CJEU, 16 Jul 1998, C-355/96 (Silhouette), ECLI:EU:C:1998:374.

JUDGMENT OF THE COURT

16 July 1998 (1)

(Directive 89/104/EEC — Exhaustion of trade mark — Goods put on the marketin the Community or in a non-member country)

In Case C-355/96,

REFERENCE to the Court under Article 177 of the EC Treaty by the ObersterGerichtshof (Austria) for a preliminary ruling in the proceedings pending beforethat court between

Silhouette International Schmied GmbH & Co. KG

and

Hartlauer Handelsgesellschaft mbH,

on the interpretation of First Council Directive 89/104/EEC of 21 December 1988to approximate the laws of the Member States relating to trade marks (OJ 1989L 40, p. 1), as amended by the Agreement on the European Economic Area of 2May 1992 (OJ 1994 L 1, p. 3),

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, C. Gulmann (Rapporteur),M. Wathelet and R. Schintgen (Presidents of Chambers), G.F. Mancini,J.C. Moitinho de Almeida, J.L. Murray, D.A.O. Edward, P. Jann, L. Sevón andK.M. Ioannou, Judges,

Advocate General: F.G. Jacobs,

Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

—    Silhouette International Schmied GmbH & Co. KG, by Klaus Haslinger,Rechtsanwalt, Linz,

—    Hartlauer Handelsgesellschaft mbH, by Walter Müller, Rechtsanwalt, Linz,

—    the Austrian Government, by Wolf Okresek, Ministerialrat in theChancellor's Office, acting as Agent,

—    the German Government, by Alfred Dittrich, Regierungsdirektor in theFederal Ministry of Justice, and Bernd Kloke, Oberregierungsrat in theFederal Ministry of Economic Affairs, acting as Agents,

—    the French Government, by Catherine de Salins, Head of Subdirectorate inthe Legal Affairs Directorate of the Ministry of Foreign Affairs, andPhilippe Martinet, Secretary in the same Directorate, acting as Agents,

—    the Italian Government, by Umberto Leanza, Head of the Legal Service inthe Ministry of Foreign Affairs, acting as Agent, and Oscar Fiumara,Avvocato dello Stato,

—    the Swedish Government, by Erik Brattgård, Departementsråd in theForeign Trade Department of the Ministry of Foreign Affairs, TomasNorström, Kansliråd in the same Ministry, and Inge Simfors,Hovrättsassessor in the same Ministry, acting as Agents,

—    the United Kingdom Government, by Lindsey Nicoll, of the TreasurySolicitor's Department, acting as Agent, and by Michael Silverleaf, Barrister,

—    the Commission of the European Communities, by Jürgen Grunwald, LegalAdviser, and Berend Jan Drijber, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Silhouette International Schmied GmbH &Co. KG, represented by Klaus Haslinger, of Hartlauer Handelsgesellschaft mbH,

represented by Walter Müller, of the Italian Government, represented by OscarFiumara, and of the Commission represented by Jürgen Grunwald, at the hearingon 14 October 1997,

after hearing the Opinion of the Advocate General at the sitting on 29 January1998,

gives the following

Judgment

1.     By order of 15 October 1996, received at the Court on 30 October 1996, theOberster Gerichtshof referred to the Court for a preliminary ruling under Article177 of the EC Treaty two questions on the interpretation of Article 7 of the FirstCouncil Directive 89/104/EEC of 21 December 1988 to approximate the laws of theMember States relating to trade marks (OJ 1989 L 40, p. 1, 'the Directive‘), asamended by the Agreement on the European Economic Area of 2 May 1992 (OJ1994 L 1, p. 3, 'the EEA Agreement‘).

2.     Those questions were raised in proceedings between two Austrian companies,Silhouette International Schmied GmbH & Co. KG ('Silhouette‘) and HartlauerHandelsgesellschaft mbH ('Hartlauer‘).

3.     Article 7 of the Directive, concerning exhaustion of the rights conferred by a trademark, provides:

'(1)    The trade mark shall not entitle the proprietor to prohibit its use in relationto goods which have been put on the market in the Community under thattrade mark by the proprietor or with his consent.

(2)    Paragraph 1 shall not apply where there exist legitimate reasons for theproprietor to oppose further commercialisation of the goods, especiallywhere the condition of the goods is changed or impaired after they havebeen put on the market.‘

4.     In accordance with Article 65(2), in conjunction with Annex XVII, point 4, of theEEA Agreement, Article 7(1) has been amended for the purposes of theAgreement so that the expression 'in the Community‘ has been replaced by 'ina Contracting Party‘.

5.     Article 7 of the Directive was transposed into Austrian law by Paragraph 10a of theMarkenschutzgesetz (Law on the Protection of Trade Marks), the firstsubparagraph of which provides: 'The right conferred by the trade mark shall not

entitle the proprietor to prohibit a third party from using it in relation to goodswhich have been put on the market in the European Economic Area under thattrade mark by the proprietor or with his consent.‘

6.     Silhouette produces spectacles in the higher price ranges. It markets themworldwide under the trade mark 'Silhouette‘, registered in Austria and mostcountries of the world. In Austria, Silhouette itself supplies spectacles to opticians;in other States it has subsidiary companies or distributors.

7.     Hartlauer sells inter alia spectacles through its numerous subsidiaries in Austria,and its low prices are its chief selling point. It is not supplied by Silhouette becausethat company considers that distribution of its products by Hartlauer would beharmful to its image as a manufacturer of top-quality fashion spectacles.

8.     In October 1995 Silhouette sold 21 000 out-of-fashion spectacle frames to aBulgarian company, Union Trading, for the sum of USD 261 450. It had directedits representative to instruct the purchasers to sell the spectacle frames in Bulgariaor the states of the former USSR only, and not to export them to other countries. The representative assured Silhouette that it had so instructed the purchaser. However, the Oberster Gerichtshof noted that it had not proved possible toascertain whether that had actually been done.

9.     In November 1995 Silhouette delivered the frames in question to Union Tradingin Sofia. Hartlauer bought those goods — it has not, according to the ObersterGerichtshof, been possible to find out from whom — and offered them for sale inAustria from December 1995. In a press campaign Hartlauer announced that,despite not being supplied by Silhouette, it had managed to acquire 21 000Silhouette frames abroad.

10.     Silhouette brought an action for interim relief before the Landesgericht Steyr,seeking an injunction restraining Hartlauer from offering spectacles or spectacleframes for sale in Austria under its trade mark, where they had not been put onthe market in the European Economic Area ('EEA‘) by Silhouette itself or bythird parties with its consent. It claims that it has not exhausted its trade markrights, since, in terms of the Directive, trade-mark rights are exhausted only whenthe products have been put on the market in the EEA by the proprietor or withhis consent. It based its claim on Paragraph 10a of the Markenschutzgesetz andon Paragraphs 1 and 9 of the Gesetz gegen den Unlauteren Wettbewerb (Lawagainst Unfair Competition) and Paragraph 43 of the Allgemeines BürgerlichesGesetzbuch (General Civil Code, 'the ABGB‘).

11.     Hartlauer contended that the action should be dismissed since Silhouette had notsold the frames subject to any prohibition of reimportation into the Community. Inits view Paragraph 43 of the ABGB was not applicable. Moreover, it observed thatthe Markenschutzgesetz does not grant a right to seek prohibitory injunctions and

that, given that the legal position was unclear, its conduct was not contrary toestablished customs.

12.     Silhouette's action was dismissed by the Landesgericht Steyr and, on appeal, by theOberlandesgericht Linz. Silhouette appealed to the Oberster Gerichtshof on apoint of law.

13.     The Gerichtshof noted, first, that the case before it concerned the reimportationof goods originally produced by the proprietor of the trade mark and put on themarket by the proprietor in a non-member country. It went on to point out thatbefore Paragraph 10a of the Markenschutzgesetz entered into force Austrian courtsapplied the principle of international exhaustion of the right conferred by a trademark (the principle that the proprietor's rights are exhausted once the trade-marked product has been put on the market, no matter where that takes place).Finally, the Oberster Gerichtshof stated that the explanatory memorandum to theAustrian law implementing Article 7 of the Directive indicated that it was intendedto leave the resolution of the question of the validity of the principle ofinternational exhaustion to judicial decision.

14.     Accordingly, the Oberster Gerichtshof decided to stay proceedings and refer thefollowing questions to the Court for a preliminary ruling:

'(1)    Is Article 7(1) of the First Council Directive 89/104/EEC of 21 December1988 to approximate the laws of the Member States relating to trade marks(OJ 1989 L 40, p. 1) to be interpreted as meaning that the trade markentitles its proprietor to prohibit a third party from using the mark forgoods which have been put on the market under that mark in a State whichis not a Contracting State?

(2)    May the proprietor of the trade mark on the basis of Article 7(1) of theTrade Marks Directive alone seek an order that the third party cease usingthe trade mark for goods which have been put on the market under thatmark in a State which is not a Contracting State?‘

Question 1

15.     By its first question the Oberster Gerichtshof is in substance asking whethernational rules providing for exhaustion of trade-mark rights in respect of productsput on the market outside the EEA under that mark by the proprietor or with hisconsent are contrary to Article 7(1) of the Directive.

16.     It is to be noted at the outset that Article 5 of the Directive defines the 'rightsconferred by a trade mark‘ and Article 7 contains the rule concerning 'exhaustionof the rights conferred by a trade mark‘.

17.     According to Article 5(1) of the Directive, the registered trade mark confers on theproprietor exclusive rights therein. In addition, Article 5(1)(a) provides that thoseexclusive rights entitle the proprietor to prevent all third parties not having hisconsent from use in the course of trade of, inter alia, any sign identical with thetrade mark in relation to goods or services which are identical to those for whichthe trade mark is registered. Article 5(3) sets out a non-exhaustive list of the kindsof practice which the proprietor is entitled to prohibit under paragraph 1, including,in particular, importing or exporting goods under the trade mark concerned.

18.     Like the rules laid down in Article 6 of the Directive, which set certain limits to theeffects of a trade mark, Article 7 states that, in the circumstances which it specifies,the exclusive rights conferred by the trade mark are exhausted, with the result thatthe proprietor is no longer entitled to prohibit use of the mark. Exhaustion issubject first of all to the condition that the goods have been put on the market bythe proprietor or with his consent. According to the text of the Directive itself,exhaustion occurs only where the products have been put on the market in theCommunity (in the EEA since the EEA Agreement entered into force).

19.     No argument has been presented to the Court that the Directive could beinterpreted as providing for the exhaustion of the rights conferred by a trade markin respect of goods put on the market by the proprietor or with his consentirrespective of where they were put on the market.

20.     On the contrary, Hartlauer and the Swedish Government have maintained that theDirective left the Member States free to provide in their national law forexhaustion, not only in respect of products put on the market in the EEA but alsoof those put on the market in non-member countries.

21.     The interpretation of the Directive proposed by Hartlauer and the SwedishGovernment assumes, having regard to the wording of Article 7, that the Directive,like the Court's case-law concerning Articles 30 and 36 of the EC Treaty, is limitedto requiring the Member States to provide for exhaustion within the Community,but that Article 7 does not comprehensively resolve the question of exhaustion ofrights conferred by the trade mark, thus leaving it open to the Member States toadopt rules on exhaustion going further than those explicitly laid down in Article7 of the Directive.

22.     As Silhouette, the Austrian, French, German, Italian and United KingdomGovernments and the Commission have all argued, such an interpretation iscontrary to the wording of Article 7 and to the scheme and purpose of the rules ofthe Directive concerning the rights which a trade mark confers on its proprietor.

23.     In that respect, although the third recital in the preamble to the Directive statesthat 'it does not appear to be necessary at present to undertake full-scaleapproximation of the trade mark laws of the Member States‘, the Directive nonethe less provides for harmonisation in relation to substantive rules of central

importance in this sphere, that is to say, according to that same recital, the rulesconcerning those provisions of national law which most directly affect thefunctioning of the internal market, and that that recital does not preclude theharmonisation relating to those rules from being complete.

24.     The first recital in the preamble to the Directive notes that the trade mark lawsapplicable in the Member States contain disparities which may impede the freemovement of goods and freedom to provide services and may distort competitionwithin the common market, so that it is necessary, in view of the establishment andfunctioning of the internal market, to approximate the laws of Member States. Theninth recital emphasises that it is fundamental, in order to facilitate the freemovement of goods and services, to ensure that registered trade marks enjoy thesame protection under the legal systems of all the Member States, but that thisshould not prevent Member States from granting at their option extensiveprotection to those trade marks which have a reputation.

25.     In the light of those recitals, Articles 5 to 7 of the Directive must be construed asembodying a complete harmonisation of the rules relating to the rights conferredby a trade mark. That interpretation, it may be added, is borne out by the fact thatArticle 5 expressly leaves it open to the Member States to maintain or introducecertain rules specifically defined by the Community legislature. Thus, in accordancewith Article 5(2), to which the ninth recital refers, the Member States have theoption to grant more extensive protection to trade marks with a reputation.

26.     Accordingly, the Directive cannot be interpreted as leaving it open to the MemberStates to provide in their domestic law for exhaustion of the rights conferred by atrade mark in respect of products put on the market in non-member countries.

27.     This, moreover, is the only interpretation which is fully capable of ensuring that thepurpose of the Directive is achieved, namely to safeguard the functioning of theinternal market. A situation in which some Member States could provide forinternational exhaustion while others provided for Community exhaustion onlywould inevitably give rise to barriers to the free movement of goods and thefreedom to provide services.

28.     Contrary to the arguments of the Swedish Government, it is no objection to thatinterpretation that since the Directive was adopted on the basis of Article 100a ofthe EC Treaty, which governs the approximation of the laws of the Member Statesconcerning the functioning of the internal market, it cannot regulate relationsbetween the Member States and non-member countries, with the result that Article7 is to be interpreted as meaning that the Directive applies only to intra-Community relations.

29.     Even if Article 100a of the Treaty were to be construed in the sense argued for bythe Swedish Government, the fact remains that Article 7, as has been pointed out

in this judgment, is not intended to regulate relations between Member States andnon-member countries but to define the rights of proprietors of trade marks in theCommunity.

30.     Finally, the Community authorities could always extend the exhaustion provided forby Article 7 to products put on the market in non-member countries by enteringinto international agreements in that sphere, as was done in the context of theEEA Agreement.

31.     In the light of the foregoing, the answer to be given to the first question must bethat national rules providing for exhaustion of trade-mark rights in respect ofproducts put on the market outside the EEA under that mark by the proprietor orwith his consent are contrary to Article 7(1) of the Directive, as amended by theEEA Agreement.

Question 2

32.     By its second question the Oberster Gerichtshof is in substance asking whetherArticle 7(1) of the Directive can be construed as meaning that the proprietor of atrade mark is entitled, on the basis of that provision alone, to obtain an orderrestraining a third party from using its mark for products which have been put onthe market outside the EEA under that mark by the proprietor or with his consent.

33.     In its order for reference, as clarified subsequently by letter, the ObersterGerichtshof has pointed out:

—    that the second question was put because the Markenschutzgesetz does notprovide for any right to obtain a prohibitory injunction, nor does it containany provision corresponding to Article 5(1)(a) of the Directive. Aprohibitory injunction may be sought in respect of a trade markinfringement only if there is at the same time a breach of Paragraph 9 ofthe UWG, the application of which presupposes the risk of confusion, whichis not the case where the original products of the trade-mark proprietor areconcerned;

—    in Austrian law, at least according to current academic legal writing, theproprietor of a trade mark has no right to obtain a prohibitory injunctionagainst a person who makes parallel imports or reimports of trade-markedgoods, unless the right to a prohibitory injunction is already available underParagraph 10a(1) of the Markenschutzgesetz. The question thus arises,under Austrian law, whether Article 7(1) of the Trade Marks Directive,which has the same content as Paragraph 10a(1) of the Markenschutzgesetz,provides for such a right to apply for a prohibitory injunction and whetherthe proprietor of the trade mark can therefore seek, solely on the basis ofthat provision, an order that a third party cease using the trade mark for

goods which have been put on the market under that mark outside theEEA.

34.     Under the scheme of the Directive the rights conferred by a trade mark aredefined by Article 5, while Article 7 contains an important qualification with respectto that definition, in that it provides that the rights conferred by Article 5 do notentitle the proprietor to prohibit the use of the trade mark where the conditionslaid down in that provision are satisfied.

35.     Accordingly, while it is undeniable that the Directive requires Member States toimplement provisions on the basis of which the proprietor of a trade mark, whenhis rights are infringed, must be able to obtain an order restraining third partiesfrom making use of his mark, that requirement is imposed, not by Article 7, but byArticle 5 of the Directive.

36.     That being so, it is to be remembered, first, that, according to settled case-law ofthe Court, a directive cannot of itself impose obligations on an individual andcannot therefore be relied upon as such against an individual. Second, accordingto the same case-law, when applying domestic law, whether adopted before or afterthe directive, the national court that has to interpret that law must do so, as far aspossible, in the light of the wording and the purpose of the directive so as toachieve the result it has in view and thereby comply with the third paragraph ofArticle 189 of the Treaty (see, inter alia, Case C-106/89 Marleasing v La ComercialInternacional de Alimentación [1990] ECR I-4135, paragraphs 6 and 8, and CaseC-91/92 Faccini Dori v Recreb [1994] ECR I-3325, paragraphs 20 and 26).

37.     The answer to be given to the second question must therefore be that, subject tothe national court's duty to interpret, so far as possible, domestic law in conformitywith Community law, Article 7(1) of the Directive cannot be interpreted asmeaning that the proprietor of a trade mark is entitled, on the basis of thatprovision alone, to obtain an order restraining a third party from using his trademark for products which have been put on the market outside the EEA under thatmark by the proprietor or with his consent.

Costs

38.     The costs incurred by the Austrian, French, German, Italian, Swedish and UnitedKingdom Governments and by the Commission of the European Communities,which have submitted observations to the Court, are not recoverable. Since theseproceedings are, for the parties to the main proceedings, a step in the actionpending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT,

in answer to the questions referred to it by the Oberster Gerichtshof by order of15 October 1996, hereby rules:

1.     National rules providing for exhaustion of trade-mark rights in respect ofproducts put on the market outside the EEA under that mark by theproprietor or with its consent are contrary to Article 7(1) of First CouncilDirective 89/104/EEC of 21 December 1988 to approximate the laws of theMember States relating to trade marks, as amended by the Agreement onthe European Economic Area of 2 May 1992.

2.     Article 7(1) of Directive 89/104 cannot be interpreted as meaning that theproprietor of a trade mark is entitled, on the basis of that provision alone,to obtain an order restraining a third party from using his trade mark forproducts which have been put on the market outside the EuropeanEconomic Area under that mark by the proprietor or with his consent.

Rodríguez IglesiasGulmannWathelet

SchintgenManciniMoitinho de Almeida

MurrayEdwardJann

SevónIoannou

Delivered in open court in Luxembourg on 16 July 1998.

R. Grass G.C. Rodríguez Iglesias

RegistrarPresident

1: Language of the case: German.