Levi Strauss v. Tesco and E.U. Trademark Exhaustion: A Proposal for Change

Reed, Kimberly | January 1, 2002

When the European Court of Justice (“ECJ”) issued its final decision in the case of Levi Strauss & Co. v. Tesco Stores Ltd. in November 2001, affirming Levi Strauss’ right to keep cut-price imported Levis out of the European Union (“E.U.”), the general public was outraged at the perceived blow to consumer rights. The ECJ’s decision to allow Levi Strauss to prohibit “gray market” imports of its jeans from the United States for resale in the United Kingdom at prices much cheaper than Levi Strauss’ own U.K. prices was characterized as protecting “big business” at the expense of consumers. While the decision undoubtedly was a “strong win for brand owners,” the Court was correct in ruling for Levi Strauss, given the relevant E.U. statutes and case law regarding E.U. trademark protection. This article examines current E.U. law on the sale of “gray market goods,” that is, trademarked goods imported without the trademark owner’s consent, and explains the Levi Strauss decision and its predecessor cases, which center on the E.U.’s policy of “regional exhaustion” of trademarks. The article then looks at the alternative approaches of “international exhaustion” of trademarks and the American “hybrid” exhaustion system, which contains an important and highly effective exception that allows many gray market imports and results in cheaper consumer prices in the United States. In conclusion, the article examines the advantages and disadvantages of the European Union changing its current laws in this area, and recommends that the European Union eschew calls for adoption of an international exhaustion system and instead adopt the American “hybrid” system that includes the “common control exception” as its centerpiece.