24 November 2016Jurisdiction reportsMichiel Rijsdijk

The long route to trademark exhaustion

The path of the trademarked goods in question (including towels) started in Asia, where the goods were produced, before they went to France, Belgium and the Netherlands. The court traced the route of the goods by looking in detail at the different licensing agreements, mutual agreements of understanding and emails between more than five parties.

Guy Laroche, a French fashion company, concluded a licensing agreement with another French company, called TOM. This company then had the right to manufacture and sell the trademarked products for an exclusive promotional event at French supermarket chain Carrefour. TOM concluded a sublicensing agreement with Belgian company Promeco concerning promotional activity in France. The agreement stated that under no circumstances could Promeco sell the products outside of the promotional activity.

There was a significant amount of leftover stock, so TOM and Promeco concluded a second sublicensing agreement for a similar promotional activity at Belgian Carrefour supermarkets. Guy Laroche gave written permission for this sublicensing agreement with the understanding that the sale and offering of the products must be in line with the luxury and prestige of the products of Guy Laroche.

Promeco was again unable to sell all the Guy Laroche products. It therefore concluded a sale agreement with the Belgian company Boxter. Unknown to Guy Laroche, Boxter sold part of the stock to Dutch company 4EveryWare, stating that the goods had been brought onto the market with the permission of Guy Laroche.

"The court looked at the different licensing agreements and emails sent between the parties and referred to the CJEU decision in Copad v Christian Dior."

The goods therefore went from Guy Laroche to TOM, to Promeco (in France and Belgium), to Boxter, to 4EveryWare and were finally sold to consumers and companies. Guy Laroche filed a court case to recall the goods from the market and obtain damages.

Giving permission

The main question in the case concerned whether Guy Laroche gave implied permission to bring the leftover stock onto the market, and therefore whether the rights in the goods were exhausted.

According to the Court of Justice of the European Union (CJEU) case Peak Holding v Axolin-Elinor (2004), the offering for sale—but failure to actually sell—goods is insufficient to count as ‘being put on the market’.

Therefore the offering of the goods for sale in the promotional activity at Carrefour in France and Belgium did not result in trademark exhaustion. Since the sale from Boxter to 4EveryWare did not have the permission of Guy Laroche, this cannot result in exhaustion either.

The subsequent question was whether the sale from Promeco to Boxter led to exhaustion; it is questioned whether this sale took place with the implicit permission of Guy Laroche. The court looked at the different licensing agreements and emails sent between the parties and referred to the CJEU decision in Copad v Christian Dior (2009).

In line with this decision, exhaustion does not occur when a licensee acts in breach of the stipulations concerning the duration of the licence, the way in which the licensed mark may be used, the goods and services for which it may be used, and the quality of the goods and services.

The Hague court considered that these circumstances have to be taken into account for a sub-licensee as well. In line with the Copad CJEU decision, the court concluded that TOM had acted in breach of the licensing agreement and for that reason every other step had not been followed with the permission of the trademark owner. Therefore the court considered that 4EveryWare infringed the trademarks and ordered it to recall the goods.

As the party selling the trademarked goods has to show that the IP rights in the goods have been exhausted, it is clear that a party needs to take precautions when acquiring goods which have already followed a long path. And as this case shows, in the end the path of trademarked goods comes full circle back to the trademark owner.

Michiel Rijsdijk is a partner at  Arnold + Siedsma. He can be contacted at: mrijsdijk@arnold-siedsma.com

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