PARIS — In a boost to luxury players’ ongoing battle over where and how their goods can be sold, the European Court of Justice on Thursday ruled that trademark owners can legally oppose the resale of their goods by discount stores.
The decision relates to a case first brought to the French courts by Christian Dior Couture SA against its former licensee Société Industrielle Lingerie (SIL) for selling Dior corsetry goods to French discount business Copad International.
Dior’s licensing agreement with SIL, signed in 2000, stipulated SIL would not sell its products outside the selective distribution network without written agreement from Dior. When SIL ran into financial difficulties in 2002, it asked Dior for permission to do so, but the house refused.
The Brussels court ruled a selective distribution system contributes to the luxury image of a product and that selling outside the network thus “might affect the quality itself of those goods.”
“The quality of luxury goods is not only the result of their material characteristics, but also of the allure and prestigious image, which bestows on them an aura of luxury,” the court continued.
However, the judgment leaves national courts within the European Union to decide on a case-by-case basis whether selling outside the selective distribution network has damaged the “allure and prestigious image of luxury goods.”
“The really big question is how that will be interpreted,” said Alice Proby, an intellectual property lawyer at London-based Charles Russell, who’s been following the case. “There isn’t really anything at the moment to base it on.”
The judgment comes at a sensitive time, as luxury goods players feel threatened by the European Competition Commission’s review of rules governing selective distribution, particularly online. Competition commissioner Neelie Kroes is expected to present her main proposals this summer.
Dior executives could not be reached for comment on the decision.