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GAZETTE
January-February 1976
EUROPEAN SECTION
Patent and Trade Mark Rights and Licences
in Community Law
by John Temple Lang
Introduction
This article is a short summary of a lecture given by
John Temple Lang in Stockholm at a conference
organised by the Federation of Swedish Industries and
the University of Uppsala.
The law of the EEC has greatly altered the position
under patent, trade mark and knowhow law of many
Irish companies, giving them new opportunities for ex-
porting their patented and trade marked goods, and
exposing them to new competition. It has also made
illegal certain types of clauses restricting competition,
which occur frequently in patent and similar licences,
and therefore exposed companies to the risk of fines.
This is a risk which should now be covered in a
thorough audit. EEC law also offers companies a way
of escaping from certain contractual restrictions on
their growth which they may have agreed to in the past.
The full text of the lecture is being published by the
conference organisers.
Defined rights to exercise patents and trade marks
Many of the problems of reconciling the need for a
unified Common Market with the national character of
patent and trade mark laws have now been resolved.
First, in a series of cases the Court of Justice of the
European Communities has ruled on how far owners
of patents and trade marks may exercise their rights to
prevent goods made and marketed in the Community
from being imported into a given Member State. Sec-
ondly, the application of EEC law on restrictive prac-
tices to patent licences is now becoming clearer.
Apart from the classical arguments for competition
and for antitrust laws to ensure that competition con-
tinues, free competition was essential to create a single
market out of first six, then nine, national markets.
The benefits of competition in a larger market would
not be obtained if companies could keep national
frontiers in existence through market-sharing agree-
ments or by using national patent or trade mark rights.
Community rules on freedom to use patent and similar
rights were not only an essential element in EEC anti-
trust law, but an essential element in the uniting of
Europe. Free competition to unify the Common Market
is a means, not an ideology. Any method of maintaining
national frontiers as barriers to trade is therefore looked
at very critically by the EEC Commission and the Court.
Article 36 EEC Treaty allows import restrictions in-
sofar as necessary to protect industrial and commercial
property, provided they do not form a disguised restric-
tion on trade between Member States. Under the
decision of the Court in the Centrafarm case, this
means that national patent rights may be used to
prevent importation of goods only in order to protect
the patentee's exclusive right to use the invention and
to put the resulting goods on the market for the first
time either himself or by a licensee, and the correspond-
ing right to prevent infringements. Similarly national
trade mark rights may be used to exclude goods from a
national market if this is necessary to protect the trade
mark owners' exclusive right to sell the trademarked
goods for the first time.
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Territorial protection
Territorial protection is therefore justified against
goods imported from a member state where the inven-
tion in question is not patentable if the goods were
manufactured there without the patentee's consent,
express or implied (the Parke Davis case). It is justified
against goods infringing the patent or trademark im-
ported from outside the EEC or from another Member
State, which have been produced and sold without the
patentee's consent and in violation of his patent rights.
And it seems fairly likely from statements made by the
Court in the Centrafarm and Cafe Hag cases (although
the point has not yet been directly decided), that terri-
torial protection is permitted against goods produced
under a similar patent or trade mark in another Mem-
ber State where th£ original owners of the patents or
marks were legally and economically independent: the
case of similar patents and trade marks not having a
common origin. In other words, unilateral exercise of
rights not having a common origin with those rights,
if any, under which the goods were produced elsewhere
in the EEC, is permitted. On the other hand, national
patent or trade mark rights cannot be used to prevent
imports from another Member State of goods which
have been legally marketed there by the patentee or
trade mark owner or its licensee, or otherwise with its
consent (e.g. by an associate company). In such a case
the owner's exclusive right to the first sale has been
satisfied, and the owner therefore has no right to divide
up the Common Market.
If this was not the law, the owners of patents or
trade marks could partition off national markets and so
prevent the unifying of the Common Market, though
this would not be justified to protect the essence of the
owner's rights.
It follows that there are now
considerable oppor-
tunities for companies to buy patented or trade marked
goods from the patentee or trade mark owner or his
licensee
(or after they have been sold for the first time)
and to export them to other
EEC
Member States where
the prices being charged by the local licensee are higher.
This was what the Centrafarm company was doing.
As a result of the Cafe Hag Case, the same rule
applies (i e. territorial protection is not obtainable)
where the consent was given by the previous owner of
a trade mark, as well as by the present owner. Also, the
person entitled to use the trade mark in one Member
State may sell directly into any other Member State
where a trade mark with the same origin exists. It is
not yet clear that these two consequences of the Café
Hag case apply also to patents.
Owners in different Member States of "parallel" trade
marks having the same origin may therefore need to
differentiate their goods from those of the other owners
by adding to the trade mark which is common to both.
It is probable but not yet certain that these rules do
not apply to the relatively unusual cases where two
similar patents or trade marks were originally obtained
by coincidence in different Member States by owners
unconnected with one another (no common origin).
Nor is it settled that the owner of a patent in say
Ireland can use his Irish rights to prevent the import
of goods manufactured in say Italy by a company un-
connected with him if he never sought an Italian
patent, or has allowed the relevant Italian patent to
lapse.
Clearly he could not do so if he had agreed to the
manufacture in Italy, but he probably could obtain