Oracle trademark case

Oracle trademark case

Oracle America Inc v M-Tech Data Ltd Supreme Court [2012] UKSC 27

On appeal from the Court of Appeal: [2010] EWCA Civ 997

[2013] F.S.R. 14

Trade-marks – Parallel Imports-Application for Summary Judgment-Whether Trade Mark directive is a complete code for trade-marks – Brand friendly Supreme Court ruling

Before Lord Walker, Lord Clarke, Lord Sumption, Lord Reed Lord Carnwath

This case arose out of parallel imports of goods bearing registered trade marks into the EEA. At the core of the appeal was whether an owner of parallel imported goods bearing registered trade marks could defend a challenge on the grounds of trademark infringement on the basis that the proprietor of the mark is engaged in conduct calculated to obstruct the free movement of goods between member states or to distort competition in the EEA market for those goods (the “Euro defences”).

Oracle America Inc (formerly Sun Microsystems (“Sun”)), manufacture computer hardware. Sun is the proprietor of trade marks registered in connection with computer hardware. M-Tech Data Ltd supplies computer hardware including parallel imports.

Lord Sumption gave the unanimous judgment overturning the decision of the court of appeal and restoring the J Kitchin’s order of first instance.

Facts

The court considered the Trade Marks Act 1994 giving effect to directive 89/10/EC which was replaced by directive 2008/95/EC (the “Directive”) harmonising EU law with respect to registered trademarks.

Articles 5 and 7 of the directive state as follows:

Article 5

“Rights conferred by a trade mark

1. the registered trademark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:

(a) any sign which is identical with the trade mark in relation to goods or services which are identical

with those for which the trademark is registered;

3. The following, inter alia, may be prohibited:

(a) affixing the sign to the goods or to the packaging thereof;

(b) offering the goods, or putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder;

(c) importing or exporting the goods under the sign;

(d) using the sign on business papers and in advertising.”

Article 5 is subject to article 7, which provides:

“Exhaustion of the rights conferred by a trade mark

1. The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trademark by the proprietor or with his consent.

2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.”

Relying on the decisions of the Court of Justice in Silhouette International Schmied GmbH & Co. KG v Hartlauer Handelsgesellschaft mbH (Case C-355/96) and Sebago Inc GB UNnic SA (Case C-173/98) it was accepted that the combined effect of Article 5 and 7 is to confer on the trade mark proprietor exclusive rights to control first marketing of a product bearing its mark in the EEA, even if they are genuine products  bearing its mark which have previously been marketed outside of the EEA by him or with his consent. This was the issue at the core of the appeal. The absolute right of the proprietor was underlined in Zino Davidoff SA v AG Imports Ltd (Joined Cases C-414/99 to 416/99) which required the unequivocal consent of the proprietor. It could not be implied either from silence or from marketing the products outside the EEA.

The appeal arose out of an application for summary judgment made by Sun for inter alia damages for infringement; and an injunction. M-Tech Data Ltd’s answer was to put forward the so called Euro Defences. Kitchin J hearing the application gave judgment to Sun on the basis that there was no arguable defence. M-Tech Data Ltd were successful in overturning that judgment on appeal.  Sun appealed the decision of the Court of Appeal. The Supreme Court allowed Sun’s appeal and restored the order of Kitchin J. M-Tech Data Ltd were unable to overcome the “insuperable difficulties” of a relevant connection between the conduct of Sun and any inconsistency  with the free movement of goods and undistorted competition.

Although unpopular with parallel traders who are not part of the distribution network of the large brand proprietors the Supreme Court upheld the rejection of a rule of international exhaustion. This is a welcome decision for brand owners.