Supreme Court puts brake on “Euro defences”

The UK Supreme Court has given trade mark proprietors reason to celebrate, in a judgment which is likely to have important consequences for the success of “Euro defences” more broadly.

See: Oracle America Inc (formerly Sun Microsystems Inc) v M-Tech Data Limited [2012] UKSC 27.

From the point of view of trade mark law, the case’s main significance is that it emphasises the right of trade mark proprietors to control the initial entry onto the EEA market of any trademarked goods (see Article 5 of the Trade Mark Directive). M-Tech, which had imported and tried to sell Sun trademarked goods without Sun’s consent, argued in its defence that Sun’s attempts to enforce its trade mark rights were part of a broader scheme to partition the EEA market, and were therefore contrary to the free movement of goods provisions at Articles 34 to 36 TFEU.

The Supreme Court, overturning the Court of Appeal’s decision, held that (for summary judgment purposes) such a defence was unarguable. A trade mark proprietor’s right to prevent the initial entry of trademarked goods onto the EEA market does not engage the principle of free movement of goods, which is concerned with movement of goods between member states (see paragraph 25). That broad statement of principle will give considerable comfort to trade mark proprietors.

Potentially of much wider significance is the Court’s treatment of another of M-Tech’s defences, namely the argument that Sun should not be allowed to enforce its trade mark rights because it was party to an agreement which breached Article 101 TFEU. The Court rejected that defence on the basis that there was not a sufficient nexus between the trade mark proceedings and the alleged unlawful agreement.

The nexus between the proceedings and the agreement was that they were both said to be part of a scheme intended to exclude unofficial distributors such as M-Tech from the market. The Court of Appeal considered that link to be arguably sufficient. The Supreme Court, however, took a much narrower view of the required nexus. Citing the traditional test, it noted that the trade mark proceedings were not “the subject, the means, or the result” of the alleged unlawful agreement. The fact that the proceedings may have been part of a broader scheme, some elements of which may have been unlawful, was insufficient to provide a defence.

An interesting contrast can be drawn with Sportswear SpA v Stonestyle Limited [2006] EWCA Civ 380, which was cited to the Supreme Court but is not referred to in its judgment. In that case, the Court of Appeal refused to strike out a defence to trade mark proceedings which alleged that the claimant was, through the proceedings, seeking to give effect to agreements in breach of Article 101. Such a nexus is plainly much closer than that in Oracle America Inc.

Euro defences have recently come under scrutiny in other areas outside trade mark law – see for example Humber Oil Terminals Trustee Limited v Associated British Ports [2012] EWCA Civ 36, where the Court of Appeal set out at paragraph 43 various criteria which an Article 102 defence would need to satisfy. Oracle America Inc is likely now to be an important starting point for evaluating many such defences.

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