Tim AshdownCourt of Appeal creates uncertainty for trade mark owners by allowing euro-defences to be argued by parallel importer of second hand computer hardware.

Through our support to ACID members, I am well aware that some of you sell your products outside the European Economic Area (“EEA”) under your own trade marks, and often at lower prices to those at which you may sell within the EEA member states.  For any business that does this, the risk of those goods then being imported and sold within the EEA without your consent is often a real and expensive pain.

There has always been a tension between the rights of trade mark owners to control the first marketing of their goods within the EEA, and the rights of those trading in the grey market.  This tension was intensified following a decision by the English Court of Appeal on 24 August 2010 in a dispute between Sun Microsystems Inc v. M-Tech Data Limited.

Trade Mark owners – and their lawyers – have for some time felt comfortable in taking action against those importing branded goods into the EEA which had not been first placed on the market within the EEA by the trade mark owner (or with its consent).  We had all assumed (as supported by the well-honed trade mark skills of Mr Justice Kitchin, who heard the case in the Chancery Division), that the so-called “Euro-defences” based on EU competition laws were not readily available to the parallel importers.  It now seems that in some circumstances they might be. Sun (now Oracle) was trying to prevent the vast trade in second hand Sun hardware which was being imported from outside the EEA. However, the practices it deployed in an attempt to stifle that trade, have potentially enabled M-tech to deploy some “Euro-defences”.  For example, Sun refused to publish its database of serial codes enabling resellers to identify whether goods were first market in the EEA with the consent of Sun or not.  This, combined with the aggressive pursuit of resellers through litigation, enabled the lawyers for M-Tech to present an argument that this behaviour was anti-competitive as its effect was to prevent the attainment of a single market in the EEA for legitimate trade in Sun products which had been first marketed in the EEA with the consent of Sun.

The decision was made following an early attempt by Sun to obtain early judgment.  Assuming it is not settled, the case has a way to go until trial and may well then be the subject of a reference to the European Court of Justice.  The downside of all this is the potential uncertainty – and legal expense – created for brand owners attempting to prevent parallel imports by legitimate means.  Trade mark owners pursing legitimate Infringement cases, now risk getting stuck in a quagmire of casually deployed euro-defences.

However the judgement is a useful reminder to trade marks owners that they might usefully consider assisting resellers in attempting to identify which branded goods they can legitimately re-sell in the EEA, either by marking goods or publishing other such data.

Tim Ashdown Partner at ACID accredited law firm DMH Stallard

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