1. By order of 11 May 2000, received at the Court on 19 June 2000, the Bundesgerichtshof (Federal Court of Justice) referred to the Court for a preliminary ruling under Article 234 EC a question on the interpretation of Articles 28 EC and 30 EC and of Article 7(2) of 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), as amended by the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3, "the Directive" ).
2. That question was raised in proceedings brought by Van Doren + Q. GmbH ( "Van Doren" ), a wholesale and retail clothing company established in Cologne (Germany), against Lifestyle sports + sportswear Handelsgesellschaft mbH ( "Lifestyle" ), a company established in Berlin, and Michael Orth, its managing director, concerning the marketing by Lifestyle of clothing bearing the Stüssy trade mark, of which Van Doren is the exclusive distributor in Germany. Legal background
3. Article 5 of Directive 89/104 provides, under the heading "Rights conferred by a trade mark" : "1. The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade: (a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered; ... 3. The following, inter alia, may be prohibited under paragraphs 1 and 2: ... (b) offering the goods, or putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder; (c) importing or exporting the goods under the sign; ... "
4. Article 7(1) of the Directive provides under the heading "Exhaustion of the rights conferred by a trade mark" : "The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent."
5. Pursuant to Article 65(2) of the Agreement on the European Economic Area, read in conjunction with point 4 of Annex XVII thereto, Article 7(1) of the Directive was amended by replacing the words "in the Community" by "in a Contracting Party" .
6. Article 5(1) and (3) and Article 7(1) of the Directive were implemented in German law by Paragraph 14(1) to (3) and Paragraph 24(1) of the Gesetz über den Schutz von Marken und sonstigen Kennzeichen of 25 October 1994 (German law on the protection of trade marks and other distinctive signs; "the Markengesetz" ). The main proceedings and the question referred for a preliminary ruling
7. Stussy Inc., a company established in Irvine (United States) is the proprietor of the word and device mark "Stüssy" , which is registered in respect of clothing, in particular shirts, shorts, swimwear, T-shirts, track suits, waistcoats and trousers. Goods bearing this trade mark are marketed worldwide. They have no particular characteristic which would enable them to be recognised as having been allocated to a specific sales territory.
8. Under a dealership agreement of 1 May 1995, Van Doren has exclusive distribution rights in respect of Stussy Inc.'s products in Germany. Stussy Inc. authorised the claimant to bring legal proceedings in its own name to obtain injunctions against, and claim damages from, third parties for infringement of the trade mark.
9. According to Van Doren there is in each country of the European Economic Area ( "EEA" ) only one exclusive distributor and general importer for "Stüssy" articles and that distributor is contractually bound not to sell the goods to intermediaries for resale outside his contractual territory.
10. Lifestyle markets in Germany "Stüssy" articles which it has not acquired from Van Doren.
11. Van Doren brought proceedings against Lifestyle and Michael Orth before the German courts. It sought an injunction prohibiting such marketing, disclosure of information concerning their activities since 1 January 1995, and a declaration of liability for damages as from 1 January 1995. It maintained that the articles distributed by Lifestyle were products which had originally been put on the market in the United States, and that their distribution in the Federal Republic of Germany and other Member States had not been authorised by the trade mark proprietor.
12. Lifestyle and Michael Orth contended that those claims should be dismissed, arguing that the rights conferred by the trade mark in respect of the goods in question were exhausted. The defendants claim that they sourced the goods in the EEA where they had been put on the market by the trade mark proprietor or with his consent. The clothing purchased from Lifestyle as a test purchase in October 1996 had been acquired by it in the EEA from an intermediary who, Lifestyle and Michael Orth assumed, had purchased it from an authorised distributor.
13. Lifestyle submitted that it was not required to name the suppliers until such time as Van Doren proved the imperviousness of its distribution system.
14. At first instance, the court upheld most of the claims in the action.
15. However, on appeal by Lifestyle and Michael Orth most of the claims made by Van Doren were dismissed. The court hearing the appeal held that it had been for Van Doren to plead circumstances which established it as to some extent probable that the goods in question originated from imports which were put on the market in the EEA without the consent of the trade mark proprietor.
16. Van Doren appealed on a point of law to the Bundesgerichtshof.
17. In its order for reference that court points out that, according to the case-law of the Court of Justice (judgments in Case C-355/96 Silhouette International Schmied [1998] ECR I-4799 and Case C-173/98 Sebago and Maison Dubois [1999] ECR I-4103), there is exhaustion of the right conferred by a trade mark within the meaning of Article 7(1) of the Directive where the goods have been put on the market in the EEA under that mark by the trade mark proprietor or with his consent, but not where they were first put on the market outside the EEA.
18. It considers that the existence of the conditions for exhaustion of the trade mark right, which is a defence under Paragraph 24(1) of the Markengesetz, must in principle be proved by the defendant, according to the general principle that each party to proceedings must prove the existence of the conditions for application of the rule on which he relies.
19. According to the Bundesgerichtshof, a reversal, in trade mark law, of the burden of proof pursuant to general principles would be alien to the structure of that system because it would result in an unwarranted departure from the traditional scheme of tort law, according to which the existence of facts constituting an infringement of the protected right is generally evidence of unlawfulness so that it is not for the injured party to show unlawfulness, but, as a rule, for the alleged infringer to show the absence thereof. Furthermore, a reversal of the burden of proof would unduly prejudice the trade mark proprietor's exclusive rights. That would also limit the effect of EEA-wide exhaustion to such an extent as to render it almost redundant, even though the alleged trade mark infringer could easily show the origin of the goods in question.
20. The referring court points out that under Paragraph 14(2) of the Markengesetz third parties are prohibited from using a trade mark "without the consent of the trade mark owner" . In its view, although it is for the trade mark proprietor to prove that the conditions are satisfied to show "use" within the meaning of this provision, it is for the defendant to prove that the trade mark proprietor has granted consent, if he wishes to rely on it.
21. However, the referring court takes the view that if the burden of proof is imposed on the third party against whom a trade mark proprietor has brought proceedings, there is a risk that a dealer unconnected with the proprietor could be prohibited from marketing products bearing that mark even where the products have been put on the market in the EEA with the consent of the proprietor. In general, a dealer will be readily able to show from whom he has purchased goods but he will not be able to make his suppliers reveal the previous supplier or identify other links in the distribution chain. Moreover, even if he were able to trace the distribution channel back to the trade mark proprietor and to show that the goods were put on the market in the EEA with the consent of that proprietor, his supply source would be liable to dry up immediately.
22. Under those circumstances there is a risk that the trade mark proprietor will use the trade mark to partition national markets.
23. The court therefore raises the question whether Article 28 EC requires provision for an exception to the general rule that the full burden of proving the factual conditions for exhaustion of the right conferred by a trade mark lies with the third party. It considers that a possible solution might be to impose that burden on the third party only if the manufacturer has first used such means as can reasonably be expected of him to distinguish, by affixing signs, goods which have been put on the market in the EEA by him or with his consent from goods which have been put on the market outside the EEA. Where it appears that the trade mark proprietor consistently acts in such a way, the third party is required to prove that the conditions for exhaustion are satisfied, if, prima facie, the goods could have been first put on the market only outside the EEA.
24. As it considers that, against that background, the resolution of the dispute in the main proceedings turns on the interpretation of Articles 28 EC and 30 EC and Article 7(1) of the Directive, the Bundesgerichtshof has stayed proceedings and referred the following question to the Court for a preliminary ruling: "Are Articles 28 EC and 30 EC to be interpreted as meaning that they permit the application of national legislation under which an infringer against whom proceedings are brought on the basis of a trade mark for marketing original goods, and who claims that the trade mark right has been exhausted within the meaning of Article 7 of Directive 89/104/EEC ... has to plead and, if necessary, prove that the goods marketed by him have already been put on the market in the European Economic Area for the first time by the trade mark owner himself or with his consent?" The question referred for a preliminary ruling
25. In Articles 5 and 7 of the Directive the Community legislature laid down the rule of Community exhaustion, that is to say, the rule that the rights conferred by a trade mark do not entitle the proprietor to prohibit use of the mark in relation to goods bearing that mark which have been placed on the market in the EEA by him or with his consent. In adopting those provisions, the Community legislature did not leave it open to the Member States to provide in their domestic law for exhaustion of the rights conferred by a trade mark in respect of products placed on the market in third countries (Silhouette International Schmied , cited above, paragraph 26, and Joined Cases C-414/99 to C-416/99 Zino Davidoff and Levi Strauss [2001] ECR I-8691, paragraph 32).
26. The effect of the Directive is therefore to limit exhaustion of the rights conferred on the proprietor of a trade mark to cases where goods have been put on the market in the EEA and to allow the proprietor to market his products outside that area without exhausting his rights within the EEA. By making it clear that the placing of goods on the market outside the EEA does not exhaust the proprietor's right to oppose the importation of those goods without his consent, the Community legislature has allowed the proprietor of the trade mark to control the initial marketing in the EEA of goods bearing the mark (Sebago and Maison Dubois , cited above, paragraph 21, and Zino Davidoff and Levi Strauss , cited above, paragraph 33).
27. During the oral procedure, the defendants in the main proceedings, the German and French Governments and the Commission discussed the possible effect on the answer to be given to the question referred for a preliminary ruling in this case of the judgment in Zino Davidoff and Levi Strauss , which was delivered after the order for reference.
28. It must be observed that there are differences between the cases resulting in that judgment and the present case.
29. In the former cases, in which the Court had to consider the way in which the trade mark proprietor's consent to marketing in the EEA is expressed and proved, it was common ground that the goods at issue had been marketed outside the EEA by the trade mark proprietor or with his consent and then imported and marketed in the EEA by third parties. In paragraphs 46, 54 and 58 of Zino Davidoff and Levi Strauss the Court held that, in such circumstances, the consent of a trade mark proprietor to marketing within the EEA cannot be presumed, that it must be express or implied and that it is for the trader who relies on that consent to prove it.
30. In the present case, the dispute in the main proceedings turns primarily on whether goods were placed on the market for the first time within or outside the EEA. The claimant in the main proceedings submits that the goods were initially placed on the market by the trade mark proprietor outside the EEA, while the defendants in the main proceedings contend that they were first placed on the market within the EEA, so that the exclusive right of the trade mark proprietor is exhausted there, pursuant to Article 7(1) of the Directive.
31. Such a situation raises the question inter alia of the burden of proving where the trade-marked goods were first put on the market in cases of dispute on that point.
32. Articles 5 to 7 of the Directive embody a complete harmonisation of the rules relating to the rights conferred by a trade mark and accordingly define the rights of proprietors of trade marks in the Community (Zino Davidoff and Levi Strauss , paragraph 39).
33. Article 5 of the Directive confers on the trade mark proprietor exclusive rights entitling him, inter alia , to prevent all third parties not having his consent from importing goods bearing the mark. Article 7(1) contains an exception to that rule in that it provides that the trade mark proprietor's rights are exhausted where goods have been put on the market in the EEA by the proprietor or with his consent (see Zino Davidoff and Levi Strauss , paragraph 40).
34. It therefore appears that the extinction of the exclusive right results either from the consent of the proprietor, given either expressly or impliedly, to goods being placed on the market within the EEA, or from their being placed on the market by the proprietor himself. The consent of the proprietor or the placing of goods on the market within the EEA by the proprietor, which are tantamount to renunciation of his exclusive right, each constitute decisive factors in the extinction of that right (see, as regards consent, Zino Davidoff and Levi Strauss , paragraph 41).
35. The referring court observes that, under German law, the exhaustion of the trade mark right constitutes a plea in defence for a third party against whom the trade mark proprietor brings an action, so that the conditions for such exhaustion must, as a rule, be proved by the third party who relies on it.
36. Such a rule of evidence is consistent with Community law and, in particular, with Articles 5 and 7 of the Directive.
37. However, the requirements deriving from the protection of the free movement of goods enshrined, inter alia , in Articles 28 EC and 30 EC may mean that that rule of evidence needs to be qualified.
38. This must be so where that rule would allow the proprietor of the trade mark to partition national markets and thus assist the maintenance of price differences which may exist between Member States (see, to that effect, inter alia , Case C-349/95 Loendersloot [1997] ECR I-6227, paragraph 23).
39. As the referring court observes, there is a real risk of partitioning of markets, for example, in situations where, as in the main proceedings, the trade mark proprietor markets his products in the EEA using an exclusive distribution system.
40. In such situations, if the third party were required to adduce evidence of the place where the goods were first put on the market by the trade mark proprietor or with his consent, the trade mark proprietor could obstruct the marketing of the goods purchased and prevent the third party from obtaining supplies in future from a member of the exclusive distribution network of the proprietor in the EEA, in the event that the third party was able to establish that he had obtained his supplies from that member.
41. Accordingly, where a third party against whom proceedings have been brought succeeds in establishing that there is a real risk of partitioning of national markets if he himself bears the burden of proving that the goods were placed on the market in the EEA by the proprietor of the trade mark or with his consent, it is for the proprietor of the trade mark to establish that the products were initially placed on the market outside the EEA by him or with his consent. If such evidence is adduced, it is for the third party to prove the consent of the trade mark proprietor to subsequent marketing of the products in the EEA (see Zino Davidoff and Levi Strauss , paragraph 54).
42. The answer to the question referred should therefore be that a rule of evidence according to which exhaustion of the trade mark right constitutes a plea in defence for a third party against whom the trade mark proprietor brings an action, so that the conditions for such exhaustion must, as a rule, be proved by the third party who relies on it, is consistent with Community law and, in particular, with Articles 5 and 7 of the Directive. However, the requirements deriving from the protection of the free movement of goods, enshrined, inter alia , in Articles 28 EC and 30 EC may mean that this rule of evidence needs to be qualified. Accordingly, where a third party succeeds in establishing that there is a real risk of partitioning of national markets if he himself bears that burden of proof, particularly where the trade mark proprietor markets his products in the EEA using an exclusive distribution system, it is for the proprietor of the trade mark to establish that the products were initially placed on the market outside the EEA by him or with his consent. If such evidence is adduced, it is for the third party to prove the consent of the trade mark proprietor to subsequent marketing of the products in the EEA.