WRITTEN QUESTION P-3726/98

by Werner Langen (PPE) to the Commission

(25 November 1998)

Subject: Principle of exhaustion/EU trade mark directive

In its answer to Question P-0737/98(1) the Commission states:

1. "Current international economic relations being what they are, Community exhaustion is likely to have certain advantages for consumers, depending on the product. In particular, it can guarantee the sustained quality of the products moving around the internal market and ensure continuity of after-sales service."

2. " ... that at present, none of the Community's main trading partners or its Member States apply the principle of the international exhaustion of industrial property rights."

3. Referring to the Silhouette case and the Advocate-General's conclusions, that "the relevant provision of the Directive constitutes a total harmonisation measure."

Can the Commission explain:

1. How far sustained quality depends on the introduction of the Europe-wide exhaustion of trade mark rights?

2. Are branded products imported from non-European economic areas not, as a rule, identical products?

3. Are European sales outlets not in any case frequently supplied by non-European production plants owned by the holder of the trade mark?

4. Does the Commission stand by its contention that maintaining continuity of after-sales service entirely depends on Europe-wide exhaustion, given that there are, according to newspaper reports, firms which urge their dealers to increase the prices of spare parts and maintenance for owners of grey market products?

5. Does the Commission not consider Japan, the USA, Switzerland, and South Korea to be main trading partners of the Community and its Member States, given that these countries - as judgments of the highest courts prove - accept and endorse the principle of international exhaustion, with exceptions in South Korea's case?

6. Would harmonisation not have occurred even if international exhaustion had been generally introduced, without the price-boosting disadvantages occurring for the consumer?

Answer by Mr Monti on behalf of the Commission

(14 January 1999)

1. and 2. The international exhaustion of trade mark rights could indeed pose some risks with regard to the quality of products sold in the Community. While it is not possible to apply this claim generally, it seems that some types of product sold under the same trade mark throughout the world can have differing characteristics as a result of the requirements of the local markets in which they are sold (e.g. because of the local climate). In such cases, international exhaustion of rights could mean that a consumer living in the Community might find that a parallel import of the product differs from that to which he is accustomed. In addition, there is a risk that the international exhaustion of rights may result in a certain number of counterfeit goods among the flow of unchecked imports, which would obviously be to the disadvantage of consumers.

3. It is true that distributors located in the Community may be supplied by trade mark holders with goods manufactured outside the Community. This is a decision that is up to each company and is part of its industrial strategy. The Commission has no detailed figures on this matter at the moment. The study which the Commission has ordered on the economic consequences of the current situation in the Community concerning the exhaustion of rights should provide more information on the subject.

4. The Commission has no knowledge of situations whereby distributors and retailers are urged by trade mark holders to charge more for after-sales service when the product in question has been imported via the grey market.

5. The initial indications emerging from the study that the Commission has ordered on the economic consequences that currently apply in the Community and its major partners concerning the exhaustion of rights indicate that the situation is rather complex. Especially in the United States and Japan, the Community's main trading partners, international exhaustion is not applied on an automatic and general basis. In the United States, for example, it is possible for holders of a trade mark to restrict parallel imports when there is no economic and legal link between the firm that holds the trade mark and the manufacturer in the foreign country, and when the product that is imported on the grey market is materially and qualitatively different from that sold domestically. As for Japan, the distribution contracts signed by trade mark holders and their retailers govern this matter and impose contractual obligations on the different parties.

6. Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks(2) represents, as far as the matter of exhaustion is concerned, a measure for total harmonisation, and this was confirmed by the Court of Justice in the Silhouette case. It is not for the Commission to comment on the suggestion that the same degree of harmonisation would have been achieved if the directive had been worded differently.

(1) OJ C 402, 22.12.1998, p. 25.

(2) OJ L 40, 11.2.1989.