Trade marks: infringement in breach of co-existence agreement

By Audrey Horton

06-2020

The High Court has considered infringing trade mark use, appropriate form of relief for trade mark infringement and breach of a co-existence agreement, and partial revocation of trade marks.

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 registered trade mark owner of an EU or UK trade mark has the right to prevent unauthorised third parties from using, in the course of trade, an identical or similar sign for identical or similar goods or services to those for which the trade mark is registered, where there exists a likelihood of confusion or association on the part of the public.

A UK trade mark owner's rights will be revoked if, within a continuous period of five years, the trade mark has not been put to genuine use in the UK in connection with the goods or services in respect of which it is registered.

The British National Formulary (BNF) sets out 15 categories of pharmaceuticals relating to treatment of major body systems or to diseases.

Facts

A German company, MK, and a US company, MS, entered into a worldwide co-existence agreement in 1955 regarding the global use of the term "Merck", which was amended in 1970 (the agreement). The agreement divided the world and broadly allowed MS to use "Merck" in the US and Canada, and MK to use in the rest of the world.

MK issued proceedings against MS for breach of the agreement and UK trade mark infringement. MK argued that MS had used the name "Merck" and trade marks online and in some offline materials. MK owned two UK trade marks for the word MERCK and two international registrations for a figurative "Merck" mark. MS operated websites which were accessible globally. MS argued that its websites were only targeted at the US and Canada where the "Merck" logo was legitimately used but not the UK, and that the fact the websites could be merely accessed from the UK did not amount to a breach of contract or trade mark infringement.

The High Court decided in favour of MK (www.practicallaw.com/6-623-5023). It held that MS's use of "Merck" in the UK was a breach of the agreement, and that MS should be restrained from describing itself in any printed or digital material addressed to the UK as "Merck" or using "MERCK" as a trade mark. MS appealed.

The Court of Appeal held that use by MS of "Merck" in the UK whether as a trade mark or a company name amounted to breach of the agreement. However, it remitted certain questions back to the High Court including: which breaches amounted to trade mark infringement; whether any of MS's uses were de minimis; the extent to which the registered trade marks should be revoked; and what relief, if any, should be granted.

Decision

The court granted MK a declaration that MS had infringed MK's trade marks; and breached the agreement, through use of "MERCK" in the UK. It also granted a declaration of trade mark infringement and an injunction against further breach and infringement.

On the question of infringement, the court had to decide whether online and offline use of "MERCK", amounted to trade mark infringement in the UK, even when MS used a different house brand on products actually sold in the UK. The court analysed 32 samples of offline and online use to assess whether the use was mere use of a corporate name or use that had a material link with goods and services. Infringement arose in those examples that would lead the relevant reasonable consumer to consider that MS's UK products and activities were linked with "Merck" as their originator. These included, for example, webpages about MS's clinical trials outside the US and its sponsorship of grants, research and vaccination schemes, but not those explaining about the company's history and the appointment of a new executive. YouTube videos displaying "Merck" icons for videos did not infringe, while Twitter pages using a variety of #Merck hashtags did. An email giving information to a consumer about a particular product infringed, while another providing contact details for MS's head office did not.

Most samples contained uses by MS of "MERCK" which amounted to trade mark infringement. The remaining uses were held to refer solely to the corporate entity and were not in relation to goods and services; as a consequence they did not infringe MK's trade marks, although they were still breaches of the agreement. These uses were not de minimis.

The declaration granted recorded that there had been breach of the agreement on two counts: use of the MERCK name as a trade mark, and use of it as a business name. The court did, however, allow carve outs from the injunctions, such as the use by MS of "MERCK" on social media so long as MS used country restriction techniques, like geo-blocking, to the fullest extent available on the relevant platform to prevent access by visitors from the UK.

No publicity order was made due to the difficulty of summarising such a complex case and also because publicity orders are primarily appropriate in intellectual property cases, rather than those where breach of contract is the main claim.

On the question of partial revocation of MK's trade mark registrations for pharmaceutical substances and preparations, although the "MERCK" mark had been used as a house brand in relation to pharmaceutical products falling within nine BNF categories, this was not sufficient to preserve a registration as broad as "pharmaceutical substances and preparations". The registration should be narrowed to cover categories that were exemplified by the products sold under the trade mark. The purpose and intended use of a pharmaceutical product are particularly important in identifying categories, and the court had to take into account therapeutic indications and the perception of the average consumer such as a doctor or pharmacist. The mark should not be limited to the nine BNF categories as these are too broad. Instead the court used them as a guide to identify the categories that the average consumer would consider were exemplified by the products sold. This partial revocation had no effect on the outcome of the claim for trade mark infringement.

Comment

This decision illustrates the importance of adhering to the terms of older co-existence agreements when businesses expand and use global websites for marketing their goods and services. Geo-blocking and other forms of territorial restrictions online can be used as here to avoid straying into each other's agreed territories. Parties can also build a regular review mechanism into their co-existence agreement to allow for renegotiation in case modifications are needed in the light of changing commercial circumstances.

Case: Merck KGaA v Merck Sharp & Dohme Corp and others [2020] EWHC 1273 (Ch).

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