Out-Law Analysis | 10 Jun 2020 | 4:25 pm | 4 min. read
Those are the lessons businesses should derive from a High Court judgment that concerns a dispute between two previously related pharmaceutical companies that now operate separately, Merck KGaA (Merck Global) and Merck Sharp & Dohme Corp (Merck US).
Under the terms of a co-existence agreement, Merck US was entitled to use the 'Merck' name in its operations in the US, and Merck Global was entitled to use 'Merck' in a number of other territories around the world, including the UK. When Merck US substantially increased its use of 'Merck' outside the US, Merck Global issued proceedings alleging infringement of its UK trade marks and breach of the co-existence agreement. Merck US lodged a counterclaim that Merck Global's trade mark rights should be revoked for non-use.
The High Court first ruled on the case in 2016. At that time it held that Merck US had breached the co-existence agreement by using 'Merck' in the UK, and had infringed Merck Global's trade marks. The High Court also partially revoked Merck Global's trade marks for non-use, but not so as to affect the finding of infringement. The decision was appealed, but upheld. However, in a relatively unusual move, the Court of Appeal remitted five issues back to the High Court for reconsideration. Those issues form the basis of the High Court's most recent ruling. Two of the issues addressed by the court are of particular relevance to brand owners.
First, the Court of Appeal asked the High Court to reconsider whether the partial revocation of Merck Global's trade marks had gone far enough or whether further revocation of rights was justified. The specifications for each mark included "pharmaceutical substances and preparations", which in itself included a number of subcategories.
In its initial decision, the High Court said Merck Global was entitled to retain trade mark rights for that specification even though it had not been able to show use of the 'Merck' mark across all of the subcategories. After reconsidering the issue, however, the High Court decided to narrow the scope of Merck Global's trade mark rights to reflect the specific pharmaceutical substances for which 'Merck' had actually been used by Merck Global in the UK. This further restriction of trade mark protection did not, however, affect the overall finding that Merck US was responsible for infringing Merck Global's trade mark rights.
Trade mark applicants should carefully consider and seek expert advice on how to draft their trade mark specifications. This is a skilled art as it requires a careful balance between capturing the protection needed while minimising the risk of future challenge to the validity of the registration based on non-use
The High Court was considering this issue in light of a number of rulings issued in the case of Sky v Skykick. Those rulings emphasised the need for trade mark owners to take a realistic approach to trade mark filing by limiting the scope of protection to that which is commercially justifiable. The filing should cover the goods and services for which the trade mark is actually to be used, with some latitude for realistic future expansion.
The ruling in the Merck case appears to endorse that approach. In response, trade mark applicants should carefully consider and seek expert advice on how to draft their trade mark specifications. This is a skilled art as it requires a careful balance between capturing the protection needed while minimising the risk of future challenge to the validity of the registration based on non-use.
The second issue of particular interest stemming from the High Court's ruling concerns the finding of infringement of the UK trade marks by Merck US.
Merck US had used 'Merck' on websites, social media and promotional pages targeted at the UK. The question was whether this was use of the trade mark 'in the course of trade', which is an essential element in a trade mark infringement claim. The High Court held that it was, finding that the use of 'Merck' on websites and social media was intended to link the trade marked name to the goods and services of Merck US, diluting its function as a mark denoting Merck Global's goods and services in the UK. Use ‘in the course of trade’ was not confined to situations where Merck US was selling goods bearing 'Merck' in the UK, the court said.
Co-existence agreements should be sufficiently comprehensive to set out in clear terms the limitations within which each party is able to use the trade mark concerned and, so far as is possible, anticipate and provide for future eventualities
The companies had been forced to fight over this question of infringement because the type of infringement that had occurred in practice had not been anticipated in the co-existence agreement. The agreement was drafted some time before the internet and social media came into mainstream use and so did not expressly provide for a situation in which infringing activities were occurring online. Had it done so, Merck Global could have raised a breach of contract claim against Merck US to recover losses it suffered as a result of Merck US's conduct. This would have been a simpler and potentially more cost-effective claim to present to the court than a trade mark infringement claim.
The infringement issues in this case emanated from a 50 year old co-existence agreement that inevitably had not anticipated the emergence of the internet and the phenomenon of social media when it was drafted. Nevertheless, the ruling highlights to trade mark owners the need to ensure that trade mark co-existence agreements are carefully drafted.
Co-existence agreements should be sufficiently comprehensive to set out in clear terms the limitations within which each party is able to use the trade mark concerned and, so far as is possible, anticipate and provide for future eventualities. This is particularly important where parts of businesses are divested and the agreement is to allow for future use of identical brands in different territories.
However, disputes may well arise even where the parties to co-existence agreements agree to use different brands within territorial limitations. Regard must be had to all commercial activities targeted at or taking place, including ‘corporate’ activities such as the email addresses adopted, to avoid a risk of others linking this use back to the restricted brand, which could potentially result in trade mark infringement and breach of the co-existence agreement.
06 May 2020