The Development of Intellectual Property Law pursuant to Arts. 30 and 36 of the EC Treaty. Explain and Discuss it in the Light of European Community Cases
Essay 1996 17 Seiten
Table of contents
The Specific Subject-Matter Formula and the Applicability of the Exhaustion Doctrine Developed by the European Court of Justice
Table of Cases
Art. 9(1) EC Treaty establishes the principle of the internal market as one of the principal pillars related to the free movement of goods. Art. 7a EC Treaty defines this principal pillar closer as "an area without internal frontiers in which the free movement of goods (...) is ensured in accordance with the provisions of this Treaty". However, neither Art. 7 nor Art. 9(1) EC Treaty give a precise answer about the material scope of the principle of free movement of goods. Art. 9(2) EC Treaty opens the door for the applicability of "products originating in Member States" and thus to chapter 2 of the EC Treaty which contains provisions concerning the "elimination of quantitative restrictions between Member States". As this essay focuses on the area of intellectual property regarding patents, trademarks and copyrights, Articles 30 and 36 EEC Treaty are important. On the one hand, Art. 30 establishes the principle that "quantitative restrictions on imports and all measures having equivalent effect" shall "be prohibited between Member States". It thus provides that each Member State can import goods from one Member State into another State within the European Community, regardless of any restrictions or measures on the national level. Art. 30 EC Treaty therefore grants free trade between the Member States. On the other hand, Art. 36 EC Treaty, seen as a derogation from Art. 30 EC Treaty, determines that Art. 30(1) EC Treaty shall not apply to those prohibitions or restrictions on imports established by Member States which are legally justified on certain grounds. In the field of intellectual property law, "the protection of industrial and commercial property", mentioned as one of the specific reasons of Art. 36(1) EC Treaty, can be regarded as an exception that justifies not to apply the prohibitions of the restrictions on imports between Member States pursuant to Art. 30 EC Treaty. Art. 36 EC Treaty must be read in the light of Art. 222 EC Treaty which states that the EC Treaty does not affect "the rules in member States governing the system of property ownership".
Thus, this norm wholly protects the existence of national industrial and commercial property rights. Art. 36 EC Treaty is an emanation from the principle established in Art. 222 EC Treaty and guarantees the protection of industrial and commercial property rights. This provision allows to the right holder to rely on prohibitions and restrictions on the national level to protect industrial and commercial property rights against any infringement resulting from the import of goods. However, the scope of Art. 36(1) EC Treaty is restricted to the requirements pursuant to Art. 36(2) EC Treaty. The second sentence of Art. 36 EC Treaty seeks to exclude those prohibitions or restrictions established on the national level from the scope of Art. 36(1) EC Treaty which could "constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States".
The European Court of Justice, when applying the principles laid down in Arts. 30 and 36 EC Treaty traditionally distinguishes between the existence and the exercise of intellectual property rights. Where the exercise of intellectual property rights is concerned, the imports of goods from one Member State into another Member State affect the Treaty rules. The rationale behind the existence/exercise criterion is to provide legal space for new developments of intellectual property law under national legislation which particularly grants the specific intellectual property rights to the owner. In addition, the distinction of existence/exercise allows the right holder to rely on his exclusive intellectual property rights under national laws.
However, once the right holder exercises his/her exclusive rights beyond national boarder, his/her exclusive rights are no longer protected, but subject to the principle of free movement of goods set forth in Art. 30 EC Treaty. When looking through the relevant case-law, it can be observed that there exists an inherent tension between Arts. 30 and 36 EC Treaty. And this tension is visible when it comes to the discussion of the specific subject-matter and the exhaustion of intellectual property rights that the court raises.
In this essay, I will present the current case-law of the European Court on the specific subject-matter problem as well as the exhaustion doctrine developed in the field of patents, trademarks, and copyrights. This also includes a closer examination of the scopes of Arts. 30 and 36 EC Treaty. However, I shall present some critical remarks regarding the court's argumentation.
The Specific Subject-Matter Formula and the Applicability of the Exhaustion Doctrine Developed by the European Court of Justice
The first development in the field of intellectual property rights on the European Community level, which can be observed, is that the decisions of the European Court of Justice suggests the existing breach of Art. 30 EC Treaty without closely interpreting the scope of the norm. However, where the court defines the scope of Art. 30 EC Treaty, it hangs the discussion on the legal prerequisite of "measures having equivalent effect" to quantitative restrictions to which Art. 30 EC Treaty refers. In the Dassonville case the court developed a definition of what contains "measures having an equivalent effect" by stating that
"all trading rules enacted by member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade is to be considered as measures having an equivalent effect to quantitative restrictions".
Although this definition presents an expansive interpretation of "measures having an equivalent effect" pursuant to Art. 30 EC Treaty, the European Court has applied a more restrictive interpretation in intellectual property rights. In Musik-Vertrieb Membran v. GEMA the plaintiff, a German right holder of copyrights, tried to prevent the import of sound recordings to the German market, after having placed the product in the United Kingdom. Regarding the requirement of "measures having an equivalent effect" to quantitative restrictions the court ruled that
"national legislation whose application results in obstructing trade in sound recordings between Member States must be regarded as a measure having equivalent effect to a quantitative restriction within the meaning of Art. 30 of the Treaty. That is the case where such legislation permits a copyright management society to object to the distribution of sound recordings originating in another Member State on the basis of the exclusive exploitation which it exercises in the name of the copyright owner".
From this interpretation, it follows that the national legislation concerning intellectual property rights, which concerns imported products from one Member State into another Member State, is regarded as "measures having an equivalent effect" and, thus, in breach of Art. 30 EC Treaty. The court's opinion is reiterated and affirmed by the judgement in the case of Warner Brothers Inc. and Metronome Video aps. v. Erik Viuff Christiansen. Warner was the copyright holder of video cassettes which the defendant, a Danish video renting company, imported into Denmark, after they had been put into circulation on the market with the consent of the copyright holder. The judges decided that
"[t]he right to prohibit such hiring-out (of videocassettes to individuals) in a Member State is therefore liable to influence trade in videocassettes in that Member State and hence, indirectly, to affect intra-Community trade in those products. Legislation of the kind which gave rise to the main proceedings must therefore, in the light of established case-law, be regarded as a measure having an effect equivalent to a quantitative restriction on imports, which is prohibited by Art. 30 of the Treaty".
The European Court has sharply stated that national laws concerning intellectual property rights only infringe Art. 30 EC Treaty, if they affect the trade of Member States within the European Community. The clear and unambiguous interpretation of the court shows that the actual problem is neither the legal issue concerning the interpretation of "measures having an equivalent effect" to quantitative restrictions nor the establishment of the breach of the principle of free movement of goods pursuant to Art. 30 EC Treaty. But, as it can be viewed from the interpretation of the two sentences of Art. 36 EC Treaty, the mere objection of the court is whether such a national law, establishing prohibitions or restrictions on imports with respect to intellectual property rights, either prevails over Community law pursuant Art. 36(1) or should be modified in accordance with Art. 36(2) EC Treaty. The first sentence of Art. 36 EC Treaty admits of derogations from the principle of free movement of goods where such derogations are justified for the purpose of safeguarding rights, such as "the protection of industrial and commercial property”. The absence of any definition regarding the protection of industrial and commercial property to which extent those rights should be protected under Art. 36(1) EC Treaty, remains a great problem. The European Court has developed a specific formula called the specific subject-matter of intellectual property which allows to apply it for those cases where the concept of national exhaustion of intellectual property rights provides problems to fit the scope of Art. 36(1) EC Treaty. The formula of the specific subject-matter of intellectual property rights was, for example, mentioned in the case Deutsche Grammophon Gesellschaft mbH v. Metro-SB-Großmärkte GmbH & Co. KG. The court ruled that
“Art. 36 only admits derogations from (Art. 30 EC Treaty) to the extent to which they are justified for the purpose of safeguarding rights which constitute the specific subject-matter of such property”.
According to Art. 36(1) EC Treaty it thus follows from this judgement that the “specific subject-matter” test is only applicable where the provision of national law concerning the protection of industrial and commercial property rights can be regarded as necessary to protect the specific subject-matter of that property. However, the court has not yet determined the specific purpose of industrial and commercial property rights which should be safeguarded under national law. In Centrafarm BV v. Sterling Drug Inc. the court has applied the specific subject-matter formula in the field of patents pursuant to the scope of Art. 36(1) EC Treaty by saying that:
“the guarantee that the patentee, to reward the creative effort of the inventor, has the exclusive right to use an invention with a view to manufacturing industrial products and first putting them into circulation for the first time (…), either directly or by the grant of licenses to third parties, as wee as the right to oppose any infringements”.
And even in the case of Centrafarm BV v. Winthrop BV, the European court has extended the definition to the area of trade marks. It includes the guarantee that the owner of the trade mark has the exclusive right to use that trade mark, for putting products protected by the trade mark into circulation for the first time, and is thus intended to protect him/her against competitors "who would to take advantage of the position and reputation of the mark by selling products improperly bearing the mark".
The rationale behind these definitions, clarifying the "specific subject-matter" of intellectual property rights, should be interpreted in the light of the exclusive protection of intellectual property rights under national law. National intellectual property laws permit the right holder is, after he has lawfully registered the product under a trade mark or held a patent of this product, entirely protected against any competitors. Because the right holder has the right to use and exploit the patent or the trade mark as well as to demand a certain fee or reward for the exploitation of those rights by a third party with his/her consent. Where a third party makes unlawfully use of trade mark or patent right, without the consent of the right holder, the right holder, in addition, can claim for damages or apply for a restrictive injunction. Therefore, the protection of the product under national patent and trade mark law guarantees the right holder to take advantage of the rights’ exploitation legally and economically. It follows from these explanations that the right holder under national intellectual property law enjoys a monopoly position under which no competitors can acquire the same legal advantages deriving from a patent or trade mark of the same product. In the context of Art. 36(1) EC Treaty the protection of intellectual property law prevails over the principle of free trade within the European Community.
 Steiner/Woods (1996), at p. 143, stating that "both provisions (...) appear to ensure that national laws governing industrial property remain intact".
 See, for instance, ground 11 of the judgement in the case of Deutsche Grammophon Gesellschaft mbH v. Metro-SB-Großmärkte GmbH & Co. KG, case 78/70 (1971) CMLR 631, at p. 657: "Article 36 mentions among the prohibitions or restrictions on the free movement of goods permitted by it those that are justified for the protection of industrial and commercial property. If it can be assumed that a right analogous to copyright can be covered by these provisions it follows (...) from this Article that although the Treaty does not affect the existence of the industrial property rights (...), the exercise of these rights may come within the prohibitions of the Treaty." See also Marenco/Banks (1992), at pp. 224-225 and Friden (1989), at p. 193.
 See Terrapin (Overseas) Ltd v. Terranova Industrie C.A. Kapferer & Co., case 119/75 (1976) ECR 1039, (1976) 2 CMLR 482; Deutsche Grammophon Gesellschaft mbH v. Metro-SB-Großmärkte GmbH & Co. KG, case 78/70 (1971) ECR 487, (1971) CMLR 631; Centrafarm BV v. Sterling Drug Inc., case 15/74 (1974) ECR 1147, (1974) 2 CMLR 480; Centrafarm BV v. Winthrop BV, case 16/74 (1974) ECR 1183; Merck & Co. Inc. v. Stephar BV, case 187/80 (1981) ECR 2063, (1981) 3 CMLR 463.
 Compare, for instance, Friden (1989), at p. 194.
 See Procureur du Roi v. Benoit and Gustave Dassonville, case 8/74 (1974) 2 CMLR 436, ground 5 of the judgement, at pp. 453-454.
 Musik-Vertrieb Membran v. GEMA, case 55, 57/80 (1981) 2 CMLR 44, ground 8 of the judgement, at pp. 63-64.
 Warner Brothers Inc. and Metronome Video aps. v. Erik Viuff Christiansen, case 158/86 (1988) ECR 2605, at p. 260.
 Deutsche Grammophon Gesellschaft mbH v. Metro-SB-Großmärkte GmbH & Co. KG, case 78/70 (1971) CMLR 631, at p. 657.
 Centrafarm BV v. Sterling Drug Inc, case 15/74 (1974) 2 CMLR 480, ground 9 of the judgement, at p. 503.
 Centrafarm BV v. Winthrop BV, case 16/74 (1974) 2 CMLR 480, at p. 509 (ground 9 of the judgement).
 See also Kemp (1974), at p. 362, who emphasises that a trade mark also supports the protection of the consumer because "it indicates to the consumer a standard of quality which he expects to get from articles bearing that trade mark."
 See, for instance, the discussion in Koch/Froschmaier (1965), pp. 121-128.