Trade marks: co-existence agreements

Background

Trade mark co-existence agreements between parties govern the rights, restrictions, and obligations concerning marketplace co-existence of their respective trade marks in the context of resolving a dispute.

A person infringes a registered trade mark if he uses in the course of trade a sign which is identical or similar to the trade mark in relation to goods or services which are identical or similar with those for which it is registered (section 10, Trade Marks Act 1994) (1994 Act) (section 10).

A trade mark owner cannot rely on a registered mark to prevent a third party using its own name or address, provided that it uses it in accordance with honest practices in industrial or commercial matters (the own name defence) (section 11(2)(a), 1994 Act).

Under German contract law, the intention of the parties is given greater weight than under English law and the parties are obliged to support the purpose of the contract.

Facts

MK (a German company) and MS (a US company), entered into co-existence agreements in relation to the MERCK trade mark. A 1955 co-existence agreement provided protection for MK and MS in their respective home territories, Germany and the US, in relation to their use of the trade mark. However, MK had rights for the rest of the world. The 1955 agreement was amended by a 1970 agreement.

MK issued proceedings against MS for breach of the 1970 agreement and trade mark infringement. MK argued that MS had used the name “Merck” and trade marks online.

MK owned two UK trade marks for the word MERCK and two international registrations for a figurative “Merck” mark. MS operated websites including merck.com, merckformothers.com, merckresponsibility.com and merckmanuals.com, which were accessible globally. MS argued that its websites were targeted at the US and Canada where the “Merck” logo was legitimately used, and that accessibility from the UK was unpreventable.

It had been held as a preliminary issue that the 1955 agreement was governed by German law. MS and MK accepted because of that ruling that the 1970 agreement was governed by German law.

Decision

The court held that MS was in breach of the 1970 agreement and had infringed MK’s MERCK trade marks in the UK. It ordered MS not to describe itself in any printed or digital material addressed to the UK as “Merck”, but only as “MSD” or as “Merck Sharp & Dohme” or as “Merck & Co Inc” accompanied by a geographical identifier, and not to use the mark MERCK in this material. It was also ordered to stop using certain domain names in the UK, and to stop expanded use of merck.com and @merck.com on social media sites, although geo-targeting would be sufficient performance.

Under German law it was held that the 1970 agreement governed the use of the word “Merck” as a trade mark or trade name on the internet. The purpose of the 1970 agreement was to set up an all-encompassing co-existence model, negotiated by parties who were aware that technology evolved. The object of the agreement was to settle litigation in various countries by providing for use by MS of the word “Merck” in the US and Canada, and by MK in Germany and the rest of the world, As the 1970 agreement was forward-looking it was not anchored to a particular time: if the meaning and content of the word “mark” or “trade mark” changed in any particular jurisdiction, the obligation not to use the word “Merck” as a trade mark continued.

Use in the UK of “Merck” alone as a contraction of the full company name was a breach of the 1970 agreement. The agreements addressed in detail the use of the corporate names of MS, specifying that they could only be used with geographical identifiers of equal prominence or in the form “Merck Sharp & Dohme”. A reference on the website which defined any use of “Merck” as “Merck Sharp & Dohme” was not sufficient to comply with this contractual obligation.

Logos used on MS’s website and on slide presentations available online included the use of “Merck” as a trade mark as it established a link between the “Merck” sign and the goods or services provided by MS. This use outside the US and Canada was in breach of the agreement.

The court dismissed MS’s argument that its websites were targeted at the US and Canada and that accessibility from the UK was unpreventable. Evidence showed the websites were global websites, users of the msd-uk domain were directed to the merck.com website, there was substantial visitor traffic from outside the US, and MS had not restricted access from outside the US, such as by geo-targeting or using territorial restrictions on social media sites.

MS’s internet activity was directed at the UK. Its global websites had UK-specific content directed at commercial activity in the UK. Enquirers about MSD and its products were redirected to MS’s website and received information under the “Merck”, not the “MSD”, branding. So, MS had infringed MK’s trade marks under section 10. This use also diluted the effect of the MERCK mark in the UK and took unfair advantage of its repute. The use was without due cause because there was a deliberate attempt to expand beyond the boundaries of a long established co-existence agreement.

The own name defence was inapplicable. In the UK, MS was known as “MSD” or "Merck Sharp & Dohme”. Use of the mark MERCK in the UK was not use of its own name and MS’s use of the mark was not in accordance with honest practices in industrial and commercial matters.

Comment

The key question here was how global online brand use could co-exist with national trade mark rights and a geographical delimitation agreement. Although the decision was dependent on the long and complex relationship between the parties, it shows how co-existence agreements, negotiated when the internet had not been contemplated, may be interpreted in the context of global online use. The agreement was interpreted under German law. Under English law, although it may have been similarly interpreted, the words of the contract are given greater weight, rather than the intention of the parties.

The decision illustrates the importance of keeping to the terms of older co-existence agreements when businesses expand and use global websites for marketing their goods and services. Businesses may wish to consider the use of geo-targeting and other forms of territorial restrictions online to avoid straying into each other’s agreed territories. Parties could also build a review mechanism into their co-existence agreement to allow for renegotiation after a set number of years in case modifications are needed in the light of changing commercial circumstances.

Case: Merck KGaA v Merck Sharp & Dohme Corp and others [2016] EWHC 49 (Pat).

First published in the March 2016 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.