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.