The European Court of Justice ruled that Levi's had the right to limit imports of its jeans from outside the EU. Tesco had been importing from what is known as the "grey market" in South America and then selling the jeans at discounted prices in its stores.
In a statement, the court said, "The consent of a trademark proprietor to marketing within the European economic area of goods placed on the market outside the European economic area must be expressed unequivocally. Such is not the case where the trademark proprietor is merely silent."
Tesco had been expected to win the case, which has been dragging on for three years, for the right to sell branded goods at discount prices.
Levi's began proceedings against Tesco in 1998, threatening to take it to court and claiming that the retailer was breaching Levi's trademark rights by selling the cut-price jeans against its wishes.
Levi's argument was that its brand reputation is at stake and that staff need special training to sell the jeans. Tesco responded to the threats by suing Levi's. It claims to have saved UK consumers £42m since it began selling the jeans, which are imported through the "grey market".
In April, Tesco scored a partial victory in its battle against Levi's when an interim report by the court hinted that Tesco was entitled to sell cut-price Levi's jeans in its stores.
The court's non-binding opinion recognised Tesco's right to "freely sell products bought from around the world". The wording of the opinion, however, was complex enough for Levi's to interpret it in a different way, claiming that it gave trademark owners the right to control the import of their branded products.
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