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European Union (EU) - Doctrine of "Common Origin" Relating to Trademarks Overturned

In its decision of June 24, 1994 in the Ideal Standard case the European Court of Justice (ECJ) finally overturned the so-called doctrine of "common origin" that it created in 1971, in connection with the PREP trademark in the Sirena case, subsequently extended in the 1974 decision in the Hag case, and tempered in 1989 by a second decision relating to the HAG trademark.

In accordance with the free flow of goods principle under EU law, the right of a trademark owner to use its trademark to prevent the import of goods marketed by that owner, or with his consent, into a member state of the EU is exhausted by the introduction of those goods by the owner, or an entity within its control (e.g. licensee, related company, exclusive distributor, etc.), on the market in any other member state.

In Sirena, it had been held that the assignee of a mark in one EU country could not use its rights under that mark to prevent importation into that country of goods that had been put on the market in another EU country by the assignor of the mark, since the agreement which gave rise to the assignment might have the effect of distorting trade between the member states.

In the Hag I case, the ECJ expanded the exhaustion principle to apply in situations where a mark was owned by different parties in different EU countries as a result of post-war expropriations of enemy property. The Court held that the assignee of the HAG mark in Luxembourg could not prevent imports of HAG coffee from Germany, where the HAG mark was owned by a different party, because the assignee had ultimately acquired the trademark from the German owner. Thus, because the marks had a common origin, the use of trademark law to divide the marketplace was inconsistent with the principle of free circulation of goods within the Common Market under the Treaty of Rome.

In the Hag II case, the ECJ reversed its decision in Hag I, realizing that the "common origin" doctrine, at least in expropriation cases, was somewhat incompatible with developing EEC law. The Court stated that consumers should be protected from confusion caused by the use of the same or a confusingly similar mark for the same product by parties that are legally and economically independent of one another. Also, the Court held that whether a trademark owner consents to the marketing of products under the trademark should be an important factor in deciding whether the trademark owner may prevent parallel importation. Therefore, since divided ownership of the HAG mark resulted originally from expropriation, the Court held that Hag AG had not granted its consent to the split in trademark ownership or to the subsequent marketing of the Belgian HAG coffee.

However, the ruling in Hag II that the free flow of goods principle did not preclude a trademark owner from seeking to prevent the importation of goods in the circumstances described above did not completely overturn the "common origin" doctrine. Since the Court limited its holding on the consent issue to cases involving expropriation (i.e. involuntary transfer), the question remained as to what types of consent in a "common origin" situation were required to enable unrelated successors-in-interest of a trademark from the same original owner to exercise their territorial trademark rights in the EU. The ECJ recently clarified this issue in the Ideal Standard case.

The IDEAL STANDARD mark was owned in France and Germany by the French and German subsidiaries, respectively, of the American Standard Group. The French IDEAL STANDARD registration was subsequently acquired by another company, which started marketing its French-made IDEAL STANDARD products in Germany. The American Standard Group's German subsidiary, and registered owner of IDEAL STANDARD in Germany, brought suit for trademark infringement.

In its decision, the ECJ shifted its focus from consent to control. The Court indicated that consumers are entitled to a guarantee that goods bearing a particular mark have been produced under the control of a single entity that is responsible for their quality. Therefore, the Court held that, where a trademark right is transferred, whether by agreement or expropriation, to an unrelated party, the original owner may no longer exercise the necessary control over use of the mark. Accordingly, such an assignment may not preclude subsequent owners from preventing the importation into their territory of goods marketed under the same mark by the owner in another territory. However, if the assignment resulted from an otherwise prohibited market-sharing agreement under Article 85 of the Treaty of Rome, then the assignment would be void.

It therefore appears that the "common origin" doctrine has finally been abrogated and trademark owners need no longer fear the attendant consequences when trademark rights in different EU member states are assigned from a single source to unrelated parties, provided such assignments are not made pursuant to a prohibited market-sharing agreement.



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© Copyright 1994 Ladas & Parry - Originally published November1994
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