Pharmaceuticals, Fig Leaves and Accidental Overspill: the Merck-y World of Co-existence Agreements

The AmeriKat passed out on all of her
co-existence agreements...
A mammoth decision from Mr Justice Norris plopped on the AmeriKat's desk last week in the long-running awaited trade mark co-existence saga of Merck KGaA v Merck Sharp & Dohme [2016] EWHC 49 (Pat).  With limited time to digest the decision herself, she had to rely on a helping paw in the form of Kat friend Nick Buckland (Irwin Mitchell) who has helpfully summarized the judgment for readers:
"In the realm of trade mark (alas, as in life) even with the best intentions (and the assistance of binding legal agreements) we can't always get along.  And so it was that the case of Merck KGaA v Merck Sharp & Dohme Corp and others found itself in the Chancery Division of the High Court, following earlier preliminary skirmishes as reported here and here.
In short, the lengthy historical background to this dispute is as follows: Merck started life as a pharmaceutical business in Germany in 1668.  Success followed and by the late 19th century the company had expanded into a global business with a US subsidiary (“Merck US”). After World War I, Merck US became a completely separate entity, with the de facto situation being that Merck US traded under the name ‘MERCK’ in the US and Canada, with the original German company (“Merck Global”) trading under the name ‘MERCK’ everywhere else. After several unsuccessful attempts this arrangement was formalised in a Co-Existence Agreement in 1955, updated in 1970 (the “1970 Agreement”). Under the 1970 Agreement, outside of the US and Canada Merck US could only use the name ‘Merck’ if accompanied with due prominence by the rest of its company name ‘Merck Sharp & Dohme Corp’ or a geographical indication (i.e. ‘Merck, NJ, USA’).  The situation for Merck Global was the same inside the US and Canada.

So far, so straightforward.  The problems arose when both entities started trading and advertising over the internet, allowing global access and publicity in a way the 1970 Agreement (quite understandably) didn’t envisage. With Merck US increasingly using solely the name ‘MERCK’ and various slogans such as “MERCK Be Well” across www.merck.com (the US site which had been labelled the ‘global site’ until a couple of weeks before trial), as well as on social media and in presentations given in the UK, Merck Global decided enough was enough. It therefore issued proceedings for breach of the 1970 Agreement and trade mark infringement under its UK registrations for the word ‘MERCK’.

The questions facing Mr Justice Norris were three-fold:#
1.  Could the 1970 Agreement possibly cover usage over the internet? 
2.  If the answer to 1 was yes, had Merck US breached the 1970 Agreement through their use of solely the name ‘MERCK’?
3.  Had the remaining four defendants also been in breach of English trade mark law as joint tortfeasors? Could the 1970 Agreement cover internet usage?
Could the 1970 Agreement cover internet usage?
Just because you look the same, does not mean you cannot
co-exist....
As the 1970 Agreement pre-dated both the Rome Convention and the Rome I Regulation, the question of breach of the 1970 Agreement fell to be decided under German law.  Applying the relevant legal provisions (with the assistance of two German legal experts) the judge found that the 1970 Agreement could be interpreted so as to cover internet usage. This was either through a simple interpretation of the words used (internet use being a "classic means of advertising" which would be covered by the original wording relating to publicity) or by taking the German approach of considering how the parties would have bridged an "unintentional gap" in the drafting and assuming that the agreement would have been extended on its terms to cover use via the internet.
Had Merck US breached the 1970 Agreement?
The judge considered that Merck US’ usage of the name ‘MERCK’ without the remainder of the company name or a suitable geographic indication was prima facie a breach of the wording of the 1970 Agreement. Merck US advanced several counter-arguments.  The first argument pointed to the fact that on the ‘Terms of Use’ page Merck US was defined as "Merck Sharp & Dohme", with the same page stating that the site was ‘intended for residents of the US’.  Second, Merck US claimed it could do nothing about what it termed "unpreventable overspill" of visitors from the UK to what was its US site. Mr Justice Norris gave short shrift to this, stating that the reference to ‘Merck Sharp & Dohme’ did not equate to "due prominence" as required under the 1970 Agreement, and the content of the site was clearly aimed at UK visitors, with the statement on the Terms of Use regarding the US being merely a "fig leaf" which could not possibly cover all users.  
The judge then considered the possibility of honest concurrent use and the German doctrine of "forfeiture" (for English law read equitable estoppel). Applying the German cases of The Honda Grauimport Case GRUR 2012, 928 and The Hard Rock Cafe Case GRUR 2013, 1161, it was held that, although "merck.com" and the "@merck.com" addresses had been used since 1993, any “equilibrium” which had been in place during that time had been extinguished due to the aggressive promotion by Merck US of their site following an increased global profile, as well as due to widespread use of the word ‘MERCK’ across social media. The onus was on Merck US to show that this increased activity had not led to increased confusion; it had not discharged this duty at trial. 
Accordingly Merck Global was entitled to an injunction restraining Merck US from describing itself in any printed or digital material addressed to the UK as "Merck", and Merck US was ordered to use either geo-blocking or pop-ups on any UK-targeted websites or social media to ensure that users know not only when they are leaving the UK site and are made aware of Merck Global’s rights outside of the US and Canada.  
Had the remaining four defendants also been in breach of English trade mark law as joint tortfeasors? 
The judge then returned to more familiar doctrines.  Having established that due to the amount of UK-centric material contained at merck.com the Merck US site was evidently directed towards the UK, Mr Justice Norris considered infringement under ss. 10(1), (2) and (3) of the Trade Marks Act (TMA) 1994, having regard to the tests as laid down in Interflora III [2014] EWCA Civ 1403 (paras 67 -69).  
Merpel could feel some "unpreventable overspill" was likely
any second....
The distinction was made between use as a trading name (such as “Merck is active in dealmaking” and “At Merck, corporate responsibility is a cornerstone…”) and use in a trade mark sense. It was found that Merck US’ use through activities such as listing prescription medicines and vaccines and detailing services rendered in medical and pharmaceutical areas equated to uses of a sign in the course of trade, and due to the identity of the marks the case for infringement was clear. This is interestingly where the provisions of the 1970 Agreement went beyond the general law: use of merck.com and @merck.com were contrary to the provisions of the 1970 Agreement, but did not amount to use of the sign in a trade mark sense and so would not have amounted to infringement under the TMA.  
As far as it was necessary to consider s.10(2), the judge accepted Merck US’ argument that there was an inherent risk of confusion that could not be avoided due to the parties’ shared heritage. However this did not entitle Merck US to exploit such a risk to cause more confusion (which is what it had done through the acts complained of resulting in a finding of a strong likelihood of confusion as a result). The same outcome was found under 10(3).  The judge found a deliberate and transparent attempt by Merck US to push the boundaries of the 1970 Agreement and to promote itself in connection with the "MERCK" brand outside the area within which it has the exclusive right to use it and into the territory in which (by agreement) Merck Global has the right.  
Accordingly Merck Global was entitled to an injunction against all defendants (joint tortfeasorship being found due to the inter-relating corporate structure of the defendants) to restrain infringement of Merck Global’s UK marks.  
The judgment reads on logically from the provisions of the 1970 Agreement, and save for some partial revocations achieved by Merck US to slightly less-important parts of Merck Global's trade mark specifications (Merck Legal Services may now have to wait) this is a fairly one-sided judgment.  The decision seems to do the job of putting both parties in the position they would have been in had the 1970 Agreement been adhered to, together with a common-sense infringement decision sitting alongside it.  
If only the parties had have listened to the sage IPKat readership in the first place they could have saved themselves a lot of time and (presumably) a fair bit of catnip…"
Pharmaceuticals, Fig Leaves and Accidental Overspill: the Merck-y World of Co-existence Agreements Pharmaceuticals, Fig Leaves and Accidental Overspill: the Merck-y World of Co-existence Agreements Reviewed by Annsley Merelle Ward on Thursday, January 28, 2016 Rating: 5

1 comment:

  1. So this would be an example of justified geo-blocking within the EU under the proposals for a digital single market? Given the new trademark package retains national marks in the directive, there will be dozens of split ownership examples that continue o fragment the single market, not only on websites but also sales platforms like Amazon.

    ReplyDelete

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