17 September 2012

Euro-defences: Oracle America Inc v M- Tech Data Ltd

On 5 Nov 2009 Oracle America Inc, which was then known as Sun Microsystems Inc. ("Oracle"), applied to Mr. Justice Kitchin for summary judgment against M-Tech Data Ltd. ("M-Tech") (see Sun Microsystems Inc v M-Tech Data Ltd and another [2010] 2 CMLR 7, (2010) 33(2) IPD 33010, [2010] ETMR 13, [2009] EWHC 2992 (Pat), [2010] FSR 9). Oracle is the registered proprietor of a series of UK and Community trade marks comprising or consisting of the word "Sun" in respect of, inter alia, computers, computer hardware, computer software and computer peripherals.   M-Tech, which supplies computer hardware in what has been described as the secondary market for hardware, had purchased 64 Sun disc drives from a broker in the USA, imported them into the UK and sold them to a business called KSS Associates. Oracle contended that those disc drives were put on the market by M-Tech in the UK without its consent and thereby infringed its British and Community trade marks.

M-Tech resisted that application essentially on three grounds. 
  1. It contended that Oracle had failed to establish where the disc drives were first marketed, and said it might be the case that the discs were first marketed in the European Economic Area ("EEA"), in which case Oracle's trade mark rights would have been exhausted. 
  2. It asserted that the enforcement by Oracle of its trade mark rights was contrary to articles 28 to30 of the Treaty of Rome as its effect would be to prevent the attainment of a single market in hardware which has been marketed by Oracle or with its consent in the EEA. 
  3. It asserted that the enforcement by Oracle of its trade mark rights was connected with agreements which are contrary to article 81 of the Rome treaty and therefore prohibited. The agreements relied upon were those between Oracle and its authorized distributors which required the distributors to buy Oracle equipment, whether new or second hand, within the Oracle authorized supply network whenever possible. 
The judge rejected all those arguments and gave judgment to Oracle under CPR 24.2.

M-Tech appealed to the Court of Appeal (Lord Neuberger MR, Lady Justice Arden and Lord Justice Tomlinson) which held that all three points were arguable (Oracle America Inc v M-Tech Data Ltd and Another  [2010] ETMR 64, [2010] EWCA Civ 997, [2011] FSR 2, [2011] ECC 4, [2011] Eu LR 117). Oracle appealed to the Supreme Court.

Lords Walker, Clarke, Sumption, Reed and Carnwath allowed the appeal and restored the judgment of Mr. Justice Kitchin (Oracle America Inc  v M- Tech Data Ltd [2012] 1 WLR 2026, [2012] WLR 2026, [2012] UKSC 27). Delivering judgment on behalf of the Court, Lord Sumption set out in full articles 5 and 7 of Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008to approximate the laws of the Member States relating to trade marks ("the directive"). He said at paragraph [4]:
"It has been accepted ever since the decisions of the Court of Justice in Silhouette International Schmied GmbH & Co. KG v Hartlauer Handelsgesellschaft mbH (Case C-355/96) [1999] Ch 77 and Sebago Inc v GB-Unic SA (Case C-173/98) [2000] Ch 558, that the combined effect of articles 5 and 7.1 of the directive is to confer on the trade mark proprietor the exclusive right to control the first marketing in the EEA of goods bearing his trade mark, even if they are genuine goods which have previously been put on the market by him or with his consent outside the EEA. This is the only right attaching to the trade marks which is relevant in the present case. The subsequent decision of the Court in Zino Davidoff SA v A&G Imports Ltd (Joined Cases C-414/99 to 416/99) [2002] Ch 109, underlined its absolute nature by establishing that the consent of the trade mark proprietor had to be such as to amount to an unequivocal renunciation of the right. It could therefore rarely be implied, and never from the mere fact of his having placed the goods on the market outside the EEA and/or his silence on the question whether they had been lawfully placed in the market within the EEA: see paras 53-56. These decisions are understandably unpopular with parallel traders not forming part of the authorised distribution network of the trade mark proprietors. But they are securely established as part of the legal order of the EU in the domain of trade mark protection. Proposals to modify their effect or to adopt a rule of international exhaustion have been firmly rejected by the EC Commission and the Economic and Social Committee and no attempt was made to change the position when the new directive was adopted in 2008."
At paragraph [12] Lord Sumption noted that  the directive is in most respects substantially based on the case law of the Court of Justice that had developed over the two previous decades on the reconciliation of the prohibition of quantitative restrictions on imports and exports under arts 34 and 35 of the Treaty on the Functioning of the European Union ("TFEU") with art 36 which permits such restrictions for the protection of industrial and commercial property. He noted at paragraph [14] that "articles 5 and 7 of the directive already embodies both the primary provisions governing the free movement of goods in articles 34 and 35, and the limited exception in article 36 for the protection of industrial and commercial property."

The right that Oracle sought to enforce was to prevent the importation of goods into a member state of the EEA.   Art 7 was irrelevant because that article only restricted the right of a trade mark owner to object to the onward distribution of goods already lawfully within the EEA. M-Tech complained that Oracle had chilled the secondary market for Oracle goods by refusing to say whether or not a particular product had been put on sale in the EEA with or without its consent. Such refusal might possibly be unlawful but even if it was it would not take away the rights conferred upon a registered proprietor by art 5 of the directive.

As to the art 81 (or art 101 TFEU) point, Lord Sumption observed that although an intellectual property right is not itself an agreement or concerted practice capable of contravening article 101 of the treaty "there are undoubtedly circumstances in which it may be unenforceable because there is a sufficient nexus between the exercise of the right and the agreement or concerted practice in question". The test, which dates back to Case 40/70 Sirena Srl v Eda Srl  [1971] ECR 69  is whether it is "the subject, the means or the result of a restrictive practice"or "when it is the purpose, the means or the result of an agreement … or concerted practice" (see Keurkoop BV v Nancy Kean Gifts BV [1982] ECR 2853, [1983] FSR 381, [1982] EUECJ R-144/81, [1983] 2 CMLR 47, [1982] Com LR 212). His Lordship concluded at paragraph [32] that "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 article 101."

Since the hearing before Mr Justice Kitchin, M-Tech had added the argument that enforcement of Oracle's trade marks would constitute an abuse of rights as that concept is understood in EU law. That point seemed to the judge to be incapable of succeeding in circumstances where their other points had failed.  Even if Oracle had eliminated independent resellers from the secondary market by aggressive enforcement of its rights, that would not make such enforcement an abuse of rights.

Lord Sumption acknowledged that there were still obscurities in this area of EU law but the particular legislative provisions and legal principles were entirely clear and there was no need for a reference to the Court of Justice of the European Union.

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1 comment:

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