1

ROBERT KENNEDY COLLEGE &

UNIVERSITY OF SALFORD

LLM INTERNATIONAL COMMERCIAL LAW

GROUP ASSIGNMENT 1

[UoS] International Intellectual Property Law

Module Title

Group Assignment 1
Title of Assignment
LL.M. - International Intellectual Property Law

Group A
Submitted By
(C. Cooper-Vakis, J. Fernandez, G. Jassal, A. Karvelis)

Word Count; excluding

cover page, table of
3,280
contents, abstract and
bibliography.

1
 A Group Report

“If a right related to copyright is relied upon to prevent the marketing in a Member State of
products distributed by the holder of the right or with his consent on the territory of another
Member State on the sole ground that such distribution did not take place on the national
territory, such a prohibition, which would legitimise the isolation of national markets, would
be repugnant to the essential purpose of the Treaty, which is to unite national markets into a
Single Market”. Deutsche Grammophon v Metro [1971] ECR 487.

Write a report which analyses how successful the European Court has been in balancing these
competing interests in conjunction with Treaty Obligations. In light of the above statement by the
European Court of Justice you should:

(a) examine the impact of the free movement of goods principle on intellectual property.
(b) the rights conferred on owners of intellectual property
(c) the conditions for exhaustion of intellectual property rights to occur,
(d) the consequences of exhaustion.

Submission Date: 15th October 2017

Abstract

In today’s growing globalization; increasing free movement of international trade of goods and

services, borderless commercial transactions and in essence, “one world” enterprise, how has

conflicting proprietary rights in intellectual property and advancement of free movement and

distribution throughout the EU been decided and in particular, how has the European Court of Justice

balanced these competing positions and what has been the outcome?

2
4 Table of Contents

1. Introduction................................................................................................................................... 4

2. The impact of the free movement of goods principle on intellectual property.......................5

3. The rights conferred on owners of intellectual property...........................................................8

3.1 Copyright................................................................................................................................ 9

3.2 Patents.................................................................................................................................. 10

3.3 Trademarks........................................................................................................................... 10

3.4 Industrial Design.................................................................................................................. 11

4. The conditions for exhaustion of intellectual property rights to occur.................................12

4.1 Goods lawfully placed in the market..................................................................................13

4.2 Proof of any form of consent or acquiescence of the IP right holder.............................13

5. The consequences of exhaustion............................................................................................. 15

6. Conclusion.................................................................................................................................. 17

7. Bibliography................................................................................................................................ 19

7.1 Table of Cases...................................................................................................................... 19

7.2 Table of Legislation..............................................................................................................20

7.3 Laws and Statues................................................................................................................. 20

7.5 Books.................................................................................................................................... 21

7.6 Articles and Journals...........................................................................................................21

7.7 Websites................................................................................................................................23

3
 1. Introduction

For decades, the relationship between the free movement of goods and intellectual property rights

(“IPRs”) has been of a competitive nature within international trade and particularly within the

European Union (“EU”).1 The European Court of Justice (“ECJ”) has been confronted with deciding

and balancing IPRs on a national level with those conferred by the European Community Treaty

(“ECT”)2 which promotes the free movement of goods and the drive to harmonization amongst

Member States (“MS”).

IPRs within the free movement of goods domain is twofold argument; existing laws provide

inadequate protection verses stronger protection for right owners. The ways in which IPRs are

comprehended and enforced within the EU are shaped by political, economic and legal

considerations.

The European Commission (“EC”) in 1993 established the European Internal Market which seeks to

guarantee the free movement of goods, capital, services, and labor within the EU, commonly known

as the “four freedoms”.3 Since the creation of the European Economic Community (“EEC”) in 1957 4,

The ECJ has been faced with the complexities to enhance economic growth and integration whilst at

the same time, respect IPRs that have been granted by individual MS.5

1
Daniel C.K Dhow and Thomas Choenbaum, International Trade Law (2008).
2
Maciej Mataczyński, 'What Did The European Community Founders Actually Mean By Saying That The Treaties Shall In No Way
Prejudice The Rules In Member States Governing The System Of Property Ownership? Analysis of Article 345 TFEU' Adam
Mickiewicz University Law Review.
3
The European Single Market' (The European Commission, 2017) <http://ec.europa.eu/growth/single-market/> accessed 30
September 2017.
4
SUMMARY OF: Treaty Establishing The European Economic Community (EEC Treaty)' (EUR-Lex Access to European Union law
EUR-Lex Access to European Union law, 2017) <http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=LEGISSUM:xy0023> accessed
4 October 2017.
5
Mireille van Eechoud and others, 'Harmonizing European Copyright Law, The Challenges of Better Lawmaking' (2009) 19 Kluwer
Law International.

4
This paper seeks to analyse how successful the ECJ has been in balancing the competing interests

of the free movement of goods and IPRs in conjunction with obligations conferred by the ECT and will

address the following:

i. The impact of the free movement of goods principle on intellectual property

ii. The rights conferred on owners of intellectual property
iii. The conditions for exhaustion of intellectual property
iv. The consequences of exhaustion.

2. The impact of the free movement of goods principle on intellectual property

The free movement of goods is fundamental to the effective functioning of the internal market as it

facilitates and promotes economic activity, expansion, increases stability and raises the standard of

living, thus creating closer relationships between MS.6 The EU has secured this strategy through the

removal of customs, duties, quantitative restrictions, and the prohibition of measures having an

equivalent effect.7

The Treaty on the Functioning of the European Union (“TFEU”) can be considered as the governing

Treaty of the free movement of goods within the EU. In particular, Articles 26 to 37 of the TFEU are

the crucial provision governing the free movement of goods. These provisions have been subject to

debate and discussed by the ECJ when dealing with the conflict of IPRs, which are territorial in nature

and defined at a national level.8 As a result, IPR owners have tended to claim that their

products/services are being illegally exploited across national borders and attempt to protect their

IPRs within the national level. Due to these exclusive rights being granted at national levels, this can

6
Fact Sheets on the European Union, The Internal Market' (European Parliament, 2017)
<http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=theme3.html> accessed 30 September 2017.
7
Fact Sheets on the European Union, Free Movement of Goods' (European Parliament, 2017)
<http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_3.1.2.html> accessed 4 October 2017.
8
Claude CRAMPES, David ENCAOUA and Abraham HOLLANDER, 'COMPETITION AND INTELLECTUAL PROPERTY IN THE EUROPEAN
UNION'.

5
cause obstacles to trade and anti-competitive effects9 which impede the free movement of goods’

principles.10 There are several ways that the free movement of goods principle impacts IPRs on the

backdrop of Articles 26 to 37 of the TFEU, which include;

1. Free movement laws are addressed to MS, therefore, holding national jurisdictions responsible
for implementation and enforcement of national IPRs.11
2. Prohibition against quantitative restrictions on imports into MS.12
3. Prohibition of ‘Any measure having equivalent effect upon importers’ 13. It is to be noted that
Article 35 TFEU14 prohibits the same, however, with relation to exports. 15

4. Free movement provisions are directly effective, thus providing rights that can be enforced by
16
individuals before national courts even though the provisions have been addressed to MS.

Some of the landmark cases that have influenced the ECJ’s decisions on the free movement goods

and IP that involve the territorial character of IPRs and any form of national restrictions which could

be considered as ’quantitative restriction’’17 are Procureur du Roi v. Dassonville v. S. A. ETS Fourcroy

and S. A. BreuvaletCi18 and Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (Cassis

de Dijon).19 In Dassonville, the ECJ found that “combine effects”20 of a mechanism of protection of
9
Jarrod Tudor, 'Intellectual Property, the Free Movement of Goods and Trade Restraint in the European Union' Kent State
University.
10
Article 34 TFEU: ‘’Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between
Member States”.
11
Consolidated version of the consolidated version of the Treaty on the European Union (2012)
12
Article 34 TFEU (n 9).
13
Article 34 TFEU (n 9).
14
Article 35 TFEU: “Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited
between Member States”.
15
Ibid.
16
Fact Sheets on the European Union, Free Movement of Goods' (European Parliament, 2017)
<http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_3.1.2.html> accessed 4 October 2017.
17
Article 34 TFEU (n 9).
18
Procureur du Roi v Dassonville v S. A. ETS Fourcroy and S. A. BreuvaletCie, Civil Parties Case 8/74 [1974] ECR.

19
Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein Case 120/78 [1979] ECR (Cassis de Dijon).

20
The Court held: “More particularly, an exclusive dealing agreement may adversely affect trade between Member States and
can have the effect of hindering competition if the concessionaire is able to prevent parallel imports from other Member States
into the territory covered by the concession by means of the combined effects of the agreement and a national law requiring the
exclusive use of a certain means of proof of authenticity”. PROCUREUR DU ROI v DASSONVILLE Case 8/74 [1974] ECR 853.

6
IPR’s (exclusive dealing agreement of trademarked products) and national restrictions (certificate of

origin) cannot limit the free movement of goods within the internal market, because under Article 34

TFEU (ex Article 28 of TEU), this “formula”21 is considered as a quantitative restriction.

Another impact is the availability of parallel imports principally within the pharmaceutical industry,

where the ECJ has been known to support parallel importation 22, thus, negatively affecting owner’s

efforts to protect IP. In Cassis de Dijon23 the ECJ highlighted the protection of public interest24, such

as public health, consumer defense, and fiscal control, to accept necessary measures to hinder the

movement of goods within the internal market.25

Similarly in the joined cases of Bernard Keck and Daniel Mithouard 26 the ECJ stated that

requirements made by a MS regarding features, labels, and packaging imposed on goods which were

legally marketed by another MS, are considered as a disguised restriction on trade under Article 36

TFEU (ex Article30 TEU),27 unless the MS can prove that the measure was applied in order to protect

a public interest.

21
Article 34 TFEU (n 9).
22
Glaxosmithkline services and others v commission and others Joined cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06
P[2009] ECR I-09291.
23
Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein Case 120/78 [1979] ECR (Cassis de Dijon) (n 19).
24
The Court held: “Obstacles to movement within the Community resulting from disparities between the national laws relating to
the marketing of the products in question must be accepted in so far as those provisions may be recognized as being necessary in
order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public
health, the fairness of commercial transactions and the defence of the consumer”. Rewe-Zentral AG v.
Bundesmonopolverwaltung für Branntwein Case 120/78 [1979] ECR 662.
25
ibid.

26
Bernard Keck and Daniel Mithouard Joined cases C-267/91 and C-268/91 [1993] ECR I-6097.

27
Article 36 TFEU: “The provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods
in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans,
animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of
industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary
discrimination or a disguised restriction on trade between Member States.”

7
Furthermore, it is worthwhile to note that there is little reference made with regards to IPRs. The

notable provisions include Articles 118, 207, and 345 of the TFEU. Article 345 of the TFEU is chiefly

concerned with IPRs28 and recognizes ownership of IPR; however it clashes with Article 34 and its

free movement principle. An example of the application of this provision in the context of patent rights

is the case of Parke, Davis & Co. v. Pröbel et al.29 This case demonstrates how, the ECJ presumes

that Article 345 does not exempt the issue of exercising exclusive rights 30 in the area of IP from EU

law. Furthermore, the TFEU limits owners’ rights in that it prevents owners in MS from using their IP

in a way that deters the free movement of goods within the internal market.

Therefore, the free movement of goods principle has restricted the existence and exercise of IPR’s

granted at the national level in order to protect the integrity of the internal market. In this sense, the

ECJ has played an important role as law-maker complementing and interpreting the provisions of the

TFEU in relation to IPRs.

3. The rights conferred on owners of intellectual property

IP can be broadly categorized as a creation of the human intellect 31 related to inventions, literary

works, artistic works, designs, symbols, names and images 32.Legal rights granted to the creator of IP

traditionally comprise of patents, copyrights, trademarks, and industrial designs33. The basis for

legislation that regulates the relation between IPRs protection and trade is the Agreement on Trade

Related Aspects of Intellectual Property (“TRIPS”). 34 According to the World Trade Organization,
28
Article 345 TFEU: “The Treaties shall in no way prejudice the rules in Member States governing the system of property
ownership”.
29
Parke, Davis & Co v Probel Case 24/67 [1968] CJEU.
30
Anna Viola Rocchi, 'Article 345 TFEU And the Right to Property: A Possible Limitation to the Principle of Free
Movement? The Analysis of the Jurisprudence of the Court Of Justice of the European Union'.
31
David Bainbridge, Intellectual Property (9th edition, Pearson Education Limited 2012).
32
What Is Intellectual Property?' (World Intellectual Property Organization (WIPO), 2017) <http://www.wipo.int/about-ip/en/>
accessed 4 October 2017.
33
Ibid.
34
Trade-related Aspects of Intellectual Property Rights' (World Trade Organization, 1994)
<https://www.wto.org/english/docs_e/legal_e/27-trips_01_e.htm> accessed 4 October 2017.

8
TRIPS focuses on three main features: standards, enforcement and dispute settlement 35, whilst the

World Intellectual Property Organization (“WIPO”)36 promotes the protection of IP. Both TRIPS and

WIPO play an integral role in facilitating IPRs and have influenced national systems, supporting the

development of the EU’s IP policies whilst providing a substantive legal foundation and guidance for

rights conferred to IP owners.37

Intellectual property (IP) is an essential contributor to economic growth and competitiveness within

the EU which claims that protection of IP is important for promoting innovation, creativity, developing

employment, and improving competitiveness. However, IPRs in the EU are still chiefly protected by

national rather than EU laws. Therefore, IPRs at the national level continue to conflict with EU law

and can create legal uncertainty when IP cases are brought before the ECJ as illustrated below.

3.1 Copyright

During the recent decades of the 20th century, technological developments have created various

uncertainties and complexities within IP copyright cases. In the case of abuse of a dominant position

pertaining to copyright, Radio Telefis Eireann (RTE) and Independent Television Publications Ltd

(ITP) v. Commission of the European Communities (Magill TV Guide LTD intervening)38 the ECJ ruled

that the dominant position39 under Article 102 of TFEU had been abused, when three TV stations

(based in UK and Ireland) had refused to supply Magill with program listings. The Court

acknowledged that broadcasters did benefit from a de facto monopoly, whilst the Court stressed that

in exceptional circumstances, the exercise of IPRs can involve an abusive conduct. Similarly, in
35
Ibid.
36
Art.3 WIPO Convention (1967), main aim of WIPO is: ‘’to promote the protection of intellectual property throughout the world
through cooperation among States, and where appropriate, in collaboration with any other international organisation’’.
37
Ibid.
38
Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission of the European Communities
ECLI:EU:C:1995:98.

39
RTE and ITP v CommissionJoined cases C-241/91 P and C-242/91 P [1995] ECR I-834.

9
relation to dominant position and copyright is the Microsoft Corp. v. Commission of the European

Communities40, where Microsoft refused to share technical information with its competitors. By doing

so, Microsoft prevented other developers to build programs compatible with their Windows platform,
41
and based on Article 102 of TFEU, prohibits the owner of IPR to occupy dominant position.

3.2 Patents

A patent is a territorial right, yet it is impacted by the free movement of goods principle within the EU,

meaning that the ECJ is forced to fairly account for the rights conferred to patent owners by national

laws. In the case of Parke, Davis & Co v. Probels42 the Court ruled that defenses against restricted

trade and dominant position are not valid as protection rights are granted by default under patent law.

This case reflects the conflicting relationship between EU law and national legislation, were the patent

was protected by national laws, which should not have restricted the free movement.

Furthermore, in Centrafarm v. Sterling Drug Inc.43, Sterling was aiming for an injunction against

Centrafarm to distribute drugs in the Netherlands (the medicine was imported from UK and

Germany). Sterling claimed that the defendant had violated the patent rights. The ECJ ruled that once

goods are circulated in another MS that gives enough grounds for exhaustion.

3.3 Trademarks

40
Microsoft Corp. v Commission of the European Communities Case T-201/04 [2017] CFI.
41
Ibid.
42
Parke, Davis & Co v Probel Case 24/67 [1968] ECJ.
43
Centrafarm BV and Adriaan de Peijper v Sterling Drug Inc. [1974] ECJ.

10
The registration of a trademark is imperative to build and protect a brand. In the EU a trade mark can

either be registered at a national level (as a national trademark) or at EU level as a European Union

trademark.44

In L’Oréal SA and others v. Bellure NV and others 45, the ECJ held that trademarks can be exploited

as an advertising instrument46. In the case of Pfizer, Inc. v. Eurim-Pharm GmbH47 the latter had

repackaged the drugs to suit and cater the market’s customs in Germany. Pfizer claimed that it held a

trademark for a drug called ‘’Vibramycin” and that only they can distribute it in Germany. The Court

found that Eurim-Pharm had not breached IP laws as the name of the antibiotic was visible in the

repackaging. Moreover, the Court emphasized that banning the defendant from distribution would

compromise the principle of parallel imports. However, the ECJ has set certain criteria with this ruling

in relation to repackaging; the original manufacturer should indicate on the new package, sand should

not damage the reputation of trademark owner. Furthermore, the decision in the case of

Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v. Commission the European

Economic Community48 triggered the Court’s judgment in relation to parallel imports. The Court ruled

Grundig cannot have the exclusive right to appoint a single distributor.

3.4 Industrial Design

44
Trade Mark Protection in the EU' (European Commission, 2017) <https://ec.europa.eu/growth/industry/intellectual-
property/trade-mark-protection_nl> accessed 8 October 2017.
45
L’Oréal SA and others v Bellure NV and others C-487/07 [2009] CJEU.

46
Ibid.
47
Pfizer, Inc. v Eurim-Pharma GmbH Case 1/81[1981] ECR 2913, 2927.
48
Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission of the European Economic Community Cases
56/58, 64 [1966] CJEU.

11
In 1998 to harmonize industrial design protection, the “Community” design was introduced to give

unitary protection across the EU.49 To ensure its consistency in design protection in individual EU

countries, the EU adopted Directive 98/71/EC on the legal protection of designs aiming to ensure that

registered design rights give the right holder equivalent protection in all EU countries. 50 Although this

directive aims to create accessible design protection it has not always proven successful.

In PepsiCo, Inc. v Grupo Promer Mon Graphic SA infringement case, the ruling of the ECJ

contributed towards clarification on design freedom, registration, infringement, and invalidity. This is a

contradiction to article 28 TFEU51, meanwhile the use of IPRs outside the borders of MS is protected

by national laws. The essence of IPR is uniqueness, hence the goal is to remain protected from

infringement. Although industrial design law is a new concept, aforementioned cases have produced

indicators that can guide the Courts when making rulings.

4. The conditions for exhaustion of intellectual property rights to occur

The exhaustion of IPRs doctrine (applying to all kinds of IP) was established by the ECJ to;

compromise between the free movement of goods throughout the entire EU, and to ensure adequate

protection of IPRs under the laws of MS and the EU. 52 The doctrine’s theory indicates that the

proprietor of IPR protected by the law a MS cannot invoke that law to prevent the importation of

products which have been put into circulation in another MS’ applying to resale, export, or import.53

49
Fact Sheets on the European Union, Intellectual, Industrial and Commercial Property' (European Parliament At your service,
2017) <http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_3.2.4.html> accessed 1 October 2017.
50
Directive 98/71/EC on the legal protection of designs in 1998.
51
Article 28 TFEU: “The Union shall comprise a customs union which shall cover all trade in goods and which shall involve the
prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the
adoption of a common customs tariff in their relations with third countries”.

52
Fact Sheets on the European Union, Intellectual, Industrial and Commercial Property' (European Parliament At your service,
2017) <http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_3.2.4.html> accessed 1 October 2017.
53
Dominik Vuletić, 'Direct Horizontal Effect of the Free Movement of Goods and Reshaping Of the European Economic
Constitution. Back to the Future?' (2001) 1 Journal for the International and European Law, Economics and Market Integrations,
InterEULawEast.

12
The territorial application of the exhaustion doctrine, Article 6 of TRIPS, is considered by some

authors as neutral, because it “does not impose any exhaustion regime (national, international or

regional), leaving countries free to adopt the system that best suits their needs” 54. Here, the ECJ has

adopted “a form of regional exhaustion”55 to prevent the abuse of IPRs in order to limit the free

movement of goods within the internal market.56 Furthermore, according to WIPO’s Committee on

Development and IP, “the enforcement of a regional exhaustion principle was aimed at preventing

segmentation of the European market into national territories”. 57 Based on analysis of European case

law conditions for the exhaustion of IPRs can include;

4.1 Goods lawfully placed in the market

The ECJ has emphasized that exhaustion occurs at the moment the goods are “lawfully marketed in

another Member State”58, in order to prevent conflict between the free movement principle and “the

exercise of exclusive right”59 given by any form of IPR. Case law denotes, the voluntary release of

goods within the EU’s internal market 60 has been the basis of a regional exhaustion regime and

supports the free movement principle.

54
Bonadio E., “Parallel Imports in a Global Market: Should a Generalised International Exhaustion be the Next Step?”, European
Intellectual Property Review, 33(3), pp.6, 2011.
55
Jarrod Tudor, “Intellectual Property, the Free Movement of Goods and Trade Restraint in the European Union”, 6 J. Bus.
Entrepreneurship& L. Iss. 1, pp.56, 2012.

56
Consolidated version of the Treaty on the European Union (2012) OJ C 202/17, Article 3.
Consolidated version of the Treaty on the Functioning of the European Union (2012), OJ C 326/47, Article 26.
57
WIPO, Committee on Development and Intellectual Property, “Interface between exhaustion of Intellectual Property Rights and
Competition Law”, CDIP/8/INF/5REV Annex, pp.15, 2012.

58
Société Terrapin (Overseas) Ltd. v Société Terranova Industrie CA Kapferer&Co. Case 119/75 [1976] ECR 1039.

59
The Court held: “Consequently, it would be in conflict with the provisions prescribing the free movement of products within the
common market for a manufacturer of sound recordings to exercise the exclusive right to distribute the protected articles,
conferred upon him by the legislation of a Member State, in such a way as to prohibit the sale in that State of products placed on
the market by him or with his consent in another Member State solely because such distribution did not occur within the territory
of the first Member State”. Deutsche Grammophon Gesellschaft GmbH v. Metro-SB-Grossmarket GmbH Case 78/70[1971] ECR
500.

60
Silhouette International Schmied GmbH & Co. KG v Hartlauer Handelsgesellschaft GmbH Case C-355/96 [1998] ECR I-4799.

13
 4.2 Proof of any form of consent or acquiescence of the IP right holder

In Pharmon BV v. Hoechst AG61, the ECJ stated that the exhaustion of IPRs do not apply if there is a

“lack of direct or indirect consent”62 by the right’s owner to allow a third party to place the goods in the

internal market.

However, an exception to the exhaustion of IPRs could be applied such as counterfeiting and

repacking. In Eurim-Pharm Arzneimittel GmbH v. Beiersdorf AG and others, the Court held that

exhaustion did not apply if the repackaging process endangered the quality of the product 63, similarly,

in Christian Dior v. Ephora,64 when the repacking cause’s damage to the reputation of the

manufacturer65, these practices may distort trade. Therefore, it is notorious that the Court has

continuously favored the principle of free movement of goods 66, through the use of the regional

exhaustion regime under the scope of provisions in the TFEU.67

In brief, a common conclusion based on the latter is that IPRs “will be recognized and protected as

long as it is not abused to artificially partition the Internal Market “68, as the main goal of the Court has

been to protect the integrity of the internal market.

61
Pharmon BV v Hoechst AG Case 19/84[1985] ECR 2296.
62
ibid.
63
Eurim-Pharm Arzneimittel GmbH v Beiersdorf AG, BoehringerIngelheim KG, Farmitalia Carlo Erba GmbH Joined cases C-71/94 C-
72/94 and C-73/94 [1996] ECR I-3623.
64
Parfums Christian Dior SA and Parfums Christian Dior BV v Evora BV. Case C-337/95 [1997] ECR I-06013.
65
ibid.

66
The Court held: “It is for the proprietor of the patent to decide, in the light of all the circumstances, under what conditions he will
market his product, including the possibility of marketing it in a Member State where the law does not provide patent protection
for the product in question. If he decides to do so he must then accept the consequences of his choice as regards the free
movement of the product within the Common Market, which is a fundamental principle forming part of the legal and economic
circumstances which must be taken into account by the proprietor of the patent in determining the manner in which his exclusive
right will be exercised”. Merck & Co. v. StepharBV Case 187/80 [1981] ECR 2082.

67
Articles 28 – 37 TFEU (free movement of goods), and 101 – 102 (distortion of competition).

68
N- 34, at pp.523.

14
 5. The consequences of exhaustion

As conflicting principles continue to exist between the EU’s objective of free movement in the internal

market and the exclusive and monopolistic rights of the national law 69, the consequences of

exhaustion have favored the EU’s objective and its goal towards harmonization and uniting the

national markets.70

One of the main consequences of exhaustion is that any control over the protected good is lost

allowing the goods to be distributed throughout the internal market. 71 This opens up the opportunity

for parallel importers to purchase goods released onto the market at a low price 72 and then import

them into another MS and sell them at the prevailing market price (which may be higher) benefiting

from large profits, thus making more than the right owner. 73 Inevitably, the right owner is left with

competing against parallel importers who buy low and sell high, which has been subject to immense

litigation.

In Deutsche Grammophon Gesellschaft GmbH v. Metro-SB-Grossmarkte GmbH & Co. K.G. 74, Metro

purchased records at a reduced/discounted price and re-imported the goods back into Germany

selling them at a lower price than what the IPRs holder was selling the records for in Germany, where

prices were fixed. Deutsche obtained an injunction prohibiting Metro from parallel importing. The ECJ

held that Deutsche had exhausted its rights and therefore, allowed the parallel importation. 75

69
Roger J. Goebel, 'The Interplay between Intellectual Property Rights and Free Movement of Goods in the European Community'
(1993) 4 Fordham Intellectual Property, Media and Entertainment Law Journal
<http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1054&context=iplj> accessed 1 October 2017.
70
Annette Kur and Thomas Dreier, European Intellectual Property Law: Text, Cases And Materials (Edward Elgar Publishing 2017).
71
Mireille van Eechoud and others, 'Harmonizing European Copyright Law, The Challenges of Better Lawmaking' (2009) 19 Kluwer
Law International.
72
Damian Simeonov, 'Parallel Import EU and South East Europe' [2006] Balkan Legal Forum.
73
Claude CRAMPES, David ENCAOUA and Abraham HOLLANDER, 'COMPETITION AND INTELLECTUAL PROPERTY IN THE EUROPEAN
UNION'.
74
Deutsche GrammophonGesellschaftmbH v. Metro-SB-Grossmarkte GmbH & Co. K.G. (78/70) [1971] CMLR 63.
75
ibid.

15
Similarly, Centrafarm profited considerably from a substantial price difference by purchasing the

goods from the UK (where they were sold cheaply) and then importing them into Holland. Again, the

Court found that Sterling Drug Inc. had exhausted its rights allowing the parallel importation and

thereby, competing against the right holder’s profitability76.

In Merck & Co. Inc. v. StepharBv and Petrus Stephanus Exler 77, again with parallel importation due to

exhaustion, Stephar obtained the benefit of a considerable difference in price, since the drug was

sold more cheaply in Italy and then re-imported into the Netherlands. The Court found that exhaustion

had occurred consequently, reducing the monopoly value of the drug in Italy which increased

competition.78 Therefore, the more free flowing movement of goods due to exhaustion 79 and increased

supply, prices for the goods will inevitably be effected thus, fostering the EU’s objective of

competition.80

Another important consequence of exhaustion, and perhaps positive in the eyes of the developing

countries, is the accessibility and supply of goods without hindrance, especially in serving to protect

human life by ensuring the supply of essential goods in the fields of education and medicine 81.

Through exhaustion, less developed countries, will have the access and opportunity to use products,

technology, goods in agriculture, medicine and education to better themselves and their economies.

In summary, the main consequence of exhaustion is namely relinquishing the IPR of owners and

allowing parallel importers, to open up the free movement of goods and competition which is in line

with the EU’s internal market regime and ECT’s objective.

76
Centrafarm BV and Another v. Sterling Drug Inc. (15/74) [1974] 2 CMLR 480.
77
Merck & Co. Inc. v. Stephar B.V. and Petrus Stephanus Exler (187/80) [1981] 3 CMLR 463.
78
ibid.
79
Rochelle Cooper Dreyfuss and Diane Leenheer Zimmerman, Working Within the Boundaries of Intellectual Property: Innovation
Policy for the Knowledge Society (Oxford University Press 2010).
80
Samuel Dobrin and ArchilChochia, 'The Concepts Of Trademark Exhaustion And Parallel Imports: A Comparative Analysis Between
The EU And The USA' (2016) 6 Baltic Journal of European Studies.
81
Robert GuTowsKlt, 'The Marriage Of Intellectual Property And International Trade In The Trips Agreement: Strange Bedfellows Or
A Match Made In Heaven?' (1999) 47 Buffalo Law Review.

16
 6. Conclusion

The free movement of goods in the EU and IPRs have been in conflicting positions since they came

into force, namely; the contrast between the national law promoting exclusivity and monopolistic

rights82, protection versus the EU’s mandate to endure free movement without restrictions 83, and the

drive towards harmonization and community wide rights to enterprise.84

When confronted between having to decide the conflicting rights, the ECJ aims to fill the vacuum that

this conflict has created. Consequently, the ECJ, under its obligations to uphold the ECT and Articles

contained therein, have tended to rule in favor of promoting the internal market going against national

law and the protection of IPRs at a national level. It seems logical that the ECJ (being the highest

court of the EU) will favor harmonization among the EU’s MS, the obligations of the ECT, and

opening up free enterprise across the EU, rather than restricting and protecting IPRs within the MS.

On balance, the ECJ is to look out for the entire EU, rather than MS individually. In support of its

decisions to “open up the playing field”85 for IP owners and distributors, the Court has relied on the

doctrine of exhaustion and has consistently found that IPRs have been exhausted in furtherance of

promoting the ECT and internal market, putting national the law of the MS and protection of IPRs

behind in priority.

In sum, the ECJ has attempted to balance the competing rights of national law and the mandate

given to it in order to uphold the internal market and Treaty. It seems that the ECJ has swayed
82
Jarrod Tudor, 'Intellectual Property, the Free Movement of Goods and Trade Restraint in the European Union' Kent State
University.
83
Rochelle Cooper Dreyfuss and Diane Leenheer Zimmerman, Working Within the Boundaries of Intellectual Property: Innovation
Policy for the Knowledge Society (Oxford University Press 2010).
84
Christopher Stothers, 'Who Needs Intellectual Property? Competition Law and Restrictions on Parallel Trade within the
European Economic Area' [2005] European Intellectual Property Review
<https://login-westlaw-co-uk.salford.idm.oclc.org/maf/wluk/app/document?src=doc&linktype=ref&context=4&crumb-
action=replace&docguid=IA75534B0E75011DAB6EDAFAEBAD7D114> accessed 1 November 2017.
85
Roger J. Goebel, 'The Interplay between Intellectual Property Rights and Free Movement of Goods in the European Community'
(1993) 4 Fordham Intellectual Property, Media and Entertainment Law Journal
<http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1054&context=iplj> accessed 1 October 2017.

17
towards the latter by relying on the concept of exhaustion, as the consequences of which have

supported one of the ECJ’s and EU’s guiding principles of encouraging and fostering free movement

of goods, competition and accessibility, which will not only become more prevalent in the future, but

will continue to be driven by the openness and growth of international trade and globalization of

commercial enterprise.

18
 7. Bibliography

7.1 Table of Cases

Centrafarm BV and Another v. Sterling Drug Inc. Case 15/74[1974] CJEU

Centrafarm BV and Another v. Winthrop BV. Case 16/74 [1974] CJEU

Deutsche Grammophon Gesellschaft mbH v. Metro-SB-Grossmarket GmbH& Co. K.G. Case 78/70
[1971] CJEU

Glaxosmithkline services and others v commission and others Joined cases C-501/06 P, C-513/06 P,
C-515/06 P and C-519/06 P[2009] ECR I-09291.

ÉtablissementsConstenS.à.R.L. and Grundig-Verkaufs-GmbH v. Commission of the European

Economic Community Cases 56/58-64 [1966] CJEU

Eurim-Pharm Arzneimittel GmbH and Beiersdorf AG, BoehringerIngelheim KG Farmitalia Carlo Erba
GmbH Joined cases C-71/94 C-72/94 and C-73/94 [1996] CJEU

L’Oréal SA and others v.Bellure NV and others C-487/07 [2009] CJEU

Merck & Co. Inc. v.Stephar B.V. and Petrus Stephanus Exler.Case 187/80[1981] CJEU

Microsoft Corp. v. Commission of the European Communities. Case T-201/04 [2017] CFI

Parfums Christian Dior SA v. Evora BV. Case C-337/95 [1997] CJEU

Parke, Davis & Co v.Probel. Case 24/67 [1968] CJEU

Peak Holding AB v.Axolin-Elinor AB.Case C-16/03[2003] CJEU

PepsiCo, Inc. v.GrupoPromer Mon Graphic SA. Case C-281/10 P[2012] FSR

19
Pfizer, Inc. v.Eurim-Pharma GmbH. Case 1/81 [1981] CJEU

Pharmon BV v. Hoechst AG.Case 19/84[1985] CJEU

Procureur du Roi v.Dassonville v S. A. ETS Fourcroy and S. A. BreuvaletCie, Civil Parties Case 8/74
[1974] CJEU

Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v. Commission of the
European Communities ECLI:EU:C:1995:98

Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein. (Cassis de Dijon) Case 120/78

[1979] CJEU

RTE and ITP v. Commission Joined cases C-241/91 P and C-242/91 P [1995] CJEU

Silhouette International Schmied GmbH & Co. KG v. Hartlauer Handelsgesellschaft GmbH. Case C-
355/96 [1998] CJEU

Société Terrapin (Overseas) Ltd. V. Société Terranova Industrie CA Kapferer&Co.Case 119/75

[1976] CJEU

Van Doren + Q GmbH v. Lifestyle Sports + SportswearHandelsgesellschaftGmbH. Case C-244/00

[2003] CJEU

7.2 Table of Legislation

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

The Treaty on the Functioning of the European Union (TFEU) (2007)

World Intellectual Property Organisation (WIPO)

7.3 Laws and Statues

Directive 98/71/EC on the legal protection of designs in 1998.

20
 7.4 Government Publications

An Industrial Property Rights Strategy for Europe (COMMISSION OF THE EUROPEAN

COMMUNITIES 2008)

Consolidated version of the Treaty on the Functioning of the European Union [2012] Official Journal
of the European Union C 326/47

HM Revenue & Customs, Department for Business, Innovation & Skills, and Intellectual Property
Office, 'Review Of the Balance of Competences between the United Kingdom and the European
Union Single Market: Free Movement of Goods' (Her Majesty's Government 2014)

WIPO, Committee on Development and Intellectual Property (CDIP), ‘Interface between exhaustion of
Intellectual Property Rights and Competition Law’ 2011, CDIP/8/INF/5 REV.

7.5 Books

Aplin T and Davis J, Intellectual Property Law: Text, Cases, And Materials (2nd edn, Oxford
University Press 2017)

Bainbridge D, Intellectual Property (9th edn, Pearson Education Limited 2012)

CHOW D and SCHOENBAUM T, INTERNATIONAL TRADE LAW (2008)

Colston C and Galloway J, Modern Intellectual Property Law (3rd edn, Routledge 2017)

Cooper Dreyfuss R and Zimmerman D, Working Within the Boundaries of Intellectual Property:
Innovation Policy for the Knowledge Society (Oxford University Press 2010)

Keeling D, Intellectual Property Rights in EU Law Volume I Free Movement and Competition Law (1st
edn, Oxford University Press 2003)

Kur A and Dreier T, European Intellectual Property Law: Text, Cases and Materials (Edward Elgar
Publishing 2017)

Seville C, EU Intellectual Property Law and Policy (Edward Elgar Publishing Limited 2009)

Waelde C and others, Contemporary Intellectual Property Law and Policy (4th edn, Oxford University
Press 2016)

7.6 Articles and Journals

21
Calboli I, 'Trademark Exhaustion in the European Union: Community-Wide or International? The Saga
Continues' (2002) 6 Marquette University Law School
<http://scholarship.law.marquette.edu/cgi/viewcontent.cgi?article=1074&context=facpub> accessed 5
October 2017

CRAMPES C, ENCAOUA D and HOLLANDER A, 'COMPETITION AND INTELLECTUAL

PROPERTY IN THE EUROPEAN UNION'

Dobrin S and Chochia A, 'The Concepts Of Trademark Exhaustion And Parallel Imports: A
Comparative Analysis Between The EU And The USA' (2016) 6 Baltic Journal of European Studies

Eechoud M and others, 'Harmonizing European Copyright Law, The Challenges Of Better
Lawmaking' (2009) 19 Kluwer Law International

Ganslandt M and Maskus K, 'Parallel Imports and the Pricing of Pharmaceutical Products: Evidence
from the European Union' [2004] Journal of Health Economics

Ginter C, 'Free Movement of Goods and Parallel Imports in the Internal Market of the EU' (2006) VII
European Journal of Law Reform

Goebel R, 'The Interplay between Intellectual Property Rights and Free Movement of Goods in the
European Community' (1993) 4 Fordham Intellectual Property, Media and Entertainment Law Journal
<http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1054&context=iplj> accessed 1 October
2017

GuTowsKlt R, 'The Marriage Of Intellectual Property And International Trade In The Trips Agreement:
Strange Bedfellows Or A Match Made In Heaven?' (1999) 47 Buffalo Law Review

K. Yu P, 'THE OBJECTIVES AND PRINCIPLES OF THE TRIPS AGREEMENT' (2009) 46 Houston

Law Review

Matthews D, 'Trade-Related Aspects of Intellectual Property Rights: Will the Uruguay Round
Consensus Hold?' (2017) 99/02 CSGR Working Paper

Mataczyński M, 'What Did The European Community Founders Actually Mean By Saying That The
Treaties Shall In No Way Prejudice The Rules In Member States Governing The System Of Property
Ownership? Analysis of Article 345 TFEU' Adam Mickiewicz University Law Review

Simeonov D, 'Parallel Import EU and South East Europe' [2006] Balkan Legal Forum

Stothers C, 'Who Needs Intellectual Property? Competition Law and Restrictions on Parallel Trade
within the European Economic Area' [2005] European Intellectual Property Review <https://login-
westlaw-co-uk.salford.idm.oclc.org/maf/wluk/app/document?src=doc&linktype=ref&context=4&crumb-
action=replace&docguid=IA75534B0E75011DAB6EDAFAEBAD7D114> accessed 25th September
2017S

Tudor J, 'Intellectual Property, the Free Movement of Goods and Trade Restraint in the European
Union' (2012) 6, The Journal of Business, Entrepreneurship & the Law

22
Viola Rocchi A, 'Article 345 TFEU and the Right to Property: A
Possible Limitation to the Principle of Free Movement? The Analysis of the Jurisprudence of the
Court Of Justice of the European Union'

Vuletić D, 'Direct Horizontal Effect of the Free Movement Of Goods And Reshaping Of The European
Economic Constitution. Back To the Future?' (2001) 1 Journal for the International and European
Law, Economics and Market Integrations, Inter EU Law East

7.7 Websites

'Fact Sheets on the European Union, The Internal Market' (European Parliament, 2017)
<http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=theme3.html> accessed 30
September 2017

'Fact Sheets on The European Union, Free Movement of Goods' (European Parliament, 2017)
<http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_3.1.2.html> accessed 4
October 2017

'Fact Sheets on the European Union, Intellectual, Industrial and Commercial Property' (European
Parliament At your service, 2017) <http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?
ftuId=FTU_3.2.4.html> accessed 1 October 2017

'SUMMARY OF: Treaty Establishing The European Economic Community (EEC Treaty)' (EUR-Lex
Access to European Union law EUR-Lex Access to European Union law, 2017) <http://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=LEGISSUM:xy0023> accessed 4 October 2017

'The EU In Brief' (European Union, 2017) <https://europa.eu/european-union/index_en> accessed 27

September 2017

'The European Single Market' (The European Commission, 2017) <http://ec.europa.eu/growth/single-

market/> accessed 30 September 2017

'Trade-related Aspects of Intellectual Property Rights' (World Trade Organization, 1994)

<https://www.wto.org/english/docs_e/legal_e/27-trips_01_e.htm> accessed 4 October 2017

'Trade Mark Protection in the EU' (European Commission, 2017)

<https://ec.europa.eu/growth/industry/intellectual-property/trade-mark-protection_nl> accessed 8
October 2017

'What Is Intellectual Property?' (World Intellectual Property Organization (WIPO), 2017)

<http://www.wipo.int/about-ip/en/> accessed 4 October 2017

23