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'Anti-competitive' allegations are no defence against trade mark infringement claim, rules Supreme Court

Out-Law News | 29 Jun 2012 | 4:47 pm | 2 min. read

Whether or not Sun Microsystems interfered with the free movement of goods within the European Economic Area (EEA) or distorted competition in the EEA market is not relevant to its claim against a rival for trade mark infringement, the Supreme Court has ruled. 

The Court said that M-Tech could not defend itself against trade mark infringement by claiming that Oracle-owned Sun Microsystems offended the fundamental EU principles on free trade.

The Court said that M-Tech would have to link the alleged breach of The Treaty on the Functioning of the European Union (TFEU) directly to its defence against trade mark infringement in order to make the alleged breach relevant to its case.

"It will be apparent that it is not good enough for M-Tech's purposes to establish a breach of the treaty," the Supreme Court said in its ruling. "It has to show that that breach gives them a defence to an action for infringement of the marks."

M-Tech is accused of infringing on the trade mark rights of Oracle subsidiary Sun Microsystems, now part of Oracle America, Inc, when it bought 64 disk drives from a US broker and sold them in the UK to another firm without Sun's consent.

European law says that a company has the exclusive right to control the first sale in the EEA of goods bearing its trade mark, even if those goods have already been sold outside the EEA with the company's permission.

Importing branded goods destined for one market to sell them in another is known as parallel importing. The trade mark owner's right to sue a parallel importer is lost only if the goods were first marketed in the EEA.

In its defence, M-Tech argued that Sun's approach to controlling parallel imports was unfair. Sun did not publish information that a reseller like M-Tech would need to determine whether or not particular products had first been placed on the market in the EEA, which would determine whether or not Sun had exhausted its rights.

Overarching principles for the operation of the EU are set out in the TFEU. The Treaty says that unless they are designed to protect industrial and commercial property, restrictions on imports and exports between EU countries are forbidden.

M-Tech said Sun's approach breached European laws on restricting the sale of goods between EU countries by its deliberately withholding information to secure the second-hand computer hardware market for itself and its authorised dealers, but the Supreme Court said its claims were "irrelevant" to determining whether the company had a defence to trade mark infringement.

"It is not a defence to proceedings brought on that basis that there is other business that M-Tech have been prevented from doing by Sun's arguably unlawful policy of withholding information," it said.

"There is no relevant connection between the policy of withholding information about provenance and the enforcement of Sun's right to control the first marketing of its trade-marked products in the EEA," said the ruling. "More generally, neither the trade marks nor the rights conferred on their proprietor by the directive can be characterised as the subject, the means or the result of an agreement or concerted practice contravening [EU free trade principles]."

The Supreme Court said that although laws on the free movement of goods and the rights of trade mark owners seemed to be in conflict, that conflict was reconciled by the "absolute nature" of a trade mark holder's right to first sale of its products within the EEA.

Intellectual property law expert Tom Cahill of Pinsent Masons, the law firm behind Out-Law.com, said: "Although the arguments failed as a defence to trade mark infringement, the Supreme Court commented in passing that M-Tech may well have a good cause of action for damages under competition law for lost sales."

"It is also worth noting that the injunction granted against M-Tech contains a mechanism designed to ensure disclosure by Oracle. In this regard, the injunction does not apply to goods marketed by M-Tech unless Oracle confirms, within ten days of receiving details of the relevant goods, that they have not been put on the EEA market by Oracle or with its consent. " Cahill added.