Parfums Christian Dior SA v. Evora BV.

AuthorHegg, Douglas R.
PositionRecent Rulings of the European Court of Justice
  1. INTRODUCTION

    Unrestricted trade is an essential step in the equalization and integration of the European Community.(1) This case note proposes that the European Court of Justice (ECJ) is correct in encouraging parallel imports as a means of promoting unrestricted intra-Community trade. Similarly, assuming parallel imports provide an important benefit to the community, manufacturers should not be able to side-step such benefits by imposing artificial limits on parallel importers' ability to advertise the products legally imported and offered for sale. Parfumes Christian Dior SA v. Evora BV provides a basis upon which future courts may balance the rights conferred by a trademark and the Community's interest in the free movement of goods.

    Price discrepancies among Member States of the European Union (EU) have resulted in a practice known as "parallel imports," whereby individuals purchase products on the market in low-price countries, export them to high-price countries for resale at a profit, and still undercut the manufacturer's official selling price.(2) General principles of economics suggest that such actions will continue as long as the costs of transportation are less than the profit derived on resale. Thus, from a consumer's standpoint, parallel imports are beneficial, providing the same product at lower costs and in turn leading to price equalization throughout the EU.

    Unsurprisingly, manufacturers have a different viewpoint. A trademark confers a right to proprietors to prevent, in the course of trade, unauthorized use of the trademark that takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trademark.(3) Since consumers regard a trademark as an indication of the quality and identity of the manufacturer of a given product, proprietors of a trademark have a legitimate interest in protecting the integrity of the trademark.(4)

    Manufacturers initially attempted to restrain parallel imports through claims of trademark infringement resulting from the repackaging of the product.(5) In Hoffmann-La Roche & Co. AG v. Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse GmbH, the ECJ held that Article 36, in principle, grants a right to restrict the import of repackaged goods upon which the trademark had been reattached.(6) Article 36 of the EC Treaty permits quantitative restrictions on imports, exports, or goods in transit that fall within specific categories of public concern.(7)

    Nevertheless, the EC Treaty also provides that any such prohibitions or restrictions may not "constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States."(8) The ECJ concluded that restrictions were an impermissible "disguised restriction" on trade where: (1) use of the trademark right contributes to the artificial partitioning of the markets between Member States; (2) repackaging cannot adversely affect the original condition of the product; (3) the proprietor of the mark receives prior notice of the marketing of the repackaged product; and (4) it is stated on the new packaging by whom the product has been repackaged.(9) Thus though the limits are ambiguous, Article 36 provides a measure of restraint from undue interference with free trade. The adoption of the First: Council Directive (Directive) raised additional questions as to the scope of Article 36.(10) Article 5 of the Directive codifies the rights conferred by a trademark.(11) It purports to grant broad rights against unauthorized third party use which takes "unfair advantage of, or is detrimental to, the distinctive character or the repute of the trademark."(12) Such, unauthorized use includes: a) affixing the sign to the goods or to the package thereof; b) offering the goods, or putting them on the market under that sign; c) importing or exporting the goods under the sign; and d) using the sign on business papers and in advertising.(13)

    Nevertheless, the sweeping grant of rights to trademark proprietors in Article 5 is limited by the doctrine of Exhaustion of Rights provided in Article 7.(14) Pursuant to Article 7, a proprietor may not restrict the use of his trademark in goods marketed within the Community by the proprietor without his consent, unless a legitimate reason exists to oppose further commercialization.(15) A "legitimate reason" includes alteration or impairment to the goods after entering the Community market.(16)

    In Parfums Christian Dior SA & Anor v Evora BV (Dior), Christian Dior took an alternate approach to limiting parallel imports.(17) Dior sought to prohibit resellers from advertising its products acquired through parallel imports, thereby limiting the product's marketability by parallel importers.(18)

    The ECJ held that unauthorized advertising of parallel products may only be opposed where such advertising results in significant damage to the reputation of the trademark and its owner.(19) The ECJ concluded that what constitutes "significant damage" is a question of fact for the national court. However, it did provide some guidance. As a general rule, proprietors of a trademark should not be entitled to object to "respectable advertising by respectable traders", even if there is some damage to the product's luxurious image, resulting in advertising inferior to that of selected distributors.(20) The ECJ stated, however, that it might be justifiable for a trademark proprietor of luxury perfumes to oppose an advertisement which "depicted his perfumes heaped in a sale-bin at cut-price prices along with rolls of toilet paper and toothbrushes."(21) Without explaining its reasoning, the ECJ concluded that "resellers cannot be required to comply with the same conditions as selected distributors."(22)

    With this holding, the ECJ promoted the equalization of pricing by extending the principle of the Exhaustion of Rights to the advertising and marketing of trademarked goods. In doing so, it eliminated a potential "disguised restriction on trade between Member States," and effectively promoted the use of parallel imports as a means of price equalization.(23) The holding makes clear that the rights of a trademark proprietor cannot outweigh the interests of the European Community.

  2. THE CASE IN CHIEF

    1. Facts

      In Dior, the Hoge Raad der Nederlanden (the Supreme Court of the Netherlands), referred six questions for preliminary ruling to the ECJ.(24) The essential question was whether a trademark conveys upon the proprietor authority to prevent unauthorized advertising, even when conducted in a manner customary to the trade.(25)

      Parfums Christian Dior SA (Dior France) is the manufacturer of "luxury" perfumes and other cosmetic products, which it sells at premium prices. It utilizes a selective distribution system, whereby selected retailers only supply ultimate customers or other selected retailers.(26) Parfums Christian Dior (Dior Netherlands)is Dior France's sole representative in the Netherlands. In addition, Dior France has exclusive trademark rights in Benelux, including illustrations of the packaging of the perfumes.(27)

      The defendant, Evora, operates a chain of approximately 300 "health and beauty" retail stores under the subsidiary name Kruidvat.(28) Consumers in the Netherlands regard the stores as the "undisputed number one" for the sale of luxury perfumes.(29) Kruidvat obtained Christian Dior products by means of parallel imports, whereby products are purchased in low priced markets, exported to higher priced markets for resale at a profit, and yet still undercut the manufacturer's official selling price.(30) As part of a 1993 Christmas promotion, Kruidvat advertised several Dior perfumes.(31) The advertisements depicted the packaging and bottles of some Christian Dior products in a manner customary to retail traders in the relevant sector.(32) Nevertheless, Dior France had not consented to the advertising and commenced proceedings to prohibit Evora from making any use of its picture trademarks.(33)

      Dior claimed that its trademark had been used "either in breach of its exclusive right to use the mark in respect of the same or similar goods," or "in circumstances liable to cause it damage, by, inter alia, impairing the prestige and image of the marks.(34) Dior sought an order to prevent Evora from making any publication or reproduction of Dior's trademarks in unauthorized catalogues, brochures, advertisements, or otherwise.(35)

    2. Procedural History

      The Arrondissementsrechtbank Haarlem (district court) ordered Evora to desist from using Dior's trademark "in a manner not conforming to Dior's customary...

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