Opinion of the Economic and Social Committee on the "Exhaustion of registered trademark rights"
Date: 2001-01-24
Institutions: Provisional data
Subjects: copyright, registered trade mark, single market, trade-mark law

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directives, adopted between 1973 and 1999, covering not
only access to and exercise of non-life activities, but also more
specifically vehicle insurance, credit insurance, travel insurance
and legal protection insurance.

4.3.
The Committee is also concerned that the proposed
directive should not leave the way open for the principles and
procedures laid down by the consolidated directives to be
called into question.

Brussels, 24 January 2001.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Exhaustion of registered trademark
rights’

(2001/C 123/05)

On 13 July 2000 the Economic and Social Committee, acting under the third paragraph of Rule 23 of its
Rules of Procedure, decided to draw up an opinion on the Exhaustion of registered trademark rights.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 10 January 2001. The rapporteur was
Mrs Sa´nchez Miguel.

At its 378th plenary session of 24 and 25 January 2001(meeting of 24 January), the Economic and Social
Committee adopted the following opinion unanimously.

1.

Introduction

1.1.
The purpose of this opinion is to endorse the Com-
mission’s decision of May 2000 not to change the current
Community exhaustion regime for registered trademarks,
owing in part to the need to continue protecting European
goods and services identified by trademarks.

1.2.
Registered trademarks form part of the corpus of
legislation governing industrial and intellectual property rights.
At European level the discussion on registered trademarks has
focused on the accession of the European Community to the
Madrid Protocol and on the Community exhaustion regime.

Existing Community law (1) on industrial property
1.3.
rights (design, registered trademarks, copyright and similar
rights) provides for the principle of Community exhaustion of
rights. The purpose of
this regime is to guarantee free
movement of goods within the EU; it allows the owner of a
trademark to prevent imports of products bearing that trade-
mark which were first brought on to the market outside the
EU.

(1) Council Directive 89/104/EEC of 21 December 1988 to approxi-
mate the laws of the Member States relating to trade marks;
Council Regulation (EC) No 40/94 of 20 December 1993 on
the Community trade mark; Council Directive 87/54/EEC of
16 December 1986 on the legal protection of topographies of
semiconductor products; Council Directive 91/250/EEC of 14 May
1991 on the legal protection of computer programs; Council
Directive 92/100/EEC of 19 November 1992 on rental right and
lending right and on certain rights related to copyright in the field
of intellectual property; Council Regulation (EC) No 2100/94 of
27 July 1994 on Community plant variety rights; Directive
96/9/EC of the European Parliament and of the Council of
11 March 1996 on the legal protection of databases.

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1.4.
In November 1999 the Commission presented a
working document that was intended to form the basis for
future, more detailed, discussions in the group of experts
appointed by the Member States at the request of the Council
about a possible EU position on any change in the current
Community exhaustion arrangements.

2.1.4.
A change in the regime would produce a barely
perceptible reduction in consumer prices (0-2 %). The study
in prices would probably
also showed that the initial fall
disappear over the long term.

1.5.
At the Internal Market Council of 25 May 2000,
ministers exchanged contrasting views based on the outcome
of recent discussions in the group of experts. At this Council,
Commissioner Frederik Bolkestein informed the ministers of
the Member States that the Commission had decided not to
propose any change to the current Community exhaustion
regime.

1.6.
The exhaustion regime was included at the request of
the European Parliament, under Article 13 of Council Regu-
lation (EC) No 40/94 and Article 7 of Council Directive
89/104/EEC.

2. General comments: arguments for and against a

change in the Community exhaustion regime

2.1. The NERA study

2.1.1.
In November 1998 the Commission asked for a
study to be carried out (‘The economic consequences of the
choice of regime of exhaustion in the area of trademarks’) by
National Economic Research Associates (NERA), S.J. Berwin &
Co. and IFF Research.

The main aim of the study was to look at the
2.1.2.
potential economic consequences for the European Union of
any change in the exhaustion regime for trademarks. The study
analysed the effects that the exhaustion regimes (Community
and international) might have on prices and trade volumes,
market and product structures, and consumers, and the
impact of these regimes on macroeconomic indicators such as
employment.

2.1.3.
The study concluded that the only obvious benefici-
aries of a switch from the Community exhaustion regime to
an international exhaustion regime would be parallel importers
and the transport sector. National importers and exporters,
and manufacturers, would suffer most.

2.1.5.
The study did not quantify the potential job losses
that a change in the regime would cause, although it indicated
that jobs would probably be lost among ‘national’ suppliers of
a product, while new ones would be created among ‘external’
suppliers.

Other conclusions of the study were that a change in
2.1.6.
the Community exhaustion regime would affect the quality
of products, their availability to consumers and after-sales
services.

2.2. Public hearing

On 28 April 1999 the Commission organised a
2.2.1.
public hearing attended by 180 representatives of various
interest groups,
including owners of registered trademarks
from different industrial sectors, consumers, parallel traders
and retailers.

2.2.2.
At the hearing arguments were advanced for change
and for maintaining the current Community exhaustion
system:

— Those in favour of maintaining the current arrangements
argued that an international regime would lower the
economic value of trademark rights, which would have a
negative impact on research and innovation, and reduce
investment, causing higher unemployment.

— A number of participants argued against adopting the
international exhaustion system on the grounds that there
was a close link between parallel trade and piracy.

— Arguments supporting a change in the current regime
focused exclusively on the fall in prices (0-2 % according
to the NERA study) that would benefit European con-
sumers.

— The potential broader range of products was another
argument put forward by defenders of the international
exhaustion regime.

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2.3. Groups of experts in the Council

2.3.1.
The Commission has held a number of meetings
with the Member States and interest groups. Two meetings
have been held with experts from the Member States on the
basis of the working document prepared by the Commission
in November 1999.

consumers. However, the Community exhaustion regime also
furthers integration of the single market. An international
exhaustion regime could put European companies at a disad-
vantage, since there has been no equivalent process of
integration at global level as yet; SMEs would be particularly
affected, as they are covered by national trademark arrange-
ments, these being cheaper.

2.3.2.
arguments put forward by the national experts:

The ESC agrees in particular with the following

2.4.2. O t h e r i n t e l l e c t u a l p r o p e r t y r i g h t s

— The introduction and use of new technologies such as
electronic commerce may make a wider range of products
available to consumers at lower prices, so there would be
less reason to change the current exhaustion regime for
price reasons.

— In many cases products are protected not just by regis-
tered trademarks but by a number of intellectual property
rights (industrial designs). Introducing an international
exhaustion regime for registered trademarks would there-
fore have only a limited impact on a small number of
sectors.

— In Europe, registered trademarks are governed by Direc-
tive 89/104/EEC (national trademarks) and Regulation
(EC) No 40/94 (Community trademarks). It is essential
that exhaustion regimes should be the same for both
types of trademark (national and Community). Different
co-existing systems would create confusion in the market,
and among consumers, especially in terms of whether or
not a product with a specific trademark had been brought
onto the market legally.

2.4. Consequences of a possible change in regime

2.4.1. C o m m u n i t y l e g i s l a t i o n

First and foremost,

the Committee feels it

is
2.4.1.1.
essential that the exhaustion regime be the same for national
and Community registered trademarks. However, it must be
borne in mind that there can be no guarantee that the
exhaustion regime would be changed in both the legal
instruments regulating this area (the Directive for national
registered trademarks and the Regulation for Community
registered trademarks), since the Directive can be changed by
qualified majority in the Council, whereas amendment of the
Regulation requires unanimity.

2.4.2.1.
Registered trademarks are only a part of the corpus
of legislation dealing with intellectual and industrial property.
In practice, most products are covered by a complex of rights
relating to industrial property, registered trademarks, patents,
copyright and designs. It is rare for the trademark to be the
only industrial property right covering a product. For example,
in the case of an audio compact disc the music will be
protected by copyright, the technology by patent and the
trademark by registered trademark rights.

2.4.2.2.
The legislative processes relating to intellectual and
industrial property rights are likely to be complex and long-
drawn-out. The European-level discussion about designs began
in 1993 and has not yet finished. As the Commission recently
noted (1), changing the exhaustion regime for registered trade-
marks would not have much impact on the market because
most products are covered by a number of intellectual property
rights. The Commission does not consider it appropriate to
introduce an international exhaustion regime for all intellectual
property rights.

2.4.3. E c o n o m i c g r o w t h i n E u r o p e

2.4.3.1.
A change in the Community exhaustion regime
could in the long term inhibit investment in new products or
even result in the withdrawal of products with registered
trademarks that are already established on the market because
they cannot compete with imported products.

2.4.3.2.
Owners of registered trademarks might also decide
to cut post-sales services or other features of their products
that parallel importers do not provide to European consumers
because they are not subject to a Community standard.

2.4.1.2.
It is likely that some Member States would resist a
change in the Regulation, which might result in two different
exhaustion regimes existing alongside each other, a situation
that would only produce confusion in the market and among

(1) Commission Communication of 7 June 2000.

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2.4.3.3.
The Community exhaustion regime meets the
need to further integrate the single market. An international
exhaustion regime would put European companies at a
competitive disadvantage because such an integration process
has not taken place at global level. Conditions of access to
markets for products from third countries vary more at global
level than within the EU.

2.4.3.7.
Finally, differences in administrative requirements
or labour costs may affect the costs of parallel trade. Com-
munity policy has prevented such differences occurring within
the EU, which is not the case at international level.

2.4.3.4.
The single market has brought about economic
integration and a levelling-out of prices across the EU. These
conditions do not however exist on the global market. The
countries coming under the WTO thus do not form a customs
or economic union like the EU, or even a free-trade area.
Numerous tariff and non-tariff barriers still exist between these
countries, as do major differences in terms of their economies,
legal systems, levels of wealth and development, controls and
regulations.

3. Reasons to support the current Community exhaus-

tion regime

3.1. Consumers

2.4.3.5.
In addition to the possible consequences of a
change of regime for European manufacturers, consideration
must be given product marketing/distribution channels —
especially of specialist products — and franchising. At present,
franchising arrangements give European consumers access to
high-quality products with clear references. A change of regime
would give rise to confusion among European consumers,
who could come across products with well-known trademarks
but failing to meet their expectations of quality.

3.1.1.
The Committee believes that European consumers
currently demand a certain level of quality and post-sales
services, as well as competitive prices, and this is recognised in
European law. But above all they expect to pay for what they
believe they are getting. Sometimes producers of trademarks
use different designs or variations for different customers. For
example, the most popular brands of toothpaste in Europe are
mint-flavoured, whereas in Indonesia the most popular ones
are clove-flavoured. Another example would be lubricating
oils for engines, whose composition can vary depending on
the climate where they are to be used.

2.4.3.6.
Another important single market issue is the risk
of counterfeiting and piracy concerning products coming
from non-EU countries. As argued in the Green Paper on
counterfeiting and piracy and its follow-up communication (1),
account must be taken of:

— the negative impact of these products on the European

economy;

— the risk of parallel import channels being used for such

products;

— the need for action taken by the Commission in

implementing the green paper to be consistent.

(1) ESC opinion in OJ C 116 of 28.4.1999, rapporteur: Mr Malosse.
Green Paper — Combating counterfeiting and piracy in the Single
Market (COM(1998) 569 final); Communication — Follow-up to
the Green Paper on combating counterfeiting and piracy in the
Single Market (COM(2000) 789).

3.1.2.
Access to products that are not designed to meet the
climatic and technical requirements of European consumers
could pose a safety risk to them. It is important in this part of
the opinion to point to the possible impact on health in
Europe of parallel imports of pharmaceutical products, bearing
in mind that the pharmaceuticals sector in Europe is subject to
considerable surveillance to protect consumer health.

Availability: the current Community exhaustion regi-
3.1.3.
me ensures the availability of all types and ranges, not just
those that are most in demand. Thus an official vendor of
jeans, for example, will offer its customers all sizes, not just
those of the largest section of the population.

3.1.4.
Post-sales services: European consumers expect a
range of services to be provided by producers, which are not
available to them with parallel imports. A television bought
from an unofficial supplier may not come with any installation
services or
the instructions
accompanying imported products are usually in the language
of the country in which the parallel importer acquired the
product, not that of the consumer.

repair guarantee. Moreover,

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3.1.5.
Counterfeited and pirated products: The routes used
by parallel importers are often the same as those used for
pirated products. An international exhaustion regime might
trigger an increase in pirated products in the EU, the harmful
effects of which for the proper working of the single market
were confirmed in the replies to the green paper. As indicated
in point 2.4.3.6 above, the harmful effects on European
economic growth would also have repercussions for con-
sumers. The importers of such products are responsible for
proving that
is also
important to highlight the serious consequences of counter-
feiting and piracy for consumer protection and public health
and safety. Given that some counterfeited/pirated products are
in everyday use, the risks are frightening. Among the most
significant cases uncovered by the European Commission in
1999 (1) were 530 000 counterfeit toothbrushes, 21 tonnes of
counterfeit rice and energy drinks. The quality and origin of
these products evade any form of control by the Community
or Member State authorities.

they meet Community standards.

It

3.1.6.
Prices: Advocates of parallel trading cite reduced
prices as almost the sole argument in its favour. In fact, the
NERA study has now shown that price reductions are negligible
(between 0 and 2 %) and that they tend to disappear in the
long run. The NERA study also found that producers would
lose up to 35 % of earnings, resulting in less investment in
research and development for European products. But Euro-
pean producers must innovate constantly in order to compete
and provide more added value to consumers. This added value
is increasingly to be found in the ‘intellectual’ content of
the brand (whether this is a technological or image-related
innovation), which means that it is increasingly important for
this intellectual property to be protected.

3.2. Community legislation

3.2.1.
Keeping the current Community exhaustion regime
would not lead to any change in Community legislation
governing registered trademarks or any other industrial or
intellectual property rights, particularly regulations or direc-
tives.

(1) 1999 annual report on the Community’s customs operations

concerning piracy and counterfeiting.

3.3. Single market

3.3.1.
The Community exhaustion regime is a natural part
of the single market, in which obstacles to free circulation of
goods and people are being removed and the economies of
the Member States are converging.

The purpose of EU competition law is to prevent any
3.3.2.
obstacles to integration of the market, including obstacles to
consumers’ freedom to buy what they want wherever they
want in the EU. Competition law also provides an appropriate
framework in which companies that consider themselves
threatened or discriminated against in the face of potential
dominant market positions can lodge any complaints.

The current Community exhaustion regime provides
3.3.3.
assurance to producers and suppliers with respect to invest-
ment in research and development for new products.

3.4. Trade relations with third countries

3.4.1.
The first point to bear in mind is that the Community
exhaustion regime is a natural part of the single market in
which the Member State economies converge and which seeks
to remove obstacles to the free movement of goods.

3.4.2.
On a global level, there can be no valid comparison
between European integration and the attempt to remove
barriers to the free movement of goods on the one hand, and
the WTO process on the other. Neither is there a parallel
political process working to reduce existing differences
between the EU and third countries.

Trademarks are important at

level.
3.4.3.
European companies competing on the world market must
face companies with considerably lower production costs. The
Community exhaustion regime offers a degree of protection
to these companies and to non-European companies working
within the single market.

international

An international exhaustion regime would mean that
3.4.4.
a trademark established in the EU would be unable to penetrate
the markets of developing countries using marginal prices,
since these products would immediately return to the EU,
destroying the base market. Companies pursuing a marginal
price strategy would have to choose between not exporting, or
removing production from the EU to lower-cost markets.

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3.4.5.
It must also be borne in mind that parallel imports
from third countries can have a significant deterrent effect on
production and investment in innovation within the EU. This
would probably result in reduced European exports and greater
incentives to shift production to lower-cost locations than the
EU.

3.4.6.
dealing with possible abuses by certain companies.

EU competition law (1) represents the best way of

(1) Especially the following articles: Treaty Article 82 on abuse of

dominant positions.

Brussels, 24 January 2001.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Proposal for a Directive of the European
Parliament and of the Council amending Directive 80/232/EEC as regards the range of nominal
weights for coffee extracts and chicory extracts’

(2001/C 123/06)

On 23 October 2000 the Council decided to consult the Economic and Social Committee, under
Article 251 of the Treaty establishing the European Economic Community, on the above-mentioned
proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 10 January 2001. The rapporteur was
Mr Liverani.

At its 378th plenary session (meeting of 24 January 2001) the Economic and Social Committee
unanimously adopted the following opinion.

The present proposal follows up the obligation undertaken by
the Commission to amend Directive 80/232/EEC by adding
the mandatory range previously contained in the Directive on
coffee extracts and chicory extracts. The aim is to maintain a
legal basis in Community law for the range. The range need
not be adapted as it is sufficient to ensure free circulation of
goods in the sector.

Entry into force will be 20 days after the publication of the
Directive. This short period of time is justified because the
range is already part of the acquis and therefore has already
been implemented by all Member States.

The Committee endorses the Commission proposal.

Brussels, 24 January 2001.

The President

of the Economic and Social Committee

Göke FRERICHS