No clarity (yet) on whether rental can exhaust trade mark rights

The court of first instance in The Hague issued a decision on 31 January 2024 in the case of Container Centralen ('CC') against Quality Plants Europe B.V.’s bankruptcy trustee ('QPE') regarding the question of exhaustion of trade mark rights put on plant containers that were part of a rotation system, operated and managed by CC (the ‘Containers’).[1] The court decided that the trade mark rights were not exhausted because the contracting parties to the rotation system did not acquire the actual right of disposal of the Containers, thereby relieving itself from the more fundamental question whether trade mark rights can in principle exhaust when goods are distributed via rental methods.

Facts of the case

The contracting parties in the rotation system exchange Containers, receiving either an empty container or credit in return. Each Container is equipped with a metal plate and a padlock with an RFID label. Participation in the rotation system follows either by renting a container from CC or by adding a container that is then fitted with the specified metal plate and RFID label. The RFID labels are replaced every five or six years to check unpaid participation.

QPE, a wholesale flower and plant business, did not participate in the rotation system. When QPE went bankrupt, Containers were found on its premises and claimed by CC. CC holds a European Union trade mark (the letters: ‘CC’) that is attached to the Containers and RFID labels, along with Community design rights and a patent for the RFID labels.

CC alleges that QPE infringes its trade mark, patent, and design rights by offering the Containers for sale in the EU. Furthermore, CC asserts that removing the trade marks before selling the Containers constitutes trade mark infringement.[2] QPE contends there is no infringement because the IP rights are exhausted, as the Containers were marketed with CC's consent accompanied by a payment. CC argues against this, stating there is no exhaustion since the Containers are rented, not sold.

Exhaustion

The court considers the principle of exhaustion from a trade mark perspective, which equally applies to the exhaustion defence for design and patent rights. Exhaustion for these three types of intellectual property rights occurs when a product (protected by intellectual property rights) has been placed on the market in the EEA by the right holder or with its consent. "Placed on the market" means that (1) third parties have acquired the right of disposal of the trade marked goods, and (2) the trade mark proprietor has had the opportunity to realise the economic value of its trade mark.[3] It is not necessary for the trade mark proprietor to have actually realised the economic value. What is important is that the proprietor has had the opportunity to do so.[4]

According to QPE, the Containers are made available to contractors in return for a fee, allowing CC to realise the economic value associated with CC’s IP rights regarding the Containers. QPE contends that this is not contradicted by CC's general terms, which state that the containers remain CC's property. QPE refers to Advocate General Stix-Hackl, who suggests that rights are exhausted if a third party gains the 'actual right of disposal' over trade marked goods, such as through a sale. QPE argues that CC has granted contractors to the rotation system similar disposal rights over the containers, thus exhausting the IP rights, even without a sale.[5] QPE also refers to an opinion of Advocate General Van Peursem who suggests that rental could, in some cases, lead to exhaustion.[6] In another opinion, Van Peursem noted that economic value realisation of the trade mark by the owner without a sale is possible in certain circumstances, specifically citing a loyalty campaign where goods were produced exclusively for that purpose.[7] The court, however, counters that neither the CJEU nor the Supreme Court of the Netherlands have confirmed these opinions.

QPE also refers to the Davidoff/Doddema case, where it was decided that providing perfume testers to a third party for marketing purposes (and not by selling them) led to the exhaustion of IP rights. However, according to the court, this does not apply to the Containers, as they were neither produced nor made available as part of a special promotion or for marketing protected goods.[8]

Therefore, the court concludes that the IP rights are not exhausted, regardless of whether CC has realised the economic value of its trade mark. According to the court, CC does not let the contractors to the rotation system dispose of the Containers in a manner that constitutes placing them on the market within the EEA, as meant in EU case law.[9] As such, the Containers are not exhausted.

Conclusion

In conclusion, QPE has presented strong arguments for why the Containers should be considered exhausted, despite being placed on the market through rental rather than sale.

However, it appears that the court was reluctant to substantially address the issue of whether trade mark rights on rented goods can be exhausted. Instead, the court sidestepped these arguments by rejecting QPE’s reasoning and concluding that the contracting parties to the rotation system did not acquire the actual right of disposal of the Containers. As a result, the court in my opinion missed an opportunity to clarify this unresolved issue, as highlighted by the Advocate Generals’ Opinions and case law referenced by QPE.