In Makro Bediensgroothandel v Diesel SpA, C 324/08 15 October 2009 (unreported), the European Court of Justice (ECJ), on a reference from the Hoge Raad der Nedeleranden, has ruled that it is irrelevant, for the purpose of determining whether or not goods bearing a trade mark have been placed on the market within the European Economic Area (EEA) with the proprietor's consent, whether those goods were first placed on the market inside or outside the EEA. Rather, it must be demonstrated that the trade mark owner has renounced unequivocally his exclusive rights in order for a defence of exhaustion of rights to succeed.
In 1994, Diesel SpA’s distributor in Spain, Portugal and Andorra, Distributions Italian Fashion SA (DIFSA) appointed Flexi Casual SA, a footwear distributor, on an exclusive basis for the whole of its territory. Later that year, DIFSA granted Flexi a licence to manufacture and distribute shoes of its own design bearing the DIESEL mark, in order that the shoes could be distributed by Diesel, or alternatively, that the licence could be assigned to Diesel.
In 1997, Flexi granted a licence to Cosmos World SL to manufacture bags and shoes under the DIESEL mark. Cosmos manufactured shoes under this agreement, without reference to DIFSA or Diesel. The Cosmos shoes found their way to the cash and carry outlet Makro in the summer of 1999.
Diesel brought an action in the Rechtbank te Amsterdam, seeking an injunction to prevent copyright and trade mark infringement by Makro. This injunction was granted and upheld on appeal.
On a further appeal to the Hoge Raad der Nederlanden, Makro claimed that Diesel's rights in its mark were exhausted because Cosmos had marketed the shoes with Diesel's consent within the meaning of Article 2.23(3) of the Benelux Convention on intellectual property and Article 7(1) of Trade Marks Directive (89/104/EEC).
The Hoge Raad stayed the proceedings and referred questions to the ECJ as to whether: 1. where goods bearing a trade mark have been placed on the market within the EEA, but not by the proprietor or with his consent, the criteria to be applied in determining whether this has occurred with the (implied) consent of the proprietor are the same as where such goods were placed on the market outside the EEA by the proprietor or with his consent and; 2. if the answer to the first question is no, what criteria should be applied in order to determine whether or not the proprietor has given (implied) consent within the meaning of the Trade Marks Directive.
The ECJ held that there was nothing in the wording of the judgment in Zino Davidoff and Levi Strauss  joined cases C-414/99 to C-416/99 ECR I-8691 that gave grounds for concluding that the statements made by the Court concerning the facts and circumstances from which the implied consent of a trade mark proprietor may be inferred, were applicable only in a factual context in which the goods had been placed on the market outside the EEA and imported into it without the consent of the proprietor.
Following Sebago and Maison Dubois  C-173/98 ECR I- 4103, Peak Holding  C-16/03 ECR I-11313 and Zino Davidoff, the ECJ held that, in order to ensure the protection of the rights conferred by the trade mark and to make possible the further marketing of goods bearing a trade mark without the proprietor of the trade mark being able to oppose that, it is essential that the proprietor can control the first placing of those goods on the market in the EEA, irrespective of the fact that they may have first been marketed outside that area.
The ECJ concluded that Article 7(1) of the Directive must be interpreted as meaning that the consent of the proprietor of a trade mark to the marketing of goods bearing that mark carried out directly in the EEA by a third party who has no economic link to that proprietor may be implied, insofar as such consent is to be inferred from facts and circumstances prior to, simultaneous with, or subsequent to, the placing of the goods on the market in that area. In the view of the national Court, this demonstrates unequivocally that the proprietor has renounced his exclusive rights. The case now returns to the Hoge Raad to determine whether, on the facts, Diesel so renounced its rights.
The ECJ's answer in this case will be welcomed by brand owners as it clearly confirms that its ruling in Zino Davidoff on the criteria applicable to the determination of whether a trade mark proprietor has (impliedly) consented to goods being placed on the market in the EEA is not restricted to circumstances where the goods are first marketed outside the EEA. Brand owners may also derive a useful lesson from the circumstances of the dispute to the effect that they should ensure any flexibility afforded to distributors is clearly delineated so that further sub-licensing does not undermine the strength of their brand.