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Tuesday, 24 August 2010

Sun in August? Summery but not so summary

Readers may remember this dispute as Sun Microsystems Inc v M-Tech Data Ltd and another (noted by the IPKat here), but it has resurfaced today -- at a time when Court of Appeal judges should be out in the sun, not judging it -- as Oracle America Inc (formerly Sun Microsystems Inc) v M-Tech Data Ltd and Lichtenstein [2010] EWCA Civ 997. The Court consisted of Lady Justice Arden, who delivered the judgment, aided and abetted by the Master of the Rolls and Lord Justice Tomlinson.

Sun owned a series of UK and Community trade marks comprising or consisting of the word 'Sun' for computers, computer hardware, computer software and computer peripherals. M-Tech, a UK company, supplied computer hardware in the "secondary market" for hardware originally sold by major manufacturers like Sun and its rivals. M-Tech bought 64 Sun disk drives from a US broker and sold them in the UK. Sun sued for trade mark infringement, alleging that M-Tech had put the drives on the UK market without Sun's consent. M-Tech maintained however that, since Sun hadn't shown where the drives had been first marketed, its attempt to enforce its trade mark rights was contrary to Articles 28 to 30 of the EC Treaty since its effect would be to prevent the attainment of a single market in hardware. Further, the enforcement of Sun's rights in this way was contrary to Article 81 of the EC Treaty and therefore prohibited.

Sun, maintaining that there was no evidence to suggest it had ever consented to the importation of these drives into the EEA, sought and obtained summary judgment, having furnished evidence that the drives had initially been placed on the market outside the European Economic Area (EEA). According to Mr Justice Kitchin:

* The court had to ask whether the claimant had a 'realistic' as opposed to a 'fanciful' prospect of success, one which carried some degree of conviction and which was more than merely arguable.

* In reaching its conclusions the court should not conduct a mini-trial, but had to take account of evidence that could reasonably be expected to be available at trial.

* The court should not be hasty to reach a final decision without a full trial where reasonable grounds existed for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case.

* Summary disposition was not appropriate in any area of law that was still developing.

* 'Consent' -- the parallel importer's favourite defence to a trade mark infringement -- had to be a pan-European concept under harmonised European law. It was thus up to the European Court of Justice to supply a uniform interpretation of the concept of 'consent' to the placing of goods on the market within the EEA. In view of its serious effect in extinguishing the exclusive rights of proprietors of trade marks, consent had to be expressed in such a way that an intention to renounce those rights was unequivocally demonstrated. While such an intention would normally be gathered from an express statement of consent, it was conceivable that consent might be inferred from the facts and circumstances surrounding the placing of the goods on the market outside the EEA that unequivocally demonstrated that the proprietor had renounced his rights.

* Implied consent to the marketing within the EEA of goods put on the market outside that area could not be inferred from the mere silence of the trade mark proprietor, from the fact that the proprietor had not communicated his opposition to goods placed on the market outside the EEA being placed on the market within the EEA or from the fact that the goods carried no warning of a prohibition on their being placed on the market in the EEA.
The Court of Appeal, in a relatively short decision, granted the defendants permission to appeal, since M-Tech was entitled to argue that Articles 28 to 30 and 81 of the EC Treaty prevented Oracle from obtaining summary judgment for trade mark infringement. Reminding the parties that the fact that this application for permission to appeal was allowed didn't mean that M-Tech wouldn't have to substantiate its defences, the court directed Oracle to call for a case management conference as soon as possible, perhaps for the strange reasons that (i) it has the potential to establish an industry precedent and (ii) it looks like a good prospect for a reference to the Court of Justice of the European Union. Thus the court said (at para. 41):
“... This case clearly has important financial and economic implications not just for the parties but also for others involved in the grey market in Oracle, and possibly other, computer hardware and goods. The economic function of parallel imports and the grey market is controversial”,
adding ominously (at para. 42):
"If M-Tech's allegations are established, the trial judge will have to consider whether to make a reference to the Court of Justice to enable him to decide the issues in the action. In the absence of any material change in European Union law or in M-Tech's case, there would be a strong case for a reference by the trial judge. The point is not acte clair, and in this case where the issues involve questions of economic policy likely to affect the European Union as a whole and where this court has already considered the points of European Union law in issue, there would be a good reason to make a reference without waiting for the case to reach this court again".
The IPKat is unhappy. He thinks that, strictly speaking, the Court of Appeal is correct to say that, as it stands, the raising of Euro-defences under the Treaty or its renumbered successor in title the TFEU is not likely to be a strong candidate for summary judgment. If this is so, parallel traders can routinely plead Euro-defences and thereby avoid summary judgment and cause havoc among legitimate rights owners.

Summary judgment here and here
Summery judgment here

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