Denver Journal of International Law & Policy Volume 27 Number 4 Fall Article 9 May 2020 Parfums Christian Dior Sa & (and) Anor v. Evora BV Douglas R. Hegg Follow this and additional works at: https://digitalcommons.du.edu/djilp Recommended Citation Douglas R. Hegg, Parfums Christian Dior Sa & (and) Anor v. Evora BV, 27 Denv. J. Int'l L. & Pol'y 669 (1999). This Article is brought to you for free and open access by Digital Commons @ DU. It has been accepted for inclusion in Denver Journal of International Law & Policy by an authorized editor of Digital Commons @ DU. For more information, please contact [email protected],[email protected]. PARFUMS CHRISTIAN DIOR SA & ANOR V. EVORA BV DOUGLAS R. HEGG* I. INTRODUCTION Unrestricted trade is an essential step in the equalization and inte- gration of the European Community.1 This case note proposes that the European Court of Justice (ECJ) is correct in encouraging parallel im- ports 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 ad- vertise 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 Com- munity'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, ex- port them to high-price countries for resale at a profit, and still under- cut the manufacturer's official selling price.2 General principles of eco- nomics 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 * Douglas R. Hegg is a third year law student at the University of Denver College of Law. The author wishes to thank his family and friends for their support and encour- agement throughout his scholastic career. He wishes to extend special thanks to Sheila for helping him through the rigors of law school. 1. See generally Andreas Reindl, Intellectual Property and Intra-Community Trade, 20 FORDHAM INT'L L.J. 819 (1997) (analyzing trademark functions, costs and benefits). 2. See Joined Cases C 427, 429 & 436/93 Bristol-Myers Squibb v. Paranova [1996] ECR 1-3457, 13 [hereinafter Bristol-Meyers-Squibb]. 670 DENV. J. INT'L L. & POL'Y VOL. 27:4 of, or is detrimental to, the distinctive character or the repute of the trademark.' Since consumers regard a trademark as an indication of the quality and identity of the manufacturer of a given product, proprie- tors of a trademark have a legitimate interest in protecting the integ- rity of the trademark.4 Manufacturers initially attempted to restrain parallel imports through claims of trademark infringement resulting from the repack- aging of the product.' 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 Ar- ticle 36 of the EC Treaty permits quantitative restrictions on imports, exports, or goods in transit that 7 fall within specific categories of public concern. Nevertheless, the EC Treaty also provides that any such prohibi- tions or restrictions may not "constitute a means of arbitrary discrimi- nation 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 prod- uct; (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.' Thus, though the limits are ambiguous, Article 36 provides a measure of restraint from undue inter- ference with free trade. The adoption of the First Council Directive (Di- rective) raised additional questions as to the scope of Article 36."° Arti- 3. See First Council Directive to Approximate the Laws of the Member States Re- lating to Trademarks, No. 89/104/EEC [1988], art. 5(2) 1989 O.J. (L 40)1 [hereinafter First Council Directive]. 4. See generally Reindl, supra note 1, at 854-57; See, e.g., N. Wilkof, Same Old Tricks or Something New? A View of Trademark Licensing and Quality Control, 18 EUR. INTELL. PROP. REV. 261, 268 (1996). 5. See also, Reindl, supra note 1, at 854-55. See generally Bristol-Meyers Squibb, supra note 2. 6. Case 102/77 Hoffmann-La Roche & Co. AG v. Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse GmbH, 1978 E.C.R. 1039, [1978] 3 C.M.L.R. 217 (1978). 7. TREATY ESTABLISHING THE EUROPEAN COMMUNITY (Treaty of Rome), Feb. 7, 1992, O.J. (C 224) 1 (1992), [1992] 1 C.M.L.R. 573 (1992) art. 86 [hereinafter EC TREATY] (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). 8. Id. 9. Id. 44. 10. See generally First Council Directive, supra note 3. 1999 PARFUMS CHRISTIAN DIoR cle 5 of the Directive codifies the rights conferred by a trademark.1 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."' 2 Such unauthorized use in- cludes: a) affixing the sign to the goods or to the package thereof; b) of- fering the goods, or putting them on the market under that sign; c) im- porting or exporting the goods under the sign; and d) using the sign on business papers and in advertising.'" Nevertheless, the sweeping grant of rights to trademark proprie- tors in Article 5 is limited by the doctrine of Exhaustion of Rights pro- vided 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.'" A "legitimate reason" includes al- teration or impairment to the goods after entering the Community market.' In Parfums ChristianDior 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.' 8 The ECJ held that unauthorized advertising of parallel products may only be opposed where such advertising results in significant dam- age to the reputation of the trademark and its owner.' 9 The ECJ con- cluded 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 infe- rior to that of selected distributors.2" 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 tooth- 11. See id. art. 5. 12. See id. art. 5(2). 13. See id. art. 5(3). 14. See id art. 7. 15. See id. art. 7(1). 16. Id. 17. Case C-337/95, Parfumes Christian Dior SA v. Evora BV 1997 CELEX LEXIS [1997] [hereinafter Dior]. 18. See id. 1 6. 19. See id. 61. 20. See id. 1 51. 672 DENV. J. INT'L L. & POLYV VOL. 27:4 brushes."2 Without explaining its reasoning, the ECJ concluded that "resellers cannot be required to comply with the same conditions as se- 22 lected distributors. 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 po- tential "disguised restriction on trade between Member States," and ef- fectively promoted the use of parallel imports as a means of price 2 equalization. ' The holding makes clear that the rights of a trademark proprietor cannot outweigh the interests of the European Community. II. THE CASE IN CHIEF A. 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 pre- mium prices. It utilizes a selective distribution system, whereby se- lected retailers only supply ultimate customers or other selected retail- ers.2" Parfums Christian Dior (Dior Netherlands) is Dior France's sole representative in the Netherlands.