Oracle America Inc. (formerly Sun Microsystems Inc.) v M-Tech Data Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Tomlinson,The Master of the Rolls |
| Judgment Date | 24 August 2010 |
| Neutral Citation | [2010] EWCA Civ 997 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2009/2692 & A |
| Date | 24 August 2010 |
[2010] EWCA Civ 997
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
Kitchin J
Before: The Master of the Rolls
Lady Justice Arden and
Lord Justice Tomlinson
Case No: A3/2009/2692 & A
Mr Christopher Vajda QC & Mr Guy Tritton (instructed by Hill Dickinson LLP) for the Appellant/First and Second Defendant
Mr James Mellor QC & Ms Marie Demetriou (instructed by Nabarro LLP) for the Claimant/Respondent
Hearing date: 28 July 2010
Lady Justice Arden:
The essence of the problem on this application for permission to appeal (with appeal to follow if permission is granted) may be described shortly. A, the proprietor of a trade mark, grants exclusive licences within the EEA and outside the EEA. The provenance of goods produced under the licences granted by A is identifiable by A by a means not available to the public: there is no published serial mark tracker. Under Article 7 of the Trade Mark Directive (“TMD”) ( Directive 2008/95/EC), A's right to bring proceedings for infringement of its trade mark within the EEA is exhausted if (but only if) the goods alleged to infringe its mark were first marketed in the EEA. B, an importer, brings goods using A's trade mark into the EEA. A is able to identify these goods as having been first marketed outside the EEA so that A's right to bring infringement proceedings in the EEA is not exhausted. A sues B for infringement of his trade mark. A has adopted an aggressive policy of suing persons who are not its authorised distributors or resellers in these circumstances. B, having no other defences, sets up three “Euro–defences” derived from the conduct of A in failing to make publicly available a serial mark tracker, in aggressively pursuing infringement proceedings against non-licensed resellers of goods using its mark and agreeing terms it contends are designed to reduce a grey market in its goods. Those defences are: (1) breach of Articles 28 and 30 (set out below) of the EC Treaty (freedom of movement of goods between member states); (2) abuse of rights conferred by Article 5TMD; and (3) breach of Article 81EC (set out below)(prohibition of agreements restricting competition within the European Union). Is summary judgment properly entered against B or should some other order be made? In this case, Kitchin J, in his carefully reasoned judgment of 25 November 2009, and before whom defences (1) and (3) only were argued, held that those defences disclosed no real prospect of success, and that summary judgment should be given against the defendant (“M-Tech”), the appellant in this court.
There are five possible outcomes to this problem. This court could refuse permission, or it could grant permission and dismiss the appeal, or it could grant permission and allow the appeal, or it could grant permission, allow the appeal and make a reference to the Court of Justice of the European Union (“the Court of Justice”), or it could grant permission, allow the appeal and remit the case to the Chancery Division for trial, with a view to the judge making a reference to the Court of Justice, if thought fit, after trial has taken place.
The problem posed by this case has to be seen in the context of the assumed facts of this case, which I summarise below.
For reasons which I will briefly set out below, I have concluded that the defences are arguable and that the order for summary judgment should be set aside. The principal point is that there is a real prospect of success in the argument that Article 5TMD does not exclude the defences based on Articles 28 and 30EC where it is shown that the proprietor of a trade mark has adopted practices which distort trade within the single market On the question of a reference to the Court of Justice, because this argument is likely to turn on a close consideration of the particular facts and may not arise if the facts pleaded are not proved at trial, I consider that the reference should be made (if appropriate) only after the facts have been found. Accordingly, in my judgment, the correct outcome to the problem posed in the first paragraph of this judgment, is, on the facts of this case, the fifth outcome given in paragraph 2 above.
Background
As the application before the judge was for summary judgment, that is, judgment without a trial, it must be assumed that M-Tech will establish at trial the matters on which it relies in its draft defence (referred to below as its “defence”), and this summary of the background is based on its allegations, many of which are not accepted by Oracle, and which have not yet been proved to be true. The defence does not refer to abuse of rights which will need to be included in the defence when served.
M-Tech imported into the United Kingdom from the United States of America 64 disk drives which used the trade mark belonging to the respondent, Oracle America, Inc (“Oracle”) (formerly Sun Microsystems Inc). The judge held that those disk drives had been first put on to the market in China, Chile and the United States of America, and there is no appeal from that finding. Thus Oracle's rights to sue for trade mark infringement were not exhausted in respect of those 64 disk drives.
There is a large market in second-hand computer hardware. In 2007, the market was approximately €260 billion, of which €160 billion is traded by independent resellers. They do not constitute part of authorised networks of computer manufacturers, but (on M-Tech's case) help ensure a competitive market for second-hand computer hardware. A substantial part of the market in second-hand computer hardware consists of hardware first placed on the market in the EEA by computer hardware manufacturers or with their consent. There is a strong demand for Oracle hardware. Trade is global, and the hardware is often traded several times. As a result, the location of the hardware or of the dealer is often not a guide to whether the hardware was first placed on the market in the EEA with the consent of the trade mark proprietor.
Oracle does not publish any information which would enable independent resellers to identify whether a particular item of Oracle hardware has first been placed on the market within the EEA by it or with its consent. Oracle has deliberately adopted a policy of not publishing its database in order to make trade in genuine EEA-first marketed goods as difficult as possible. It aggressively pursues independent resellers for trade mark infringement if they have offered for sale any Oracle hardware which was first marketed outside the EEA. Oracle's practices deter the import of Oracle hardware by independent dealers whether or not those products were first put on the market in the EEA. The enforcement of Oracle's exclusive rights in the marks is said to be contrary to articles 28 and 30 as its effect is to prevent the attainment of a single market in hardware which has been first marketed by Oracle, or with its consent, in the EEA.
In addition, Oracle has made it a term of its agreements with distributors and resellers of its products that they must buy Oracle new and second hand equipment from within its supply network unless a particular item cannot be supplied from that network. In recent years, as a result of Oracle's policy, trade in the independent network has largely disappeared. This is detrimental to competition. It also leads to artificial partitioning of the market in second-hand Oracle equipment, and permits Oracle to control that market. M-Tech asserts that in the circumstances it is contrary to Article 81EC for Oracle to enforce the rights attached to its marks against it.
Relevant articles of the EC Treaty
Article 28EC (now Article 34 of the Treaty on the Functioning of the European Union (“TFEU”)) provides:
“Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States”.
Article 30 EC (now Article 36TFEU) provides:
“The provisions of Articles 28 and 29 shall not preclude prohibitions or restrictions on imports…justified on grounds of …the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.”
Article 81EC (now Article 101TFEU) provides in material part:
“1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings …which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions…. “
The TMD clarifies and codifies the provisions of the earlier Trade Mark Directive of 20 December 1998 (89/104/EEC) (“TMD1”). That directive was designed to remove disparities in the laws of Member States in the interests of the proper functioning of the internal market (see recital (2) to the TMD). The TMD does not codify all aspects of trade mark protection. It is concerned only with those aspects which most directly affect the functioning of the internal market (recital (4) of the TMD).
Article 5 of the TMD enables a proprietor to bring infringement proceedings against third parties using his mark...
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