Parallel Imports and Trade Marks: Oracle v M-Tech

August 23, 2010

In Oracle v M-Tech [2010] EWCA Civ 997, the Court of Appeal held that, in a trade mark infringement case involving importation of Sun branded computer hardware from outside the EEA, M-Tech was entitled to argue that Articles 28 to 30 and 81 of the EC Treaty prevented Oracle from obtaining summary judgment for trademark infringement. As Lady Justice Arden remarked in the judgment handed down on 24 August, ‘This case clearly has important financial and economic implications not just for the parties but also for others involved in the grey market in Oracle, and possibly other, computer hardware and goods.‘ 

Oracle (formerly Sun Microsystems) is the well-known manufacturer of Sun computer hardware. M-Tech is a UK company that is an independent trader in the computer hardware market. M-Tech purchased second-hand Oracle hardware from a US dealer, which Oracle alleged amounted to infringement of its registered trademarks. Under the Trade mark Directive, it is an infringement to import goods bearing a trademark from outside the EEA into the EEA even if the goods are genuine.

M-Tech maintained that Oracle was not entitled to enforce its trademark rights because it was impossible for independent traders to differentiate between genuine Sun goods first marketed in the EEA by Oracle and those first marketed outside the EEA. Oracle was able to differentiate such goods by reference to the serial numbers and their own internal database but deliberately chose not to make such a database available to traders. M-Tech maintained that such facts combined with an aggressive litigation strategy employed by Oracle against independent traders such as M-Tech meant that the independent sector was no longer dealing in any second-hand Sun goods regardless whether they were first marketed in the EEA.  

M Tech maintained that such conduct by Oracle in enforcing its trade marks resulted in artificial partitioning of the internal market in Europe, which was contrary to Articles 28 to 30 EC (now Articles 34 to 36 TFEU) and therefore in breach of European law. In addition M-Tech maintained that Oracle’s actions were contrary to the emerging European doctrine of abuse of rights and that distribution agreements between Oracle and its authorised distributors whereby they were prevented from buying from the independent sector was anti-competitive (ie in breach of Article 81). These breaches, it was argued, could amount to a defence to the trade mark infringement action. 

Oracle had sought summary judgment on the grounds that the Trade Mark Directive was a complete code and there was no scope for Articles 28 to 30 and that, on the facts, there was no nexus between the Article 81 defence and the imports of the goods into the EEA. Mr. Justice Kitchin granted summary judgment (see [2009] EWHC 2992 (Pat))  accepting Oracle’s arguments.  

The clear and readable judgment of Arden LJ emphasises at many intervals that the overturning of the judgment of Kitchin J may not survive the establishment of the facts. Oracle disputes many of the M-Tech allegations about its conduct. But if the M-Tech allegations are found to be justified, the case is likely to be referred to the Court of Justice. 

Harvey Stringfellow of Hill Dickinson LLP who acted for M-Tech commented ‘This judgment has very important consequences for the parallel market because it is often the case that the independent sector cannot determine the provenance of branded goods and thus are often sued for inadvertent trade mark infringement as a result of trap purchases by brand owners. This case provides a potential defence to parallel importers and a warning to trade mark holders that they may have to be careful in the enforcement of their rights’.