The Federal Court of Justice decided that there is no exhaustion of trademark rights if the trademark owner has given his consent to the marketing of goods only under the condition that the packaging with the trademark on it is removed from the goods.
Tchibo Markenverwaltungs GmbH & Co. KG, a subsidiary of Tchibo GmbH (Tchibo), is the owner of the trademark rights in "Tchibo" and "TCM". Tchibo sells, in a closed distribution system, an assortment of coffee products and, in addition, a regularly changing range of consumer goods in a uniform designed packaging bearing Tchibo's trademarks.
Tchibo had contracted a stainless steel company for the production of cake cutlery sets to be sold by Tchibo in their original packaging bearing the trademarks "Tchibo" and "TCM".
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As parts of the cutlery sets, which were produced in China, were faulty, Tchibo refused to accept these parts, but allowed the stainless steel company to sell them without their original packaging.
Nevertheless, the stainless steel company sold the faulty cutlery sets in their original packaging bearing Tchibo's trademarks.
Tchibo initiated proceedings against one distributor of the faulty cake cutlery sets, claiming trademark infringement. The Court of Appeal of Dusseldorf dismissed the claims - contrary to the Regional Court of Dusseldorf which had granted the claims - holding that Tchibo's trademark rights were exhausted and, therefore, not infringed. The court referred to an older decision of the Federal Court of Justice , according to which Tchibo would need to be treated as if the faulty cutlery sets had been distributed in their original packaging due to an internal error.
On further appeal, the Federal Court of Justice ruled that the distribution of the faulty cake cutlery sets infringed Tchibo's trademark rights because they were not exhausted. Neither had the cutlery sets been put on the market by Tchibo nor was there an economic relation between Tchibo and the stainless steel company. There was no consent of Tchibo to put the faulty cutlery sets in their original packaging on the market because Tchibo had explicitly prohibited the stainless steel company to sell the cutlery sets in the branded original packaging.
The court clarified that, contrary to its older decision, for the exhaustion of trademark rights, an explicit consent of the trademark owner to put the branded goods on the market was necessary. If the consent related only to the sale of the goods without the trademarks, there was no exhaustion of the trademark rights. An agreement between the trademark owner and the seller about the marketing of goods under such condition did not only have effect between the parties of the agreement but towards everyone.
With this decision, the quality function of the trademark has been secured. Trademark owners can now act against unwanted channels of distribution and ensure that their goods correspond with their demands on quality.