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European Developments: Trademark Rights Strengthened

May 16, 2009

Thomas C. Carey | Partner, Business Chair View more articles

Thomas is a member of our Business Practice Group

Trademarks for Luxury Goods. The European Court of Justice issued a judgment on April 23, 2009 in a case involving the resale of luxury goods bearing the Dior label at a discount store. The store had purchased the goods from a distributor whose distribution agreement with Dior prohibited sales to discount stores.

The Court was asked to consider whether such a provision in a distribution agreement was enforceable, and whether the owner of the Dior trademark could assert its trademark rights directly against the discount store to prevent it from selling Dior garments. The discount store argued that Dior’s rights with respect to the goods had been exhausted when they were sold to the distributor.

The ECJ ruling contains this remarkable passage:

25. Since luxury goods are high-class goods, the aura of luxury emanating from them is essential in that it enables consumers to distinguish them from similar goods.
26. Therefore, an impairment to that aura of luxury is likely to affect the actual quality of those goods.

Building upon this base, the ECJ decided that Dior could not only assert contract rights against the distributor, but trademark rights against the discount store.

As is the case generally in European law, the opinion is carefully hedged and capable of being interpreted differently in different European countries. Nonetheless, it is a victory for owners of luxury brands, and a blow to discount retailers.