Opinion of Advocate General Gulmann delivered on 9 February 1994

1 Original language: Danish.

2 According to point 1(a) of the agreement, Ideal-Standard SA assigned all its rights in the trade mark Ideal Standard in France, including the overseas departments and territories, and in Algeria and Tunisia, as regards production, marketing and sale of heating installations.

3 It was stated during the case that Ideal-Standard SA had brought an action before the Tribunal de Grande Instance, Paris, claiming that the assignment of the trade mark from SGF to CICh was void, the reason being that the agreement between Ideal-Standard SA and SGF contained a clause granting Ideal-Standard SA an option of re-purchase in the event of re-assignment, which SGF is alleged to have disregarded.

4 IHT has since July 1992 been the successor in tide to Ideal Heizungstechnik GmbH, which was entered in the companies registry on 31 October 1988.

5 The respondent in the main proceedings, in addition to Ideal-Standard GmbH, is Wabco Standard-GmbH, which took over the management of Ideal-Standard GmbH as from 1 January 1991.

6 The appellant in the main proceedings, in addition to IHT, is Mr Uwe Danziger, engineer, who until 1975 was employed by Ideal-Standard GmbH and later by IHT.

7 SA CNL-SUCAL v HAG GF [1990] ECR I-3711.

8 Van Zuylen v HAG [1974] ECR 731.

9 See inter alia the judgment in Case 35/87 Thetford and Another v Fiamma and Others [1988] ECR 3585.

10 OJ 1989 L 40, p. 1.

11 See the third recital to the directive.

12 See Council decision of 19 December 1991, OJ 1992 L 6 p. 35.

13 Cf. the judgment of the Court in Case C-317/91 Deutsche Renault [1993] ECR I-6227 at paragraph 14.

14 OJ 1994 L 11, p. 1.

15 See the proposal for a first Council Regulation on the Community trade mark of 25 November 1980, OJ 1980 C 351, p. 1, as amended by the amended proposal for a Council Regulation on the Community trade mark of 9 August 1984, OJ 1984 C 230, p. 1.

16 Article 7 provides: 1. 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. 2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialization of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.

17 Article 5(1) provides: 1. The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade: (a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered; (b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.

18 See paragraphs 51 to 57 of the Opinion, delivered on 13 March 1990, [1990] ECR I-3711.

19 [1971] ECR 125.

20 [1974] ECR 1147.

21 [1974] ECR 1183.

22 [1982] ECR 2853.

23 [1981] ECR 2063. See the corresponding judgments in Case 144/81 Keurkoop v Nancy Kean Gifts [1982] ECR 2853 and Case 35/87 Thetford v Fiamma [1988] ECR 3585.

24 [1989] ECR 79.

25 [1978] ECR 1139.

26 [1981] ECR 2913. It would also be incompatible with the conditions in the second sentence of Article 36 for a producer who markets the same goods in various Member States under different trade marks to oppose parallel importation of goods by a third party who removes the mark for the State of export and replaces it with that for the import State if it can be demonstrated that the proprietor of the trade mark has applied various marks for the purpose of partitioning the markets (see the judgment in Case 3/78 Centrafarm v American Home Products [1978] ECR 1823).

27 See inter alia the judgments in Cases 24/67 Parke, Davis v Centrafarm [1968] ECR 55 and 78/70 Deutsche Grammophon [1971] ECR 125.

28 See paragraph 11 of the Opinion.

29 [1966] ECR 299.

30 [1978] ECR 1391. In this connection see also the Court's conclusion in the judgments in Cases 119/75 Terrapin v Terranova [1976] ECR 1039 and 40/70 Sirena [1971] ECR 7. An agreement prohibiting exportation between two parties will not however affect the right of a third party based on Articles 30 and 36 of the Treaty to make parallel imports (see the judgment in Case 58/80 Dansk Supermarked v Imerco [1981] ECR 181).

31 [1976] ECR 1039.

32 See, as regards the interpretation of the concepts of similar goods and trade marks likely to lead to confusion, the judgment in Case C-317/91 Deutsche Renault AG v Audi AG [1993] ECR I-6227. The proprietors of independent trade marks may choose to enter into so-calleddelimitation agreements seeking to delimit, in the mutual interests of the parties, the spheres within which their respective trade marks may be used so as to avoid confusion or conflict. Such agreements may conflict with Article 85 of the Treaty in so far as they have the aim of dividing up the market or restricting competition in other ways (see judgment in Case 35/83 BAT v Commission [1985] ECR 363).

33 [1985] ECR 2281.

34 [1982] ECR 2015. That case concerned an agreement for assignment in respect of Germany of plant-breeders' rights for certain products and the exclusive right to deal in such products in Germany. The Court found that an open exclusive licence, that is, a licence concerning only the contractual relationship between the proprietor and the licensee, regard being had to the specific nature of the products in question, was not in itself incompatible with Article 85(1) of the Treaty. On the other hand, as regards exclusive licences granting absolute territorial protection in favour of a licensee with a view to controlling and preventing parallel imports by third parties, the Court declared that in accordance with its consistent case-law that was incompatible with Article 85 of the Treaty.

35 See in particular Commission Regulation (EEC) No 2349/84 of 23 July 1984 on the application of Article 85(3) of the Treaty to certain categories of patent licensing agreements (OJ 1984 L 219, p. 15) and Commission Regulation (EEC) No 4087/88 on the application of Article 85(3) of the Treaty to certain categories of franchise agreements (OJ 1988 L 359, p. 46).

36 [1971] ECR 7.

37 [1976] ECR 811.

38 Agreements concluded between undertakings which, being owned by parent company and subsidiary, belong to the same group will not be covered by Article 85 in the event of the undertakings' forming an economic unit within which the subsidiary has no real freedom to determine its course of action on the market and where the agreements or practices are concerned merely with the internal allocation of tasks as between the undertakings (see the judgments in Cases 15/74 Centrafarm v Sterling Drug [1974] ECR 1147 and 16/74 Centrafarm v Winthrop [1974] ECR 1183).

39 In 1907-1908 the German company HAG GF registered the trade mark HAG for decaffeinated coffee in Germany, Belgium and Luxembourg. In 1935 the Belgian and Luxembourg trade marks were assigned to the wholly-owned subsidiary in Belgium. In 1944 all the subsidiary's assets including the Belgian and Luxembourg trade marks were confiscated as enemy property and sold to the Van Oevelen family. In 1971 the trade marks were assigned to the Belgian limited partnership Van Zuylen Frères. As HAG GF in 1972 Degan to export coffee to Luxembourg under the trade mark Kaffee HAG, Van Zuylen Frères brought an action for trade-mark infringement. Those proceedings led to the preliminary ruling of the Court in HAG I. In 1979 Van Zuylen Frères was purchased by a Swiss company and converted into a wholly-owned subsidiary under the style of CNL-SUCAL NV. When in 1985 that company began to export coffee to Germany under the HAG trade mark, HAG GF brought an action for trade-mark infringement. Those proceedings led to the preliminary ruling of the Court in HAG II.

40 See in this connection paragraph 73 of Advocate General Jacobs's Opinion in HAG II, in which he states that one of the criticisms which might be levelled against the ruling in HAG I is that it was considerably wider than necessary and that a repetition of that mistake should be avoided in drawing up the judgment in HAG II.

41 See in that connection section VII of Advocate General Jacobs's Opinion in HAG II.

42 The Court has thus precisely established and applied the exhaustion principle in connection with parallel imports by third parties, but it has declared the principle inapplicable to direct sales undertaken by independent proprietors of parallel rights within one another's territory (see Section D above).

43 It follows, however, from Articles 10, 11 and 12 of the directive on trade marks that a trade-mark proprietor may forfeit his rights if he has not made genuine use of the trade mark in a Member State for a period of five years.

44 This was expressed as follows by Advocate General Jacobs in his Opinion in HAG II: whereas patents reward the creativity of the inventor and thus stimulate scientific progress, trade marks reward the manufacturer who consistently produces high-quality goods and they thus stimulate economic progress. Without trade-mark protection there would be little incentive for manufacturers to develop new products or to maintain the quality of existing ones. Trade marks are able to achieve that effect because they act as a guarantee, to the consumer, that all goods bearing a particular mark have been produced by, or under control of, the same manufacturer and are therefore likely to be of similar quality... A trade mark can only fulfil that role if it is exclusive. Once the proprietor is forced to share the mark with a competitor, he loses control over the goodwill associated with the mark. The reputation of his own goods will be harmed if the competitor sells inferior goods. From the consumer's point of view, equally undesirable consequences will ensue, because the clarity of the signal transmitted by the trade mark will be impaired. The consumer will be confused and misled. (Paragraphs 18 and 19).

45 See Article 17(1) of the regulation, which provides: A Community trade mark may be transferred, separately from any transfer of the undertaking, in respect of some or all of the goods or services for which it is registered.

46 See Article 1(2) of the regulation, which provides: A Community trade mark shall have a unitary character. It shall have equal effect throughout the Community: it shall not be registered, transferred or surrendered or be the subject of a decision revoking the rights of the proprietor or declaring it invalid, nor shall its use be prohibited, save in respect of the whole Community. This principle shall apply unless otherwise provided in this regulation.

47 This point of view finds support in the Court's judgments on the exhaustion principle. Thus there will be exhaustion if a product is put on the market in another Member State by or with the consent of a company legally or economically dependent on the proprietor (cf. inter alia the judgment in Case 144/81 Keurkoop v Nancy Kean Gifts [1982] ECR 2853) and it seems irrelevant in this respect whether companies related in this way have also taken advantage in practice of their opportunity to coordinate their policy as to quality and marketing.

48 The same idea is expressed in the judgment in Pharmon v Hoechst, in which the Court mentioned that by the grant of a compulsory licence to a third party, a patentee is deprived of his right to determine freely the conditions under which he markets his product.

49 This case provides a precise illustration. Ideal-Standard GmbH has explained that the contract of assignment was concluded only on the basis of the special situation in France, where the assignee had managed Ideal-Standard SA for a considerable period and thus was fully acquainted with the company's policy on quality and where it was therefore a question of entrusting the quality of the trade mark to a company on which reliance could be placed, whilst at the same time the company was forbidden to assign the mark to others.

50 In this connection it is of interest that the Landgericht Düsseldorf, in interpreting the Court's judgment in HAG II, stated: Such priority For the free movement of goods cannot be justified, either, on the ground that it is not necessary to protect a trade-mark proprietor who voluntarily assigns his rights to a third person in one or more Member States. That does not take into consideration the fact that the mark's distinguishing function cannot be assessed solely from the proprietor's point of view, but that consideration must also be given to the protection of consumers, who are entitled to be able to establish with certainty the origin of the goods protected by a trade mark so that they can distinguish them from goods from another undertaking. In that respect there is no relevant legal difference between the compulsory and the voluntary subdivision of a mark.

51 See paragraph 18 of the Opinion, in which, inter alia, Advocate General Jacobs stated: The guarantee of quality offered by a trade mark is not of course absolute, for the manufacturer is at liberty to vary the quality; however, he does so at his own risk and he —and not his competitors — will suffer the consequences if he allows the quality to decline. Thus, although trade marks do not provide any form of legal guarantee of quality — the absence of which may have misled some to underestimate their existence — they do in economic terms provide such a guarantee, which is acted upon daily by consumers.

52 This idea finds a certain support in particular in the judgment in Case 16/74 Centrafarm v Winthrop [1974] ECR 1183, in which the Court stated, in paragraphs 19 to 23: This question requires the Court to state whether the trade-mark owner is authorized to exercise the rights conferred on him by the trade mark, notwithstanding Community rules concerning the free movement of such goods, for the purpose of controlling the distribution of a pharmaceutical product with a view to protecting the public against the risks arising from defects therein. The protection of the public against risks arising from defective pharmaceutical products is a matter of legitimate concern, and Article 36 of the Treaty authorizes the Member States to derogate from the rules concerning the free movement of goods on grounds of the protection of health and life of humans and animals. However, the measures necessary to achieve this must be such as may properly be adopted in the field of health control, and must not constitute a misuse of the rules concerning industrial and commercial property. Moreover, the specific considerations underlying the protection of industrial and commercial property are distinct from the considerations underlying the protection of the public and any responsibilities which that may imply. The question ... should therefore be answered in the negative. (My emphases).

53 There may for example be rules prohibiting the assignment of a mark for only a part of the products for which it is protected. In this connection see Section N a, below. See also Article 3(1)(g) of the trade-mark directive, according to which trade marks may be excluded from registration or if registered may be declared invalid if they are of such a nature as to deceive the public, for instance as to the nature, quality or geographical origin of the goods or service, and Article 4(1) according to which a trade mark may be excluded from registration or may be declared invalid if it is identical with an earlier trade mark or if there exists a likelihood of confusion on the part of the public or of association with the earlier trade mark.

54 See in this respect the sixth recital to the trade-mark directive which states that this directive does not exclude the application to trade marks of provisions of law of the Member States other than trade-mark law, such as the provisions relating to unfair competition, civil liability or consumer protection. See in this connection also the judgment in Case 58/80 Dansk Supermarked v Imerco [1981] ECR 181 concerning partly the Danish rules with regard to protection of copyright and trade marks and partly rules on marketing dealing inter alia with consumer protection. With regard to the latter category of rules the Court ruled that the importation into a Member Sute of goods lawfully marketed in another Member State cannot as such be classified as an improper or unfair commercial practice, without prejudice however to the possible application of legislation of the State of importation against such practices on the ground of the circumstances or methods of offering such goods for sale as distinct from the actual fact of importation ....

55 In his Opinion on the case Advocate General Jacobs had expressed himself as follows: If HAG Bremen had voluntarily assigned the Belgian and Luxembourg marks to Van Oevelen, it would be easy to say that HAG Bremen had consented to the use of the mark by Van Oevelen in another Member State and had therefore exhausted its rights. HAG Bremen would not therefore be able to rely on its German trade mark in order to prevent imports of Van Oevelen's products into Germany. But would the same principle apply in reverse? Logically it should, even though the assignee of the subdivided mark could hardly be said to have exhausted his right; it would be more accurate to say that he acquired a right that was already exhausted (Paragraph 63).

56 An interpretation of Articles 30 and 36 to the effect that it is contrary to those provisions to use actions for infringement of trade marks to partition the internal market in continuation of separate assignments of parallel trade marks does not prevent its being accepted that it may be possible in national law to use the penalties attached to infringements of trade marks to penalize breaches of contracts.

57 In this connection see in particular paragraph 9 of the judgment in which the Court stated: when a trade-mark right is exercised by virtue of assignments to users in one or more Member States, it is necessary to establish in each case whether such use leads to a situation falling under the prohibitions of Article 85 (my emphasis).

58 Case 144/81 [1982] ECR 2853 at paragraph 24. IHT has also referred to Advocate General Tesauro's Opinion delivered on 9 June 1993 in Case C-317/91 Deutsche Renault v Audi [1993] ECR I-6227, which refers in point 7 to the paragraph quoted above.

59 Ideal-Standard GmbH added that considerable importance is still attached within the group to the Ideal-Standard trade mark for heating installations since the group intends to use it commercially, for example by licence or sale (as happened in France).

60 The German Government has stated that partial assignments of registered trade marks cannot be effected but it is proposed to amend the law so as to make such a step possible.

61 The Oberlandesgericht Düsseldorf explained in its order for reference that the German mark was registered for heating installations, steam hearing, refrigerating, drying, ventilating, water and sanitary installations including parts for such products, particularly washbasins, w. c. basins, bidets, douches (non-medical) and fittings for such installations with steel and cast-iron radiators and boilers.

62 IHT has stated that in April 1993 an action was brought against American Standard for cancellation of the German trade mark for heating installations for non-use.

63 In the course of that assessment the court attached importance to the fact that for a long time past joint trade fairs had been held for the two sectors, that both were represented by the same national trade organization and that there had been a number of actual cases of confusion between IHT's and Ideal-Standard GmbH's products. Finally the Court attached decisive importance to the fact that until 1976 the American Standard group carried on business in heating installations and that the Ideal Standard mark continues to be known in that sector, so that marketing of heating installations under that mark would almost inevitably lead to the conjecture that the American Standard group had resumed its operations in that sector. The court added that in addition IHT launched its products under the slogan Come-back d'une marque mondiale ... IDEAL STANDARD.

64 IHT in its observations submitted to the Court disputes the statement in the judgment of the Landgericht Düsseldorf that there have been a number of cases of actual confusion or that the American Standard group's operations in heating installations, which ceased more than 15 years ago, continue to be known. Next IHT mentions that after the Second World War an almost total separation took place at the production stage between the heating and sanitary sectors and that that separation had to a large extent repercussions on the retail trade and installation businesses. IHT mentions that a third of undertakings in the gas, water, central heating, ventilation, air-conditioning and plumbing sectors have nothing to do with the sale or installation of sanitary equipment. IHT further explains that a number of special-interest groups have grown up within the two sectors and that industrial and commercial interests within each branch are represented by two independent organizations.

65 See most recently the judgment in Case C-317/91 Deutsche Renault v Audi [1993] ECR I-6227, at paragraph 20.

66 See in this connection paragraph 19 of the judgment in Deutsche Renault, in which the Court declared: ... the purpose of the second sentence of Article 36 is to prevent restrictions on trade based on the grounds set out in the first sentence from being diverted from their purpose and being used in such a way as to introduce discrimination against goods originating in other Member States or to provide indirect protection for certain national products.

67 See in this connection paragraph 33 of the judgment in Deutsche Renault, in which the Court declared: It should however be recalled that national law is subject to the restrictions set out in the second sentence of Article 36 of the Treaty. There is, however, nothing in the documents before the Court to indicate that those restrictions have been exceeded. In particular there is nothing to suggest that the German courts make a broad interpretation of the concept of confusion where the protection of the trade mark of a German producer is at issue, but make a strict interpretation of the same concept where the protection of the trade mark of a producer established in another Member State is concerned.