Selective distribution meets parallel trade: Higher Regional Court of Munich on exhaustion, licensing and prestige
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Marcel Pemsel
Sep 22, 2025, 11:46:12 AM (13 days ago) Sep 22
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Selective distribution meets parallel trade: Higher Regional Court of Munich on exhaustion, licensing and prestige
The Higher Regional Court of Munich has handed down a
practice-oriented judgment on trade mark exhaustion in selective
distribution systems – one that will interest luxury and cosmetics
brands, marketplace resellers and anyone drafting ‘don’t-sell-to-them’
clauses. In its decision
(6 U 2795/23e) the Court confirmed that a brand owner who supplies
independent authorized retailers puts the goods on the market within the
meaning of Art. 15(1) EUTMR. Contractual sales restrictions in the dealership agreement do not prevent exhaustion.
Background
The plaintiff is part of the Maria Galland group and licensee of EU trade mark MARIA GALLAND, registered since 1998 inter alia for cosmetics.
In Germany, the brand is sold primarily through a network of authorized retailers such as beauty studios, pharmacies and drugstores operating under dealership agreements that contain typical distribution restrictions, including that the products may only be sold to end-consumers or other authorized resellers in the European Economic Area (‘EEA’).
The defendant, a UK-based online retailer, obtained original goods from an authorized retailer in Germany and shipped them in a test purchase by the plaintiff to Germany.
The plaintiff sued the defendant for trade mark infringement arguing that the authorized German retailer violated the distribution agreement, which prevented exhaustion because the goods were not sold with the plaintiff’s consent.
The District Court of Munich I dismissed the action. The plaintiff appealed to the Higher Regional Court.
The Higher Regional Court’s decision
The appeal was unsuccessful.
a. The judges found that the undisputed sale of the contested goods from the authorized German retailer to the defendant led to the exhaustion of the plaintiff’s trade mark rights under Art. 15 EUTMR because the goods have been put on the market in the EEA by the plaintiff.
By reference to Peak Holding (case 16/03), the judges found that goods are put on the market if the trade mark owner has transferred control over the goods to a third party and thereby realized the economic value of the mark. With the deliberate transfer of control in the EEA, the trade mark owner loses the ability to control the further distribution of the goods within this area. Goods are not put on the market in the case of intra-company movements or sales within a group of companies.
The judges found that the sale of the original goods by the plaintiff to the authorized German retailer for the purpose of resale to end-consumers or other authorized retailers exhausted the trade mark rights. The plaintiff transferred the control over the goods to its authorized retailer and realized the economic value of the trade mark by obtaining the purchase price.
Neither the plaintiff’s selective distribution system nor the resale restrictions in the dealership agreements prevented exhaustion because this concerned only the relationship between the parties and the authorized retailers are allowed to sell the goods under certain conditions.
b. The plaintiff argued that it did not lose control because violations of the dealership agreement provide the plaintiff with the rights to terminate the agreement and to demand a penalty payment. The judges were not convinced. These rights emerged only after a violation and show that the plaintiff does not have control over the goods.
c. The plaintiff also relied on the agreement of a retention of title (i.e. the plaintiff remained the owner of the goods until the authorized retailer paid the purchase price). The judges countered that this legal construct only served to secure the payment of the purchase price but was not meant to prevent the sale of the goods and to maintain control.
d. The judges further held that the sale to the authorized retailer can also not be compared to sales within a group of companies. The former are independent entities and the dealership agreement does not give the plaintiff control over the retailer similar to that of a parent company over its subsidiary.
e. The authorized retailer could also not be compared to a licensee. The judges acknowledged that case law has not yet explored what the relationship between a licensor and a licensee must be so that the sale of goods from the licensor to the licensee does not amount to ‘putting on the market’. The only published cases (in Germany) concerned manufacturing licenses where no goods were moved that could be exhausted.
The Court considered that situations in which the licensor delivers branded products to the licensee are rare. Either the licensee manufactures the goods (or has them manufactured) or the licensee receives the branded goods from the licensor in order to distribute them. In the latter case, there is no need for a license because either the delivery of the goods leads to exhaustion or the trade mark owner consents to the further sale of the goods. The judges held that the present case falls under the second situation. The dealership agreement did not use the word ‘license’ and the authorized retailer was not entitled to affix the trade mark to the goods. At best, the agreement granted a license for distribution services.
f. The authorized distributors can also not be compared to an exclusive licensee for an entire Member State to whom the trade mark has been transferred, as was the case in IHT Internationale Heiztechnik v Ideal-Standard. The authorized distributors are not as closely connected to the trade mark owner as an exclusive licensee who owns the trade mark.
g. The plaintiff’s argument that exhaustion required, in principle, explicit consent of the trade mark owner to the resale of the goods was rejected. Goods are exhausted when they are put on the EEA market (1) by the trade mark owner or (2) with its consent. In the first alternative, which is at issue here, no consent is required. The mere putting on the market is sufficient.
h. As a consequence, the plaintiff’s trade mark rights have been exhausted by the plaintiff’s sale of the goods to its authorized retailer in Germany. Even if, as the plaintiff claimed, there were no exhaustion through this sale, the trade mark rights would be exhausted by the sale from the authorized retailer to the defendant. The prohibitions in the distribution agreement do not prevent exhaustion because they only apply between the plaintiff and the authorized retailer.
In addition, the judges referred to the CJEU's Copad decision, where the latter held that only violations covered by Art. 25(2) EUTMR prevent exhaustion (para. 50). However, the authorized dealer is not a licensee and the dealership agreement does not grant a license.
In any event, the sale of the goods to the defendant did not constitute a violation of Art. 25(2) EUTMR, in particular, it did not affect the quality of the goods, including their prestige (Art. 25(2)(e) EUTMR). The reason is that exhaustion occurred because of the sale from the plaintiff to the authorized retailer. Therefore, the sale from the authorized retailer to the defendant is irrelevant to the assessment of Art. 25(2) EUTMR in conjunction with Art. 15(1) EUTMR.
Background
The plaintiff is part of the Maria Galland group and licensee of EU trade mark MARIA GALLAND, registered since 1998 inter alia for cosmetics.
In Germany, the brand is sold primarily through a network of authorized retailers such as beauty studios, pharmacies and drugstores operating under dealership agreements that contain typical distribution restrictions, including that the products may only be sold to end-consumers or other authorized resellers in the European Economic Area (‘EEA’).
The defendant, a UK-based online retailer, obtained original goods from an authorized retailer in Germany and shipped them in a test purchase by the plaintiff to Germany.
The plaintiff sued the defendant for trade mark infringement arguing that the authorized German retailer violated the distribution agreement, which prevented exhaustion because the goods were not sold with the plaintiff’s consent.
The District Court of Munich I dismissed the action. The plaintiff appealed to the Higher Regional Court.
The Higher Regional Court’s decision
The appeal was unsuccessful.
a. The judges found that the undisputed sale of the contested goods from the authorized German retailer to the defendant led to the exhaustion of the plaintiff’s trade mark rights under Art. 15 EUTMR because the goods have been put on the market in the EEA by the plaintiff.
By reference to Peak Holding (case 16/03), the judges found that goods are put on the market if the trade mark owner has transferred control over the goods to a third party and thereby realized the economic value of the mark. With the deliberate transfer of control in the EEA, the trade mark owner loses the ability to control the further distribution of the goods within this area. Goods are not put on the market in the case of intra-company movements or sales within a group of companies.
The judges found that the sale of the original goods by the plaintiff to the authorized German retailer for the purpose of resale to end-consumers or other authorized retailers exhausted the trade mark rights. The plaintiff transferred the control over the goods to its authorized retailer and realized the economic value of the trade mark by obtaining the purchase price.
Neither the plaintiff’s selective distribution system nor the resale restrictions in the dealership agreements prevented exhaustion because this concerned only the relationship between the parties and the authorized retailers are allowed to sell the goods under certain conditions.
b. The plaintiff argued that it did not lose control because violations of the dealership agreement provide the plaintiff with the rights to terminate the agreement and to demand a penalty payment. The judges were not convinced. These rights emerged only after a violation and show that the plaintiff does not have control over the goods.
c. The plaintiff also relied on the agreement of a retention of title (i.e. the plaintiff remained the owner of the goods until the authorized retailer paid the purchase price). The judges countered that this legal construct only served to secure the payment of the purchase price but was not meant to prevent the sale of the goods and to maintain control.
d. The judges further held that the sale to the authorized retailer can also not be compared to sales within a group of companies. The former are independent entities and the dealership agreement does not give the plaintiff control over the retailer similar to that of a parent company over its subsidiary.
e. The authorized retailer could also not be compared to a licensee. The judges acknowledged that case law has not yet explored what the relationship between a licensor and a licensee must be so that the sale of goods from the licensor to the licensee does not amount to ‘putting on the market’. The only published cases (in Germany) concerned manufacturing licenses where no goods were moved that could be exhausted.
The Court considered that situations in which the licensor delivers branded products to the licensee are rare. Either the licensee manufactures the goods (or has them manufactured) or the licensee receives the branded goods from the licensor in order to distribute them. In the latter case, there is no need for a license because either the delivery of the goods leads to exhaustion or the trade mark owner consents to the further sale of the goods. The judges held that the present case falls under the second situation. The dealership agreement did not use the word ‘license’ and the authorized retailer was not entitled to affix the trade mark to the goods. At best, the agreement granted a license for distribution services.
f. The authorized distributors can also not be compared to an exclusive licensee for an entire Member State to whom the trade mark has been transferred, as was the case in IHT Internationale Heiztechnik v Ideal-Standard. The authorized distributors are not as closely connected to the trade mark owner as an exclusive licensee who owns the trade mark.
g. The plaintiff’s argument that exhaustion required, in principle, explicit consent of the trade mark owner to the resale of the goods was rejected. Goods are exhausted when they are put on the EEA market (1) by the trade mark owner or (2) with its consent. In the first alternative, which is at issue here, no consent is required. The mere putting on the market is sufficient.
h. As a consequence, the plaintiff’s trade mark rights have been exhausted by the plaintiff’s sale of the goods to its authorized retailer in Germany. Even if, as the plaintiff claimed, there were no exhaustion through this sale, the trade mark rights would be exhausted by the sale from the authorized retailer to the defendant. The prohibitions in the distribution agreement do not prevent exhaustion because they only apply between the plaintiff and the authorized retailer.
In addition, the judges referred to the CJEU's Copad decision, where the latter held that only violations covered by Art. 25(2) EUTMR prevent exhaustion (para. 50). However, the authorized dealer is not a licensee and the dealership agreement does not grant a license.
In any event, the sale of the goods to the defendant did not constitute a violation of Art. 25(2) EUTMR, in particular, it did not affect the quality of the goods, including their prestige (Art. 25(2)(e) EUTMR). The reason is that exhaustion occurred because of the sale from the plaintiff to the authorized retailer. Therefore, the sale from the authorized retailer to the defendant is irrelevant to the assessment of Art. 25(2) EUTMR in conjunction with Art. 15(1) EUTMR.
Comment
The gist of the decision is: No matter what clauses you as a trade mark owner include in a (selective) distribution agreement with an independent third party, the goods will be exhausted as long as the distributor is, under certain conditions, entitled to resell the goods. In this case, the trade mark owner has surrendered its control over the goods and realized the mark’s economic value by obtaining the purchase price.
The gist of the decision is: No matter what clauses you as a trade mark owner include in a (selective) distribution agreement with an independent third party, the goods will be exhausted as long as the distributor is, under certain conditions, entitled to resell the goods. In this case, the trade mark owner has surrendered its control over the goods and realized the mark’s economic value by obtaining the purchase price.
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