Sun blocks parallel imports of disk drives into Europe

UK company M-Tech Data bought the drives from a US broker and sold them in the UK to another company. Sun sued it, claiming that the sale breached its trade mark rights because the importing and sale into Europe happened without its consent.

The European Union was initially founded as a trading bloc designed to create a single market. Its laws say that a company which makes something available for sale anywhere within the EU cannot stop those goods being sold elsewhere in the EU.

It can rely on its trade mark rights, though, to prevent the sale in the European Community of goods which have only ever been made available for sale by it in countries outside of the Community. Importing branded goods destined for one market to sell them in another without the consent of the trade mark owner is known as parallel importing.

Sun argued that the 64 disk drives in question had only ever been available for sale outside Europe. It said M-Tech Data's imports were unlawful parallel imports.

"It is not disputed that Sun is the proprietor of a series of registered trade marks comprising or consisting of the word Sun, or that the trade mark appears on the 64 disk drives imported by M-Tech and sold," said Mr Justice Kitchin in his ruling. "It cannot be disputed that all 64 disk drives were first placed on the market outside the EEA and there is no evidence to suggest that Sun has ever consented to their importation into the EEA."

M-Tech argued, though, that Sun's exercise of its trade mark rights was restricting the creation of a single market in the EU in its goods. Because only Sun could tell whether equipment was first put up for sale within the EEA, only it could sell guaranteed-legal goods. M-Tech claimed that this broke EU laws on import restrictions.

"M-Tech contends that … the enforcement of Sun's exclusive rights in its registered trade marks is contrary to Articles 28 to 30 [of the EC Treaty] as its object and effect is to prevent the attainment of a single market in Sun hardware which has been marketed within the EEA by Sun or with its consent," said the ruling.

Mr Justice Kitchin rejected that claim, saying that Sun was within its rights and that none of the cases cited by M-Tech undermined Sun's arguments.

M-Tech also claimed that an agreement that distributors signed with Sun prohibiting them from buying equipment from independent dealers unless there was no alternative violated the EC Treaty's anti-cartel clause, Article 81.

"The disappearance of the independent secondary market in Sun hardware is not attributable to the offending network of agreements between Sun and its authorised distributors but to the inability of independent traders to ascertain the provenance of the Sun hardware in which they are dealing," said the ruling. "In my judgment the allegation that the exercise by Sun of its registered trade mark rights is prohibited by Article 81 EC has no real prospect of success."