In France, the question of whether an intellectual property (IP) right (such as a registered trademark or a patent) can be exercised through an infringement action against the sale of genuine goods placed on the market in another countries then imported in parallel into France, is governed by an area of law called “exhaustion”.
As a Member State of the European Union (EU), France falls under the regional exhaustion regime of the European Economic Area established by EU legislation and case law of the Court of Justice (CJEU). The basic principle is that once the goods have been placed on the market in the EU or the European Economic Area (EEA) by the owner of the intellectual property concerned or with his consent, the rights of the owner, under intellectual property law, to control subsequent transactions in the goods have been exhausted and therefore no longer exist. However, placing genuine goods on the market outside the EU and EEA does not exhaust the intellectual property of the owner within the EU/EEA, which can still be enforced against the import or sale of such goods within the EU/EEA.
The EEA regional exhaustion regime can therefore be seen to have two fundamental features: (1) exhaustion with respect to goods placed on the market in the EU/EEA by the intellectual property right holder or with his consent; and (2) no exhaustion for goods placed on the market outside the EU/EEA by or with the consent of the intellectual property right holder.
This approach is recognized in French legislation on both patents and trademarks.
For more details on the evolution and modern foundations of France’s patent and trademark exhaustion regime, read on below.
In 1974, in Centrafarm vs. Sterling, the CJEU relied on Articles (currently) 34 and 36 of the Treaty on the Functioning of the EU (TFEU) (i.e. the provisions relating to the free movement of goods) and held that the first putting into circulation of goods in a Member State, either directly or by licensing to third parties, has exhausted the trade mark proprietor’s rights under trade mark law in respect of those goods in d other Member States. This introduced in France the first of the fundamental features of the EEA regional exhaustion regime mentioned above, in relation to trademarks.
However, in France, the concept of exhaustion of rights existed before this case law. Prior to 1974, the trademark right was considered exhausted when the product was introduced to the French market by the trademark owner in France or with his consent. In this way, private property rights to the product in question have not been compromised. However, if the trademark owner put his product on the market abroad, there was no exhaustion of trademark rights in France. The pre-1974 approach in France can therefore be characterized as a regime of national exhaustion.
In 1998, the Court of Justice ruled in Silhouette vs. Hartlauer that due to the harmonization of trademark law across the EU, Member States could not choose whether or not to apply international exhaustion; the trademark directive was a complete code. This therefore confirmed the approach already adopted in France with regard to the second of the fundamental characteristics of the EEA regional exhaustion regime mentioned above, in relation to trademarks.
The case law of the Court of Justice has further addressed the legitimate reasons why the owner of a registered mark opposes the continued marketing of the products, in particular in the context of repackaged pharmaceutical products. and where further marketing would seriously damage the reputation of the registered mark.
In 1974, in Centrafarm vs. Sterling, the CJEU relied on Articles (currently) 34 and 36 of the Treaty on the Functioning of the EU (TFEU) (i.e. the provisions relating to the free movement of goods) and ruled that putting goods into circulation for the first time in a Member State either directly or by licensing to third parties has exhausted the rights of the patentee to those goods in other Member States. This introduced in France the first of the fundamental features of the EEA regional exhaustion regime mentioned above, in relation to patents.
Prior to 1978, to justify the legality of subsequent acts of marketing in France of products placed on the French market by the patentee, judges used the legal fiction of the existence of a tacit license accompanying the sale of a patent. A 1978 law introduced into French law the rule of exhaustion, which ended the need to use the legal fiction of an implied licence. In 1993, a new law, the Code of Intellectual Property, extended the principle of exhaustion recognized to patents so that it applies to goods put on the market by the patent holder or with his consent not only in France. but all over the world. (what is now called) the EU (and the EEA). Therefore, the first of the fundamental characteristics of the EEA regional exhaustion regime mentioned above has been recognized in France with regard to patents.
However, with regard to goods placed on the market for the first time outside the EU/EEA, it should be noted that the case law of the CJEU has not introduced, specifically with regard to patents, the second of the fundamental characteristics of the EEA regional exhaustion regime mentioned above (equivalent to Silhouette vs. Hartlauer but in matters of patents).
However, in a 1997 judgment the Tribunal de Grande Instance of Paris declared that there is no international exhaustion of rights for patents; and this remains the good law in France.
Therefore, in France, the law recognizes both the first and second fundamental characteristics of the EEA regional patent exhaustion regime.
To conclude, the EEA regional exhaustion regime governs the rules for parallel imports of genuine goods into France – which genuine goods can be imported and from where. If your company is involved or interested in the movement to France (or the EU) of goods protected by a trademark or patent, then you must understand what the law on “exhaustion” of intellectual property is in France and in the EU.