In Oracle America Inc (formerly Sun Microsystems Inc) v MTech Data Ltd  EWCA Civ 997, the Court of Appeal of England and Wales has overturned Mr Justice Kitchin’s decision to grant summary judgment to Oracle America Inc in respect of its claim for registered trade mark infringement in relation to certain parallel imports made by M-Tech Data Ltd.
M-Tech imported into the United Kingdom from the United States 64 computer hardware disk drives that had Oracle’s registered trade mark affixed to them. Oracle sued for registered trade mark infringement and sought summary judgment (the application being heard by Kitchin J), putting forward evidence showing that the drives had not been placed on the market in the European Economic Area (EEA) by Oracle, or with its consent.
M-Tech sought to rely upon defences based upon Articles 28, 30 and 81 EC (now Articles 34, 36 and 101 of the Treaty of the Functioning of the European Union). M-Tech alleged that an independent trader in secondary Oracle goods (i.e., one that was not a dealer authorised by Oracle) could not tell whether a particular secondary Oracle product had or had not been previously placed on the EEA market by Oracle, or with its consent. However, Oracle and its authorised dealers could. This was said to be due to the way in which Oracle had marked the goods. M-Tech also said that Oracle had a policy of vigorously enforcing its rights against any independent trader discovered to be selling Oracle hardware that was not put on the EEA market by Oracle, or with its consent. These factors were said by M-Tech to have the effect of shutting down the independent sector of the secondary market and were contrary to both Articles 28 and 30 EC.
The second Euro Defence was based upon Article 81 EC. MTech contended that agreements made between Oracle and its distributors contained a term that prevented those distributors from buying Oracle hardware from independent distributors, unless such hardware could not be supplied within the authorised Network. This, said M-Tech, had the effect of restricting or distorting competition in the secondary market and that Oracle’s policy on enforcement of its trade mark rights only had the effect of re-enforcing such agreements.
For the purposes of the summary judgment application, Kitchin J assumed the factual basis upon which M-Tech’s submissions were founded.
DECISION AT FIRST INSTANCE
Kitchin J found that M-Tech’s defence would have involved reading a further exception to Article 5 of the Trade Mark Directive (The Directive) (Directive 2008/95/EC). The further restriction would have been to the right to prohibit the use of the mark in circumstances where the exercise of the right may affect the free movement of goods between Member States. However Kitchin J found that this was exactly what the Community legislators had chosen not to do and that the legislators had expressly given trade mark proprietors the right to control the first marketing of good bearing their registered marks within the EEA.
On Article 81, Kitchin J found that, even if the agreements entered into with distributors did restrict or distort trade, the disappearance of the independent secondary market was not attributable to the network of agreements, but to the inability of independent traders to ascertain the provenance of the Oracle hardware.
COURT OF APPEAL DECISION
Articles 28 and 30 EC
The Court was referred to European Court of Justice (ECJ) case law concerning repackaging, where the earlier equivalents of Articles 28 and 30 were found to apply to a restriction imposed by a trade mark owner on the repackaging of its goods which were subsequently marketed with its consent, in the European Union. The Court found that these cases did not state that freedom of movement rules only applied to such cases. The Court also found that other authorities it was referred to (such as Zino Davidoff SA v A&G Imports  cases C-414 to 416/99 Ch 109) could not be used to exclude the applicability of Articles 28 and 30 EC, as the point did not arise in these cases. It was therefore arguable that Article 5 of the Directive did not exclude defences based upon Article 28 and 30 EC.
The Court of Appeal also noted that there was no case directly on the question of whether trade mark proprietors not supplying information on the provenance of its goods and/or vigorously pursuing litigation against parallel importers would constitute measures “having equivalent effect” and, if so, whether such measures would qualify the trade mark rights conferred by Articles 5 and 7 of the Directive. The Court of Appeal therefore decided that it was at least arguable that Articles 28 and 30 could apply in such circumstances.
Article 81 EC
M-Tech argued that, for the purposes of using Article 81 as a defence to trade mark infringement proceedings, it was sufficient to rely on the fact that the aim of the terms agreed by Oracle with its authorised distributors and re-sellers was to eliminate unauthorised secondary trade. Again, the Court relied upon the same assumed facts as Kitchin J. In contrast to Kitchin J’s finding, the Court of Appeal decided that a connection was at least arguable. It also said that there was no authority from the ECJ stating that Article 81 cannot be used as a defence in trade mark cases.
This is a case to watch for the future, particularly for rights holders and traders involved in the secondary goods market. As the Court of Appeal noted, the outcome of this case clearly has important financial and economic implications, not just for the parties but also for others involved the secondary market in other goods.