KK Sony Computer Entertainment & Anor v Pacific Game Technology (Holding) Ltd (Judge Fysh QC, SC sitting as a deputy High Court Judge;  EWHC (Ch) 2509; 18.10.06)
On 18 October 2006, Judge Fysh handed down judgment in a case between the Japanese electronics company, KK Sony Computer Entertainment & Anor ("Sony"), and a Hong Kong company, Pacific Game Technology (Holding) Ltd ("Pacific"). Parallel proceedings were ongoing in Hong Kong and Pacific did not appear at the hearing, despite its earlier separate application disputing the English Court's jurisdiction having been rejected. Judge Fysh gave a fully reasoned judgment considering various points of principle, including (i) exhaustion of rights and (ii) the sale of goods into the European Economic Area ("EEA") through websites established outside the EEA.
Pacific operated an English language website called www.lik-sang.com (which can be translated from the Cantonese as "powerful and energetic") offering various commercial video games, consoles and accessories for sale. The site was aimed primarily at consumers within the EEA and offered for sale Sony PSP Consoles which were originally intended for the Japanese market and were labelled "FOR SALE AND USE IN JAPAN ONLY".
Sony brought an action for infringement of: certain Community and UK trade mark registrations including the word PLAYSTATION; a registered Community design and UK registered design; and various copyright works including the computer programme or PSP system software, the menu icons, the surface design of the packaging and the user manual. No defence was filed.
The judge had no doubts that these IP rights were valid and subsisting, nor that, subject to the question of whether the goods had been sold in the EEA with Sony's consent, there was any issue on infringement. If the specific goods had been sold in the EEA with Sony's consent, then Sony's intellectual property rights ("IPRs") would be taken to have been 'exhausted' under the doctrine of exhaustion. This doctrine provides that national IPRs are not infringed by the use of those rights in relation to goods which have already been put on the market in the EEA by the right holder or with its consent.
There was no doubt that Sony had never given express consent to offer and/or sell PSP consoles intended for the Japanese market in the EEA. The first question was therefore whether implied consent could be inferred. The Judge reviewed the law on exhaustion, including ECJ jurisprudence, in particular, Zino Davidoff v A&G Imports Ltd/ Levi Strauss v Tesco Stores Ltd  Ch 109. On the question of whether the consent of a trade mark owner to the marketing within the EEA of trade-marked goods that have previously been put on the market outside the EEA may be implied, the court held that consent must be expressed in such a way that the owner's right to renounce his rights is "unequivocally demonstrated".
The court stated that such an intention will normally be inferred from an express statement of consent, but that in some cases it may be inferred from facts and circumstances arising before, during or after the placing of goods on the market outside the EEA which demonstrate unequivocally that the owner has renounced his rights.
On the question of whether implied consent can be inferred from the mere silence of a trade mark owner, the court held that it is not for the trade mark owner to demonstrate absence of consent, but rather for the trader alleging consent to prove it. Therefore, implied consent to the marketing within the EEA of goods put on the market outside the EEA cannot be inferred from the mere silence of the trade mark proprietor. Nor can implied consent be inferred from the fact that:
• the trade mark owner has not communicated his opposition to the marketing of the goods within the EEA;
• there is no warning carried on the goods that they must not be put on the market within the EEA; or
• the trade mark owner has transferred ownership of the goods in question without imposing contractual reservations, or that,
• according to the governing law of the contract, the property right transferred would, in the absence of such reservations, include an unlimited right of resale, or at lease a right to market the goods subsequently within the EEA.
The court also held that it was not relevant to the issue of exhaustion of rights either: That the importer of goods bearing the mark is unaware that the owner objects to their being marketed in the EEA or sold there by traders other than authorised retailers;
That the authorised retailers and wholesalers have not imposed contractual reservations on their own purchasers, setting out the trade mark proprietors' objection to marketing in the EEA, even though they have been informed of such objection by the trade mark owner. Judge Fysh concluded that Sony had not impliedly consented to the PSP consoles being sold in the EEA. Therefore, no exhaustion of Sony's rights in the EEA had occurred.
Secondly, the court considered whether an offer and/or sale of goods via Pacific's website / the internet could be viewed as marketing in the UK and/or the EEA. This question hinged on what the information contained on the site would convey to "an average consumer" on "a fair reading". The judge concluded that the following features of the site were sufficient to convey to a reasonable person that an offer for sale had been made within the UK (and therefore the EEA):
• The website is in English and English is the default language;
• The prices are in pounds sterling, which is also the default currency when the site is accessed in England. Promotions are also in sterling;
• The PSP manuals are available on the website in various European languages including English;
• There are a number of testimonials on the website from purchasers in the UK;
• Pacific ran a free shipping promotion until the very day before the PSP console was launched in Europe;
• A "spurious" (in the words of the Judge) EC Certificate of Conformity was included with the product shipped to Europe.
Judge Fysh therefore concluded that Pacific's acts had indeed been carried out in the EEA rather than Hong Kong, without Sony's consent, which constituted an infringement of Sony's IPRs.
The case reinforces the principle that consent to placing goods on the market in the EEA will only be implied in exceptional circumstances, and emphasises that there is no worldwide exhaustion. This is the case for all IPRs.
The decision rejected the argument that (absent particular facts) infringement of IPRs in the EEA can be avoided merely by "setting up a website outside the EEA crafted to sell within it". The issue to be determined in such cases is not where the business itself is located but where the legal wrong actually takes place.
Pacific's website closed down on 24 October 2006 as a consequence of the judgment.