Silhouette manufactured and marketed high quality fashion sunglasses under the trade mark Â ‘Silhouette’ in Austria. They sought to change such sunglasses seasonally. Silhouette refused to Â sell their glasses to Hartlaur who sell spectacles in numerous branches in Austria at low prices. Â Silhouette felt that selling to them would jeopardise their reputation of fashionable, quality Â products. Â Silhouette consented to the sale of outdated sunglasses in non-member states, especially Bulgaria Â at low prices that are affordable in that country. Hartlaur brought Silhouette glasses in Bulgaria Â and re-imported them into Austria for re-sale in their shops. The Austrian Court applied Â International exhaustion. The case was sent to the ECJ with the following questions: Â 1. ‘Is Article 7 (1) of the Directive 89/104/EEC to be interpreted as meaning that the trademark Â entitles its proprietor to prohibit a third party from using the mark for goods which have been Â put on the market under the state which is not a contracting state?’ Â 2. ‘ May the proprietor of the trademark on the basis of article 7 (1) of the Directive alone seek Â an order that the third party cease using trademark goods which have been put on the market under Â that mark in a state which is not a contracting state?’ Â Firstly, the ECJ noted that the directive does not prescribe international exhaustion. If so, as Â the Advocate General pointed out , the directive would have referred only to marketing in the Â community. The view of Hartlaur was that Article 7 would nevertheless allow a member state to Â provide international exhaustion. The reason being that the Article would be limited to require Â the member state to provide for trademark exhaustion within the community. Â According to this view, the Directive does not comprehensively resolve the question of exhaustion, Â but leaves it open for a member state to adopt rules going further than those explicitly laid Â down. However, the court found this interpretation contrary to the Directive. Not only the wording Â of Article 7, but also the purpose and the scheme of the Directive points out, that it fully Â harmonises the question of exhaustion, not leaving it open for member states to provide for Â international exhaustion. Â The court continued that interpretation is fully capable to safeguard the functioning of the Â internal market. A situation, in which some member states could provide for international Â exhaustion, while others provided for community exhaustion, would give rise to trade barriers Â between member states. The commission and some of the member states in the proceedings further Â elaborated argument: if a member state were free to determine whether trademark owners could Â prevent importation from third countries, the same products could be subject of parallel imports Â into one member state but not in another. Â It would be no solution to this, to let goods once imported into a member state providing for Â international exhaustion to benefit from the free movement on the internal market. Finally the Â court pointed out that the community authorities always could extend the exhaustion to products Â put on the market in non-member countries by entering into international agreements, as already Â had been done through the EEA. Â The judgement might at first glance seem contrary to some aspects of the court’s case law. The Â court has a number of times, emphasised that the function of trademarks is to point out the origin Â of the product to the consumer. As Sweden argued during proceedings, it is no part of that Â function to enable the trademark owner to divide the market. This argument was answered by the Â General Advocate, which on the one hand agreed on the Swedish point, but on the other hand, he Â added that the case law in which the function of origin has been discussed, was developed in the Â context of the community market, not the world market, and that Articles 28 and 36 do not regulate Â the relationship between the community and third countries. Â The consequence of Silhouette is that regional, community-wide exhaustion now is compulsory to all Â members of the European Union. While some countries already applied it before the judgements, Â others like Sweden have to adapt. Parallel importers cannot continue the importation of Â trademarked products from third countries without risking litigation. Parallel importation form Â other member states can, however, continue as usual, and there seems to be no reason not to allow Â the parallel importation of a trademarked product form a third country, if it sold in the EU under Â another trademark.
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