Coty Prestige Lancaster Group v Simex Trading AG (C-127/09) - 3 June 2010
The Court of Justice of the European Union (CJEU) has confirmed that perfume testers that were marked "Not for Sale" were not put on the market in the European Economic Area (EEA) by the marks' proprietors or with its consent in accordance with Article 13(1) of the Community Trade Mark Regulation (EC) No 40/94 (the Regulation)and Article 7(1) of the Trade Marks Directive (the Directive).
Coty manufactures and sells perfumery goods under both its own trade marks such as Lancaster and third party marks such as Davidoff, Calvin Klein and Vivienne Westwood. The goods are sold through an arrangement of authorised specialist dealers with which Coty has a standard contract. This contract provides that:
- Coty will support the authorised dealers "to an economically reasonable extent" in their efforts to sell the goods;
- Coty will make available decoration and advertising material free of charge which is to be returned at Coty's request; and
- Advertising material may only be used for specific advertising purposes and commercial use (such as the sale of samples) is prohibited.
Simex Trading AG (Simex) sells perfumery goods. It is not part of Coty's network of authorised dealers.
In September 2007, Coty obtained two testers containing Davidoff Cool Water Man perfume, from a shop in the German Sparfümerie chain. The bottles were original bottles, contained the original perfume, but lacked their original seal. The packaging of the testers differs from that of the original market targeted goods in that the box is made of white card with black and white writing, rather than the colours which are used on the original packaging. The words 'Demonstration' and 'Not for Sale' appear on the tester packaging.
Sparfümerie confirmed that it had obtained the testers from Simex. Coty identified, from the manufacturer's serial numbers on the testers, that the testers had originally been delivered in July 2006 to one of its authorised dealers in Singapore.
Coty brought proceedings against Simex in Germany and sought an injunction to prevent Simex infringing Coty's Community and international trade marks through the marketing of perfumery goods in Germany. It claimed that the testers had been placed on the market for the first time in the Community or the EEA without its consent. Under its contracts with its authorised dealers, Coty retains ownership of the testers which, it argued, constituted advertising material and were not to be passed to customers.
Simex opposed the application. It claimed that the trade marks' rights had been exhausted in relation to the testers because they had been placed on the market in the EEA with the consent of the trade mark proprietor.
The German proceedings
The Landgericht Nürnberg-Fürth dismissed Coty's application and held that the rights derived from the trade marks had been exhausted even though they were marked as "Not for Sale". The authorised dealers received the testers with the authority to use all the perfume they contained and as a result "the de facto power of disposal of those goods was transferred and, accordingly, the goods were put on the market within the meaning of Article 7 of Directive 89/104 and Article 13 of Regulation No 40/94." The Landgericht stated that the principle of exhaustion cannot be restricted or invalidated by means of contractual restrictions.
Coty appealed the decision. The Oberlandesgericht Nürnberg (Higher Regional Court, Nuremberg) referred to Case C-16/03 Peak Holding  ECR I-11313, where it was stated that the essential conditions for goods to be 'put on the market' within the meaning of Article 7(1) of the Directive and Article 13(1) of the Regulation are the transfer of the power of disposal of the goods and the realisation of their economic value. Under the contract with the authorised dealers, the testers remain the property of Coty and their contents are made available for use but not for sale. Further, Coty could not have realised the economic value of the testers, as they were not intended for sale.
The purpose of the testers was for advertising but they did not fulfil that purpose as they were sold in breach of the contract with Coty. The Oberlandesgericht Nürnberg stayed the proceedings and referred the following question to the ECJ for a preliminary ruling:
"Are goods put on the market within the meaning of Article 13(1) of Regulation (EC) No 40/94 and Article 7 of Directive 89/104/EEC if "perfume testers" are made available to contractually-bound intermediaries without transfer of ownership and with a prohibition on sale, so that those intermediaries are able to allow potential customers to use the contents of the goods for test purposes, the goods bearing a notice stating that they may not be sold, the recall of the goods by the manufacturer/trade mark proprietor at any time remaining contractually possible and the presentation of the goods being significantly different from the goods usually put on the market by the manufacturer/trade mark proprietor in that it is plainer?"
Article 13(1) of the Regulation states:
"A Community 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."
Article 7(1) of the Directive states:
"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."
Under German law, Article 24(1) of the Law on the protection of trade marks and other signs (Markengesetz) of 25 October 1994 (BGBl. 1994 I, p. 3082) states:
"The proprietor of a trade mark or a trade name shall not have the right to prohibit use by another person of that trade mark or trade name in relation to goods which have been put on the market in Germany, another Member State of the European Union or another Contracting Party to the Agreement on the European Economic Area under that trade mark or trade name by the proprietor or with his consent."
The CJEU's judgment
The CJEU confirmed that it is vital that a proprietor can control the first placing of its goods on the market in the EEA, regardless of whether they have first been marketed outside the area. Further, the rights conferred by the trade mark are exhausted only in relation to the individual items of the product which have first been put on the market in the EEA by the proprietor or with his consent. The rights in other even identical items which have not first been put on the market in the EEA will not be exhausted. Therefore it was irrelevant that Coty Prestige also supplied its authorised dealers in the EEA with other testers of the same product.
In fact, neither the supply by Coty to its authorised dealer in Singapore of the testers nor the supply by Coty Prestige to its authorised dealers in the EEA of other testers of the same product constituted placing on the market within the meaning of Article 7(1). The question was therefore whether Coty had given its consent, whether express or implied, to the placing of the testers on the market in the EEA by a third party.
The court stated that "consent may, in some cases, be inferred from facts and circumstances prior to, simultaneous with or subsequent to the placing of the goods on the market outside or inside the EEA which, in the view of the national court, unequivocally demonstrate that the proprietor has renounced his rights (Joined Cases C-414/99 to C-416/99 Zino Davidoff and Levi Strauss  ECR I-8691, paragraph 46)".
The court held that implied consent cannot be inferred:
- from the fact that the proprietor of the trade mark has not communicated to all subsequent purchasers of the goods placed on the market outside the EEA his opposition to marketing within the EEA;
- from the fact that the goods carry no warning of a prohibition on their being placed on the market within the EEA; or
- from the fact that the trade mark proprietor has transferred the ownership of the products bearing the trade mark without imposing any contractual reservations and that, according to the law governing the contract, the property right transferred includes, in the absence of such reservations, an unlimited right of resale or, at the very least, a right to market the goods subsequently within the EEA."
The court also stated that it is irrelevant if the importer of the goods bearing the trade mark is unaware that the proprietor objects to their being placed on the market in the EEA or sold there by traders other than authorised retailers. Nor was it relevant that the authorised retailers and wholesalers had not imposed on their own purchasers any contractual requirements setting out such objections, even though they have been informed of the objections by the trade mark proprietor.
Although whether or not consent has taken place and the nature of such consent is a matter for the national court, the court held that the circumstances surrounding the supply of the testers did not indicate "a clear renunciation by that proprietor of his exclusive right provided for in Article 5 of the Directive". The statements "Demonstration" and "Not for Sale" reflected Coty's intention that the testers should not be sold, whether inside or outside the EEA. There was no evidence of a contrary intention and this would preclude a finding of consent under Article 7(1) of the Directive.
The Court concluded that:
"in circumstances where 'perfume testers' are made available, without transfer of ownership and with a prohibition on sale, to intermediaries which are contractually bound to the trade mark proprietor for the purpose of allowing their customers to test the contents, where the trade mark proprietor may at any time recall those goods and where the presentation of the goods is clearly distinguishable from that of the bottles of perfume normally made available to the intermediaries by the trade mark proprietor, the fact that those testers are bottles of perfume which bear not only the word 'Demonstration' but also the statement 'Not for Sale' precludes, in the absence of any evidence to the contrary, which it is for the national court to assess, a finding that the trade mark proprietor impliedly consented to putting them on the market."
The above conclusion may seem obvious. The express statement "Not for sale" on a product would seem quite clearly to preclude any argument that the item has been placed on the market with the consent of the proprietor. However, the sale of testers has been something of a thorn in the side for the branded perfume industry and this formal confirmation on the point will be welcomed.