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Coexistence agreements,
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Another week, another English High Court decision in a long-running trade mark dispute. This time it was Merck KGaA v Merck Sharp & Dohme Corp and Ors [2020] EWHC 1273 (Ch), regarding issues remitted by the Court of Appeal back in November 2017 [fun fact: also the month that Salvator Mundi became the most expensive painting ever sold, at a cool $450,312,500.]
Quick recap: Merck KGgA (Merck Global) is a German company that traces its roots back to 1668. After the First World War, Merck Global's US subsidiary (Merck US) became an independent business, trading under the name MERCK in the US and Canada, while Merck Global traded under that name in other countries. A coexistence agreement was signed in 1955 and updated in 1970. The terms of the 1970 agreement were, in extremely brief summary, that each party could only trade in the other's territory if it used its full name.
So far, so good, until the Internet came along and ruined everything. Merck Global ended up suing Merck US for trade mark infringement in the UK on the basis of use of "MERCK" by Merck US on various websites, social media platforms and email addresses, which Merck Global said were targeted at the UK (Merck US also made some presentations physically in the UK, but Merck Global did not allege any actual sales or offers for sale by Merck US in the UK). Broadly speaking, Merck Global won at first instance and on appeal (reported by the Kat here and here, respectively), but various issues were remitted to the High Court for further consideration (because the first instance judgment did not contain sufficiently detailed findings in relation to some of the points in dispute).
Five points were remitted, but three stand out.
1. Partial revocation
At first instance, the judge maintained Merck Global's trade mark specifications for "pharmaceutical substances and preparations" (and similarly broad terms) even though Merck Global had not proven use for several sub-categories of therapeutic use. The problem seems to have been that the judge did not hear detailed arguments regarding how the sub-categories should be defined (most likely because, as the Court of Appeal confirmed, the outcome of the issues of breach of the 1970 agreement and infringement did not depend on the outcome of the issue of partial revocation). The first instance judge (then Mr Justice Norris; now Sir Alastair Norris for the remitted hearing) felt he was faced with a binary choice: maintain the specifications in this respect, or adopt a categorisation system that may result in an unfair pruning.
At first instance, the judge opted for the the former option. Following the appeal, it was clear that the specifications would be cut down, but the questions were by how much, and on what basis? The point of general interest: the court adopted the British National Formulary (BNF) classification as a framework, to identify broad categories of intended use of pharmaceutical products. On this basis, the judge identified nine broad categories in respect of which the trade marks had been used, and partially revoked the trade marks outside of these categories.
2. Use in the course of trade
The judge re-emphasised that "use in the course of trade" does not require goods (or services) to be made available, or actually sold, in the UK; instead, this issue turns on the question of whether there is a material link (which engages the essential function of a trade mark) between the goods or services concerned and the undertaking from which such goods, or services, originate. The judge reviewed 32 examples of various website, social media and email address uses by Merck US of "MERCK" (each example taken, properly, on its own merits), and concluded [in this GuestKat's view, correctly] that there would be such a material link, and therefore that there was infringement.
3. De minimis
The judge reached a clear conclusion at first instance regarding de minimis for the purposes of breach of contract, but the issue of de minimis infringement was left less clear. At first instance, the judge concluded that web traffic that amounted to 3% of sessions on Merck US's websites (averaged over a five-year period) was not de minimis (this was, however, 26% of the websites' traffic, excluding the US and Canada). When the judge considered the 32 specific examples in terms of individual and cumulative impact, the conclusion was the same: the judge saw these as, well, examples of a broader policy of Merck US to use the sign "MERCK" to market Merck US's products in the UK at every opportunity.
Comment
More than four years after the first instance judgment, we are pretty much back at the same place. One presumes that a lot of ink has been spilled, and money spent, since the start of this action.
Reading through the three public judgments in this case, this GuestKat's impression was that Merck US adopted - whether by design or default - a risky commercial strategy that treated the UK as a de facto target market. Assuming that this impression is fair, this was always going to lead to problems, in an increasingly (at least pre-COVID-19) interconnected world.
The main lesson here probably concerns co-existence agreements: easy to agree, easy to regret. True future-proofing is nigh-on impossible, but perhaps the echoes of a 50-year-old agreement today will remind today's lawyers to anticipate and resolve the difficult points now, while everyone is around the table.
Quick recap: Merck KGgA (Merck Global) is a German company that traces its roots back to 1668. After the First World War, Merck Global's US subsidiary (Merck US) became an independent business, trading under the name MERCK in the US and Canada, while Merck Global traded under that name in other countries. A coexistence agreement was signed in 1955 and updated in 1970. The terms of the 1970 agreement were, in extremely brief summary, that each party could only trade in the other's territory if it used its full name.
So far, so good, until the Internet came along and ruined everything. Merck Global ended up suing Merck US for trade mark infringement in the UK on the basis of use of "MERCK" by Merck US on various websites, social media platforms and email addresses, which Merck Global said were targeted at the UK (Merck US also made some presentations physically in the UK, but Merck Global did not allege any actual sales or offers for sale by Merck US in the UK). Broadly speaking, Merck Global won at first instance and on appeal (reported by the Kat here and here, respectively), but various issues were remitted to the High Court for further consideration (because the first instance judgment did not contain sufficiently detailed findings in relation to some of the points in dispute).
Five points were remitted, but three stand out.
1. Partial revocation
At first instance, the judge maintained Merck Global's trade mark specifications for "pharmaceutical substances and preparations" (and similarly broad terms) even though Merck Global had not proven use for several sub-categories of therapeutic use. The problem seems to have been that the judge did not hear detailed arguments regarding how the sub-categories should be defined (most likely because, as the Court of Appeal confirmed, the outcome of the issues of breach of the 1970 agreement and infringement did not depend on the outcome of the issue of partial revocation). The first instance judge (then Mr Justice Norris; now Sir Alastair Norris for the remitted hearing) felt he was faced with a binary choice: maintain the specifications in this respect, or adopt a categorisation system that may result in an unfair pruning.
At first instance, the judge opted for the the former option. Following the appeal, it was clear that the specifications would be cut down, but the questions were by how much, and on what basis? The point of general interest: the court adopted the British National Formulary (BNF) classification as a framework, to identify broad categories of intended use of pharmaceutical products. On this basis, the judge identified nine broad categories in respect of which the trade marks had been used, and partially revoked the trade marks outside of these categories.
2. Use in the course of trade
The judge re-emphasised that "use in the course of trade" does not require goods (or services) to be made available, or actually sold, in the UK; instead, this issue turns on the question of whether there is a material link (which engages the essential function of a trade mark) between the goods or services concerned and the undertaking from which such goods, or services, originate. The judge reviewed 32 examples of various website, social media and email address uses by Merck US of "MERCK" (each example taken, properly, on its own merits), and concluded [in this GuestKat's view, correctly] that there would be such a material link, and therefore that there was infringement.
3. De minimis
The judge reached a clear conclusion at first instance regarding de minimis for the purposes of breach of contract, but the issue of de minimis infringement was left less clear. At first instance, the judge concluded that web traffic that amounted to 3% of sessions on Merck US's websites (averaged over a five-year period) was not de minimis (this was, however, 26% of the websites' traffic, excluding the US and Canada). When the judge considered the 32 specific examples in terms of individual and cumulative impact, the conclusion was the same: the judge saw these as, well, examples of a broader policy of Merck US to use the sign "MERCK" to market Merck US's products in the UK at every opportunity.
Comment
More than four years after the first instance judgment, we are pretty much back at the same place. One presumes that a lot of ink has been spilled, and money spent, since the start of this action.
Reading through the three public judgments in this case, this GuestKat's impression was that Merck US adopted - whether by design or default - a risky commercial strategy that treated the UK as a de facto target market. Assuming that this impression is fair, this was always going to lead to problems, in an increasingly (at least pre-COVID-19) interconnected world.
The main lesson here probably concerns co-existence agreements: easy to agree, easy to regret. True future-proofing is nigh-on impossible, but perhaps the echoes of a 50-year-old agreement today will remind today's lawyers to anticipate and resolve the difficult points now, while everyone is around the table.
Don't make me co-exist with the dog
That's the article: No longer Merck-y - High Court determines issues remitted by Court of Appeal in Merck trade mark dispute
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You are now reading the article No longer Merck-y - High Court determines issues remitted by Court of Appeal in Merck trade mark dispute with link address https://viralupdateonline.blogspot.com/2020/05/no-longer-merck-y-high-court-determines.html
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