Abstract Merck KGaA v Merck Sharp & Dohme Corp and others  EWCA Civ 1834, 24 November 2017 In this decision, the Court of Appeal of England and Wales examined a co-existence agreement between Merck Global and Merck US, as the former party claimed breach of contractual obligations and infringement of its trade marks in the UK through Merck US’s online activity. The decision is a useful review of the many issues that can arise in litigation involving co-existence agreements. Legal context and facts On 24 November 2017, the Court of Appeal of England and Wales handed down its decision in the case of Merck KGaA v Merck Sharp & Dohme Corp and others. Merck KGaA (‘Merck Global’) has its origins in an apothecary’s shop founded in 1668 in Darmstadt in Germany. In 1889, a family member opened the business that became Merck Sharp & Dohme (‘Merck US’). Initially, Merck US was economically supported by Merck Global, but by the end of the Great War the two companies were separate. Since then, they have sought to cooperate over the use of the Merck name by entering into co-existence agreements. The main agreement in issue had been signed in 1955 and amended in 1970. This stated that the USA and Canada would be the home territory of Merck US and that Germany would be the home territory of Merck Global. Each party consented to the use of the other party’s trading name in its home territory so long as such name was accompanied by a geographical identifier. In all other countries, Merck Global was permitted to use the word ‘Merck’ in its trading name and agreed not to object to Merck US’s use of the name Merck Sharp & Dohme or variations of ‘Merck & Co’ that include a geographical identifier. Merck US further agreed to discontinue all registrations, applications and use of the marks ‘Merck’, ‘Merck Cross’ and ‘MerckMerckMerck’ in those countries. The dispute in this case arose as Merck Global argued that Merck US had breached a clause of the co-existence agreement and had infringed its trade marks in the UK through its online activity. It was determined as a preliminary issue that the agreement was governed by German law. At trial at first instance, Norris J found for Merck Global and held that Merck US had both breached the agreement and infringed Merck Global’s trade marks. Merck US appealed. The Court of Appeal upheld the finding that Merck US had both breached the co-existence agreement and infringed Merck Global’s trade marks. However, it did refer several questions back to the High Court for further consideration. In particular, the court requested clarity with regard to the partial revocation of the Merck Global trade marks and whether the use of such marks in relation to goods and services in the UK was negligible or trivial. The High Court has also been asked to consider the correct form of relief for this matter. We understand that Merck US has sought permission to appeal to the Supreme Court. Analysis There are several interesting points to draw out of this judgment. We consider seven of these below: i. Targeting Merck US challenged the finding that their use on the Internet of the name ‘Merck’ had targeted the UK. If the use did not target the UK, then it would not amount to breach of contract or trade mark infringement. In several prominent places, Merck US’s global website referred solely to the trading name ‘Merck’. Merck US argued that this was permitted behaviour under the agreement as the website was intended for customers within its home territory, whereas Merck Global countered that it was targeted at customers in the UK. Kitchin LJ summarized the law in this area. As set out by the Court of Justice of the European Union (CJEU), whether or not behaviour is targeted at the UK is something that has to be considered objectively from the perspective of the average consumer. While such behaviour may include clear expressions of intention, such as including the UK in a list of countries the company supplies to, it does not have to be so obvious. A non-exhaustive list of indicative behaviours which might suggest targeted behaviour is provided in paragraph 93 of Cases C-585/08 and C-144/09 Pammer v Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GesmbH v Heller  ECLI:EU:C:2010:740. This list includes behaviours such as use of a language or currency other than the language or currency in the company’s established territory, mention of clientele in a prohibited territory and use of telephone numbers with an international code relating to that territory. On the facts, the judge held that Merck US’s UK-specific websites had been used as an integrated part of the architecture of Merck US’s global online presence to promote Merck US’s global business. The global websites were used to target inventors, scientists, suppliers, potential employees and licensing partners in the UK, and also to provide information about Merck US and its businesses, policies, products and services. Parties drawing up co-existence agreements may find it beneficial to specify the types of activity that are permissible and how companies should avoid actively targeting online customers in specific territories with the shared trade marks in question. In a letter to Merck Global sent prior to trial, Merck US suggested several ways in which this could be achieved. For example, by not including relevant terms and conditions specific to other countries, by removing the contact details of individuals listed in prohibited territories off the global website and by placing a clear notice on the website that it was intended for residents in the permitted territory only (however, the efficacy of this solution was questioned by Kitchin LJ in this case). Geo-targeting can also now be used to restrict access from users in certain territories though it remains to be seen how this might be effected by the upcoming proposed EU regulations on this technology. Of course, an arrangement such as this could also give rise to competition law issues, and companies will want to carry out a competition law assessment to ensure that their agreements are compliant. ii. Revocation for non-use Merck US claimed that Merck Global’s trade marks should be partially revoked because they had not been used in relation to the full breadth of their specification. Kitchin LJ re-formulated his guidance from Maier v Asos into four key points: One must identify the goods and services the mark has been used for; Secondly, one must consider the goods or services for which the mark is registered. If the mark is registered for a category of goods or services which is sufficiently broad that it is possible to identify within it a number of subcategories capable of being viewed independently, use of the mark in relation to one or more of the subcategories will not constitute use of the mark in relation to all of the other subcategories. Care must be taken to ensure this exercise does not result in the proprietor being stripped of protection for goods or services which, though not the same as those for which use has been proved, are not in essence different from them and cannot be distinguished from them other than in an arbitrary way. These issues are to be considered having regard to the perception of the average consumer and the purpose and intended use of the products or services in issue. Ultimately, it is the task of the tribunal to arrive at a fair specification of goods or services having regard to the use which has been made of the mark. At trial, the judge allowed Merck Global to maintain registrations for ‘pharmaceutical substances and preparations’. Kitchin LJ had no doubt that this was sufficiently broad to include within it a number of subcategories. Accordingly, the matter was remitted to the High Court for re-assessment. iii. Choice of law and contractual construction The choice of law had a significant impact on how the court construed the agreement. The application of German law meant that the parties’ intentions and the history of the dispute were given more weight in the decision than they would have been if UK law applied. To comply with German law, the judge considered not just the 1970 agreement, but also the intention of the parties, the negotiations leading up to the 1955 agreement, the objects of the agreements, the conduct of the parties after the agreements, the parties’ obligation to desist from endangering the object of the agreements and whether the uses fell into an unintentional rather than an intentional gap. This is considerably more complex than the reading that would have been given under English law. iv. Entity names, domain names and email addresses Merck US said that the agreement did not apply to company names and so should not apply to entity names, domain names or email addresses. Reviewing the agreements in light of context and according to German law, the Court of Appeal found that Merck US had agreed not to use ‘Merck’ as a contraction of its name or as a trade or business name and therefore its use of the name in its online activity constituted breach of the agreement. v. The agreement applied to services Merck US submitted that, in 1955, trade marks could not protect services and that the amended clause in the 1970 agreement must have the same meaning as in the 1955 agreement. Therefore, the agreement could not cover services. Kitchin LJ disagreed. The settlement was intended to be comprehensive, the agreement was intended to cover use beyond that which had been registered, and the parties had treated the agreements as though they covered services. vi. Trade mark infringement Kitchin LJ found that the judge’s analysis of trade mark infringement had been inadequately reasoned and was on occasion inconsistent; he could not ascertain why some website pages were found to have infringed when others did not. There was also a lack of findings in relation to conferences, board meetings, press releases and emails. In those circumstances, the court remitted the trade mark infringement findings back to the High Court for re-assessment. vii. Relief Following the trial, the judge granted an injunction preventing Merck US from taking certain steps, particularly in relation to material ‘targeted’ at the UK. The judge did not give reasons for granting this injunction. Merck US said that it had always sought to act fairly, that since the judgment it had implemented a set of appropriate measures and that ‘targeting’ is not a precise term. They further argued that an injunction would be impractical to implement. The Court of Appeal found that these contentions had ‘considerable force’ and said that it was not fair or just for the judge to make the order without giving the reasons for doing so. Accordingly, the issue of relief was remitted for re-hearing. Practical significance Co-existence agreements are notoriously fraught with potential complications. The difficulties the parties encountered came from the increasingly globalized and connected nature of business conducted through the Internet. It is therefore likely that these issues will arise in future disputes and the Court of Appeal’s careful consideration of the facts in this case will no doubt prove useful in assessing the likely outcomes of such matters. © The Author(s) 2018. Published by Oxford University Press. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices)
Journal of Intellectual Property Law & Practice – Oxford University Press
Published: May 2, 2018
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera