21

The Scope of Rights and the Functions of Trademarks
Under the European Trademark System
Long-term Overseas Research Fellow: Masami Ashidate

It has long been pointed out that a trademark serves many functions in a market. In addition
to the essential function of indicating the origin of goods, such functions as the so-called functionof guaranteeing the quality of goods and the function of advertising goods have been well-known.
People have been debating whether these functions should be protected under the trademark law
in addition to the function of indicating the origin of goods. This debate has reemerged in Japan
as well. For example, the Japanese Supreme Court addressed the issue of the function ofguaranteeing the quality of goods in a recent case about parallel imports. Since then, the scope oftrademark functions that should be subject to legal protection has been reexamined. This paper
will cast light on the European trademark system and introduce some theories and precedents,
which are categorized into several groups in this paper, concerning trademark functions debatedin the course of determining the scope of protection for trademark rights. Based on those theories
and precedents, we will examine and analyze the interpretations and definitions of trademark
functions presented therein.

1

trademarks
includethefunctiontodistinguish the origin of goods, the function
to guarantee the quality of goods, and thefunction to advertise goods. There is aconsensus that the function to distinguishthe origin of goods should be protected under
the trademark law. However, there aredifferent views on whether to protect theother functions under said law and what the
specific purpose of each of those functions is.
The European Union issued a directive
concerning the unification of trademark
systems in 1988 (First European Union’s
Directive to approximate the Laws of theMember States relating to Trade Marks:
hereinafter referred to as “Trademark
Directive/TMD”)(*1) and adopted the council
regulation on trademarks in 1993 (Council
regulation on the community trade mark:hereinafter referred to as “Trademark
Regulation/CTMR”).(*2) Both the TMD and
CTMR were devised for the purpose of
unifying the trademark protection systems in
the Member States in an effort to create a
Common market and further develop the

The purpose of this report

With the diversification of the roles
played by trademarks in the market and thedevelopment of a new asset-evaluation
method called “brand value index” as ameans to assess corporate values, theeconomic values of trademarks per se havebeen increasing in recent years. Against thisbackdrop, there is an increasing demand forlegal protection for the practical functions
performed by trademarks in the market anda new definition of the scope of protection
broad enough to contribute to the successful
implementation of corporate marketingstrategies and management methods.
In Japan, the issue of whether any
person who interprets the scope of protectionforatrademarkshouldtake
into
consideration the economic function andvalue of the trademark has often been
discussed in relation with the issue of how tointerpret the “functions of trademarks” to beprotected under the trademark law. We
traditionally assume that the functions of(*1) First Council Directive 89/104 EEC of 21 Dec. 1988 to approximate the laws of Member States relating to trade marks, OJL 040 11/02/1989 p.
0001.
(*2) Council Regulation (EC) No.40/94 of 20 Dec. 1993 on the community trade mark, OJL 011, 14/01/1994 p. 0001.

1IIP Bulletin 2007

The second case is where the issue of parallel
import is disputed. This issue has reemergedin Japan in recent years, sparking vigorous
debates. As the issue of parallel import isconsideredtoinvolveexhaustionoftrademark rights under the European
trademark system, we will first analyze
disputes regarding the applicability of theprinciple of international exhaustion. Then,we will examine some cases where theapplicability of the exhaustion principle could
be at issue, in other words, where therepackaging of a marked product or the use a
trademark in an advertisement could be atissue.

economy in the EU territory. In compliancewith the TMD and the CTMR, many Member
States altered their conventional scopes ofprotection.
Some articles point out that a reason for
the establishment of the TMD was theincreasing awareness that the trademark
laws of the Member States no longer reflected
the reality of the market. In other words, theeconomic value embodied by a trademark is
generated by more than just its basic
function of indicating the commercial originof goods or services. As the economic value ofa trademark is generated from a wider rangeof functions, protection for a trademark
should not be restricted to the function ofindicating the origin of goods or services.
This interpretation is said to be reflected in
the TMD and the CTMR, which provides
protection to the use of non-similar goods orservices and allows an assignment of a
trademark right without business transfer.
Some court judgments with regard to theinterpretation of the Directive indicate thepossibility of widening the scope of protection
for trademarks and protecting a wider rangeof trademark functions. Some people consider
such court decisions to be meaningful
because those decisions are in line with thecurrent trends of diversification of trademark
functions and an increase in the property
value of trademarks.
The purpose of this report is to introduce
different interpretations of the “functions of a
trademark” protected by the trademark law
by reviewing and analyzing the legislative
history of the establishment of the European
trademark system and the judgments handed
down by the ECJ. In order to understand thefunctions of a trademark, we need to discussa wide range of issues, because trademark
functions must be understood in light of the
trademark law as a whole. Therefore, itwould be a good idea to illustrate several
typicalinfringement
cases
where
interpretation of the functions of a trademark
could greatly affect the judgment.
The first case is where interpretation of
the concept of “likelihood of confusion” could
affect the scope of protection for a trademark.

2

Outlines of the European trademark
systemThe European Community adopted theTrademark Directive in 1988 and theTrademark Regulation in 1993. The former
was devised for the purpose of harmonizing
the national trademark laws of the Member
States, whereas the latter aims at thecreation of a Community trademark that will
be effective throughout the EU territory.
Both the directive and regulation provide
similar protection in substance as both havealmost the same provisions about thecontents of protection and the restrictions on
trademark rights, except for some differencesin procedures and the geographic scopes ofrights.
Article 9 of the CTMR and Article 5 of
the TMD specify that a trademark
infringement shall be considered to havebeen committed when any of the three typesof signs is used in a transaction.
a) A sign identical with a registeredtrademark used for goods or services
identical with those for which thetrademark is registered;b) Any sign identical with or similar to aregistered trademark that is likely to cause
confusion (a likelihood of confusion) amongsome of the general consumers because thesign is used for goods or services identicalwith or similar to the goods or services forwhich an EU trademark has beenregistered. This likelihood of confusion
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would associate the indication with aregistered trademark. This is why alikelihood of association is often explained inconnection with non-origin association.
Therefore, the concept of a “likelihood of
association” is considered to be wider thanthe concept of a “likelihood of confusion” inits broad sense. (A likelihood of “confusion”
includes a case where similar signs mislead
consumers into believing that the owners of
those
signs
have
some
economic
relationships.) It has been said that the proofof a likelihood of confusion is unnecessary fortheestablishmentofatrademarkinfringement as long as a likelihood of
association has been proven. As explained
above, the Uniform Benelux Law on
Trademarks is said to have protected thefunction of a trademark as an attraction for
consumers with the recognition that a
trademark is more than an indication that
simply distinguishes the origin of goods fromthat of other goods and that a trademark
stays in the mind of the public and gives
consumers a sense of trust toward the goods
bearing the trademark separately from asense of trust given by the origin, source, andquality of the goods.
As such concepts that have been used in
the Uniform Benelux Law on Trademarks
were adopted in the Trademark Directive andin the Trademark Regulation, some people
naturally consider the said system to provide
protection not only for the trademark
function of indicating the origin but also forother functions as well.
However, it is not clear why and how theEuropean trademark system has come toadopt the term “likelihood of association.”
Some people say that the system is just a
product of compromise among the Member
States. Naturally, strong oppositions against
the practice of recognizing such a broad scopeof protection have been expressed in sometheories and precedents, especially in the
United Kingdom.
For instance, in relevant precedents in
the United Kingdom, it has been pointed out
that, since the TMD has a provision
stipulating a likelihood of confusion, theincludes a likelihood of association; orc) Any sign identical with or similar to aregistered trademark that is used inrelation to goods or services unlike thosefor which the trademark is registered. In
this case, the registered trademark shouldhave a reputation within the EU territory(in the Member States), and the sign wasused without due cause for the purpose ofgaining
unjustprofitsfromthedistinctiveness and reputation of the said
trademark or for the purpose of damaging
its distinctiveness or reputation.
One of the noteworthy alterations to theconventional scopeofprotection for
trademarks is that the likelihood of
association is included in the concept of a“likelihood of confusion” as specified in b)
above. Another noticeable alteration is that
protection is considered necessary for a
trademark with reputation in c) even if there
is no similarity in goods or services.
This paper shed light on the disputes
over the concept of “likelihood of association”
and relevant judgments handed down by the
ECJ.

3

Relationship between a likelihood ofconfusion and a likelihood of
association
The concept of “likelihood of association”
specified in Article 5(1)(b) TMD is said tohave been originated from the Uniform
Benelux Law on Trademarks. Many
publications have pointed out that the terms
regarding a likelihood of association wereadopted into the European trademark system
as the Benelux states strongly recommended
the adoption at the negotiation table for theestablishment of the system.
First of all, please note that the term “alikelihood of association” does not herein
imply such association as licensing or
alliance, unlike cases when the term is used
in a broader sense in the context of referringto the contents of a likelihood of confusion.
The likelihood of association is not an issue ofthe origin of goods to which an indication is
attached but an issue of whether a person
who sees an allegedly infringing indication
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disregarded the importance of the trademark
function of advertisement in terms of thecurrent value of a trademark. With regard to
the use of a trademark as an advertisement,
some people say that the reputation of a
trademark should be protected in a casespecified in Article 5(1)(b) TMD; in this case,the goods are considered similar in view ofthe fact that a certain level of protection isprovided for a trademark with a reputation
despite the lack of similarity between the
goods under Article 5(2).
The ECJ has kept its stance that alikelihood of association is not enough toestablish a trademark infringement. This
stance and the theories supporting the stanceare based on the interpretation that it would
be enough to give legal protection to thefunction of a trademark as an indicator of theorigin of goods or services. That is the mostbasic function of a trademark that “gives an
exclusive right to the trademark owner toattach the trademark to certain products,
making them distinctive.” The economic
value of a trademark created by othertrademark functions, such as a function of
accumulating consumers’ trust in the qualityof goods or a function of advertising themarked goods, may be legally protected
merely as a result of the protection for thisbasic function. Even if the necessity ofprotection for those functions is recognized,
some people would remain critical ofproviding a broad scope of protection under
Article 5(1)(b), which does not specify theconditions under which protection may beprovided, whereas Article 5(2) provides
protection only when such conditions as thenecessity of a high level of distinctiveness or
reputation are satisfied.

interpretation that a mere likelihood of
association shall be enough to establish an
infringement lacked legal grounds. In
practice, the interpretation that a trademark
should be protected even if there is only alikelihood of association could create an
exclusive right in the area irrelevant to thetransaction with the trademark owner andthereby gives an exclusive right to thetrademark itself. Therefore, a likelihood ofconfusion is required for the establishment of
an infringement.
The ECJ presented its interpretation ofthis issue in the Sabel judgment as follows.
Since this interpretation was repeatedly
mentioned in subsequent cases brought
before the Court, it could be said that thisissue was, though controversial, settled in
the Sabel Case.
The Court held that the term “alikelihood of association” may be used withthe following three meanings: (1) a likelihoodof direct confusion about the origin (so-called
narrow sense of confusion); (2) a likelihood of
indirect confusion about the origin (so-called
broad sense of confusion); and (3) noconfusion between two signs while consumers
find associations between the two signs. The
Court also held that, according to thewording of the TMD, the concept of likelihoodof association is not an alternative to that oflikelihood of confusion, but serves to define
the scope of protection and, therefore, that alikelihoodofassociation
shouldbeinterpreted as a concept subordinate to theconcept of a likelihood of confusion.
Furthermore, the Court presented its
interpretation that a likelihood of confusion
is required for the establishment of an
infringement.
The issue of how to interpret a“likelihood of association” may be boiled
down to a question of whether the trademark
laws of the Member States should provide
protection for the use of a trademark as an
attraction for customers, for example, the useof a trademark image or the trademark
function of advertising goods or services.
Some
peoplecriticizethat
theabove-mentioned judgment of the ECJ

4International exhaustion of trademark
rightsConcerning the acts prohibited under
Article 5(1) TMD and Article 9(1) CTMR,
Article 5(3) TMD (Article 9(2) CTMR as well)categorizes those acts into the following fourgroups: (a) affixing the sign to the goods or to
the packaging thereof; (b) offering the goods,
or putting them on the market or stocking
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the Community” and the legislative history of
why the term has come to be used in the
Directive should be interpreted to suggest thatthe Directive is limited to requiring theMember States to provide for exhaustion
within the Community; and (2) the purpose of
the TMD is to unify the trademark protection
systems in the Community for efficient andeffective trade within the Community market.
If the issue of exhaustion was left up to each
Member State, some Member States would
provide for international exhaustion whileothers provided for Community exhaustion.
Such confusion in interpretation would giverise to barriers to the free movement of goods
and therefore should be prevented.
This judgment has been criticized by somescholars. Such criticism can be categorized
into the following three groups. First of all, thecritics argued that it was inappropriate toconsider the Silhouette Case to be a dispute
over the applicability of the principle ofexhaustion to goods imported from outside theCommunity(international
exhaustion)
because the Silhouette Case, where the goods
were initially sold within the EEA market,
should be subject to Article 7(1) of the TMD.
Secondly,
critics
questioned
theappropriateness of using the legislative
history as a basis to interpret that alegislative judgment, though controversial,
was made on the scope of application of theprinciple of exhaustion. Thirdly, critics pointed
out that no explanation had been given on theessence of the principle of exhaustion, i.e., theinterpretation of the scope of a trademark
right.
In this paper, in order to examine thesecond criticism, we first reviewed thelegislative history of the establishment of aprovision specifying the exhaustion principle
in the TMD and the CTMR. The Proposal for a
first Council Directive to approximate thelaws of the Member States relating totrademarks publicized in 1980 had aprovision: “The trade mark shall not entitle
the proprietor thereof to prohibit its use inrelation to goods that have been put on themarket under that trade mark by the
proprietor or with his consent.” It is clear fromthem for these purposes under that sign, oroffering or supplying services thereunder; (c)importing or exporting the goods under thesign; and (d) using the sign on business papers
and in advertising.
This means that, under the European
trademark system, the owner of a trademark
is entitled to exercise his/her right on the
genuine goods bearing the trademark thathave been legally introduced into the market
for distribution or import. However, theEuropean trademark system restricts thetrademark owners’ rights to some extent.
Article 7 specifies the concept of exhaustion of
trademark rights. The first paragraph of said
Article stipulates, “The trade mark shall notentitle the proprietor to prohibit its use inrelation to goods that have been put on themarket in the Community under that trade
mark by the proprietor or with his consent,”
while the second paragraph specifies a casewhere the exhaustion principle does not apply
by stating “Paragraph 1 shall not apply where
there exist legitimate reasons for the
proprietor to oppose further commercializationof the goods, especially where the condition of
the goods is changed or impaired after they
have been put on the market.”Paragraph 1 specifies that the principle ofexhaustion shall apply to the goods that havebeen legally put on the market in the“Community”(so-called“Community
exhaustion”). However, it has not necessarily
been clear as to how one should interpret anddetermine the applicability of the principle ofexhaustion to any goods that were initially puton the market outside the Community(“international exhaustion”). This lack ofclarity is attributable to the fact that not a few
Member States adopted the principle ofinternational exhaustion in their respective
domestic laws before the establishment of theEuropean trademark system.
This lack of clarity was solved when the
ECJ handed down a judgment for the
Silhouette Case in 1998 by stating thatnational rules providing for international
exhaustion of trademark rights are contrary to
the TMD. The Court held as follows: (1) thewording of the TMD that contains the term “in5
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guaranteeing the identity of the origin ofgoods and, therefore, that any trademark
system with no regard to this trademark
function is inappropriate. For those whointerpret that a trademark right is the right ofcontrol over the first use of the trademark
attached to the goods to be put on the EU and
EEA markets, this stance would prompt themto identify the functions of a trademark thatshould be protected by giving a trademark
owner such right of control. A right of control
over the first marketing of goods plays avariety of roles such as the maintenance ofquality guarantee, pricing system, andadvertisement value. Thus, it is necessary to
examine the contents of each of those roles.

the explanatory memorandum as well that the
principle of international exhaustion was
adopted. The memorandum also clearly statesthat the principle of exhaustion is a directconsequence of its “function as an indicator of
origin” and that the place where the marked
product is initially put on the market is notimportant in this respect. However, thisprinciple was criticized by the European
Parliament. As a result, the condition that the
goods in question must have been put on amarket “in the Community” was added to thefinal TMD in 1984. The reason for thisalteration was unclear. It was simply
explained to the public that the Community
Legislator must refrain from introducing theprinciple of international exhaustion, andmust establish the rule of Community-wide
exhaustion.
The
conversion
totheCommunity-exhaustion principle is widely
regarded as an economic and political decision
made in response to the pressure from theindustry opposing the adoption of the principle
of international exhaustion. Therefore, thedecision to establish of the Community
exhaustion principle was not made in relation
to the functions of a trademark. In thesubsequent Sebago Case, which upheld the
Silhouette judgment and denied international
exhaustion, although it was a case where theuse of a trademark for parallel-imported goods
did not damage its functions of indicating theorigin and guaranteeing the quality, the ECJ
denied the international exhaustion based on
the TMD. This indicates that the Court
considered this issue as irrelevant to the issueof trademark functions. This judgment
resulted in the interpretation that a
trademark right is the right of control over the
first use of the trademark that is attached to
the goods to be put initially on the EU and
EEA markets.
However, many theories criticized that it
would allow decisions and legislation to bemade on whether to apply the principle ofinternational exhaustion without taking into
consideration the functions of a trademark.
These theories share the same stance that themost essential function of a trademark thatshould be legally protected is the function of

5

The applicability of the principle ofexhaustion of rights
On the other hand, the adoption of theprinciple of Community exhaustion is
specified in Article 7(1) TMD (Article 13(1)CTMR). However, even when a trademark
right is exhausted as the conditions stipulated
in said provision are satisfied, there are
exceptional cases where the exhaustion ofright is denied under Article 7(2) TMD (Article
13(2) CTMR). Article 7(2) sets forth that
Paragraph 1, which specifies the exhaustion ofrights, shall not apply to a case where there
exists a legitimate reason for the owner of a
trademarkto
opposefurthercommercialization of the goods bearing thetrademark, especially where the condition of
the goods is altered or impaired after they
have been put on the market. A legitimate
reason is considered to exist if a product has
been physically changed. This provision is
generally regarded as providing protection for
the trademark function of indicating the originof marked goods.
A question could be raised as to what
constitutes a “legitimate reason” in various
cases, including a case where a product has
been physically altered or damaged. In somerecent cases, the Court mentioned in its
judgments not only the effect on the
trademark function of indicating the origin of
the marked goods but also the likelihood of theuse of the trademark to damage the quality of
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presented in previous cases. The essentialfunction of the trademark is “to guarantee tothe consumer or end user the identity of the
trade-marked product’s origin by enabling him
to distinguish it without any risk of confusionfrom products of different origin.”
In the Bristol Case, for instance, theCourt judged that a trademark owner may not
exercise his right against an act of
repackaging because the act is not considered
to be damaging to the trademark functions
when (1) the use of the trademark right by theowner would not contribute to the artificial
partitioning of the markets between Member
States (it would be necessary to take into
consideration the effective access to themarket of the importing State and thenecessity of repackaging), (2) the repackaging
would not adversely affect the original
condition of the product, (3) it is stated on the
new packaging by whom the product has been
repackaged, (4) the presentation of therepackaged product is not such as to be liable
to damage the reputation of the trademark
and of its owner, and (5) the importer gives
prior notice to the trademark owner before therepackaged product is marketed. It should be
noted that these conditions were reexaminedin subsequent cases in terms of the specificcontents of each of the conditions and theappropriateness thereof and were, as a result,altered in many ways. Therefore, these
conditions should not be regarded as
established criteria generally used. It is
widely believed that these conditions were
established in consideration of special
circumstances surrounding pharmaceuticalproducts. For this reason, not all of the fiveconditions were applied to the case where alabel on the bottle of whiskey was reaffixed.
The second type is a case concerning
replacement of a trademark.
The term “replacement” means a casewhere, as a trademark owner uses different
trademarks for the same product in theexporting country and the importing country,
an importer of the genuine product replaces
the trademark used in the exporting country
with the trademark used in the importing
country.

the goods or the reputation of the trademark.
In this report, cases where the existence ofsuch a legitimate reason had been disputed
were categorized into three types for further
analysis.
The first type is a case regarding
repackaging of a product. It has long been
debated whether a trademark owner isentitled to exercise his right if a company
purchases
markedgoods(especiallypharmaceutical products) in one Member
State and repackages them and reaffixes thetrademark on the new packaging before
importing them into another Member State.
The ECJ had handed down judgments for
similar cases even before the establishment of
the European trademark system. As described
below, the Court considered that the main
issues in those cases can be boiled down to theissue of interpretation of Article 30 and Article
36 of the EC Treaty. In the relevant precedents
after the establishment of the TMD, the Court
took a consistent stance in its judgments bysaying that those Articles of the EC Treaty
and Article 7 of the TMD are intended toreconcile the fundamental interest inprotecting trademark rights with thefundamental interest in the free movement ofgoods within the common market and,
therefore, that those provisions, which pursue
the same result, must be interpreted in thesame way. For this reason, as far as this issue
is concerned, the interpretation has remained
the same before and after the establishment of
the European trademark system. In otherwords, a judgment has been made based onwhether a particular case falls under Article
36 of the EC Treaty, where restrictions onimports and exports are allowed for the
purpose of protecting the specific subject
matter of an industrial property right and,more specifically, based on what “specificsubject matter” of a trademark right means. It
was in this context that the European Court
presented its interpretation on what theessential function of a trademark is.
Even after the establishment of theEuropean trademark system, the European
Court’s interpretation on the essentialfunction of a trademark is the same as that7
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series of the above-mentioned cases about
repackaging of pharmaceutical products,
where the Court presented its interpretationthat the trademark owner may exercise its
right if the presentation of the repackaged
product is liable to damage the reputation of
the trademark. The Dior judgment wasparticularly noteworthy in that the Court
recognized the necessity of the protection for
the image of a trademark by holding that, inthe case of prestigious, luxury goods, thereseller must not act unfairly in relation to thelegitimate interests of the proprietor of the
trademark and that the trademark law should
allow the trademark owner to prohibit a seller
from creating an advertisement for a marked
product that would affect the value of the
trademark by reducing the aura of luxury of
the goods and the trademark or the allure andprestigious image of the goods in question.
In view of the court judgments handed
down in these three types of precedents, itwould be safe to conclude that the Court
presumes that the essential function of a
trademark is to guarantee the identity of theorigin and considers it necessary to protect theprestigious image and good reputation of a
trademark with such image and reputation.
Article 5(2) of the TMD (Article 9(1)(c) of theCTMR) protects any trademark that has
gained reputation against the use thereof insuch a way as to be liable to damage thedistinctiveness and reputation of the
trademark. Such interpretation that theadvertisement function of a trademark should
be protected under the trademark law is inline with the said provisions to protect theadvertisement value of a trademark.
Such interpretation, however, has givenrise to the following questions.
First, as seen in the above-described
precedents, parallel imports are not subject to
Article 5(2) but to Article 5(1), which classifies
parallel imports into two categories. Therefore,
it should be carefully determined whether it isappropriate to use this Article as a basis forprotecting the reputation in cases where theapplicability of Article 5(1) is disputed.
Second, in relation to the precedents, itwould be possible to reach the same conclusion

Some cases of replacement of a trademark
were distinguished from those concerning
repackaging and were subject to conditions
different from those used in the latter cases.
In those cases, the essential trademark
function of “guaranteeing the origin of goods”
merely means that the trademark owner isentitled to give identity to a product by
putting an indication thereon. The function ofguaranteeing the origin of goods would bedamaged if a third party were allowed to put
an indication on the goods. Even if those
products are genuine, that function would bedamaged. The Court seems to give greater
protection to a case of replacement of a
trademark than the protection provided in acase of repackaging. On the other hand, insome cases, the Court concluded that bothcases were the same in substance. In suchcases, the Court based its judgment on theabove-mentioned conditions presented in theBristol Case.
The third type is a case where a
trademark is used in advertising.
In this case, it is generally believed thatthe reseller was free to make use of the
trademark in order to bring to the public's
attention the further commercialization of
goods as long as the circulation of those goods
that had legally been put on the Community
market was considered legal. However, in thecase of use of a trademark in an advertisement
for sale of used goods, the Court stated that alegitimate reason is considered to exist for the
trademark owner to exercise his right against
any use of the trademark in such a way thatthe reseller of used cars has commercial
connections with the trademark owner. This
interpretation could be made in considerationof the trademark function of guaranteeing theidentity of the origin of goods, which is aconventional function of a trademark.
One of the cases that fall under thiscategory is the Dior Case, where the use of a
trademark in an advertisement in such a waythat could damage the reputation of the
trademark was considered to constitute a“legitimate reason” specified in Article 7(2) inprinciple. The Court maintained its stance ofprotecting the reputation of a trademark in a
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undefined.
Regarding a case of replacement of a
trademark, which falls under the second
category mentioned above, some people
criticized that the scope of protection wasdetermined without taking into consideration
specific circumstances of each case. From theperspective of trademark functions, as pointed
out in some precedents, it would be difficult toapply the same conditions to both repackaging
and replacement of a trademark. The term
“origin,” used in the trademark law, does notmean that a product was, in fact, produced in
the exporting State and sold in the importing
State by the same company. Therefore, itwould be possible to interpret that a third
party’s act of putting a new trademark on
goods without the trademark owner’s consent
constitutes a trademark infringement inprinciple.

even when protection is presumed to beprovided for the trademark function ofguaranteeing the origin. In sum, a trademark
owner has the right to exclusively decide whento put a product bearing its trademark on amarket for the first time and what packaging
and user instructions it should add to the
product. Without such right, the trademark
owner would not be able to bear responsibility
for its product and enjoy the goodwill
accumulated in the trademark. If an act of
repackaging makes the trademark ownerresponsible for an outcome that the trademark
owner has nothing to do with, it may be
explained that the trademark function ofguaranteeing the origin of goods could bedamaged.
The Dior judgment should also be taken
into account to examine this issue.
The Dior Case is often interpreted as a
case
where
the
Court
clarifiedits
understanding that protection should be
provided to the reparation of a trademark(advertisement
value).
Some
theories
interpret that protection should be provided tothe act of selling marked goods in an
atmosphere requested by the trademark owner.
In other words, this interpretation would
allow a trademark owner to have the right tocontrol the method of selling goods bearing his
trademark even when those goods have been
put on a market legally.
Another point to examine in relation to
the above-mentioned interpretation is underwhat conditions the Court would consider the
reputation of a trademark to have beendamaged. It should be noted that, in the Dior
judgment, the Court took into consideration
whether the defendant’s way of using thetrademark was customary in that industry.
The Court did not require the reseller toadvertise the marked goods in an atmospheresimilar to the one in which the dealers, whowere designated by the trademark owner,advertise the goods. In other words, the Court
did not allow the trademark owner to demandthat advertisement should be made in the way
they preferred. This reveals that the concept of“reputation,” which was subject to protectionin the Dior Case, has, in fact, remained

6

Conclusion
As described in the preceding sections,the issue of how to interpret trademark
functions has remained unsolved. From theperspective of trademark functions, I foundnone of the interpretation convincing enoughto justify the necessity of protection for the
trademark function of quality guarantee andadvertisement.
In this paper, I examined three major
issues. The first issue is a likelihood of
association, which was explicitly denied by
the case-law. The second issue is theinternational exhaustion of rights. This
concept is not a theory based on the
trademark law but rather an interpretation
made solely for economic and politicalreasons. As far as Japan is concerned, since
this country does not apply the principle ofexhaustion of rights to parallel imports, I
find it difficult to consider the principle ofinternational
exhaustiontobeaninterpretation theory, while it may beconsidered a legislative theory. The third
issue is “legitimate reasons” to denyexhaustion. Some of the judgments handed
down by the European Court of Justice may
be interpreted that the Court decided toprotect the reputation or image of a9

IIP Bulletin 2007

trademark even when such protection was
not necessary to guarantee the origin. This
judgment was justifiable because theEuropean trademark system had a rule toprotect famous indications. Since theJapanese Trademark Act lacks such rule, theCourt’s judgment does not suggest that thetrademark function of advertisement such as
reputation or image is protectable in Japan.
It is clear from relevant precedents in
Europe that, when protection is demanded
for a trademark function other than thefunction of guaranteeing the origin of goods,
there are various situations where suchprotection is considered necessary. Before
further consideration on this matter, it would
be necessary to clarify what really needs tobe protected. Some theories rightly pointed
out that a trademark owner should not use
his right as a means to partition markets sothat he can distribute his products under his
pricing policy. Such abusive use of a
trademark could occur depending on how todefine the trademark functions of quality
guarantee and advertisement and when toprotect such functions.
In order to study similar arguments inJapan, it would be necessary to analyze eachtrademark function by discussing a specificcase where the protection for that particularfunction is in dispute. It would also benecessary to carefully classify those cases byidentifying what specifically is at stake ineach case.

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IIP Bulletin 2007