A historical perspective

11. Prior to the UK joining the European Union, it was widely understood that the UK national law (as in many other countries) recognised international exhaustion of trade mark rights. There are differing interpretations as to whether the situation was one of 'implied' licence or international exhaustion or both. The Trade Marks Patents and Designs Federation (TMPDF) told us that before the UK joined the EU the British courts interpreted the law as "recognising an implied licence when a product protected by an intellectual property right in the UK was sold abroad".[25] They define an 'implied licence' to mean "if you do not put terms in your sales contract then the goods are freed from any intellectual property right you may have. But you were allowed to put in restricted terms, especially geographic resale terms".[26] Exhaustion is a different matter because "what exhaustion means is that you have lost your rights whether you put geographical resale restrictions on or not".[27] The Chartered Institute of Patent Agents (CIPA) note that the English Courts have "historically favoured international exhaustion";[28] the Institute of Trade Mark Attorneys (ITMA) cited the Revlon case as one where the British court did rule in favour of international exhaustion.[29] Historically 'implied consent' has also been applied to copyright and patents in the UK, but international exhaustion has not.

12. In any event, international exhaustion of trade mark rights was not a major issue until recent years. As Mr Weston of ITMA pointed out in evidence, markets were far less global twenty years ago than they are today. "People are now far more aware via the media or via their own travel and investigations how market conditions can vary around the world. They have far more information."[30] In the past, people were largely unaware of price differences between countries and, as a result, brand owners were not faced with the problem of their goods being traded outside their own distribution channels. Markets were also far more local than global; some trade marks indeed only applied in practice to parts of countries rather than nationally, and there was nothing like the range and volume of globally branded and marketed consumer goods.

13. In the early 1980s the European Commission brought forward a proposal for a Trade Marks Directive that initially included international exhaustion. Both the European Parliament and the European Council, however, considered that the Directive should provide only for community-wide exhaustion, based on the principle of the Single Market. It is unlikely that an international exhaustion provision would have commended the necessary consensus. The Trade Marks Directive was adopted in 1989 and was subsequently widened to cover EEA exhaustion.[31] Article 7 of the Directive states that the trade mark "shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent". However, this will not apply where there "exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market."[32] The 1989 Directive, by avoiding the issue of international exhaustion, consciously left an area of uncertainty as to whether Member States could also allow for international exhaustion in their national legislation.

EXISTING UK LEGISLATION

14. The current UK statute governing registered trade marks is the Trade Marks Act 1994. This both implemented the Directive and went further by abolishing some archaic features of UK trade marks law. The Trade Marks Bill (Lords) received its Second Reading in the House of Commons on 18 April 1994. The then Minister described the Bill as making it easier for industry and commerce to register their trade marks, and providing owners of registered trade marks with wider infringement rights. The Bill "will harmonise our law with the laws of other Members of the European Union". The most widely raised subject in debate was look-alike products. There was also some discussion of the provision aimed at preventing counterfeiting of trade marks.[33] In Kent County Council v Price, the Divisional Court had found that if goods were advertised as 'branded copies' then there was no consumer deception and consequently no offence had taken place under the Trade Descriptions Act 1968. The Trade Mark Bill dealt with this problem by introducing an offence of "unauthorised use of a trade mark".[34] The issue of exhaustion, international or otherwise, was not raised. Indeed, the doctrine of exhaustion was not a major issue during the passage of the Bill. The Act came into force on 31 October 1994.

15. The 1994 Act only modified the law in relation to infringement of registered trade marks. So far as international exhaustion of rights was concerned, there was some uncertainty which was not resolved until the Silhouette case discussed below. Section 12 of the Trade Marks Act sets out the circumstances in which exhaustion of the trade mark proprietor's rights can take place. Section 12 states:

• "12 (1) A registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market in the European Economic Area under that trade mark by the proprietor or with his consent.
•  (2) Subsection (1) does not apply where there exist legitimate reasons for the proprietor to oppose further dealings in the goods (in particular, where the condition of the goods has been changed or impaired after they have been put on the market)."

16. Subject to the above, section 89 of the Trade Marks Act 1994 allows proprietors of a registered trade mark (or licensees) to give notice to Customs that goods expected to arrive in the UK from outside of the EEA will infringe their trade mark and are to be treated as prohibited goods.[35] Section 89 does not apply to goods which are intended for the private and domestic use of the person importing them. A trade mark owner must lodge a notice with Customs specifying the nature of the infringing goods and the expected time and place of arrival, along with evidence of their trade mark ownership. HM Customs and Excise told us that, because it is a condition of giving notice under section 89 that the information must be consignment-specific and provided to Customs in advance of the importation, use of this section by right owners is relatively rare. "In the last 24 months only four section 89 notices have been lodged: three of these resulted in the goods being seized, of which two are the subject of an on-going appeal."[36] This provision seems to have had the effect of allowing trade mark owners to prevent grey imports. In the absence of any clear direction either way in the 1989 Directive, the Government chose in the 1994 Act to avoid the broader issue of international exhaustion.

IMPLEMENTATION OF THE DIRECTIVE BY OTHER EU COUNTRIES

17. Interpretation of the Trade Marks Directive and its transposition into national law varied between EU Member States. Some countries (such as Germany, Austria, Sweden and the Benelux countries) interpreted it as allowing international exhaustion: others as implicitly allowing only for EEA exhaustion. With such differing interpretations, it was inevitable that brand owners and parallel importers should also take opposing views over what the legal situation actually was. Consequently, the situation arose that, as Davies Arnold Cooper put it "for goods whose geographical provenance was unclear, or clearly non-European, until Silhouette, there was a straightforward conflict between what brand owners thought the law was and what retailers thought it was", resulting in a stand-off between brand owners and parallel wholesalers and retailers.[37]

THE SILHOUETTE CASE

18. On 16 July 1998, in a landmark case (Silhouette International Gmbh and Co KG v Hartlauer Handelsgesellschaft mbH)[38] the European Court of Justice (ECJ) ruled that the Trade Marks Directive granted only EEA-wide and not international exhaustion. In 1995 Silhouette (an upmarket Austrian sunglasses manufacturer) sold a quantity of out-of-fashion spectacle frames to a Bulgarian company called Union Trading and delivered them to that company in Sofia. Hartlauer (an Austrian discount retail chain) bought the frames and offered them for sale in Austria. Silhouette sought an injunction restraining Hartlauer from offering spectacles or frames for sale in Austria under its trade mark when they had not been put on the market in the EEA by Silhouette, or by third parties with its consent. Hartlauer contended that the action should be dismissed since Silhouette had not sold the frames subject to any prohibition of re-importation into the Community and noted that, given that the legal position was unclear, its conduct was not contrary to established custom.[39] Silhouette's action failed in the lower courts. Silhouette appealed on a point of law to the Austrian Supreme Court which noted that prior to the implementation of the Trade Marks Directive the principle of international exhaustion had been applied by the Austrian courts. It referred the question of whether the Directive allowed Member States to apply a rule of international exhaustion to the European Court of Justice.

19. The ECJ ruling on 16 July 1998 stated that the Directive provides that trade mark rights are only exhausted when the products have been placed on an EEA market by the owner or with its consent and, in the words of Advocate General Jacobs, "Article 7(1) of the Directive precludes Member States from adopting the principle of international exhaustion".[40] The ruling confirmed the European Commission's interpretation that the Directive "constitutes a total harmonisation measure which no longer allows Member States to lay down the principle of international exhaustion in their national legislation".[41] The Silhouette judgment not only confirmed that international exhaustion was not compatible with the 1989 Directive, it specifically excluded Member States from adopting the principle.

20. During the Silhouette case, the Swedish Government had contended that the Directive left the issue of international exhaustion to be resolved by national law. In addition to carrying out its own research looking at the effects of EEA rather than international exhaustion, in September 1998 Sweden, along with some other Member States, asked the Commission to carry out an extensive study into the economic consequences of a regime of exhaustion in the area of trade marks. The Commission appointed National Economic Research Associates (NERA) to undertake the study, which was published early in March 1999.[42] The NERA study found that initially, international exhaustion would only result in small price reductions in goods.[43] Under a unilateral initiative - that is, the EEA operating international exhaustion regardless of what other countries chose to do, thus allowing parallel imports from all other countries - NERA found that the decrease in retail prices would be 'moderate' at around 2% in consumer electronics and domestic appliances, around 1.5% in cosmetics and perfumes, and 'small' or less than 1% in footwear and leisure goods, musical recordings, and motor cars.[44] It also concluded that the long-term consequences of international exhaustion in trade marks were likely to be more important and less predictable but that the need to restore profits would probably affect the location of production as well as pricing, production and distribution strategies.[45] The Commission are still some way from any decision on the various issues. Commissioner Monti has been quoted as saying: "If I am provided with satisfactory evidence that such a move [to international exhaustion] would have the ultimate effect of reducing consumer prices without any detrimental effect on employment, I would tend to look at it not only with an open, but a favourable mind".[46] Divisions between Member States remain.

THE SEBAGO CASE

21. In a further case pending before the ECJ, Sebago Inc. and Ancienne Maison Dubois et Fils SA v GB-Unic SA, the question has been raised as to "whether the proprietor of a trade mark can be said to have consented to the marketing within the EEA of a batch of his products imported from outside the EEA on the grounds that he has consented to the marketing within the EEA of other batches of identical or similar articles."[47] Sebago is the proprietor of trade marks for shoes in the names 'Docksides' and 'Sebago'. GB-Unic purchased shoes 'made in El Salvador' from a company incorporated under Belgian law and sold them in its Maxi-GB hypermarkets. Sebago claimed that GB-Unic infringed their trade mark by marketing goods within the Community without its consent, relying on Article 13A (8) of the Uniform Benelux Law on Trade Marks (which is in similar terms to Article 7(1) of the Trade Mark Directive). GB-Unic argued that in order to satisfy the requirement of consent in Article 13A(8) it is sufficient that similar goods bearing the same trade mark have been lawfully marketed in the EEA with the consent of the proprietor of the trade mark. Sebago, the French Government and the Commission submitted that the consent of the trade mark owner to the marketing of one batch of goods does not exhaust trade mark rights even if the goods are identical. On the 15 March 1999, Advocate General Jacobs found that "it is abundantly clear, at least as regards the purely intra-EEA context, that the Community law principle of the exhaustion of trade mark rights relates to individual goods or batches of goods, whole product lines".[48] He concluded that Sebago "cannot be deemed to have consented to the placing on the market in the EEA of the particular batch of products in question by virtue of having consented to the marketing within the EEA of other batches of identical or similar goods". The European Court of Justice is yet to reach its decision in this case.

THE DAVIDOFF CASE

22. On 18 May 1999, in his judgement on the Zino Davidoff SA v A&G Imports Limited case before the UK Patents Court, Mr Justice Laddie drew heavily on the Silhouette and Sebago judgments.[49] Davidoff is the proprietor of two trade marks 'COOL WATER' and 'DAVIDOFF COOL WATER' for toiletries and cosmetics. A&G Imports deals in parallel and grey importation and had sourced Davidoff goods (presumed from Singapore) and removed or partially removed the batch codes marked on the product. The distribution agreement for the goods in question had set out exclusive rights to Luxasia Singapore to import, promote, sell and distribute the products throughout Singapore, Malaysia, Indonesia, Philippines, Hong Kong, Cambodia, Sri Lanka and Myanmar. The Agreement contains the undertaking that "the distributor undertakes not to sell any products outside the territory and shall oblige his sub-distributors, sub-agents and/or retailers to refrain from such sales".[50] A&G maintain that this does not require the distributor to incorporate self-perpetuating contractual terms on everyone further down the chain of distribution limiting where the goods may be sold. They argued that whilst Community law allows the proprietor of a trade mark to retain, if he chooses, the ability to use his registered trade marks to prevent importation of goods bearing registered marks into the Community, he also retains the right to consent to such importation. Where, as in this case, goods are placed on the market in circumstances where the plaintiff could have placed, but did not place, an effective restraint on their further sale and movement, purchasers within the distribution chain were free to market the goods where they like, including within the EEA. Mr Justice Laddie found in favour of the defendant, A&G Imports Limited.

23. Davidoff also argued that if they were to be treated as having consented in general terms to the importation of their own products into the EEA, they are still entitled to restrain the goods under Article 7(2) of the Trade Mark Directive. Article 7(2) provides that exhaustion shall not apply where there exists "legitimate reasons" to oppose further commercialisation of the goods especially where the condition of the goods is "changed or impaired after they are put on the market".[51] Mr Justice Laddie found that obliterating the batch codes did not constitute change or impairment under Article 7(2). It was also argued on behalf of Davidoff that any activity which damages the prestige of luxury goods, such as selling them in a high volume at a low price, would provide the proprietor with a legitimate reason for objecting to parallel importation.[52] Mr Justice Laddie rejected this argument on the grounds that this would be contrary to the commercial objectives of the Treaty of Rome and had little to do with the proper subject-matter of trade marks rights, which was to guarantee the identity of the origin of the trade marked product to the consumer. The case has been referred to the ECJ.

24. Mr Justice Laddie noted that one of the effects of Article 7(1), as construed by the ECJ in Silhouette, was that a proprietor "can put himself in a position to demand that his goods which have been marked by him with a trade mark for the purpose of accurately identifying their origin, must be stripped of that marking when they enter the EEA .... In other words, trade mark law can be used to prevent the marks from performing their primary function of telling the truth about the origin of goods".[53] He noted that, in his view, this illustrated how the Silhouette judgment has bestowed on a trade mark owner a "parasitic right to interfere with the distribution of goods which bears little or no relationship to the proper function of the trade mark right". This judgment further demonstrates the state of uncertainty and flux in the legal position over exhaustion and consent.

The role of trade marks

25. Addressing the questions arising from the Silhouette judgment necessitates an assessment of the primary function of trade mark law. One solicitor noted in evidence that "common sense dictates that trade mark law (the law relating to indications of origin) is an absurd regime for regulating parallel trading given that parallel trade is in goods bearing trade marks accurately identifying their origin".[54] The brand owners, through the British Brands Group (BBG), put much store by the use of a trade mark as a means of recognising the innovation and research that goes into brand development. The BBG state that "patents, trade marks and competition law ensure a return on investment flows back to the brand. This provides the platform for the next advance, fuelling the virtuous circle of further innovation and investment in new and improved products which meet broader needs, perform better and add to consumer choice."[55] One leading commentator has observed, however, in relation to the role of trade marks: "Where the rights exist to induce investment of thought or money in creation or invention and its subsequent commercialisation - as with patents, copyright and the like - there is a good case for maintaining price discrimination between markets. These rights offer the chance to maximise profits free of competition from the same or virtually the same product. The exclusion of parallel imports adds to this very incentive, which is made available only for products with particular economic and cultural advantages: new machines, new drugs, new books, new computer programmes and so on. The same does not hold for trade marks, get-up and other intellectual property which serves to identify products in competitive markets ... At root, there is far less of a case for allowing marks to shore up international price discrimination".[56] Whilst we recognise the value of trade marks to brand owners, a trade mark's primary role is as a mark of origin; to reassure consumers of the authenticity and quality of the good they are buying. In economic terms they 'reduce search costs'. It is obviously in the brand owners' best interest to ensure that they retain consumer loyalty (and hence market share) by producing a valued product that consumers can rely on and one that they can easily recognise. The nature of the competitive market will, in itself, provide a spur to innovation. In this light, we are concerned that brand owners use the same trade mark on what are inherently different goods in different markets, thus misleading consumers.

GOODS THAT 'DIFFER MATERIALLY'

26. The Committee was provided with a number of examples of goods that, under the same trade mark, are materially different in different countries. One of the key examples brought to our attention (and one that was instrumental in formulating American customs law) was that of Lever Brothers and Shield soap. On January 15 1993 in Lever Brothers Co. v United States of America, the US Court of Appeals for the District of Columbia ordered US Customs to refuse entry of 'grey' goods when they "differ materially" from the goods ordered for sale in the US. The case involved Shield deodorant soap and Sunlight hand dishwashing liquid, sold in the UK by the British company Lever Brothers Ltd and in the US by its American affiliate Lever Brothers Company ('Lever'). Both marks are registered in both countries. The products and packaging for these two marks are dissimilar in order to accommodate the varying tastes of consumers and differences in water in each country. Lever objected to the UK version of the products entering the US and asserted that "the unauthorised influx of these foreign products has created substantial consumer confusion and deception in the US about the nature and origin of this merchandise and that it has received numerous consumer complaints from American consumers who unknowingly bought the British product and were disappointed".[57] One witness suggested that the British company had been quite happy for grey traders to sell the British soap in America because it meant they sold more soap, but the US company had not been so happy because they were selling less soap.[58] This dichotomy at the heart of companies trading in the global market is, in one sense, central to the whole area of grey and parallel trading.

27. Where companies produce different goods for different markets under the same trade mark in recognition of differences in public taste or for other reasons, these should be more clearly identified by appropriate labelling. Mr Serjeant of CIPA told us in oral evidence that "certainly in the case of Cinzano the public taste in France was held by the manufacturers to be different from that in the UK so the product was different."[59] Mr Weston referred to Nestlé changing the formulation of their instant coffees depending on the market: "In southern Europe their Blend 37 would have a higher chicory content than in northern Europe".[60] We were given the examples of Nike whose licensed manufacturer in the Philippines was producing enormous amounts of Nike goods which were "substantially different" from American and European Nike products, and of Lacoste with American Lacoste products being "very inferior" to European Lacoste.[61] Indeed, Lacoste Europe took action against a retailer selling American Lacoste goods on the grounds that these goods were inferior to Lacoste European goods.

28. In a landmark case in the UK, the Court of Appeal in the Colgate case upheld a case of 'passing off' on the grounds that the Colgate toothpaste made for the Brazilian market and unofficially imported into the UK, was of an inferior quality to the same Colgate product sold in the UK.[62] It held that the 'goodwill' of Colgate had been damaged by the importation of inferior Colgate products. If a brand owner chooses to use one international trade mark then, as Davies Arnold Cooper stated, they should accept that the goods are not going to be tied into one market: "any other position is naive since it ignores international sales channels, particularly the Internet, and the fact that consumers themselves travel and compare products and prices. The negative impact of products of differing quality under the same brand finding their way into the same national market is controllable by brand owners if they ensure that there is consistent quality under a brand".[63] When goods differ in quality for different markets, the brand owner has the option of using two different trade marks.

29. Whilst a trade mark is primarily an indication of the origin of a good or service rather its contents and whilst we agree it is entirely up to a brand owner how they choose to manufacture and distinguish their goods, when the same trade mark is used for differing products there is the risk of consumer confusion. At the end of the day, this may also be to the detriment of the brand owner. If a consumer is disappointed in a product they purchase outside of the official channels or from a different country, they may be inclined to switch from that brand entirely. Conversely, it is interesting to note that there are examples where brand owners have sold an identical product under different names. As Mr Weston told us "when I was in the United States I went into the supermarket to try and get my favourite Gold Blend and I could not find it. I found out it has a different name".[64] Given linguistic differences even within the anglophone world let alone in global markets, some such cases are inevitable. We would favour, in broad terms, an international regime which would ensure that the same trade mark is not applied to products which purport to be the same, but which are significantly different.

Look-alikes

30. Look-alike goods are those that are so close to a branded good in appearance that they call the branded product to mind. The generality of 'own-label' goods produced by supermarkets (and others) are in straightforward and fair competition to branded goods. MacBride, a manufacturer of own-label goods, raised concerns over the effects on competition of ever more wide-ranging applications for trade mark registration from brand owners seeking to close such competition.[65] We concentrate here on look-alikes rather than own-label goods. The British Brands Group describe the sole intention of look-alikes as to "ride off the innovation, investment, effort, risk and reputation of the brand".[66] Tesco, however, describe the purpose of a look-alike product as "to indicate to consumers that there is a competing (and cheaper) product of the same quality as the manufacturers brand".[67] Evidence is patchy as to how far consumers really are confused by look-alikes. Consumers' Association's research "found very little such confusion and thus very little concern about consumers being misled or confused".[68] Any confusion occurs in two ways: either consumers purchase the look-alike by mistake thinking that it is the branded good; or they believe that the look-alike is made by the brand owner. The latter point raises some interesting issues. Whilst the BBG told us that "in the case of look-alikes they are not coming off the same assembly line, they are produced by different companies",[69] they also gave us an example of a brand owner producing own-label goods. Mr Blackett told us "I know that in the case of United Biscuits they have a dedicated factory unit producing the private label products for supermarkets and they have separate managements and separate accounting systems".[70]

31. If there is a likelihood of confusion between the branded product and the look-alike, the brand owner has the normal remedy for trade mark infringement in 'passing off'. The action of 'passing off' protects the 'goodwill' of a business or the 'goodwill' associated with a product, its appearance or 'get-up'. Passing off serves two functions: the protection of a trader against the unfair competition of his/her rivals; and the protection of consumers who would otherwise be confused as to the origins or nature of the goods and services they are offered. In 1990 in Reckitt & Coleman Products Ltd v Borden Inc (the Jif Lemon case),[71] the passing off case was won on the grounds that the plastic 'Jif lemon' was held to have acquired a secondary distinctive meaning signifying the claimant's particular lemon juice as opposed to just any lemon juice. Borden had produced a lemon juice product that had essentially the same packaging (the lemon shape) apart from a different coloured cap. In this case, Lord Oliver identified the three elements the claimant must show to succeed in passing off. Broadly these are: goodwill or reputation attached to goods or services in the minds of the public associated with an identifying 'get-up'; a misrepresentation by the defendant leading the public to believe the goods or services offered by the defendant are those of the claimant; and damage or likelihood of damage resulting from the defendant's misrepresentation. In a later case, Bostick Ltd v Sellotape G B Limited,[72] Sellotape marketed a product 'Sellotak' in competition with 'Blu-tak'. The product was coloured blue but since the colour of 'Sellotak' could not be seen until taken from the packet, it was found that there was no likelihood of confusion and, in any event, it was unlikely that similarity in colour could lead to confusion. The implications of the Silhouette case for unregistered marks protected by passing off are unclear. Passing off is not committed if identical goods are imported into the UK bearing the brand owners' trade mark. However, if goods of inferior quality are imported into the UK bearing the same trade mark, the owner of the mark will have a case.

32. The alleged problem lies in the stringency of the text of confusion. Look-alikes are free to call to mind the branded product and, in a sense, ride on its market achievement without trade mark infringement or falling foul of the law of passing off. The BBG state that the current legal remedies - the common law of passing off and the 1994 Trade Marks Act - are not effective in dealing with look-alikes, suggesting that passing off is "very difficult and disproportionately expensive to prove", and the Trade Marks Act is "ill-equipped to tackle look-alikes as these do not tend to copy trade marks" and cited the Penguin v Puffin case, one of the few to come to court.[73] Its significance is, however, confusing. In this case, the passing off case was, in fact, won and resulted in material changes to the get-up, although the trade mark infringement was lost on the grounds that the only registered mark the plaintiff could rely on was the word 'Penguin' and this was not infringed by 'Puffin'. Mr Willoughby of Willoughby & Partners Solicitors took the view that "the fact that the defendant in that case continued to use the name Puffin had nothing to do with the lost trade mark case, but everything to do with the fact that the parties (trading partners) had had enough fighting and wanted to settle the case".[74] In another example, Sabel v Puma (November 1997), Sabel applied to register in Germany the trade mark Sabel with a device consisting of a bounding cat (resembling a cheetah). Puma felt it was too similar to one of its marks of a bounding or leaping cat (a puma). The ECJ held that the fact one mark brought to mind another (that is, there was a likelihood of association) did not mean there was a trade mark infringement under the Directive.[75] ICI told us that as a result of competitors encroaching on their label design for DULUX(R) they "found themselves in a position where seeking to defend our rights by recourse to law was no longer a viable option". Instead ICI adopted a new livery capable of better protection, at a considerable cost.[76]

33. In the grocery sector, there is a voluntary dispute resolution procedure to settle issues such as look-alikes. The BBG describe it as "inadequate as it is limited to the grocery sector and does not cover imports".[77] They also told us that Asda had refused to sign the code.[78] Tesco told us that they used the grocery dispute procedure to discuss look-alike products with a leading grocery supplier. Partially as a consequence, Tesco stopped producing look-alike products. In their view "the procedure works and such a procedure for self regulation is absolutely crucial for the manufacturers".[79] We were interested to learn of the existence of a voluntary dispute procedure in one sector: it is an example which producers and retailers in other sectors would do well to imitate.

34. The BBG state that every mainland European country and many states of America have unfair competition law which would help prevent look-alikes. Mr Noble told us "It is that type of a measure which in the UK would fill this gap which at the moment allows these sort of products [look-alikes] to flourish".[80] The BBG supplied us with a number of examples where "tighter" legislation in other countries has enabled judgements in 'passing off' against look-alikes, including Uncle Ben's versus Amor rice in Greece, Ace Gentle Bleach versus Total in Spain, and Duracell versus Panasonic batteries in Germany.[81] The Chartered Society of Designers also question whether present UK law is "adequate to discourage this practice [of look-alikes]".[82] The Institute of Trade Mark Attorneys told us "the existing law, whatever it is, is not evidently proving to be sufficient to defeat the problem".[83]

35. There are others who believe the law is effective and that any changes would cause additional problems. The Government believes further legislation on look-alikes is not appropriate and believe the current law to be adequate.[84] The Chartered Institute of Patent Agents believe that the terms 'get up' and 'brands' are insufficiently precise to warrant additional protection and "further indefinite protection as was suggested in the 1998 Competition Bill would actively disadvantage persons wishing to search the state of the Register in order to know whether they are clear to adopt a particular trade mark".[85] In oral evidence they explained that the registered trade mark is searchable, but that the common law of passing off confers a right over unregistered marks. Mr Weston told us "it is a right which is there and as such it is very difficult to search to find out whether there is an unregistered right for a particular shape of bottle or anything else".[86]

36. The Minister told us that the subject of look-alikes "is under examination by the Competition Commission at the moment".[87] The Director General of Fair Trading referred to the Competition Commission: "the matter of the existence or possible existence of a monopoly situation in relation to the supply in the United Kingdom of groceries from stores". We were surprised to learn that look-alikes would be covered during the Competition Commission's investigation into potential uncompetitive practices in supermarkets.[88] We would, however, welcome the Commission taking this opportunity to examine the issue of look-alikes from the standpoint of competition. We are not convinced that the law is deficient in this area; the simple fact is that, whatever the law, brand owners would be understandably reluctant to start legal proceedings against the supermarkets who are their largest customers.

26  Q387 Back

27  Q387 Back

28  Ev, p106, q9 Back

29  Q455 Back

30  Q421 Back

31   Briefing received from DGXV during a visit to Brussels, 17-18 February 1999; the Directive was one of the legislative acts incorporated into EEA law by the Agreement establishing the EEA which entered into force on 1 January 1994 Back

32  First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, Article 7 Back

33  Hansard 18 April 1994, col 658-688 Back

34  Section 92, Trade Marks Act 1994 Back

35  Ev, p254, paragraph 12 Back

36  Ev, p254, paragraph 14 Back

37  Ev, p217 Back

38  Case C-355/96 Back

39  Judgment of the Court, 16 July 1998, Case C-355/96, paragraph 11 Back

40  Opinion of Advocate General Jacobs, 29/01/98, Case C-355/96, paragraph 62 Back

41  Supplementary answer given by Mr Monti on behalf of the Commission, 2 June 1998 Back

42  The Economic Consequences of the Choice of a Regime of Exhaustion in the Area of Trademarks, Final Report for DGXV of the European Commission, NERA and SJ Berwin & Co and IFF Research, 8 February 1999. Back

43  NERA Report, Executive Summary, p26 Back

44   The other sectors examined were clothing and confectionery ('very small' at less than 0.5%) and soft and alcoholic drinks where the effect was 'negligible'. NERA Final Report, p125 Back

45  NERA Report, Executive Summary, p26 Back

46  FT 26/02/99 Back

47  Case C-173/98, Opinion of Advocate General Jacobs, paragraph 2 Back

48  Case C-173/98, Opinion, paragraph 24 Back

49  Zino Davidoff SA v A&G Imports Limited, CH-1998 D No.4517 Back

50  Judgment, paragraph 31 Back

51  Judgment, paragraph 41 Back

52  In Parfums Christian Dior SA v Evora BV [1998] RPC 166 the ECJ considered that damage done to the reputation of a trade mark may in principle be the result of a resale of the goods by parallel importers. The proprietor must however show that in the specific circumstances, the use of the trade mark would seriously damage the reputation of the mark. The proprietor was not entitled to prevent a reseller using a mark in advertising customary in the reseller's sector of trade unless, in the circumstances of the case, use of the trade mark would seriously damage the reputation of the mark. Back

53  Judgment, paragraph 36 Back

54  Ev, p174, paragraph 6 Back

55  Ev, p2, paragraph 3 Back

56  Cornish [1998] EIPR 172 Back

57   Parallel Imports of Materially Different Grey Goods: Obtaining Customs Blockage or an Injunction, Linda S Paine-Powell, Article from the EIPR 1993 Back

58  Q412 Back

59  Q425 Back

60  Q439 Back

61  Q550 Back

62  Colgate-Palmolive Ltd v Markwell Finance Ltd [1989] RPC 497 Back

63  Ev, p219 Back

64  Q423 Back

65  Ev, p247-251 Back

66  Ev, p3 Back

67  Ev, p24 Back

68  Ev, p201, paragraph 36 Back

69  Q46 Back

70  Q49 Back

71  [1990] RPC 341 Back

72  [1994] RPC 556 Back

73   Ev, p4, paragraph 22 Back

74  Ev, p179 Back

75  Solicitors Journal, May 1998 Back

76  Ev, p8 Back

77  Ev, p4, paragraph 22 Back

78  Q65 Back

79  Ev, p24 Back

80  Q37 Back

81  Ev, p17-20 Back

82  Ev, p237 Back

83  Q468 Back

84  Ev, p146, paragraph 3.3 Back

85  Ev, p105, q4 Back

86  Q437 Back

87  Q602 Back

88  Ev, p264-5 Back