16

The Functions of Trade Marks and their Role in Parallel
Importation Cases-- What Can the EU and Japan Learn from Each Other’s
Experiences? -Invited Researcher: Ilanah Simon(*)
Japan and the European Union have been operating trade mark registration systems formore than a hundred years. Yet in neither jurisdiction is there consensus on what the legally andeconomically recognized functions of a trade mark should be.
This research investigates what we mean by trade mark function, arguing that it is anoversimplification to limit our analysis to a choice of origin, quality guarantee or advertising
function. Instead it proposes that we recognize a more complicated framework of interconnectedfunctions that reflects the nature of evolving markets, and the fact that the function(s) may differ,depending on the nature of the goods the mark is being used on.
It goes on to consider how the courts have dealt with the issue of parallel importation, in
which both the Japanese courts and the European Court of Justice have repeatedly justified theirdecisions by reference to trade mark function.
Ultimately it will be argued that the EU would do well to follow the Japanese lead in
explicitly recognizing the quality aspect of trade marks. However, Japan may want to consider its
position in the light of the EU’s recognition of the advertising function of marks.

I

message to consumers about the origin, andeven the quality, of the marked goods, but isbeing used in the importing country without
the trade mark owner’s consent, and incircumstances where the trade mark ownerwill not be able to reap the financial rewardof his trade mark through the sale of thegoods on the importing market. Trade markuse was chosen because such a requirement
is frequently justified and defined byreference to trade mark function. The paper
concludes with an attempt to identify what
the two jurisdictions can learn from eachother.

INTRODUCTION

This paper analyses and compares thedegree to which the various functions of a
trade mark have been recognised andprotected under Japanese and European
Union (EU) registered trade mark law. Its
objective is to investigate what Japan andEU can learn from each other on this issue.
The paper begins by identifying the widely(and not so widely) recognised trade markfunctions, which serve as a framework for the
discussion of the case law which follows. It
then considers the extent to which the courts
in Japan and the EU have recognised thosefunctions in the context of parallel
importation and trade mark use. Parallel
importation was chosen because of thespecial challenges that it poses to trade marklaw – a trade mark used on parallel imported
products will often be sending a truthfulII

Traditionally, three main trade markfunctions have been recognised: the origin(*) Lecturer in Law, Brunel University, London, UK

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TRADE MARK FUNCTION:
A THEORETICAL REVIEW

purchases of those goods.(*3) Moreover, if they
view the mark on different goods, they willassume from their past experiences of goods
bearing the mark that the new goods will beof the same quality as the previously
experienced goods, even though the goods aredifferent in nature.
Underlying this behaviour is the
expectation that all goods sold under themark will be of the same quality. However,thequalityguaranteefunctioniscontroversial. While there is an expectationof consistency, there is no legal mechanism toguarantee that the proprietor of the markwill only use his mark on goods of uniform
quality.(*4) If a mark-owner does use the markon lower quality goods, he may well losecustomers, but he faces no sanction under
trade mark law. Additionally, even if themark is used on goods of consistent quality,
there is no requirement that the goods be of
consistent good quality. The logic of thetheory just demands that the goods be of aquality that is known to consumers. Since
under this theory the mark imports noenforceable guarantee of quality, nor does it
ensure that the goods will be of any
particular quality, it might be more fitting tolabel it the ‘nature assumption’ theory.

function, the quality guarantee function andthe advertising function. However, it ispossible to identify other trade markfunctions, the recognition of which is still
evolving.

1

THE ORIGIN FUNCTION
Originally trade marks were used to
identify the physical source of the goods onwhich they were used.(*1) However, with thegrowth of mass production, the role of trade
marks changed and, instead of informing
consumers about the identity of a specific,
known source, marks began to be viewed as
an indication that all goods bearing the markcame from a single source. The identity ofthis source was not necessarily known.
The idea is that consumers will be
motivated to purchase goods because theycome from a single but anonymous source.
This assumption is open to question. Why
would consumers want to buy goods because
they know they have a common source
without knowing what that source is? Such adesire is only sensible if there was something
about that common source which they hadreason to believe was desirable. For example,
if the source had a good reputation, or if
consumers had experienced goods from thatsource before and wanted to make repeatpurchases. Such reasoning brings us close to
the quality guarantee function.(*2)

3

THE ADVERTISING FUNCTION
The advertising function is the least
understood of the trade mark functions.
There is no consensus on what theadvertising function actually is, but the best
explanation is that, where marks are used inadvertising, an image can be built up aroundthem, separate from the physical nature of
the goods themselves, which will be evokedwhenever consumers are subsequently
exposed to the mark.(*5)
The advertising function has been

2

THE
QUALITY
GUARANTEEFUNCTION
The quality guarantee function assumes
that consumers will use trade marks to
identify goods which they known fromexperience to be satisfactory. Consumers who
have had positive experiences with goods willnote the trade mark that they bear and will
look for that mark again when making future(*1) See further the account of the development of trade marks in Frank I Schechter, The Historical Foundations of Historical Foundation of the
Law Relating to Trademarks (The Lawbook Exchange, NJ, 2002 – reprint).
(*2) J Thomas McCarthy in McCarthy on Trademarks and Unfair Competition (WEST, St Paul, MINN, 1996 and updates), §3.10, characterises a
trade mark under this theory as ‘a unified source of quality control’ – a description which is virtually indistinguishable from quality control.
(*3) Although he is frequently thought of as the father of the advertising function, Frank I Schechter’s theory of trade mark function put forward in‘The Rational Basis of Trademark Protection’ 40 Harv L Rev 813 (1926-1927) rests on consumers making repeat purchases of satisfactory products
which they recognise by their trade marks. Likewise, Landes and Posner view consistency of quality as crucial to their economic explanation of how
trade marks function – see William M Landes & Richard A Posner, The Economic Structure of Intellectual Property Law (The Belknap Press ofHarvard University Press, Cambridge, MASS, 2003), p.167.
(*4) The fact that the quality guarantee communicated by a trade mark is economic, rather than legal, in nature is emphasised by Fredreich-KarlBeier in ‘Territoriality of Trademark Law and International Trade’ 1 IIC 48 (1970).
(*5) See Thomas D Dresner’s description in ‘The Transformation and Evolution of the Trademarks – From Signals to Symbols to Myth’ 82 TMR 301,
329, of how advertising can ‘obsess’ a trade mark…placing the mark within the context of whatever mythical unit has been chosen for it’.

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that they select one trader’s goods overanother trader’s.

fiercely criticised. Some argue that, because
the image is not based on tangible
characteristics of the goods, it is illusory, andany investment in creating or maintainingthat image is socially wasteful and should not
be encouraged.(*6) It could be counteredthough that quality based on the physicalcharacteristics of goods is also subjective, inthe sense that characteristics of goods thatappeal to some people will repel others.
Moreover, facilitating proprietors’ attempts tocultivate differing images for their goods may
be beneficial to consumers by allowed them toexpress themselves through ‘buying into’ theimage of goods which represent values or alifestyle that they aspire to.

5

CONCLUSIONS
A number of trade mark functions havebeen recognised, but none of them arewithout fault, nor are they universally
accepted. Some are highly controversial, andsome (particularly the origin and theguarantee function) merge into each other.
This paper goes on to consider which of
the trade mark functions described have beenrecognised by the European and Japanese
legal authorities with a particular focus onparallel importation and trade mark use
cases. In doing so, it asks which of thefunctions should be recognised.

4

A WIDER VIEW OF TRADE MARKFUNCITON
Some have identified trade marks ashaving a cultural function, forming social
icons which are used in wider discourse to
identify ideas and strengthen arguments
because of the degree of recognition that they
have in the eyes of consumers. Those whochampion this cultural function of trade
marks often argue in favour of less protection
for trade marks, so as to avoid a situation inwhich their use in wider discourse would be
suppressed. However, Jason Bosland(*7) points
out that a mark can only fulfil this function if
it is capable of being viewed by consumers as
pointing back to a single known phenomenon
which is either the subject of the comment or
the tool for making the comment.
A further possible trade mark function is
the identifying or distinguishing function.
This just requires that consumers use themark to tell the goods apart from goods whichbear different trade marks on some grounds,
but does not prescribe what these groundsare.(*8) This theory is attractive because it
leaves it for consumers to decide what it isthat they value about goods to such an extent

III RECOGNITION OF TRADE MARKFUNCTIONIN
PARALLELIMPORTATION CASES
1

PARALLEL IMPORTATION BASICS
Parallel importation occurs when an
intellectual property owner or his licensee
sells protected goods in one market undersuch circumstances that those goods can bepurchased there for export and imported intoanother market for sale against the wishes of
the intellectual property owner and incompetition with similar goods enjoyedequivalent protection on the second
market.(*9)
It is particularly appropriate fordiscussing the recognition of trade markfunction because the goods in question are‘genuine’ (in the sense that they have been
produced by the trade mark owner, his
subsidiary, or under his control) and so thetrade mark often is not giving consumers amisleading message. However, the mark is
being used in the importing jurisdiction
without the consent of its owner. Thus, courts(*6) This view is espoused by Ralph S Brown Jr in ‘Advertising and the Public Interest: Legal Protection of Trade Symbols’ 57 Yale LJ 1165
(1947-1948).
(*7) Jason Bosland, ‘The Culture of Trade Marks: An Alternative Cultural Theory Perspective’ (2005) 10(2) Media & Arts Law Review 99.
(*8) Such an idea is inherent in Barton Beebe’s ‘The Semiotic Analysis of Trademark Law’ 51 UCLA Law Rev. 621 (2004), where he states that[I]n recent times, there has emerged a truly radical structuration of the mark, what might be termed the monadic structuration. In such astructuration, the trademark signifier has broken free of its moorings in a signified or referent. It signifies still, but signified nothing.
Likewise, in Europe, the key requirement of a trade mark is that it must be ‘capable of distinguishing the goods of one undertaking from those ofother undertakings’ (Directive 89/104, Art.1) but there is no requirement given for the basis of that distinction.
(*9) Thomas Hays, Parallel Importation Under European Union Law (Sweet & Maxwell, London, 2004), p.1.

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are faced with a choice: do they give
precedence to trade mark function, or do they
instead favour the private interests of trade
mark proprietors by enjoining uses which,although not harmful to consumers, displease
the trade mark owners.
To complicate matters, other interests
sometimes play a role. This is particularly
true of the European Union (EU), which has
the establishment of a ‘common market’
without internal borders as its overriding
objective. In pursuance of this aim, theEuropean Court of Justice (ECJ) places
particular emphasis on free movement ofgoods – sometimes at the expense of trade
mark function, as we shall see.

(2) Parallel importation – basic frameworks
in Japan and the EU
Although ultimately both the EU andJapan recognise that certain acts of parallel
importation do not infringe trade mark rights,
the routes that the two jurisdictions use toreach this conclusion differ.
In the EU, even genuine parallel imports
prima facie infringe because the reseller isusing identical marks on identical goods,
which constitutes infringement under
Art.5(1)(a) of Directive 89/104, even though
the double identity is a result of the fact thatthe reseller is using the trade mark owner’s
own marks on his own goods. However,Art.7(1) of Directive 89/104 provides adefence where the goods that are resold wereoriginally put on the European Economic
Area (EEA)(*10) market by the trade markowner, or with his consent, although even in
those circumstances, the trade mark owner
can oppose the further marketing of those
goods where he has legitimate reason to do sounder Art.7(2) of the same Directive.
In Japan too, parallel importation falls
within the definition of infringement, sinceArt.25 of the Trademark Law provides thetrade mark owner with the exclusive right touse the mark on the goods designated in his
registration. Moreover, unlike the EU, there
is no parallel importation defence in theJapanese legislation. However, as we shallsee, the courts have found that genuine
parallel imported goods do not infringe.

(1) Some background: free movement in
the EUTo understand the way in which freemovement and trade mark function interact
in the EU, one must have a basic
understanding of how the free movement
rules deal with intellectual property rights(IPRs).
Under
Art.28oftheEuropeanCommunities Treaty, Member States cannot
restrict imports from other Member States.
This is problematic, because the territoriality
principle means that each Member State’s
intellectual
propertysystemoperates
independently, and so separate IPRs exist
over the same subject-matter in each
Member State, in theory leaving the
IPR-holder with the ability to raise an
objection under his IPR every time goods
cross a border. In this way, IPRs pose a threat
to free movement. However, IPRs are
acknowledged to have positive aspects and so,under Art.30 of the EC Treaty, restrictions
that are needed to protect industrial orcommercial property (including IPRs) areallowed, as long as they do not constitute anarbitrary restriction on trade, i.e. an excuse
for a limitation on free movement that is infact motivated by concerns other than theneed to protect the IPR.

2

THE GENERAL EXHAUSTION RULE
Analysing in more detail the way inwhich the exhaustion exception has
developed in both the EU and Japan reveals
a respect for trade mark function. As has
already been stated, parallel imports areallowed under Art.7of Directive 89/104. This
codifies the case law of the European Court ofJustice (ECJ) that developed prior to theharmonisation of European trade marklaw,(*11) as typified by Centrafarm v American
Home Products (*12). The court emphasised the(*10) The EEA is a group of countries, including all the EU Member States and a number of other countries in Europe which do not have, or do not
want, full EU membership, which have acceded to an agreement including, inter alia, various free trade obligations.
(*11) Through Directive 89/104, which lays down a detailed framework for the substantive trade mark law of all the Member States.
(*12) [1978] ECR 1823.

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These conditions are said by theSupreme Court to protect the origin andquality guarantee functions.
In comparing the two jurisdictions, we
can see that Japan is driven by trade markfunction, and that this drive determines theshape of its general exhaustion rule. However,the EU is ultimately driven by freemovement. Although the EU has recognised
the origin function, and used it to shape an
exhaustion rule where the goods originate
from within the EU, this is trumped where
the goods come from outside the EU and, insuch cases, trade mark function is ignored.

need to balance free movement with therecognition of IPRs which are necessary tomaintain a functioning market. As a result,the court defines trade marks restrictively, sothat only their ‘specific subject matter’ isprotected, i.e. the right to put products
bearing the mark into circulation for thesame time. However, the court instructed us
to look at the ‘essential function’ of a trademark, defined as guaranteeing the origin of
the trade marked product to the consumer orultimate user, in determining the specificsubject matter.
Here the court has used the concept oftrade mark function as a tool for determining
the scope of trade mark protection, although
it is only being used as an exception to awider principle of free movement. However,
the origin function is being recognised andprotected.
There is though a twist in the tale.
Exhaustion only occurs in Europe if the goods
are put on the market in another EEA
Member State, as was stated in the
Silhouette case.(*13) No mention was made of
trade mark function. Instead the court
focused on which approach would aid theestablishment of the internal market.
The most authoritative Japanese rulingon trade mark exhaustion was given by theSupreme Court in Fred Perry.(*14) There thecourt held that the parallel importation of
genuine trade marked goods will not infringe
if three conditions are satisfied:

3

CHANGE IN THE CONDITION OF THE
GOODS
Where the goods which are imported
have different qualities to those which aresold on the home market, the quality
guarantee function would suggest that there
should be no exhaustion. There is little directcase law on this issue in either the EU or
Japan, but such case law as there is suggeststhat a change in the condition of the goods
may not prevent there from being exhaustionin either jurisdiction.
In Europe, it is clear following HAG II(*15)
that a difference in quality which is
attributable to the fact that the goods,
although bearing the same trade mark, areproduced by unlinked undertakings will
result in exhaustion. However, an analogy
with the free movement of goods case law(*16)
suggests that, where a trade mark ownerputs goods of different qualities on themarket in different EU Member States, hewill not be able to object to their further
circulation in any EU Member State, even if
consumers are confused as a result.
In Japan, the Lacoste(*17) court found that
there was exhaustion where goods of adifferent quality to those sold in Japan were
produced under the licence of the trade markowner outside Japan and then imported into
Japan. This was partially because the trade

1. the trade mark is applied abroad by
its owner or licensee;
2. the owner abroad and in Japan are
the same legally or economically; and3. the Japanese trade mark owner has
the option of exercising quality
control, so that it can be assumed that
there is no difference in quality
between the imported goods and theJapanese goods.

(*13) Silhouette C-355/96 [1998] ECR I-4799.
(*14) Fred Perry Sportswear Limited v Hit Union Ltd 2002 (Ju) No.1100, Supreme Court, the First Petty Branch, 27 February 2003.
(*15) S.A. Cnl-Sucal NV v. Hag GF (HAG II) C-10/89 [1990] ECR I-3711.
(*16) See in particular Rewe-Zentral AG v Bundesmonopolverwaltung fur Branntwein 120/78 [1979] ECR 649, commonly known as ‘Cassis de Dijon’.
(*17) La Chemise Lacoste and another v Shinshin Boeki Kabushiki Kaisha and another, Tokyo District Court, 7 December 1984.

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to contract law, rather than trade mark law.
On the other hand, UK case law(*19) suggeststhat every breach of a licensing agreement
will result in trade mark infringement.

mark owner had the option to exercise
quality control over the foreign goods, eventhough it had not chosen to do so. Subsequentcase law has suggested that an approach thatwould be more sympathetic to the quality
guarantee function might now be taken.
However, in the Fred Perry case, theSupreme Court talks only of the possibility ofquality control, rather than its actual
exercise, indicating a possible return to theLacoste reasoning.

5

REPACKAGING
Repackaging involves removing goods
from their original repackaging and placing
them in new packaging, to which the trade
mark owner’s mark has been applied by therepackager, without the trade mark owner’s
authorisation. There are a number of reasons
why a reseller might do this, including
enabling the repackaging to conform to theregulatory requirements of the importing
jurisdiction, or ensuring that the packaging
bears information in the language of theimporting jurisdiction. Such concerns are
particularly pertinent in the EU, where there
is a need to facilitate free movement of goods
across 25 Member States with different
languages and different healthcare and foodsafety regimes.
Particular trade mark law problems
have arisen in relation to repackaging
because, although the repackaging takes
place without the trade mark owner’s consent,
the mark gives a truthful message about theorigin of the product, in compliance with theorigin function. However, the act of removing
the goods from their original packaging
involves a risk that the condition of the goods
will be harmed, thus compromising thequalityguaranteefunction.
This
isparticularly so where the goods are only
wrapped in one layer of packaging, as there isa risk that the goods will be harmed by their
exposure to the air, or may be adulterated
with other substances without consumers
being able to detect that this has occurred.(*20)
The EU tries to balance these potentiallyconflicting interests with a general rule that
repackaging is allowed, as long as thecondition of the goods is unchanged. The
leading case is Bristol-Myers Squibb v
Paranova(*21) (henceforth, BMS).
Although the ECJ started from the4

GOODS PRODUCED BY A LICENSEEIN BREACH OF A LICENSING
AGREEMENTThe effect of the fact that goods havebeen produced in breach of a licensing
agreement on the function(s) of a trade markwill depend on the nature of the breach.
Breaches pertaining to the specifications towhich, or conditions under which, the goods
must be made will clearly put the quality
guarantee function at risk. However, otherbreaches, such as a condition concerningwhere a licensee must obtain a loan from,will have no impact on the trade markfunction(s).
Neither Japan nor the EU has expressly
differentiated between different types ofbreaches. Although previous Japanese cases
held that breaches are a matter for contract
law, and so do not stop trade mark rightsfrom being exhausted, the Supreme Court inFred Perry found that a breach of a licensing
agreement which stated that production of
the goods could not be sub-contracted out,
and had to take place within a specified
geographical area prevented there from being
exhaustion. The court justified its reasoning
by reference to the quality function.
There is no direct ECJ-level case law on
the effect of a breach of a licensing agreement.
However, related case law(*18) suggest that
where there is a contract regulating therelationship between the manufacturer of theimported goods and the trade mark owner,
the trade mark owner should have recourse(*18) IHT v Ideal Standard [1994] C-9/93 1 ECR 2789.
(*19) Primark Stores Limited and Primark Holdings v. Lollypop Clothing Limited [2001] ETMR 30.
(*20) Where the goods are in two layers of packaging, even if the first layer of packaging is removed, the continued existence of the unbroken inner
layer of packaging assures consumers that the goods inside the packaging have not come into contact with the air or other substances.
(*21). Bristol-Myers Squibb v Paranova Joined Cases C-427/93, C-429/93 and C-436/93 [1996] ECR I-3457

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inside the packaging is unchanged.

position that, in the interests of freemovement, trade marks cannot be used tostop repackaged goods from moving within
the EU, it went continued by recognising theimportance of trade marks, and that theinterests in free movement must be balancedwith trade mark protection. The court
adopted a compromise position: proprietors
can oppose repackaging, but only when their
specific interests are affected. Those specificinterests were said to include the ability to
attract and retain customers through thequality of the goods. In saying this, the ECJ
recognised the quality function. Moreover,the court instructed us to look at theessential function of a trade mark to decide if
repackaging should be allowed, a process said
to involve ensuring that the goods have notbeen interfered with was a way that affects
their original condition, so that the proprietor
can oppose use liable to affect the trademark’s ‘guarantee of origin’. Although thiswas said by the court to protect the originfunction of the trade mark, it appears to beequally addressed to maintaining theguarantee function.
As well as setting out the general rule on
repackaging, the BMS court laid down afive-part(*22) test for judging if specificinstances of repackaging accord with theprinciples already outlined. It began with ageneral rule that recognises the quality
function - an assumption against the legalityof repackaging because of the risk to thequality of the repackaged goods inherent inrepackaging. This assumption can only be
rebutted if all five of the following
requirements are met:

This was said to protect the originfunction, but seems just as focused on
the quality function;
3. the repackager must state on therepackaging who repacked the goods,
so that consumers do not believe thatthe trade mark owner is responsible
for the repackaging - protecting thequality function;
4. the repackager must send notice tothe proprietor about the repackaging,allowing the proprietor to ensure thatthe repackaging does not damage his
reputation. The ECJ does not state
which interest this protects, but the
reputation-based justificationsuggests a link to the advertising
function; and5. the proprietor can oppose repackaging

if the presentation of the product islikely to damage the reputation of the
trade mark or its owner, for example,
if the repackaging is messy. Again,
the court does not state what theinterest protected is, but the
reputation aspect suggests that theadvertising function may be relevant.
The Japanese case law on repackaging isless developed. In particular, there appear to
be no infringement cases where the quality of
the goods was not put at risk, although there
have been cases where the condition of thegoods was endangered.
In LT Peabel,(*24) a defendant who
repackaged large bottles of imported perfume
into smaller bottles marked with the trade
mark was found to have infringed the trade
mark because the repackaging affected thequality of the perfume. This amounts torecognition of the quality guarantee function

1. there is artificial partitioning of the
EU market .(*23) This factor ismotivated by free movement
concerns;
2. the original condition of the goods(*22) In fact, the court sets it out as a four-part test, but subsequent cases have treated damage to the reputation of the trade mark owner as aseparate factor.
(*23) In the sense that there is some reason why the goods will not be able to flow between the Member States which is unconnected with what isrequired to secure effective trade mark protection.
(*24) LT Peabel, Societe en nom collectif v Tamizo Kanazawa Tokyo Court of Appeals, 9 August 1922, reproduced by Teruo Doi in Digest of Japanese
Court Decisions in Trademarks and Unfair Competition Cases (The American Chamber of Commerce in Japan, Tokyo, 1971), p.61.

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of trade marks. Similarly, in STP,(*25) the
court found that the repackaging of thecontents of large cans of STP oil treatment
into smaller cans bearing the STP trade
mark infringed. However, the reasoning wasdifferent. Surprisingly, considering that it
found that the quality of the oil treatment
was altered, the court focused on the originfunction. It stated that the trade mark can
only play its function of indicating origin
where its owner can stop others from using it,even where the later use is on genuine goods.
This was said to stop the ‘foundation ofreliability’ from being lost.
The Japanese court further clarified in
MAGAmp(*26) that damage to the guarantee
function is not the main concern. On the factsof that cases, it seems probable that thequality of the goods was put at risk (thedefendant repackaged fertiliser from a large
packet into smaller packets bearing the
proprietor’s trade mark), but the court statedthat infringement will occur even if thequality or the nature of the goods is unlikely
to be altered by division into smaller
packages. This is because the owner’sinterest is harmed and consumers may be
misled by the defendant trading on the
proprietor’s reputation for the quality of thegoods. Although one might suppose that themention of reputation is linked to advertising
function, the way that it is used by the court
makes it clear that this is not the case.
Instead, the concern is with any unearned
advantage that the defendant may derive,
which is not a matter of trade mark function,and suggests that the proprietor has some
sort of property-type interest in his markthat he can stop others benefiting from.
Comparing repackaging in the twojurisdictions, although the acceptance of
repackaging in the EU is the result of freemovement concerns, the ECJ is prepared togive trade marks strong protection by virtueof the assumption against repackaging.
Moreover, the repackaging test involves
recognition of all three trade mark functions,albeit sometimes implicitly. In Japan, there isclearly infringement where the repackaging
leads to a change in the condition of the goods,
i.e. where there is a breach of the quality
guarantee function. However, repackaging
also seems to infringe where the repackaging
does not change the quality of the goods,
leading to protection that is wider than theorigin or the quality guarantee functions, andeven the advertising function, and whichfavours the private interests of the trade
mark owner.(*27)
To sum up, both jurisdictions provide
robust protection against repackaging,although the Japanese protection appears togo further than what is needed to protect thetrade mark functions.
(1) A surprise from Europe
Europe has gone further in recognisingtrade mark function by acknowledging andprotecting the advertising function of trade
marks in the parallel importation case law. In
Dior v Evora,(*28) parallel imported perfumes
bearing the DIOR mark were imported into
the Netherlands from another EU Member
State and were sold and advertised by acut-price retailer. Although this was prima
facie permissible parallel importation under
Art.7(1) of Directive 89/104, the proprietor
argued that it had legitimate reasons under
Art.7(2)toopposethefurthercommercialisation of the goods in which way
because the reputation of the DIOR markwould be damaged by this mode of sale andadvertising.
Citing the fifth BMS factor (discussed
above), the ECJ agreed in principle thatdamage to a marks’s reputation canconstitute legitimate reason to oppose resale.
In particular, advertising of the parallel(*25) STP Corp v National Shoji KK et al, Osaka District Court, 4 August 1976, reported by Teruo Doi in Trademark and Unfair Competition Law ofJapan – Digest of Court Decisions (AIPPI Japan, Tokyo, 1980), p.114.
(*26) MagAmp K Case Osaka District Court, 24 February 1994.
(*27) This view is inherent in Dr Shoen Ono’s statement (Shoen Ono, Overview of Japanese Trademark Law (Yuhikaku, Tokyo, 1999) – translated
and available from http://www.iip.or.jp/translation/ono/ that[in the cases mentioned] refilling and rewrapping were found to be trademark infringement on the grounds that only the owner of the
trademark right is allowed to conduct these acts. [Ch.7, p.106 of the translated version.](*28) Parfums Christian Dior SA & Parfums Christian Dior BV v. Evora BV C-337/95 [1998] ETMR 26.

8IIP Bulletin 2007

restriction. Moreover, they describe the linkthat there must be between the trade markand the defendant’s goods as use ‘in respectof ’ the goods in the case of Japan and use ‘inrelation to’ those goods in the case of the EU.
Neither term is indicative of use as anindication of origin.

imported goods must not detract from the‘allure and prestigious image of the goods inquestion and from their aura of luxury’, normust the mark be placed in a context thatdetracts from its image. The court thatreferred this issue to the ECJ spoke of suchreasoningasprotecting
themark’s(*29)‘advertising function’.
This recognition of
the advertising function may be less of asurprise when we consider that EU law
provides statutory protection for the
reputation of marks, in the form of protection
against tarnishment (or ‘detriment to repute’as it is known in the EU) under Art.5(2) ofDirective 89/104.
There is no equivalent registered trade
mark case law in Japan.

2

The basic use requirement
Both Europe and Japan have required
defendants to make trade mark use of themark in question in infringement actions.
The European jurisprudence on thesubject has largely been ambiguous, althoughmost of the cases do appear to require use toindicate the origin of one of the parties’ goods.
However, in Arsenal v Reed,(*31) although aquestion on trade mark use was referred tothe court, the ECJ made no reference to trade
mark use in its judgment, suggesting thatsuch use is not a requirement. However, thecourt did require harm to the functions of theclaimant’s trade mark for there to be
infringement. Since the ECJ only gave theorigin function as an example of the functions
which could be damaged, it appears that eventhis non-trade mark use, damage-based,
standard afford a key role to the originfunction. Nevertheless, the trade mark use
issue is not settled in the EU. Subsequent
UK cases have read Arsenal as imposing a
trade mark use requirement, and subsequent
ECJ cases have reverted to such a standard.
Most recently, the Advocate General in Adam
Opel(*32) has said that, for infringement totake place, defendants must use the trade
mark to indicate the origin of somebody’s
goods (though it need not be his own) and, in
addition, the use must damage the functionsof the earlier trade mark. Thus, the Advocate
General combined the trade mark use
requirement with the approach taken in
Arsenal.
The situation is clearer in Japan, and in

IV RECOGNITION OF TRADE MARKFUNCTION IN TRADE MARK USE
CASES1

The meaning and statutory basis oftrade mark use
The issue of trade mark use asks
whether it is necessary for the defendant tohave used the mark ‘as a trade mark’ for the
defendant’s use to be infringing. Use as atrade mark has been taken to mean use thattells consumers about the source of goods(usually the defendant’s, but sometimes thetrade mark owner’s).(*30) This involves aparticular focus on the origin function of a
trade mark, which is apparent from the caselaw on trade mark use.
There is little statutory basis for a trade
mark use requirement in either Japan or the
EU. Neither jurisdiction has an express
requirement that the mark in question be
used ‘as a trade mark’ to indicate origin. In
fact, the opposite appears to be true, sinceboth elaborate the various activities that canconstitute trade mark infringement without(*29) Although the ECJ did not use that precise term in its judgment.
(*30) It should be noted that ‘use’ has a wider meaning in the colloquial sense, which is to indicate the activity undertaken by the defendant to ‘fix’
the sign to his goods. See for example the UK Trade Marks Act 1994, s.10(5) and Jeremy Phillips and Ilanah Simon (eds), Trade Mark Use (OUP,
Oxford, 2005), p.8.
(*31) Arsenal Football Club plc v Reed, C-206/01 [2002] E.C.R. I-10273, [2003] ETMR 19.
(*32) Adam Opel AG v Autec AG C-48/05, Opinion of Advocate General Ruiz-Jarabo Colomer, 7 March 2006.

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IIP Bulletin 2007

the Popeye cases,(*33) use as a trade mark has
been required for infringement. Although
this was justified by reference to both theorigin and the guarantee functions, the focus
is predominantly on the origin function. It isinteresting to note that, like the ECJ, theOsaka District Court also considers whether
there is damage to the functions of the trademark, and identifies the origin function as
the ‘essential function’ of a trade mark.
However, this reasoning was not employed by
the court in reaching its final ruling.

conservative, focusing primarily on the origin
and quality guarantee functions. Having said
this, in the EU at least, the perception of
trade mark function is evolving, and there
has been a limited acceptance of theadvertising function. No such development
can be seen in the Japanese case law.
Within the limits of the origin andguarantee function, it is striking that the twojurisdictions have given the functions a
crucial role, reached similar conclusions
utilising those functions, in a number of cases.
It is also noteworthy that both jurisdictions
have tended to take a more limited view oftrade mark function in the trade mark use
context than in the parallel importation
context, placing greater emphasis on theorigin function. However, one key differenceis that the case law of the EU, but not Japan,
has been distorted by an overriding interestin facilitating the free movement of goods,
meaning that in many parallel importation
situations, trade mark function is ignored.

3

Applications of the use requirement
Trade mark use has been discussed inrelation to a number of specific factual
situations in both the EU and Japan, namely
use to truthfully identify the origin of goodsof a third party,(*34) use of marks as the titlesof literary or musical works(*35) and use ofmarks on scale models, such as toy cars, in a
way that imitates the full-sized subject of themodel.(*36) Although both jurisdictions havegiven a key role to trade mark use in thesecases, they have, on some occasions reacheddifferent answers on the question of
infringement. This is in part because the ECJ
takes a more expansive view of trade markuse than Japan, recognising use to indicate
the origin of the trade mark owner’s own
goods as a species of trade mark use. The
difference demonstrates that even if thefunction of a trade mark is agreed on, theway in which that function is interpreted canlead to different results.

V

CONCLUSION

This paper has demonstrated that on atheoretical level, a wide range of relatively
fluid trade mark functions have beenrecognised. However, the case law in both
Japan and the EU has been more(*33) Osaka Sankei KK v Ox KK, Osaka District Court, 24 February 1976, reported at p.130 of Doi in Trademark and Unfair Competition Law ofJapan – Digest of Court Decisions (AIPPI Japan, Tokyo, 1980) and Petition for the elimination, etc. of trademark infringement, Supreme Court, theSecond Petit Branch, 20 July 1990.
(*34) Case for claim for injunction of infringement of trademark right (TAKARA hon-mirin iri), Tokyo District Court, 22 January 2001 (Japan) and
Bayerische Motorenwerke AG (BMW) and BMW Nederland BV v Deenik C-63/97 [1999] ETMR 339, [1999] E.C.R. I-905 (EU).
(*35) Case of claiming damages (UNDER THE SUN), Tokyo District Court, 22 February 1995 (Japan) and R v Johnstone [2004] ETMR 2 (UK).
(*36) Adam Opel (cited above) (EU) and Philip Morris Products Inc v Nikko 5E Co Ltd, Tokyo District Court, 19 November 1993 – noted in 84 TMR
942 (Japan).

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