Parallel Imports And The Silhouette Case

Corporate policies of EU companies in the areas of trademark portfolio management and commercial distribution needed to be re-evaluated in the light of the fundamental innovation introduced in 1999 in the community market through the judgment delivered by a plenary session of the Court of Justice of the European Union in the Silhouette case.

In sum, the Court legitimated the opposition by European companies to parallel imports from countries outside the EU, forbidding each member State from introducing domestic legislation implementing the principle of "international exhaustion" with regard to the rights conferred by a trademark, which would allow anyone who has lawfully purchased a good from the brand owner or its licensee to re-import and to sell it in Europe.

In fact, Council Directive 89/104 had recognised European Union parallel imports as lawful (and the impossibility of the trademark owner to prohibit them) as an expression of the principle of free circulation of goods, but only among member States, which principle was enacted by the Italian legislator (see article 1 bis, II of Italian trademark law).

Notwithstanding the opposition of some countries like Sweden, who tended to extend this treatment to goods marketed in any country, provided that they were sold by the trademark owner or with his consent, the European Court of Justice confirmed that European companies shall be allowed to seek any remedies and pursue any actions that their legal systems provide for the protection of trademarks, in order to oppose the entrance and sale in the European market, without their consent, of goods bearing their trademark.

In many cases, this principle would allow the European trademark owners to use their trademarks in order to partition the market and effectively protect margins and distribution chains in the European area. It is evident that this decision has special importance in brand products, fashion, design and large consumer goods sectors. As a matter of fact, this decision, and the security of being able to prohibit the competitive diffusion of one's own products re-imported into Europe, encouraged more aggressive and bold licensing policies, thereby improving the international exploitment of renown marks. With regard to the liquidation of surplus warehouse inventory, or substandard or defective saleable goods, by means of exporting them to Eastern Europe or North Africa, where those products can still find markets, the producer now can prevent the re-importation into the EC of those products as parallel imports for sale, in hard discount chains or in ways that can devalue the image and prestige of the trademark.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.