The principle of exhaustion in trade mark law states that once goods have been marketed by the trade mark owner or with its consent in the EEA, the trade mark owner cannot prohibit the resale of the unaltered original products by a third party. While the trade mark owner loses control over further distribution channels, he retains control over the fact that his mark is used solely to identify his products. This regulation is intended to bring the trade mark exhaustion rights into line with the free movement of goods.
One of the world’s biggest perfume manufactures sells its products on the basis of a sub-license agreement using the word as well as the word and figurative mark „Davidoff”. Thus, authorized retailers within the selective distribution system can resell original perfumes as long as the condition of the perfumes has neither changed nor decreased in quality after their placement on the EEA market.
An Austrian dealer, although not part of the selective distribution system, sold original perfumes and used the word as well as the word and figurative mark “Davidoff”.
The perfume manufacturer claimed injunctive relief in the Austrian courts on the basis of the law against unfair competition. Furthermore it was claimed that the Austrian dealer used the word and figurative mark without a compelling reason. The "eye catching" highlighting of the word and figurative mark would unfairly attract the attention of the audience and the brand's reputation.
The lower courts rejected the request to make the Austrian dealer refrain from using the word and figurative mark "Davidoff" as an eye-catcher for commercial and advertising reasons, especially on its website.
The Austrian Supreme Court confirmed this saying that the product presentation of the Austrian dealer was appropriate and – particularly – given on a professional website therefore did not create the impression that an economic connection in the sense of a dealer relationship exist. Thus, the Austrian Supreme Court ruled that the principle of exhaustion applied with the effect that the Austrian dealer has not violated Davidoff’s trade mark rights.