Facts
Proceedings were commenced by Sony to protect its trade mark
rights in its well known “PlayStation” product. PlayStvations are
marketed in a large number of countries. In so far as it is
relevant, Sony market the product in the UK by a structure of
authorised dealers and retailers. It is also, of course,
marketed in the European Economic Area and, for present purposes,
through retailers in France. Tesco had, before Christmas
1999, imported a number of PlayStations from France and were
seeking to resell them in the UK. No notice of this action
had been given to Sony. Sony was trying to stop Tesco
reselling the products in the UK in this manner.
In order to make the product acceptable to the UK market, Tesco
had to make a number of changes. Given the emergency nature
of the application made by Sony, many of the facts are not finally
established in the judgment, but the following seemed to be the
basis of the judgment. Two changes to the French PlayStation
were of particular relevance: firstly, power sockets in the UK are
totally different from those in France and, secondly, the
connection of the unit to the television in France is by means of a
SCART connector, common in France, but still relatively uncommon in
the UK thus necessitating a different connector as well.
With regard to the first modification, the plug, a moulded
adapter had been attached to the original French plug.
With regard to the second modification, the connector, Sony’s
evidence was to the effect that the connector supplied by Tesco for
the UK was less suitable than others supplied here. Sony’s
evidence suggested that Tesco’s connection lead was of less good
protection against interference and only allowed one connection at
a time i.e. the consumer had to choose whether to plug in the
PlayStation or the television aerial.
The packages offered by Tesco did bear notices about the
product. One notice was a general safety notice about plastic
bags and went on to say that the “product has been opened to fit an
adapter to enable it to be used in UK three pin power sockets and
to include an optional RFU adapter repacked for Tesco Stores
UK”.
Sony produced as evidence a Tesco sold PlayStation with the
words “Sony PlayStation” on the connection adapter itself.
Sony owned two registered trade marks for PlayStation, one in any
form, the other in a specific typeface.
Sony’s allegations of trade mark infringement included the use
of the mark both on the packaging and on the adapter.
However, on this last point, Tesco said that as many as four
different types of adapter were being used, three of these types
not having the wording on them at which Sony took offence (instead
it said “for use with Sony PlayStation”).
Tesco sought to argue that the use of the wording was only
descriptive and in accordance with section 11(2)(c) Trade Marks Act
1996.
Judgment
Lloyd J referred to Bristol-Myers Squibb v Paranova on
the question of parallel imports where the importer repackaged the
product. That case set out a number of conditions when a
product is bought in another Member State where it had been put on
the market with the consent of the trade mark owner. If an
importer wants to repackage the product and re-affix the trade
mark, they must comply with certain conditions, including, firstly,
that the repackaging cannot adversely affect the original condition
of the product and, secondly, the importer must comply with certain
obligations as to labelling and provision of samples.
Paranova also set out some ways in which the repackaged
product might indirectly affect the original condition of the
product, but did so in the context of the pharmaceutical
industry. The case decided that the condition of the product
might be affected where the importer’s instructions might be
inaccurate or omit important information or an extra article
inserted by the importer did not comply with the method or use or
dosages envisaged by the manufacturer. Lloyd J had no
difficulty in applying the general principles of these conditions
outside of the confines of the pharmaceutical industry. The
condition of the product might also be affected where the new
packaging did not give the product adequate protection.
Paranova also laid down some positive conditions that
the importer had to comply with. Such an importer
(i) had to indicate on the external
packaging, in such as way as was easily visible, who repackaged the
product and who manufactured the product
(ii) need not indicate that the repackaging was without the
trade mark owner’s authorisation
(iii) must give the origin of any additional article so that
there was no impression that the trade mark owner is responsible
for it
(iv) must give the trade mark owner advance notice, and the
trade mark owner may require a specimen in advance.
Lloyd J had difficulty in accepting Tesco’s argument to the
effect that the notice provisions were applicable only in the
special conditions of the pharmaceutical industry. However,
he did regard it as debatable. However, he had no hesitation
in rejecting Tesco’s arguments about the use of the PlayStation
mark on the UK adapter. This he described as looking like
“the clearest possible breach of trade mark rights”. The same
did not go for the use on the packaging itself.
The learned judge admitted the difficulty on an interim
application of deciding on the balance of convenience. Tesco
did not have to say explicitly that it had repackaged the product
with an additional article, but he was not sure that it had done
enough by the notice on the packaging to dispel the impression that
Sony was responsible for it. Overall Lloyd J thought that it
was up to the importer to show that it had complied with this
obligation.
In the result, Lloyd J was minded to grant an injunction in
respect of the adapter (but not the power socket) to restrain the
objectionable adapter which bore the clear trade mark infringement,
while other sales could continue of different adapters provided the
packaging made it absolutely clear that Sony was not responsible
for them.
Commentary
The interest of this case lies in the fact that it is thought to
be the first English case under the Trade Marks Act 1994 in which
the jurisprudence of the European Court of Justice concerning
intra-Community parallel imports has been applied to
non-pharmaceutical products.
So far as registered trade marks are concerned, parallel imports
from other Member States of the European Community are governed by
Article 7 of the EC Trade Marks Directive which has been
implemented by section 12 of the 1994 Act. Section 12
provides:
“(1) A registered trade mark shall
not be infringed by the use in relation to goods which have been
put on the market in the European Economic Area under that trade
mark by the proprietor or with his consent.
(2) Subsection (1) does not apply where there exist legitimate
reasons for the proprietor to oppose further dealings in the goods
(in particular, where the condition of the goods has been changed
or impaired after they have been put on the market).”
Although section 12(1) prohibits trade mark proprietors from
relying upon trade mark rights to prevent parallel imports of goods
which have been placed on the market anywhere in the EEA by them or
with their consent, section 12(2) makes it clear that this
prohibition is not absolute: proprietors can rely upon their trade
mark rights if they have “legitimate reasons”. This begs the
question, what constitutes a legitimate reason?
Guidance on the answer to this question is provided by the
jurisprudence of the ECJ. This includes a long series of
cases concerning the extent to which proprietors of national
intellectual property rights such as trade marks can rely upon
those rights to stop parallel importation of goods from one Member
State to another. In Centrafarm v Winthrop (case
16/74) [1974] ECR 1183 the Court held that it was incompatible with
the community’s rules on free movement of goods to exercise trade
mark rights so as to prevent the sale in one Member State of a
product which had previously been marketed in another Member State
by the trade mark proprietor or with his consent. As is it
now put, the trade mark proprietor’s rights are “exhausted” by
placing, or consenting to the placing of, the goods on the market
in the Community because the “specific subject matter” of a trade
mark consists of the proprietor’s right to use the trade mark for
the purposes of putting a product into circulation for the first
time so as to guarantee the product’s origin under the control of
the proprietor (see Hag II (Case C-10/89) [1990] I-ECR
3711).
In Bristol Myers Squibb v Paranova (Joined cases
C-427/93, C-429/93 and C-436/93) [1996] I-ECR 3457 the ECJ held
that Article 7 of the Directive comprehensively regulates the
question of trade mark rights for products traded in the Community,
but like any secondary legislation Article 7 must be interpreted in
the light of the Treaty rules on the free movement of goods,
particularly Article 30 (ex 36) of the EC Treaty. The Court
went on to summarise and elaborate its jurisprudence with respect
to parallel imports of pharmaceutical products, stating that the
trade mark proprietor may legitimately oppose such parallel imports
where the importer has repackaged the goods unless five conditions
are satisfied (often referred to as the “Paranova guidelines”).
In Sony v Tesco Lloyd J accepted that the Paranova
guidelines were applicable at least to some extent to
non-pharmaceutical products. In particular he held that it
was arguable that the notice requirement applied to
non-pharmaceutical goods which had been repackaged by the
importer. Surprisingly, Lloyd J does not appear to have been
referred to Loendersloot v George Ballantine & Sons
(Case C-349/95) [1998] ETMR 10, where the ECJ confirmed that four
of the Paranova guidelines, including the notice requirement, were
indeed applicable to all goods. The only one that was not
stated to be applicable was the condition that the new packaging
should state who repackaged the product and the name of the
manufacturer and that, if any extra article is included which does
not emanate from the trade mark owner, that must be indicated in
such a way as to dispel any impression that the trade owner is
responsible. It seems probable, however, that this condition
was omitted because Loendersloot was a relabelling case
rather than a true repackaging case. It is therefore of some
interest that Lloyd J regarded this condition as applicable to
non-pharmaceutical goods.
It appears from the judgment that Lloyd J took the provisional
view that Tesco had failed to comply with the Paranova guidelines
in three respects. Firstly, some of the connection adapters
which Tesco had inserted into the packs were marked “Sony
PlayStation” (rather than “for use with Sony PlayStations”).
This plainly created the impression that Sony was the source of
those adapters. Secondly, even where the adapters were not
marked in that way, Tesco had not sufficiently indicated on the
packaging that the extra components it had inserted were not Sony
or Sony-approved products. Thirdly, Tesco had failed to give
Sony advance notice. On the other hand, he did not consider
that minor quality differences between Tesco-sourced components and
the Sony equivalents were likely to damage Sony’s reputation.
It should be noted that a point which was not in issue in
Sony v Tesco, but which often crops up in other cases, is
whether it was necessary for the importer to repackage the goods at
all. The first of the Paranova guidelines states that it must
be shown that the exercise by the proprietor of his trade mark
rights would contribute to artificial partitioning of the common
market, such as where the repackaging of the product is necessary
to enable it to be marketed in the Member State of importation (see
on this point the recent case of Pharmacia & Upjohn v
Paranova (Case C-379/97( [1999] All ER (EC) 865). Sony
appears to have accepted, however, that repackaging was necessary
because of the differences between French and UK television sets
and electrical circuits.
In conclusion, the case stands as a warning to parallel
importers (and their advisors) in all sectors. Unless
considerable care is taken to comply with the Paranova guidelines,
they risk a finding of trade mark infringement.
