No 22 (July 2000/Juillet 2000/Juli 2000)

At the Internal Market Council on 25 May 2000, the Ministers had an exchange of views on the basis of the outcome of recent discussions at expert level. At this meeting Commissioner Bolkestein informed the Member States' Ministers that the Commission has, at this stage, decided not to propose a change to the current Community-wide exhaustion regime. Four Member States strongly supported the Commission approach, while eight Member States regretted the Commission's position and emphasised the need for a change. The other three Member States did not express a specific position on this issue.

The issue of trademark exhaustion has been discussed for nearly two years in the Internal Market Council. It has been claimed that trademark holders in the EU use the current Community exhaustion regime for trade marks to block parallel imports of branded goods into the Community, so as to maintain unreasonably high prices on the EU market. The Member States who agree with this analysis have invited the Commission to propose a change to the exhaustion regime for trade mark rights from Community-wide exhaustion to international exhaustion.
In order to obtain a clearer picture of the economic aspects of a possible change to the exhaustion regime, the Commission commissioned a study in 1999 from the NERA Institute in London (see SMN 17). The Commission has also consulted Member States and interested parties. Two meetings of Member States' experts have been organised on the basis of a working document from the Commission services (see SMN 19). The issue has been discussed in several meetings of the Internal Market Council.

Main conclusions
The issue of exhaustion of trade mark rights and a possible change from the current Community-wide exhaustion regime to international exhaustion has been discussed at some length. The NERA study, together with the comments of Member States
and interested circles, provided sufficient information as a basis for a decision. Further discussions on this issue would only serve to create more uncertainty, on the market place, about the future direction of intellectual property policy within the EU. It was therefore important to make a decision on whether to change the current Community-wide exhaustion regime or not.
The Commission has based its decision on the following conclusion: a change from Community exhaustion of trade mark rights to international exhaustion will not lead to a significant fall of consumer prices. Changing the exhaustion regime for trade marks would only produce little effect on the market-place given that the large majority of products are covered by a number of intellectual property rights. However, to introduce international exhaustion for all IP rights would not be appropriate.

It is crucial that the exhaustion regimes for national trade mark and Community trade marks are the same. A change of the exhaustion regime in the two legal instruments which govern this matter (a Directive for national trademarks and the Regulation on the Community trademark) cannot however be guaranteed, as the Directive may be changed through a qualified majority decision of the Council. Unanimity is necessary to change the Regulation. It is believed that at least some Member States would possibly resist any change of the Regulation. The possible co-existence of two different schemes would create confusion in the market-place as well as in the minds of consumers, in particular in relation to the question of whether a given trademarked product has been lawfully put on the market or not.

A change of exhaustion regime would make it more difficult for EC firms to sell at a lower price outside the Community. The change of regime may over time inhibit investment in new brands or even make trade mark holders withdraw products from the market. Trademark holders who continue to provide the branded goods may choose to reduce the quality of goods or the provision of associated services.

An EU-exhaustion policy has been developed to foster the integration of the Single Market. With an international exhaustion policy EU companies might face a competitive disadvantage, given that such an integration process has not occurred world-wide yet. Market conditions for goods from third countries are less equal at this stage than within the EU and parallel trade may be influenced by differences regarding trade conditions. Most of these issues have been addressed by EC legislation or EC policy to ensure a certain uniformity throughout the EU. This is not yet the case at international level.

On the basis of these conclusions, the Commission has decided, at this stage, not to propose a change to the current Community-wide exhaustion regime.

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