NOTES OF CASES
| Published date | 01 November 1972 |
| Date | 01 November 1972 |
| DOI | http://doi.org/10.1111/j.1468-2230.1972.tb01346.x |
NOTES
OF
CASES
DIVIDING
THE
COMMON
MARKET
THROUGH
NATIONAL
WHEN the Rome Treaty was negotiated, the aims of the Community
set out in Article 2-economic development, expansion and stability,
together with higher standards of living-were to be achieved by
establishing a common market.
As
tariff barriers were progressively
eliminated,
it
became important that they should not be replaced
by other barriers to trade between Member States. In their early
decisions made under Article
85
and relating to exclusive dealing
agreements, both the Commission and the Courtz made
it
clear
that they objected strongly to contractual terms and other restric-
tions which prevent a dealer from selling
in
all Member States.
Absolute protection within each dealer’s national territory threatens
the unity
of
the market.
Industrial property rights, however, are based on national terri-
tories. The negotiations for a European patent law are far from
~omplete.~ A patentee under Dutch law may forbid the manufacture
or
marketing of goods in Holland; he cannot prevent their circula-
tion in Germany unless he also has exclusive rights under German
law. Consequently,
it
was widely believed that the holder
of
industrial property rights could divide the Common Market by
granting exclusive licences,
or
by assigning to six different enter-
prises the rights obtained in each
of
the States. The territorial limits
of
industrial property protection obviate the need to impose con-
tractual restrictions on exports, which normally infringe Article
85.
’
INDUSTRIAL
PROPERTY
RIGHTS
1
Art. 85
(1)
prohibits as being inconsistent with the Common Market agreements
which may affect trade bet.ween Member States and have as their object or
effect the restriction of competition within the Common Market. Under para.
(2) agreements infringing the article are void; but the Commission may exempt
agreements from the prohibition by virtue
of
Art.
85
(3)
if
they improve
production or distribution, contain
no
restrictions not needed for that purpose
and do not eliminate competition, provided a fair share of the benefits will be
passed on to consumers.
2
Although the Commission objected to F;ohibitions
on
parallel imports
jn
earlier decisions, it first used the term absolute territorial protection
”
In
Re Agreement
of
Grundig Verkaufs
Gmbh
[1964]
3
C.M.L.R. 489, 504. Most
elements of the decision were confirmed
on
appeal to the Community
Court
in
Consfen
&
Grundig
v.
EEC
Commission,
Cases 56 and 58/64 [1966j
5
C.M.L.R. 418. The Grundig litigation proved
a
landmark in the development
of
the Constitutional law of the Community as well as
of
its competition rules,
but is considered here only
in
relation to the
use
of
trade-mark rights. For
more fundamental comments Bee C.
H.
Fulda
(1965)
65 Colum. Law Rev. 625,
631 and
R.
W.
Dam
(1971)
XVI
Antitrust Bulletin
111.
3
The preliminary drafts for two conventions were discussed by Dr. Arved
Derringer (1971)
XVI
Antitrust Bulletin
151 and by Martijn
van
Empel
9
C.M.L.Rev. 1972, 13.
On
the use of industrial property rights to divide the
Common Market generally, see Willy Alexander
9
C.M.L.Rev.
1972,
35-50.
634
Nov.
1972
NOTES
OF
CASES
635
If
goods were exported from Germany to Holland, the Dutch exclu-
sive licensee could call
on
the licensor to use his Dutch patent rights
to
repel imports. Four judgments of the Community Court, how-
ever, have progressively eroded the possibility of dividing the
market in this way, by invoking the Treaty provisions relating to
the free circulation of goods even where the competition rules have
not been infringed. This note will largely ignore the competition
rules except in footnotes, in order to concentrate on the manner
in which the Community Court has removed barriers to interstate
trade caused by the exercise of industrial property rights.
The first case concerned Grundig’s distribution scheme. The
German manufacturer sold tape recorders and allied products
through wholesalers in Germany, but through a sole distributor in
each of the other Common Market countries. Consten obtained the
French franchise. In return for Consten’s obligation to promote its
products in France, Grundig agreed to protect it from competition
from other Grundig dealers. No dealers were allowed to export
Grundig products; each machine bore two trade marks-“ Grun-
dig
”
which sufficed to indicate its origin and
‘‘
Gint
”
which in
countries other than Germany, by virtue of its agreement with
Grundig, was registered by the sole distributor. When several firms,
of whom the most important was UNEF, began regularly to obtain
Grundig products from German wholesalers and sell them in France,
Consten sued UNEF in the Paris Commercial Court. According to
French law
it
was unfair competition and
so
tortious for UNEF
to market these goods obtained through a breach of the German
wholesaler’s contract, as well as an infringement of the trade mark
“
Gint.”
The French proceedings were adjourned on appeal to enable the
EEC Commission
to
decide whether Grundig’s distribution network
infringed Article
85.
Not only did
it
decide that
it
did,
it
ordered
Consten and Grundig to refrain from any measure tending to
obstruct
or
impede the acquisition of Grundig products by third
parties. This prohibited Consten from using the
‘‘
Gint
”
mark as
well as the law of unfair competition to protect its market position
in France.
During the appeal
to
the Community Court,
it
was argued that
the prohibition on the use of the
“
Gint
”
mark infringed Article
222,
which provides that
“
This Treaty shall in no way prejudice
the rules in member states governing the system of property owner-
ship.” The Court, however, pointed out that
it
would be fruitless
to forbid the agreement dividing the market
if
Consten could con-
tinue to exercise trade-mark rights acquired under
it
to prevent
4
See note
2
above.
5
In
Beguelin
V.
G.L.
Import-Export
[1972]
C.M.L.R.
81,
96
the Community
Court
has
since ruled that a franchised dealer may not
use
the
law
of unfair
competition to prevent imports and
80
support
an
agreement that infringes
Art.
85.
636
TEE
MODERN
LAW
REVIEW
VOL.
36
imports from Germany. The Commission and the Advocate-General
argued (p.
444)
that the use of the
'(
Gint
)'
mark to exclude
imports from other Member States and not as an indication of
origin was an abuse of industrial property rights. The Court, how-
ever, went further and drew a doubtful distinction between the
existence
of national industrial property rights which
is
protected
by Article 222'and their
exercise
which should
be
limited
to
the
extent necessary
to
achieve a single market.'
It
is submitted that
a right cannot consist of more than the various ways
in
which
it
can
be exercised. The distinction between a right and its exercise, since
it is not defined, and cannot be applied by logical analysis, confers
a free discretion on the tribunal drawing the distinction in particular
instances.
It
has proved a powerful and flexible weapon for accel-
erating the integration of the market.
the plaintiff had obtained patents for
the drug chloramphenicol in five Common Market countries and
elsewhere, but pharmaceutical products cannot be patented in Italy.
Parke Davis agreed to licence a different manufacturer in each
of
the
five Member States to produce the drug. At the request
of
its
licensee in the Netherlands, Parke Davis started proceedings there
for patent infringement against Probel and others who had imported
the drug from Italy, where
it
had been produced without any pay-
ments being made to cover Parke Davis' research and development
costsY8" and put
it
into
circulation in Holland. Under Article
177
of
the Treaty the Dutch court asked the Community Court whether
"
the concept of practices prohibited under Articles
85
(1)
and
86,
perhaps considered with Articles
86
and 222 of the Treaty,
includes the action of the holder
of
a patent issued in a Member
State when, by virtue of that patent, he requests the national
courts
to
prohibit all commercial dealing in the territory of that
In
Parke Davis
v.
Probel
6
I'
Existence
"
is an inadequate translation of
'I
bestand," the German term
for rights inherent in the grant of industrial property rights.
See
Willy
Alexander,
loc.
cit.
note
3
above, p. 40.
7
The Commission has accepted the Court's decision that industrial property
rights should not
be
used
to
prevent parallel imports
in
connection with agree-
ments exempted under Art. 85 (3). Art.
3
of Reg. 67/67-the group exemp-
tion for exclusive dealing agreements is
so
qualified;
so
was the exemption
given in
Transocean Marine Paints
[1967q C.M.L.R. D9. See
also
the Commis-
sion's
First
Report
on
Competition
Policy,
1972, paras. 61-65. Grundig has
since acquired Constes, but cannot use its
marks
to prevent parallel imports
from
its
German wholesalers.
8
Case 24/67 [1968]
C.1I.L.R.
47;
(1968) XIV
Recueil de
la
Jurisprudence
de
la
Cour
81.
8a
Professor Felbroeck says that in fact the drug was made under a
''
knowhow licence from Parke Davis; but presumably
it
would receive
less
for this than it would had it had
a
patent to licence.
9
For two clear accounts
of
the development of the self-executing ,provisions of
Community law through preliminary rulings by the Community Court in
response to questions relating to the construction
of
Community law by national
courts, see Dr.
G.
Bebr, a legal advisor
to
the Commission (1970) 19 I.C.L.Q.
257 and (1971) 34 M.L.R. 481. For the Court's jurisdiction and procedure. see
also
Judge Donner (1972)
81
Law Guardian
7,
9;
A.
W.
Green,
Political
Integration by Jurisprudence
(1969).
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