sold there?

(b) has offered them for sale in the trade mark proprietor’s own shops or those of a related company within the common market but a sale of the goods has not taken place?

2. If goods have been put on the market under one of the above alternatives and exhaustion of the trade mark rights thereby occurs without there having been a sale of the goods, can a trade mark proprietor interrupt exhaustion by returning the goods to a warehouse?

3. Are goods to be regarded as having been put on the market by virtue of the fact that they have been sold by the trade mark proprietor to another company in the internal market, if, upon the sale, the trade mark proprietor imposed a restriction on the buyer under which he was not entitled to resell the goods in the common market?

4. Is the answer to question 3 affected if the trade mark proprietor, upon selling the consignment to which the goods belonged, gave the buyer permission to resell a small part of the goods in the common market but did not specify the individual goods to which that permission applied?

The ECJ ruled:

1. 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.

2. In circumstances such as those of the main proceedings, 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.

The IPKat thinks this is a jolly good ruling which effectively dovetails trade mark exhaustion doctrine with the common law concept of the "invitation to treat" in the formation of contracts. He has explained to Merpel, who was getting a bit agitated, that the ECJ was not pussyfooting when it didn't answer the second and fourth questions: it didn't need to answer them, in the light of its answers to questions 1 and 3.

More on peak performance here, here and here
Twin peaks here
Peke performance here