The European Directive on the harmonization of trademark law discussed in our Information Letter N.S. 174 requires a Member State to include in its laws a provision preventing the owner of a trademark registration from using that registration to prevent the importation or sale of goods bearing that trademark which were first marketed in another EU country by the trademark owner or with its consent unless "there exists 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". Some countries have traditionally had similar provisions in their laws but extending to goods first marketed anywhere in the world by the trademark owner or with its consent. The compatibility of such provisions with the Directive came before the European Court of Justice (ECJ) in the case of Silhouette International Schmied GmbH v. Hartlauer Handelsgesellschaft mbH. Despite representations by various member states that such international exhaustion provisions were in the interests of consumers, the Court held that:

It is interesting to note that this decision was in contrast to an earlier decision in Mag Instrument Inc. v. California Trading Company Norway, Ulsteen, in December, 1997, wherein the European Free Trade Association Court (this court has jurisdiction to interpret the European Economic Area Agreement, which governs trade between and among the European Union member states and the European Free Trade Association member states, and which obligates the parties to provide for exhaustion of rights "as laid down in [European] Community law") issued an advisory opinion that the same provision interpreted in the Silhouette case is:

Although the ECJ has in the Silhouette decision thus narrowed the territorial scope of exhaustion among the member states, the Court has also issued decisions clarifying the rights of parallel importers within the member states. In their November 1997 decision in Christian Dior SA v. Evora BV, the Court addressed Dior's claim of trademark infringement against a chain of chemist shops that had acquired genuine Dior products through parallel import channels and was using pictures of Dior's products and packaging in its sales brochures. The Court held that a trademark owner could not prevent a reseller, who customarily markets products similar to those of the trademark owner albeit not of the same quality, from using the trademark owner's mark in ways customary in the trade in order to notify the public of the further commercialization of the trademark owner's genuine goods, unless it is proven that such use of the trademark seriously damages the reputation of the trademark.

In other noteworthy decisions, the ECJ has addressed the ability of trademark owners to prohibit the relabelling and repackaging of their genuine goods by parallel importers. Previously, in 1996, the Court, in addressing this issue in the context of the pharmaceutical industry, had held in Bristol-Myers Squibb and Others v. Paranova, Eurim-Pharm v. Beiersdorf and Others and MPA Pharma v. Rhone Poulenc, that pharmaceutical trademark owners could restrain the further marketing of their products which have been repackaged, unless: in doing so the trademark owner would contribute to the artificial partitioning of the market; the repackaging could not directly or indirectly affect the original condition of the product, such as by merely replacing external packaging or adding labels or instructions; the packaging does not clearly identify the repackager; the repackaged product is not such as to be liable to damage the reputation of the trademark or its owner; and the importer notifies, and provides requested samples of repackaged products to, the trademark owner before placing them on sale. It was unclear from these decisions whether these rules would also apply outside of the pharmaceutical industry.

However, in November of 1997, the Court addressed the issue of repackaging and relabelling in the context of alcoholic beverages, holding in Loendersloot v. Ballantine & Son Limited, that the above principles were "not confined to the field of pharmaceutical products". In this case the Court held that the trademark owner could prohibit the reaffixing of his trademark to genuine goods, unless: such actions contributed to the artificial partitioning of the markets between the Member States; the repackaging or relabelling cannot affect the original condition of the product; the presentation of the relabelled product could not damage the reputation of the trademark and its owner; and the party that relabels the product notifies the trademark owner of the relabelling prior to placing the relabelled product on sale. The Court expressly distinguished the situation of pharmaceutical products by adopting a less strict standard than the notification and submission of samples required in the case of pharmaceuticals and by not requiring that the identity of the party that relabels or repackages the goods be placed on the goods.