What is the Doctrine of Exhaustion of Rights?

A look into the doctrine of exhaustion of rights in relation to trade marks within the European Union.

Article 7(1) of the Trade Mark Directive (2008/95/EC) provides that a trade mark proprietor cannot prohibit the use of the trade mark in relation to goods put on the market in the European Community under that trade mark by him or with his consent.

This is the foundation for the Doctrine of Exhaustion of Rights. The doctrine entails that once a trade mark proprietor has put the goods on the market the intellectual property rights are said to have been exhausted.

This prevents the proprietor from using the intellectual property rights to impede the further commercialisation of the goods.

This enables a third party to buy goods bearing the trade mark that are on sale in the Community and import the goods into another part of the Community for sale. The reasoning for this is to underpin the establishment of a single market in the Community. This is due to the fact that without the Doctrine of Exhaustion of Rights, the trade mark proprietor would be able to use the intellectual property rights to control the further commercialisation of the goods.

If the proprietor was able to control the further commercialisation of the goods this could distort the single market within the Community. An example would be charging a higher price in one Member State and a lower price in another.

However it is possible for a trade mark proprietor to grant a licence agreement that seeks to prevent the sale of the goods to certain types of retailers. The proprietor of a trade mark used for luxury goods may want to prevent the goods being sold in discount stores. The case of Copad SA v Christian Dior couture SA [2009] ECR I-3421 provides an example.

In this case Dior was the proprietor of a trade mark used for luxury goods. The licence agreement stated that the goods bearing the trade mark must not be sold to discount stores without permission.

Permission to sell the goods to a discount store was sought and refused but despite this the goods bearing the trade mark were sold to a discount store.

It was held that where a licensee is in breach of the licence agreement the trade mark proprietor can oppose resale, under Article 7(2) of the Directive. However only where the resale damages the reputation of the trade mark.

By Sam O’Toole

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