Adobe Systems Inc. v Netcom Online.Company uk Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 02 March 2012 |
| Neutral Citation | [2012] EWHC 446 (Ch) |
| Docket Number | Case No: HC10 C 00368 |
| Court | Chancery Division |
| Date | 02 March 2012 |
[2012] EWHC 446 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Warren
Case No: HC10 C 00368
Michael Hicks (instructed by Redd Solicitors LLP) for the Claimant
Jonathan DC Turner (instructed by Richard Slade & Co.) for the Defendants
Hearing dates: 24th and 25th January 2012
The underlying claim in these proceedings concerns alleged infringement by the first and second defendants (" Netcom" and " Ms Bhatti", together " the Defendants") of a number of Community trade marks and UK trade marks (together " the Registered Marks") owned by the Claimant (" ASI") relating to Adobe products. Proceedings were launched in February 2010. They were settled very shortly before the hearing which was due to come on before Arnold J on 7 April 2011. The parties did not actually appear before the Judge. Instead, a form of consent order which had been agreed was placed before him. He made an order in the terms of the draft which was sealed on that day (" the Consent Order").
The Consent Order provided for an inquiry as to the damages suffered by ASI by reason of the Defendants' acts of infringement of the Registered Marks. The inquiry is set to float from 17 April 2012. The Defendants wish to raise in the inquiry certain matters which they say make implementation of the Consent Order illegal. The issues are, briefly:
i) Exhaustion of rights under the EU Trademark Regulation ( Regulation 207/2009) (" the Regulation") and the EU Trademark Directive ( Directive 2008/95) (" the Directive") where products are placed on the market in the EU with the consent of undertakings economically linked with ASI.
ii) Abuse of dominant position contrary to Article 102 of the Treaty on the Functioning of the European Union (" TFEU").
iii) Agreements restricting competition contrary to Article 101 TFEU (originally Article 85 of the Treaty of Rome).
By an order dated 6 January 2012, Chief Master Winegarten ordered the determination, as preliminary issues, of the question whether these matters can be relied on, as a matter of principle, in the inquiry. Those preliminary issues now come before me.
The background
The litigation concerns genuine Adobe products made with ASI's consent and which bear Adobe trademarks applied with ASI's consent. The relevant products have been distributed at some stage by licensed distributors of the Adobe group. In this context, the Defendants suggest that the relevant licensed distributors were appointed by an Irish subsidiary of ASI, Adobe Systems Software Irelands Limited. There may well be dispute, on the inquiry, about from where and to where distribution was made by licensed distributors and whether they acted within the scope of their licenses.
ASI contends that its trademarks have been infringed because, on its case, the Defendants sold Adobe products which were not placed on the market in the EU by or with its consent. It contends that Adobe products sold by the Defendants were supplied by licensed distributors of the Adobe group outside the EU who were prohibited in their agreements from supplying them into the EU. Apart from that, there is nothing before me, and nothing in the evidence yet adduced on the inquiry, to demonstrate the extent of any economic link between the Adobe group and licensed distributors other than the mere fact of a licence.
In order to deal properly with what, on its face, is a short point, I need to consider two aspects. In the first place, I need to examine the history leading up to the issue of proceedings and the course of the proceedings thereafter. In the second place, I need to say something about the law concerning parallel imports and about certain aspects of competition law.
The history
There was an earlier action, commenced in 2007, to which two companies, Netcom Distributors Ltd (" Distributors") and Genstar Ltd (" Genstar"), were original parties. The proceedings related to alleged infringement of registered trademarks by reason of dealings in unlawful parallel imports of Adobe products. Ms Bhatti and her brother were later joined to the proceedings on the basis that, according to ASI, they controlled and directed Distributors and Genstar. There was an application for summary judgment to be heard on 4 July 2008. The proceedings were settled.
According to ASI, at the end of 2007 or in early 2008, Ms Bhatti arranged for the business of Distributors to be transferred to Netcom. ASI alleged that Ms Bhatti has at all material times been the moving spirit behind, not only Distributors, but also Netcom.
During 2009, ASI made a number of test purchases from Netcom, five of which are listed in the Particulars of Claim in the present action. Rightly or wrongly, ASI concluded that Netcom's business included dealing in illegal parallel imports of Adobe software and that the business was being run by Ms Bhatti.
As a result, ASI started these proceedings in February 2010 alleging infringement by the Defendants of the Registered Marks. In their defence, the Defendants denied dealing in imported Adobe software. At a hearing on 29 November 2010, Master Moncaster made an order in relation to disclosure. He directed that the Defendants should provide full disclosure of documents relating to their dealings in Adobe software and provide information about where relevant documents were held. Ms Bhatti has given an explanation of why the Defendants have failed to provide any relevant documents. ASI does not accept that Ms Bhatti is telling the truth but nothing turns on that for present purposes.
Of the five test purchases which I have mentioned, ASI has been able to identify that three had been supplied by ASI (or a related company) to a company known as Medyasoft, which was a licensed Adobe distributor in Turkey. In that way, ASI was able to establish that the products had been imported from outside the EEA. The chain of supply is not known to ASI and the Court has not been informed about it by the Defendants (who may not, of course, themselves know details of the chain). ASI considers that it is quite possible that the products were not supplied directly by Medyasoft to Netcom.
In early 2011, ASI obtained third party disclosure from an import agent used by the Defendants known as "Connoisseur". ASI obtained a number of documents including two invoices to Netcom from a company in Dubai known as Central Freight Systems (" CFS"), to which I will refer later.
In December 2009, ASI made a further test purchase. ASI was able, to its surprise, to establish that the item in question had first been supplied by an Adobe group company to its distributor in Dubai known as Aptec Distributions FZ (LLC) (" Aptec"). ASI considers this test purchase to be of importance because, according to it, this revealed the involvement of the Defendants in the importation of significant quantities of Adobe products from Dubai. ASI say that the documents and the test purchase established the following chain of supply:
i) An Adobe group company supplied the products to Aptec or companies related to it.
ii) Aptec supplied the products to CFS in Dubai.
iii) CFS exported the products to Netcom.
Although Ms Bhatti has from time to time acted in person, she, Netcom and Distributors have, over different periods, used the services of various different lawyers. The Defendants were represented before me by Jonathan Turner. In relation to the present proceedings, she acted in person (and for Netcom) until shortly before the trial date fixed for 7 April 2011. Counsel, not Mr Turner, was then instructed under the Bar Direct Professional Access scheme. The Defendants indicated that they wished the trial to be adjourned and filed an application to that end which was directed to be heard at the commencement of the trial. In the event, that application did not proceed because terms of settlement were agreed and the Consent Order was made.
The Consent Order
In order to deal further with the history of the proceedings and to understand the parties' positions, it is necessary to refer now to the relevant provisions of the Consent Order. The second recital reads as follows:
"AND UPON the defendants admitting (a) that the first defendant has imported into the United Kingdom Infringing Adobe Products (as defined below) and has sold, supplied and otherwise dealt in Infringing Adobe Products (b)….. and (c) that in particular (and without limitation to the foregoing) the consignments of Adobe Products (as defined below) which are the subject of the documents in trial bundle E are consignments of Infringing Adobe Products which were imported by the first defendant and that such acts of importation infringed each of the Registered Trade Marks and that the second defendant is jointly and severally liable in respect of such acts of infringement"
I shall refer to the consignments referred to in that recital as " the Bundle E products".
The "Registered Trade Marks" are the Registered Marks within paragraph 1 above. "Adobe Products" are software products (including their packaging) to which any of the Registered Marks has been attached. And "Infringing Adobe Products" are any Adobe Product which "has been imported into the EEA without the consent of [ASI] and which has not been put on the market in the EEA by [ASI] or with its consent". Those quoted words reflect, obviously, the wording in Article 13 of the Regulation, Article 7(1) of the Directive and section 12(1) Trade Marks Act 1994.
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