EU Intellectual Property Law and Cases

This assignment delves into the complexities of European Union Intellectual Property Law. Students are tasked with analyzing key EU legislation, such as the Treaty on European Union and the Treaty on the Functioning of the European Union, alongside landmark court cases like Deutsche Grammophon v Metro and Procureur du Roi v Benoît and Gustave Dassonville. The focus encompasses topics like the exhaustion of intellectual property rights, trade restrictions within the EU single market, and the interplay between IP law and competition law.

INTELLECTUAL PROPERTY 2
Introduction
Intellectual property can be best defined as the creations of mind for instance the
innovations or inventions, the artistic work, designs, names, images and symbols,
amongst the various other creations. The intellectual property law regulates these very
creations, their use and the exploitation of creative or mental labour1. There are different
type of intellectual property, which includes patents, trademarks and copyrights; yet,
each kind has one common factor, which is the protection of this intangible property,
i.e., of the information, invention, ideas and signs. As these are not tangible property,
their parameters of boundary are defined by their own technique, for instance, the
registration technique or the scheme or deposit. Intellectual property remains a
politicised issue due to some sides claiming that there is an inadequacy in the law to
protect the intellectual property right holders and the other claiming the opposite2.
The European Union laws also have an impact over the intellectual property
laws, particularly based on the harmonization of laws of member states, the move
towards a community wide intellectual property rights and the impact of the treaties of
EU on the use, as well as, abuse of these rights3. The statement made in Deutsche
Grammophon v Metro4 shows the manner in which the European Court balances the
competing interests’ by combining the treaty obligations. This case dealt with the
prohibition that where a right which relates to a copyright is relied for preventing the
1 Lionel Bently and Brad Sherman, Intellectual Property Law (4th edn, Oxford University Press 2014)
2 Tanya Frances Aplin and Jennifer Davis, Intellectual Property Law: Text, Cases, and Materials (3rd edn,
Oxford University Press 2017)
3 Charlotte Waelde, Abbe Brown, Jane Cornwell and Smita Kheria, Contemporary Intellectual Property:
Law and Policy (4th edn, Oxford University Press 2016)
4 [1971] ECR 487

INTELLECTUAL PROPERTY 3
member states from marketing of product, which is distributed with consent of another
member state or the right of the holder, on the grounds that such distribution would not
be taking place in the nation territory, would be deemed as an isolation of national
market. This report makes an attempt to highlight such balancing of competing interests
as is done by the European Court of Justice on different aspects surrounding
international property.
Impact of the Free Movement of Goods Principle on Intellectual
Property
The European Court of Justice faces dozens of complex cases which are raised
due to the conflicts in between the national laws followed by the member states and the
treaties of European Union. In Pharmon B.V. v Hoechst A.G.5, Federico Mancini, who
was the Advocate General of ECJ, while commenting upon the debate between the
recognition of intellectual property rights and free movement of goods stated that this
case brought one of the most complex, and interesting issues of the community law.
This case also saw the court essentially being asked to balance the requirements of
free movement of goods as against the need of protecting the industrial property rights,
along with the commercial guarantees which had been provided through the legal
orders of member states6.
The Treaty on the Function of the European Union7 (TFEU) places the member
states in such a position where they left the individual powers which they had for acting
5 Case 19/84
6 Jarrod Tudor, ‘Intellectual Property, the Free Movement of Goods and Trade Restraint in the European
Union’ (2012) 6 J. Bus. Entrepreneurship & L. 1
7 Treaty on the Function of the European Union, (2008) OJ C 115/47

INTELLECTUAL PROPERTY 4
as an autonomous actors with regards to the trade, through ratification of this treaty.
The common market discussion of EU begins with the prohibition placed on
discrimination on the basis of nationality, under Article 188. When it comes to intellectual
property rights, this section is usually cited by the ones who argue that discrimination
occurred on the basis of nation in which the goods originated. Under Article 34, it is
provided that no restriction can be placed on the imports by the member states9. And
under Article 35, the prohibition has been placed over the same restriction on exports10.
Article 101 protects the free movement of goods, as a result of which, a prohibition is
placed of such agreements which take place between member states or business
association whereby prices are fixed, productions is limited, or the sources of supply are
restricted11. Article 102 restricts the businesses from abusing their dominant position in
market place12. Article 56 protects the free movement of services13.
So, the Articles of TFEU are mostly balanced out by Article 36 where the
exceptions to Articles 34-35 are provided and this includes the capability of the member
states to defend their intellectual property. Hence, Articles 34, 35, 56, 101, and 102 are
used by the parties who believe that the EU treaty policy regarding the unrestricted free
movement of services and goods, along with undistorted competition is being infringed
and this defence is used by the holders of IP rights. On the other hand, the member
states and the IP rights holders who make a contention that the IP right granted by one
state has to be recognized by the other member state cite Article 3614.
8 TFEU, art 18
9 TFEU, art 34
10 TFEU, art 35
11 TFEU, art 101
12 TFEU, art 102
13 TFEU, art 56
14 At 6

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In Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein15, also referred
to as the case of Cassis de Dijon is a crucial case which throws light upon the
applicability of Article 34 and 36. In this case, a German liquor importer had refused to
import the liquor from France in Germany as the liquor would violate the law of
Germany with regards to the fruit liquors to contain a minimum of 25% alcohol volume.
This refusal was seen as a contravention of TFEU’s Article 34. And with this case, the
‘overriding reasons of public interest’ concept was brought out.
The main goal of the EU is to create an internal market16. And this is hindered as
a result of the conflict which takes place between the objectives of EU, as have been
outlined through Article 317 of Treaty on European Union (TEU)18. Under Article 26 of the
TFEU, this internal market has to be such where there are no internal barriers and as a
result of this, the free movement of capital, people, goods and services is attained.
When it comes to the IPRs, they are deemed as territorial in nature as a result of which
they can go across national borders to protect these rights. The national measures are
often reserved for the owner of exclusion rights and this creates a problem for the EU as
it poses a threat to its “internal market”. This is because it becomes a barrier to the free
movement of goods and can also result in anti-competitive effects19.
In order to deal with this conflicting issue, the court came up with the formula, in
Procureur du Roi v Benoît and Gustave Dassonville20. It was noticed that for the
15 (1979) Case 120/78
16 Kevin Gallagher, Handbook on Trade and the Environment (Edward Elgar Publishing 2010)
17 TEU, art 3
18 Treaty on European Union [2008] OJ C115/13
19 Jonathan Galloway, Daithí Mac Síthigh and Andrew Griffiths, Modern Intellectual Property Law (3rd ed,
Routledge 2010)
20 [1974] Case 8/74

INTELLECTUAL PROPERTY 6
purpose of Article 34, IPRs were not goods. Where the court deems that the IPR is such
that the free movement is hindered, the Dassonville formula is applied. This formula
embraces the possible impairment and deems this impairment as ample for classifying it
as a measure having equivalent effects. This case is an example of such cases where
the principle is in derogation, the European Court interprets the Articles in a restrictive
manner. And so, the European Court of Justice has given three principles when it
comes to the free movement of goods:
 Drawing a distinction between the existence and existence of right;
 Drawing a distinction between the existence and its exercise; and
 Drawing a distinction between the start of exercise of right and the end of
existence21.
Rights Conferred on Owners of Intellectual Property
The holders of the intellectual property are given certain rights, whereby their
intellectual property cannot be used by another, without an explicit permission and
safeguards from any sort of misuse of such IPR. There are certain reasons as a result
of which, objections are raised against these IPRs. This is particularly when these IPRs
are deemed as exclusive, which results in creation of monopoly. The monopolistic
powers are born as the control over the product allows the producer to control the
market in a monopolistic manner. They can maximize the price as there is no
alternative, or could control over the quantity which is discharged in the market. As a
result of this, a conflict is created between the interests of the consumers and the
21 Eric L. Richards and Scott J. Shackelford, Legal and Ethical Aspects of International Business (Wolters
Kluwer Law & Business 2015)

INTELLECTUAL PROPERTY 7
interests of the manufacturer, where the former looks forward to lowest costs and the
latter, at securing maximum profits22. Improver Corporation v Remington Consumer
Product Limited23 can be taken as an example of this, where the manufacturer earns
major rewards when there is no competition in the market. In this case, after two years
of marketing, the patentee made $5.8 million and had gross retail turnover of over $340
million. In this regard, it is argued that the consumer is forced to buy inferior alternative
to the overpriced product of the monopolist.
However, the other side argues that there is a single source of supply and this is
the most efficient one. Further, it can be effectively controlled by public accountability
and that by earning high profits, the high costing research and development can be
continued. This is particularly true for the pharmaceutical industry which heavily relies
upon patents for protecting their investments when a new drug is developed. This is
because once a drug reaches the market it can be copied with ease and cheaply,
without having to bear the development costs. Also, the monopolies do not out rightly
result in monopolies. The continuation of these rights has been structured in a careful
manner for subsistence and the nature of the conferred rights24.
Apart from this, these rights are only available for a limited period of time. Also,
the applicability of competition law provides the balance with regards to the market
power which the IPR owners can exert. Article 101 TFEU and section 2 Competition
Act, 1998 (UK)25 prohibits such conduct which can distort, prevent or restrict the
22 Peter K. Yu, Intellectual Property and Information Wealth: Issues and Practices in the Digital Age
(Greenwood Publishing Group 2007)
23 [1990] F.S.R. 181
24 Katarzyna Czapracka, Intellectual Property and the Limits of Antitrust: A Comparative Study of US and
EU Approaches (Edward Elgar Publishing 2010)
25 Competition Act, 1998 (UK)

INTELLECTUAL PROPERTY 8
competition. Microsoft Corp v Commission26 was the leading matter in which the
European Commission brought a case against a leading IT company, Microsoft as a
result of the abuse by the company, of its dominating position in the market, which was
deemed as a breach of the competition laws.
The developing nations have raised objections against these rights claiming that
the protection to IP hinders the access to the new technology. They also claim that the
multinationals import the products instead of producing them locally. And this restricts
the technology transfer which could be attained by producing the same locally. As a
result of these arguments, the argument has been made to revise the international
conventions and EU treaties. In this regard, certain provisions of TRIPS were deemed
as a contradiction to equitable benefit. As a result of this, WIPO had been asked to
investigate upon the relationship between the IPRs and the traditional biodiversity and
knowledge. And in this regard, steps have been taken by WIPO to work upon the issues
raised by the developing nations. By defining the subject matter of rights, the European
Court gets a tool to consider the purpose of the IPRs and this purpose is to balance
against the distortion to trade. It has been determined by the European Court that in
case where there is a difference between the member states rights, the national law has
to determine the conditions and scope of the right, save for such situation in which there
is a harmonisation Directive or where the right is replaced by a right of EU27.
26 (2007) T-201/04
27 At 19

INTELLECTUAL PROPERTY 9
Conditions for Exhaustion of Intellectual Property Rights to Occur
The exhaustion of IPRs is amongst the limits of the IPRs. The principle of
exhaustion provides the grounding of the IP for the decision of European Court in this
area. Under this concept, the IPR which is held in a product is exhausted once the
goods have been released in the market of any one or more member states, by the
owner of the IPR or with the consent of such individual28. As a result of this, the concept
of national exhaustion which is embodied in the national IP laws is replaced with the
independent EU law description of exhaustion. The exhaustion doctrine is applicable to
the rights of controlling the distribution, i.e., import, resale or export29. It is not applicable
upon the right of showing, performing or renting the IP work which takes place in public
in which the “specific subject matter” of the right enables the right owner to control every
use of it30.
Little value is given to the presence of right which cannot be exercised and the
IPRs cannot be fully stripped of their commercial value without removing the main
innovation incentives. And so, the European Courts attempt to strike a balance between
these distinctions for making certain that the free movement provisions and internal
market are effective and at the same time, recognizes the special treatment to IP merits
for justifying the conditional derogation from the provisions of free movement31. The very
condition for the exhaustion of IPR is that it has to be caused after the first sale. This is
28 Irene Calboli and Edward Lee, Research Handbook on Intellectual Property Exhaustion and Parallel
Imports (Edward Elgar Publishing 2016)
29 Michael Blakeney, Intellectual Property Enforcement: A Commentary on the Anti-counterfeiting Trade
Agreement (ACTA) (Edward Elgar Publishing 2012)
30 AIPPI, ‘Exhaustion of IPRs in cases of recycling and repair of goods’ (2017)
<https://aippi.org/download/commitees/205/GR205switzerland.pdf> accessed 28 September 2017
31 At 19

INTELLECTUAL PROPERTY 10
clarified from the Article 6(2) of the WIPO Copyright Treaty (WCT), of 199632 where it
has been stated that the exhaustion or rights is applicable after the first sale, or after the
other transfer of ownership of the copy or original work with the author’s authorization33.
Only when the owner or their authorized personnel puts the product for sale or trading
on market, which is protected by an IPR, can the exhaustion take place. Once this is
done, the person losses the right to hinder the future usage, circulation, sale and
processing of the products. So the express consent of the IPR owner is necessary and
the owner has to agree to give up his property right in a definitive manner34.
The oldest case of EU in which this doctrine was applied was the case of
Deutsche Grammophon v Metro. In this case, the court was faced with the issue based
on the fact the Deutsche Grammophon was selling the same records in France and
Germany; however, Polydor, which was its French subsidiary could charged only a
lower price as a result of the market conditions. Metro bought these records in France
and sold them in Germany at prices lower than Deutsche Grammophon as a result of
which, the latter invoked its copyright. The Court stated that the copyright of Deutsche
Grammophon had been exhausted as they put the product in French market and the
importation of Metro could not be opposed by them.
However, a landmark ruling was given by the European Court of Justice in Peak
Holding AB v Axolin-Elinor AB35, where the court stated that Article 7(1) had to be
interpreted in the manner that the good which have the trademark are to be deemed as
32 WIPO Copyright Treaty (WCT), of 1996
33 WIPO Copyright Treaty 1996, art 6(2)
34 WIPO, ‘Interface Between Exhaustion Of Intellectual Property Rights And Competition Law’ (1 June
2011) <http://www.wipo.int/edocs/mdocs/mdocs/en/cdip_4/cdip_4_4rev_study_inf_2.pdf> accessed 28
September 2017
35 Case C-16/03

INTELLECTUAL PROPERTY 11
put on the market of European Economic Area just because the proprietor of such
trademark imported the goods in such area, with a view of selling the same, or where
these have been offered for sale to consumers, without actually having sold such
goods. This is because at this stage, it is just an invitation to treat and not a contract. As
a result of this, the exclusive rights of the proprietor were not exhausted. Hence, a sale
is a key requirement for exhaustion of IPRs.
Consequences of Exhaustion
Once the rights under the IP are exhausted, the key implication of it is the owner
of the IPR, loses their right to make a further claim on the basis of the IPR as a result of
it being “exhausted”. It is a market driven lawful consequence and with regards to this, it
has been categorized as per the geographical dimension of the impact. Commonly, it is
stated that exhaustion is national, particularly when it leads to consumption of rights
which are in the national jurisdiction borders; or international, when the same is a result
of first sale which took place in another nation. When a single market is affected, it can
be regional, particularly when it covers borders of more than one nation which is
associated with the trade region36.
The exhaustion, at the multilateral level, is covered under four treaties and two of
these are managed by WIPO. These are the “United Nations Set of Principles and
Rules on Competition, of 1980”, the “Agreement on Trade-Related Aspects of
Intellectual Property Rights” (the TRIPS Agreement), of 1994; the WCT, of 1996; and
the WPPT, of 1996. The impact of setting the exhaustion regime is covered under two
36 At 34

INTELLECTUAL PROPERTY 12
provisions of Paris Convention. These can be located in the Article 4bis which relates to
the independence of the patents which are granted in different territories and for the
very same inventions; and Article 6(3) which relates to the autonomy of trademarks
which have been registered in different nations of EU37.
Conclusion
From the discussion which has been carried on the previous segments, it
becomes very clear that a major role is played by the European Court of Justice, when it
comes to the international intellectual property rights. Through the different cases
highlighted, the manner in which the Court attains a balance between the treaties and
the competing interests was elucidated. The court always attempts to attain the
objectives of the EU and at the same time, gives verdict which are just for all the parties.
The free movement of trade is protected through TFEU and where any clash of Articles
takes place, the court makes the best attempts to attain a harmony between the
conflicting Articles. Further, the court also takes steps against such companies, which
seek to violate or hamper, the free movement of trade, between the member states,
more so, between the EU’s own “internal market”. A leading example of this was the
case of Microsoft Corp v Commission where the court punished a big IT giant for
misusing its dominating position and hampering the competition. Another key concept
which was discussed was related to the exhaustion of the IPRs. Where an intellectual
property is released in the market of any member state, the IPR in it is exhausted when
the same is done with the explicit permission of the owner of such IPR or through their
37 Ibid

INTELLECTUAL PROPERTY 13
authorized agents. The cases revolving around exhaustion clarified the manner in which
this concept is utilized. And thus, the key role played by the European Court of Justice
was effectively highlighted.

INTELLECTUAL PROPERTY 14
Bibliography
Primary Sources
Statutes and statutory instruments
Competition Act, 1998 (UK)
EU legislation and cases
Deutsche Grammophon v Metro [1971] ECR 487
Improver Corporation v Remington Consumer Product Limited [1990] F.S.R. 181
Microsoft Corp v Commission (2007) T-201/04
Peak Holding AB v Axolin-Elinor AB Case C-16/03
Pharmon B.V. v Hoechst A.G. Case 19/84
Procureur du Roi v Benoît and Gustave Dassonville [1974] Case 8/74
Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (1979) Case 120/78
Treaty on European Union [2008] OJ C115/13
Treaty on the Function of the European Union, (2008) OJ C 115/47
WIPO Copyright Treaty (WCT), of 1996

INTELLECTUAL PROPERTY 15
Secondary Sources
Books
Aplin T.F., and Davis J., Intellectual Property Law: Text, Cases, and Materials (3rd edn,
Oxford University Press 2017)
Bently L., and Sherman B., Intellectual Property Law (4th edn, Oxford University Press
2014)
Blakeney M., Intellectual Property Enforcement: A Commentary on the Anti-
counterfeiting Trade Agreement (ACTA) (Edward Elgar Publishing 2012)
Calboli I., and Lee E., Research Handbook on Intellectual Property Exhaustion and
Parallel Imports (Edward Elgar Publishing 2016)
Czapracka K., Intellectual Property and the Limits of Antitrust: A Comparative Study of
US and EU Approaches (Edward Elgar Publishing 2010)
Gallagher K., Handbook on Trade and the Environment (Edward Elgar Publishing 2010)
Galloway J., Síthigh DM., and Griffiths A., Modern Intellectual Property Law (3rd ed,
Routledge 2010)
Richards E.L., and Shackelford S.J., Legal and Ethical Aspects of International
Business (Wolters Kluwer Law & Business 2015)
Waelde C., Brown A., Cornwell J., and Kheria S., Contemporary Intellectual Property:
Law and Policy (4th edn, Oxford University Press 2016)

INTELLECTUAL PROPERTY 16
Yu P.K., Intellectual Property and Information Wealth: Issues and Practices in the Digital
Age (Greenwood Publishing Group 2007)
Journal articles
Tudor J., ‘Intellectual Property, the Free Movement of Goods and Trade Restraint in the
European Union’ (2012) 6 J. Bus. Entrepreneurship & L. 1
Websites and blogs
AIPPI, ‘Exhaustion of IPRs in cases of recycling and repair of goods’ (2017)
<https://aippi.org/download/commitees/205/GR205switzerland.pdf> accessed 28
September 2017
WIPO, ‘Interface Between Exhaustion Of Intellectual Property Rights And Competition
Law’ (1 June 2011)
<http://www.wipo.int/edocs/mdocs/mdocs/en/cdip_4/cdip_4_4rev_study_inf_2.pdf>
accessed 28 September 2017