IHT Internationale Heiztechnik GmbH and Uwe Danzinger v Ideal-Standard GmbH and Wabco Standard GmbH.
Date: 1994-06-22
15 The HAG II case, whose bearing on the main proceedings is the point of the question put by the national court, related to a situation where it was not just the name that was identical but also the products marketed by the parties to the dispute. This dispute, by contrast, relates to the use of an identical device for different products since Ideal-Standard GmbH is relying on its registration of the trade mark "Ideal Standard" for sanitary fittings in order to oppose the use of that device for heating equipment.
16 It is common ground that the right of prohibition stemming from a protected trade mark, whether protected by registration or on some other basis, extends beyond the products for which the trade mark has been acquired. The object of trade-mark law is to protect owners against contrivances of third parties who might seek, by creating a risk of confusion amongst consumers, to take advantage of the reputation accruing to the trade mark (see Case 102/77 Hoffmann-La Roche v Centrafarm [1978] ECR 1139, paragraph 7). That risk may arise from the use of an identical device for products different from those for which a trade mark has been acquired (by registration or otherwise) where the products in question are sufficiently close to induce users seeing the same device on those products to conclude that the products come from the same undertaking. Similarity of the products is thus part of the concept of risk of confusion and must be assessed in relation to the purpose of trade-mark law.
18 As regards the period before the entry into force of the First Council Directive (89/104/EEC) of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1), which was postponed to 31 December 1992 by Article 1 of Council Decision 92/10/EEC of 19 December 1991 (OJ 1992 L 6, p. 35), that being the material period for the main dispute, the Court held in Case C-317/91 Deutsche Renault v Audi [1993] ECR I-6227 that "the determination of the criteria allowing the conclusion to be drawn that there is a risk of confusion is part of the detailed rules for protection of trade marks, which ... are a matter for national law" (paragraph 31) and "Community law does not lay down any criterion requiring a strict interpretation of the risk of confusion" (paragraph 32).
21 Since this case concerns a situation where the trade mark has been assigned for one State only and the question whether the solution in HAG II regarding the splitting of a mark as a result of sequestration also applies in the event of splitting by voluntary act, it should be noted first, as the United Kingdom pointed out, that national trade-mark rights are not only territorial but also independent of each other.
33 On the basis of the second sentence of Article 36 of the Treaty the Court has consistently held:
"Inasmuch as it provides an exception to one of the fundamental principles of the common market, Article 36 in fact only admits of derogations from the free movement of goods where such derogations are justified for the purpose of safeguarding rights which constitute the specific subject-matter of this property.
In relation to trade marks, the specific subject-matter of the industrial property is the guarantee that the owner of the trade mark has the exclusive right to use that trade mark, for the purpose of putting products protected by the trade mark into circulation for the first time, and is therefore intended to protect him against competitors wishing to take advantage of the status and reputation of the trade mark by selling products illegally bearing that trade mark.
An obstacle to the free movement of goods may arise out of the existence, within a national legislation concerning industrial and commercial property, of provisions laying down that a trade mark owner' s right is not exhausted when the product protected by the trade mark is marketed in another Member State, with the result that the trade mark owner can [oppose] importation of the product into his own Member State when it has been marketed in another Member State.
Such an obstacle is not justified when the product has been put onto the market in a legal manner in the Member State from which it has been imported, by the trade mark owner himself or with his consent, so that there can be no question of abuse or infringement of the trade mark.
In fact, if a trade mark owner could prevent the import of protected products marketed by him or with his consent in another Member State, he would be able to partition off national markets and thereby restrict trade between Member States, in a situation where no such restriction was necessary to guarantee the essence of the exclusive right flowing from the trade mark" (see Case 16/74 Centrafarm v Winthrop [1974] ECR 1183, paragraphs 7 to 11).
34 So, application of a national law which would give the trade-mark owner in the importing State the right to oppose the marketing of products which have been put into circulation in the exporting State by him or with his consent is precluded as contrary to Articles 30 and 36. This principle, known as the exhaustion of rights, applies where the owner of the trade mark in the importing State and the owner of the trade mark in the exporting State are the same or where, even if they are separate persons, they are economically linked. A number of situations are covered: products put into circulation by the same undertaking, by a licensee, by a parent company, by a subsidiary of the same group, or by an exclusive distributor.
35 There are numerous instances in national case-law and Community case-law where the trade mark had been assigned to a subsidiary or to an exclusive distributor in order to enable those undertakings to protect their national markets against parallel imports by taking advantage of restrictive approaches to the exhaustion of rights in the national laws of some States.
36 Articles 30 and 36 defeat such manipulation of trade-mark rights since they preclude national laws which enable the holder of the right to oppose imports.
37 In the situations described above (paragraph 34) the function of the trade mark is in no way called in question by freedom to import. As was held in HAG II: "For the trade mark to be able to fulfil [its] role, it must offer a guarantee that all goods bearing it have been produced under the control of a single undertaking which is accountable for their quality" (paragraph 13). In all the cases mentioned, control was in the hands of a single body: the group of companies in the case of products put into circulation by a subsidiary; the manufacturer in the case of products marketed by the distributor; the licensor in the case of products marketed by a licensee. In the case of a licence, the licensor can control the quality of the licensee' s products by including in the contract clauses requiring the licensee to comply with his instructions and giving him the possibility of verifying such compliance. The origin which the trade mark is intended to guarantee is the same: it is not defined by reference to the manufacturer but by reference to the point of control of manufacture (see the statement of grounds for the Benelux Convention and the Uniform Law, Bulletin Benelux, 1962-2, p. 36).
38 It must further be stressed that the decisive factor is the possibility of control over the quality of goods, not the actual exercise of that control. Accordingly, a national law allowing the licensor to oppose importation of the licensee' s products on grounds of poor quality would be precluded as contrary to Articles 30 and 36: if the licensor tolerates the manufacture of poor quality products, despite having contractual means of preventing it, he must bear the responsibility. Similarly if the manufacture of products is decentralized within a group of companies and the subsidiaries in each of the Member States manufacture products whose quality is geared to the particularities of each national market, a national law which enabled one subsidiary of the group to oppose the marketing in the territory of that State of products manufactured by an affiliated company on grounds of those quality differences would also be precluded. Articles 30 and 36 require the group to bear the consequences of its choice.
41 That situation must be clearly distinguished from the case where the imported products come from a licensee or a subsidiary to which ownership of the trade-mark right has been assigned in the exporting State: a contract of assignment by itself, that is in the absence of any economic link, does not give the assignor any means of controlling the quality of products which are marketed by the assignee and to which the latter has affixed the trade mark.
43 That view must be rejected. The consent implicit in any assignment is not the consent required for application of the doctrine of exhaustion of rights. For that, the owner of the right in the importing State must, directly or indirectly, be able to determine the products to which the trade mark may be affixed in the exporting State and to control their quality. That power is lost if, by assignment, control over the trade mark is surrendered to a third party having no economic link with the assignor.
44 The insulation of markets where, for two Member States of the Community, there are separate trade-mark owners having no economic links is a result that has already been accepted by the Court in HAG II. However, since that was a case where unitary ownership was divided following sequestration, it has been submitted that the same result does not have to be adopted in the case of voluntary division.
45 That view cannot be accepted because it is contrary to the reasoning of the Court in HAG II. The Court began by noting that trade-mark rights are an essential element in the system of undistorted competition which the Treaty seeks to establish (paragraph 13). It went on to recall the identifying function of trade marks and, in a passage cited in paragraph 37 above, the conditions for trade marks to be able to fulfil that role. The Court further noted that the scope of the exclusive right which is the specific subject-matter of the trade mark must be determined having regard to its function (paragraph 14). It stressed that in that case the determinant factor was absence of consent of the proprietor of the trade mark in the importing State to the putting into circulation in the exporting State of products marketed by the proprietor of the right in the latter State (paragraph 15). It concluded that free movement of the goods would undermine the essential function of the trade mark: consumers would no longer be able to identify for certain the origin of the marked goods and the proprietor of the trade mark could be held responsible for the poor quality of goods for which he was in no way accountable (paragraph 16).
46 Those considerations apply, as was rightly stressed by the United Kingdom and Germany and was held by the Landgericht Duesseldorf at first instance, whether the splitting of the trade mark originally held by the same owner is due to an act of public authority or a contractual assignment.
47 IHT in particular has submitted that the owner of a trade mark who assigns the trade mark in one Member State, while retaining it in others, must accept the consequences of the weakening of the identifying function of the trade mark flowing from that assignment. By a territorially limited assignment, the owner voluntarily renounces his position as the only person marketing goods bearing the trade mark in question in the Community.
48 That argument must be rejected. It fails to take account of the fact that, since trade-mark rights are territorial, the function of the trade mark is to be assessed by reference to a particular territory (paragraph 18 of HAG II).
55 The regulation on the Community trade mark referred to above also creates a right with a unitary character. Subject to certain exceptions (see in this respect Article 106 on the prohibition of use of Community trade marks and Article 107 on prior rights applicable to particular localities), the Community trade mark "shall have equal effect throughout the Community: it shall not be registered, transferred or surrendered or be the subject of a decision revoking the rights of the proprietor or declaring it invalid, nor shall its use be prohibited, save in respect of the whole Community" (Article 1(2)).