CJEC, September 26, 2000, No C-23/99

THE COURT,

1 By application lodged at the Court Registry on 2 February 1999, the Commission of the European Communities brought an action, pursuant to Article 169 of the EC Treaty (now Article 226 EC), for a declaration that, by implementing, pursuant to the French Code de la Propriété Intellectuelle (Intellectual Property Code), procedures for the detention by the customs authorities of goods lawfully manufactured in a Member State of the European Community which are intended, following their transit through French territory, to be placed on the market in another Member State where they may be lawfully marketed, the French Republic has failed to fulfil its obligations under Article 30 of the EC Treaty (now, after amendment, Article 28 EC).

Community legislation

2 Article 36 of the EC Treaty (now, after amendment, Article 30 EC) provides that the provisions on the free movement of goods in Articles 30 to 34 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of ... the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.

3 In the field of industrial property relating to designs, Council Regulation (EC) No 3295-94 of 22 December 1994 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods (OJ 1994 L 341, p. 8) does not concern counterfeit goods which are manufactured or marketed in the Community, but only those coming from non-member countries.

4 Directive 98-71-EC of the European Parliament and of the Council of 13 October 1998 (OJ 1998 L 289, p. 28) deals with the legal protection of designs without fully harmonising the laws of the Member States in that field. The prescribed deadline for implementation is 28 October 2001.

5 Article 14 of Directive 98-71, entitled Transitional provision, provides:

Until such time as amendments to this directive are adopted on a proposal from the Commission in accordance with the provisions of Article 18, Member States shall maintain in force their existing legal provisions relating to the use of the design of a component part used for the purpose of the repair of a complex product so as to restore its original appearance and shall introduce changes to those provisions only if the purpose is to liberalise the market for such parts.

6 The 20th recital in the preamble to Directive 98-71 states that ... the transitional provision in Article 14 concerning the design of a component part used for the purpose of the repair of a complex product so as to restore its original appearance is in no case to be construed as constituting an obstacle to the free movement of a product which constitutes such a component part.

7 As regards measures constituting an obstacle to the free movement of goods, Article 1 of Decision No 3052-95-EC of the European Parliament and of the Council of 13 December 1995 establishing a procedure for the exchange of information on national measures derogating from the principle of the free movement of goods within the Community (OJ 1995 L 321, p. 1) refers, in particular, to measures the direct or indirect effect of which is a general ban on the goods or a refusal to allow the goods to be placed on the market.

French legislation

8 Articles L. 335-10, L. 521-7 and L. 716-8 of the French Code de la Propriété Intellectuelle, which apply, respectively, to copyright and related rights, registered designs, and trade marks, provide for a procedure for detention by the customs authorities of goods presumed to be counterfeit. When it makes its checks, the customs administration may, on a written application from the proprietor of the protected right, detain goods which the proprietor of the right claims to be counterfeit. The detention measure is automatically revoked unless, within 10 working days of the notification of the detention of the goods, the applicant demonstrates to the customs authorities that the matter has been referred to the competent courts.

9 The sale, manufacture, importation and possession of counterfeit goods in French territory constitute criminal offences which are defined in Articles L. 335-2 (copyright), L. 521-4 (designs) and L. 716-9 (trade marks) of the Code de la Propriété Intellectuelle.

10 The French Cour de Cassation (Court of Cassation) has given a number of judgments on the offence of counterfeiting in cases where counterfeit goods were only in transit through French territory. In a judgment of 26 April 1990, in Asin Crespo Ricardo and Others v Ministère Public (Bulletin de la Cour de Cassation, 1990, No 160), concerning spare parts for motor vehicles, the Criminal Chamber of that court held that a product merely circulating in French territory infringes the right of the proprietor of a trade mark or design. That case-law is applied even if the product was lawfully manufactured in a Member State with a view to being marketed, equally lawfully, in another Member State.

Facts and pre-litigation procedure

11 The European Automobile Panel Association lodged a complaint with the Commission on the ground that the French customs authorities detain, at the frontier with Spain, spare parts for motor vehicles which are manufactured in that Member State and which are intended to be placed on the market in another Member State where their marketing is authorised, following their transit through France.

12 The French customs authorities consider that the spare parts in question, intended for French makes of motor vehicle, constitute, under French law, counterfeit goods infringing rights protected under the Code de la Propriété Intellectuelle, by virtue of the protection of registered designs and copyright. Those authorities detain under customs control goods presumed to be counterfeit in order to enable the proprietors of the protected rights to take the necessary steps to protect their rights within the prescribed time-limits.

13 Agents of the Direction Générale des Douanes et Droits Indirects (Directorate General of Customs and Indirect Taxation) of the Ministry of Economic Affairs, Finance and the Budget drew up, in particular, two written reports of 16 January and 26 February 1997 concerning spare parts for French makes of motor vehicle which are manufactured by Spanish companies and purchased by Italian companies.

14 By letter of 13 May 1997, the Commission informed the French authorities that the detention of spare parts under customs control is liable to constitute an impediment to the free movement of goods, contrary to Article 30 of the Treaty, since those parts are not intended to be marketed in French territory and they are lawfully produced in Spain and marketed, just as lawfully, in Italy.

15 By letter of 2 June 1997, the French authorities replied, first, that the counterfeit spare parts in question constitute a risk to the safety of users by reason of their dubious quality, second, that the checks made by the customs authorities before goods suspected of being counterfeit are placed on the market are consistent with the principle of proportionality since they are essential for the effective protection of one of the objectives referred to in Article 36 of the Treaty and, finally, that action to counteract counterfeiting helps to safeguard the interests of innovative industries and to ensure fair competition in the common market.

16 On 3 December 1997, taking the view that that reply was not satisfactory, the Commission sent the French Republic a letter putting it on notice to submit its observations within two months. In that letter, the Commission states that the checks and detention in question are, in its view, contrary to Articles 30 and 36 of the Treaty and that they may also be contrary to the second paragraph of Article 7a of the EC Treaty (now, after amendment, the second paragraph of Article 14 EC).

17 In its reply of 13 February 1998, the French Republic maintained its earlier arguments and contended, in particular, that, according to the judgment of the Cour de Cassation in Asin Crespo Ricardo and Others v Ministère Public, cited above, Community rules do not preclude the application of national legislation permitting the detention of counterfeit goods circulating in French territory. It stated that the customs administration's checks are carried out throughout French territory, thus also in the frontier region, but that the event giving rise to those checks is never the crossing of the frontier.

18 By letter of 24 July 1998, the Commission sent a reasoned opinion to the French Republic, in which it restated its position as to the nature of the detention undertaken by the customs authorities of that Member State and requested the French Republic to take the measures necessary to comply with Community rules within two months from the notification of that opinion.

19 In response to that reasoned opinion, the French authorities contended, by letter of 29 September 1998, that the purpose of detaining goods is to protect industrial and commercial property within the meaning of Article 36 of the Treaty and that the French legislation is fully consistent with the effect given by the Court of Justice to the principle of the territoriality of national legislation.

20 In the light of that response, and noting that the French Republic had not adopted the measures necessary to comply with the reasoned opinion, the Commission brought this action.

The alleged failure to fulfil obligations and the findings of the Court

21 The Commission submits that the detention of spare parts carried out by the French customs authorities constitutes a restriction on the free movement of goods contrary to Article 30 of the Treaty.

22 In that regard, French legislation authorises the national customs authorities, on an application from the proprietor of the right in designs of spare parts for motor vehicles, to detain spare parts presumed to be counterfeit goods for a period of 10 days during which the applicant may refer the matter to the competent national courts. The Court is bound to conclude that such detention, which delays the movement of goods and, if the competent court rules that they are to be confiscated, may block their movement completely, has the effect of restricting the free movement of goods.

23 That finding cannot be affected by the French Government's argument that the detention procedure does not restrict trade between Member States since it does not apply solely to the entry of goods into French territory but may be initiated against spare parts found anywhere in that territory. By reason of the fact that detention applies, in particular, to goods coming from or being sent to other Member States, it has a restrictive effect on trade between Member States and constitutes in principle a measure having an effect equivalent to a quantitative restriction on imports, contrary to Article 30 of the Treaty.

24 It is therefore necessary to examine whether that measure may be justified.

25 Before attempting to justify the detention procedure in question on the basis of Article 36 of the Treaty, the French Government submits that the French legislation on detention under customs control is consistent with various texts of secondary legislation, namely Decision No 3052-95, Regulation No 3295-94 and Article 14 of Directive 98-71.

26 The French Government contends, first, that the Member States have retained their principal powers in the matter of inspection of goods circulating in their territory and it relies for that purpose on Decision No 3052-95, which establishes a procedure for exchange of information on national measures derogating from the principle of the free movement of goods. It submits that it is difficult to imagine that measures liable to be taken and then notified under that decision, such as the detention under customs control at issue in this case, may in themselves constitute breaches of Community law.

27 As far as that argument is concerned, the Court finds it sufficient to observe that, according to the fifth recital in the preamble thereto, the main purpose of Decision No 3052-95 is to make it possible to enhance knowledge concerning the implementation of the free movement of goods in non-harmonised sectors and to identify the problems encountered with a view to finding appropriate solutions to them. Its purpose is not to define the type of measures which are compatible with the rules of the Treaty relating to the free movement of goods. The fact that a procedure for detention under customs control is one of the type of measures referred to in Decision No 3052-95 cannot therefore ever have the effect of rendering such a procedure compatible with the rules of the Treaty.

28 The French Government submits, next, that under Regulation No 3295-94 the proprietor of a design right may submit a written application to the customs authorities in order that they take action where counterfeit goods coming from non-member countries are released for free circulation, export or re-export, or indeed are discovered during an inspection.

29 The French Government accepts that Regulation No 3295-94 does not concern intra-Community trade, but contends that the protection which it offers upon the entry of counterfeit goods coming from non-member countries may be nullified if those goods are initially released for free circulation in a Member State, such as the Kingdom of Spain, thus giving them the status of Community goods, and they may then be in transit without obstacle through another Member State. It would suffice for Member States to release goods into free circulation in their territory in order for those goods no longer to be open to interception by another Member State, which is more concerned about industrial and commercial protection, where the territory of the second State is used solely as a mere crossing point. Such a practice has the effect of rendering Regulation No 3295-94 pointless or, at the very least, considerably limiting its purpose.

30 According to the Commission, Regulation No 3295-94 is not relevant in this case in so far as it concerns solely trade with non-member countries. In addition, the Commission contends that, although the Regulation offers significant opportunities for control in order to combat the importation into Member States of counterfeit goods coming from non-member countries, whereas the same opportunities do not exist in respect of Community goods, that is due to the fact that the latter goods are covered by the principle of free movement laid down by the Treaty.

31 As far as this issue is concerned, the Court observes that considerations concerning the effectiveness of Regulation No 3295-94 cannot justify a breach of the rules of the Treaty relating to the free movement of goods within the Community.

32 The French Government submits, finally, that the French legislation is compatible with Article 14 of Directive 98-71. It contends that, in the absence of harmonisation of protection of designs, Member States may maintain their existing legal provisions in that field. It follows that the French legislation designed to protect the right in question, including during the transit of spare parts, is allowed by that article.

33 It must, however, be remembered that, although Article 14 of Directive 98-71 authorises Member States to maintain in force their legislation relating to the protection of the designs of spare parts referred to by that article, that possibility exists only to the extent that the national legislation is compatible with the rules of the Treaty. Article 14 of that directive cannot have the effect of validating all the national provisions on the protection of the rights concerned. As the 20th recital in the preamble to Directive 98-71 states, national legislation must, in any event, be consistent with the rules of the Treaty relating to the free movement of goods.

34 It is therefore necessary to examine whether the impediment to the free movement of goods caused by the procedure for detention under customs control may be justified, as the French Government submits, by the need to ensure the protection of industrial and commercial property referred to in Article 36 of the Treaty.

35 According to the Commission, the protection of industrial and commercial property does not justify the detention under customs control of Community goods in transit, which are covered by the principle of free movement, since mere transit does not affect the specific subject-matter of the protected right.

36 The French Government submits, on the contrary, that the detention measures requested by the proprietor of a design right, in that their purpose is to enforce his exclusive right, form part of the specific subject-matter of that right as it is recognised by Community legislation. It contends that, in France, spare parts are protected by the design right and that every such part which is manufactured, placed on the market without the consent of the proprietor of that right and found in French territory, whether it is intended for import or export or is in transit, constitutes a counterfeit, so that it is justified for the customs authorities to take action by detaining the product.

37 In order to answer the question whether detention under customs control of goods in transit, as provided for under the French legislation, is justified by the exception referred to in Article 36 of the Treaty relating to industrial and commercial property, it is necessary to take account of the purpose of that exception, which is to reconcile the requirements of the free movement of goods and the right of industrial and commercial property, by avoiding the maintenance or establishment of artificial barriers within the common market. Article 36 allows derogations from the fundamental principle of the free movement of goods within the common market only to the extent to which such derogations are justified for the purpose of safeguarding rights which constitute the specific subject-matter of such property (see, inter alia, Case C-10-89 CNL-SUCAL v HAG [1990] ECR I-3711, paragraph 12; and Case C-61-97 FDV v Laserdisken [1998] ECR I-5171, paragraph 13).

38 As far as design rights are concerned, certain restrictions on the free movement of goods have been allowed on the basis of Article 36 of the Treaty, where their purpose was to protect the specific subject-matter of the right of industrial and commercial property (see, to that effect, Case 53-87 CICRA and Others v Renault [1988] ECR 6039, paragraph 11).

39 It is clear from the case-law of the Court that the right of the proprietor of a protected design to prevent third parties from manufacturing and selling or importing, without his consent, products incorporating the design forms part of the specific subject-matter of his right (see, in particular, Case 238-87 Volvo v Veng [1988] ECR 6211, paragraph 8).

40 It is thus necessary to determine whether the right of the proprietor of a protected design of spare parts to prevent third parties from putting in transit, without his consent, products incorporating that design also forms part of the specific subject-matter of his right.

41 The French Government contends that detention under customs control forms part of the specific subject-matter of the design right, namely the exclusive right of the proprietor to market a product with a particular appearance for the first time. The French Government, relying on the case-law of the Court and, inter alia, Case C-9-93 IHT Internationale Heiztechnik v Ideal-Standard [1994] ECR I-2789, submits that in putting their goods into circulation for the first time in French territory, by means of transit, without the consent of the proprietor of the exclusive right, the manufacturers of copies of protected spare parts infringe that exclusive right.

42 As far as that submission is concerned, it should be observed that manufacture, sale and importation involve use by the third party of the appearance of the product which the design right seeks to protect. Authorisation given to a third party to manufacture or market identical parts and, consequently, to use the appearance of the original design will thus normally give rise to the payment of fees to the proprietor of the right.

43 Intra-Community transit, on the other hand, consists in the transportation of goods from one Member State to another across the territory of one or more Member States and involves no use of the appearance of the protected design. As the Advocate General points out at point 84 of his Opinion, it does not, moreover, give rise to the payment of fees when the transportation is undertaken by a third person with the authorisation of the proprietor of the right. Intra-Community transit does not therefore form part of the specific subject-matter of the right of industrial and commercial property in designs.

44 The putting into circulation referred to in the case-law relied on by the French Government and referred to in paragraph 41 above was not therefore the mere physical transportation of the goods but consisted in placing them on the market, that is to say the marketing of those goods. However, in this case, the product is marketed not in French territory, through which it only passes in transit, but in another Member State, where the product is not protected and may therefore be lawfully sold.

45 Since the manufacture and marketing of the product are lawful in the Member States where those operations take place and transit does not form part of the specific subject-matter of the design right in the Member State where transit takes place, it must be concluded that the impediment to the free movement of goods caused by the product's detention under customs control in the latter Member State in order to prevent its transit is not justified on grounds of the protection of industrial and commercial property.

46 The French Government further contends that detention under customs control limited to 10 days is necessary, in any event, in order to check that the goods have indeed been manufactured in a Member State other than the French Republic and are also destined for another Member State.

47 As regards that contention, the Court finds that it is clear from the case-file and the observations submitted by the French Government at the hearing that the main purpose of the 10 days of detention under customs control is not to identify the Member States of origin and destination of the goods but to enable the proprietor of the right to have those goods inspected by an expert in order to prove that they are unauthorised copies of spare parts and are, therefore, under French law, counterfeit goods. However, since the mere transit of unauthorised copies does not form part of the specific subject-matter of design rights, the conducting of an inspection by an expert for the purpose of determining whether the spare parts are such copies cannot justify their being detained under customs control.

48 As regards the investigation of the origin and destination of the goods in transit, it should be possible for this to be carried out on the spot if the transporter is in possession of the relevant documents or if he can obtain them immediately. In any event, detention for up to 10 days is disproportionate in relation to the purpose of such an investigation and, accordingly, cannot be justified in regard to the purpose of protection of industrial and commercial property referred to in Article 36 of the Treaty.

49 Consequently, the Court finds that, by implementing, pursuant to the Code de la Propriété Intellectuelle, procedures for the detention by the customs authorities of goods lawfully manufactured in a Member State of the European Community which are intended, following their transit through French territory, to be placed on the market in another Member State where they may be lawfully marketed, the French Republic has failed to fulfil its obligations under Article 30 of the Treaty.

Costs

50 Under Article 69 (2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the French Republic has been unsuccessful, the latter must be ordered to pay the costs.

On those grounds,

THE COURT,

hereby:

1. Declares that, by implementing, pursuant to the French Code de la Propriété Intellectuelle, procedures for the detention by the customs authorities of goods lawfully manufactured in a Member State of the European Community which are intended, following their transit through French territory, to be placed on the market in another Member State where they may be lawfully marketed, the French Republic has failed to fulfil its obligations under Article 30 of the EC Treaty (now, after amendment, Article 28 EC);

2. Orders the French Republic to pay the costs.