This article follows on from Legal Circular No. 12/2009, where we addressed the issue of exhaustion of rights to intangible assets. This question is important in practice, particularly with regard to the efforts of some manufacturers of goods to restrict distribution channels (especially for more luxurious products).
By way of introduction, it may be repeated that absolute control by the owner of a trade mark in relation to specific goods placed on the market would be very impractical (further trade in such goods would be prevented), and therefore the institute of so-called exhaustion of rights was introduced in this area. Its legislative expression is found primarily in the provision of Section 11(1) of the Trade Marks Act, in the following form: “the owner of a trade mark shall not be entitled to prohibit its use on products which have been placed on the market in the Czech Republic by such owner or with his consent.” Paragraph 2 of the cited provision then extends the scope of exhaustion of the right to the entire European Economic Area. Paragraph 3 of the cited provision then contains a certain substantive limitation of the institute of exhaustion of rights in a trade mark: “the provisions of the preceding paragraphs shall not apply where the owner of the trade mark has legitimate reasons to oppose further commercial use of the products, in particular where the condition or nature of the products has been changed or impaired after they have been placed on the market.”
However, the above provisions establish only certain principles and it is not entirely clear from them what rights a further distributor of goods (seller) has in relation to the presentation of products where exhaustion of rights has occurred. For these reasons, this question has been addressed several times before the European Court of Justice.
The most important judgment in this area is considered to be the judgment in Parfums Christian Dior SA and Parfums Christian Dior BV v. Evora BV of 1997. From the operative part of this judgment it may be quoted: “…where branded goods have been put on the market in the Community by the proprietor of the mark or with his consent, a retailer, in addition to being free to resell those goods, is also free to make use of the trademark in order to bring to the public’s attention the further commercialisation of those goods.” The owner of the trade mark could oppose such conduct only if, in view of the specific circumstances of the case, it was “established that the use of the trademark for that purpose seriously damages the reputation of the trademark.” “For example, such damage could occur if a promotional leaflet distributed by the retailer took no care to prevent the trademark from being mentioned in circumstances which could seriously diminish the image which the proprietor of the trademark has successfully created around his mark.”
A related judgment is then Copad SA v. Christian Dior couture SA, Société industrielle lingerie (SIL), in which the conclusions from the above-mentioned judgment were confirmed, in the following form. The owner of a trade mark may rely on the provision of Article 7(2) of the Directive “against further marketing of those products only where it is established that, having regard to the factual circumstances of the case, such further marketing leads to damage to the reputation of the trade mark concerned.”
The European Court of Justice then addressed the issue of exhaustion of rights in a trade mark in relation to contextual advertising and SEO optimisation in the judgment Portakabin Ltd, Portakabin BV v. Primakabin BV. In this judgment it is stated that “the proprietor of a trade mark is not entitled to prohibit an advertiser from advertising, by means of a sign identical with or similar to that trade mark, which that advertiser has selected, without the consent of that proprietor, as a keyword in the context of an internet search engine optimisation service, the resale of goods manufactured by that proprietor and put on the market in the European Economic Area by that proprietor or with his consent, …” In this case too, it applies that such advertising must not be carried out in a manner damaging the reputation of the trade mark concerned, and such damage cannot be inferred in itself even from the fact that the advertiser uses the trade mark of another person with the addition of such expressions as “worn” or “used”.
Given that Czech regulation in this area is an implementation of European Union law, Czech authorities should interpret the relevant provisions by so-called Euro-conforming interpretation, that is, also in accordance with the above-mentioned case law of the European Court of Justice. This case law may thus provide certain guidance for practice.
Josef Aujezdský
Law Firm Mašek, Kočí, Aujezdský www.e-Advokacie.cz – online legal advice
This text was originally prepared by the law firm Mašek, Kočí, Aujezdský in cooperation with the Association for Electronic Commerce (APEK) as Legal Circular No. 8/2013 intended for members of this association.
This text was translated from Czech to English using an AI translator.