In Sun Microsystems v... M-Tech Data & Anor [2009] EWHC 2992 (Pat) (25 November 2009), Chancery Court ("CC"), the Court had to rule in respect of an application for a summary judgment in an action for infringement of a registered trade mark which concerns parallel imports into the European Economic Area ("EEA"). The claim was brought by U.S. corporation Sun Microsystems which makes and sells computer systems and workstations and other related goods and services ("Sun"), and which is the registered proprietor of a series of U.K. and Community trade marks comprising or consisting of the word "Sun"...

The first defendant ("M-Tech") supplies computer hardware in the secondary market for hardware originally sold by one of the major manufacturers such as Hewlett Packard, IBM or Sun. M-Tech purchased and imported into the UK 64 disk drives, and sold them to a business called KSS Associates. Sun contends these disk drives were put on the market by M-Tech in the UK without its consent and accordingly infringed its trade mark rights.

M-Tech resisted the application on three grounds, namely that, 1) Sun has failed to establish where the disk drives were first marketed, and if they were marketed first in the EEA, Sun's trade mark rights were exhausted; 2) Sun's enforcement of its trade mark rights was contrary to Articles 28 to 30 of the Treaty Establishing the European Community ("EC Treaty"), "as its effect will be to prevent the attainment of a single market in hardware which has been marketed by Sun or with its consent in the EEA", and 3) that Sun's enforcement of its trade mark rights "is connected with agreements which are contrary to Article 81 of the EC Treaty and is therefore prohibited."

Before turning to the analysis, the CC expressed caution in granting a summary judgement that "the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case" (Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63).

The Court then investigated M-Tech's objection in turn.

Evidence of first marketing

The most important factual point in this respect was that M-Tech claimed that Sun had never asserted that it had not placed the 64 drives on the market in the EEA, and that this was a distinct possibility. The CC disagreed with this contention and argued that "it is not right for a court to allow a case to go forward to trial simply because there is a possibility of something turning up or some further evidence arising which might assist M-Tech." The CC was satisfied that the 64 disk drives were not put on the market first in the EEA.

Articles 28 to 30 EC

M-Tech argued that the secondary market in relation to computer hardware comprises to a large extent brokers and dealers who are often not part of Sun's authorised network of manufacturers. Further, that the hardware may be traded many times. Therefore, it would be impossible to know whether any particular piece of hardware had first been put on the market inside or outside the EEA, and, if the former, whether it was done so with Sun's consent. However, the CC found that Sun, as well as its authorised dealers, would always know whether a particular item of hardware was first marketed in the EEA by reference to its own internal database.

M-Tech in turn argued that the consequence of Sun's action has been: " i) to cause artificial partitioning of the legitimate market in Sun hardware in the EEA; ii) to cause legitimate parallel imports of Sun hardware to reduce to marginal levels; and iii) to permit Sun to control the secondary market in Sun hardware via its own authorised network and thus to maintain artificially high prices", and that this is contrary to Articles 28 to 30 EC, which seeks to "prevent the attainment of a single market in Sun hardware which has been marketed within the EEA by Sun or with its consent."

But the CC disagreed and, relying on Articles 5 and 7 of the First Council Directive 89/104 of 21 December 1988, found that "the placing of goods bearing a registered trade mark on the market outside the EEA does not exhaust the proprietor's right to oppose the importation of those goods without his consent; and the proprietor retains the right to control the initial marketing of those goods in the EEA." Further, the legislature has "expressly given to trade mark proprietors the right to control the first marketing in the EEA of goods bearing the registered trade mark."

M-Tech argued that allowing Sun to prohibit M-Tech to introduce the disc drives into the EEA would constitute a restriction on trade between member States and listed a number of ECJ cases to support its view (for example Hoffmann-La Roche & Co v Centrafarm [1978] 3 CMLR 506; [1978] FSR 598). But the CC disagreed and found no support "for the notion that Sun is prohibited from exercising its rights conferred by Articles 5 to 7 of the Directive because such would be contrary to Articles 28 to 30 EC."

Article 81 EC

Lastly, M-Tech argued that Sun's network agreements are contrary to Article 81 EC, by their virtue of having the "effect of appreciably restricting or distorting competition in the secondary market for Sun hardware and thereby affecting trade between Member States", and Article 81 prohibits agreements that prevent trade between Member States. But the CC agreed with Sun in that the "disappearance of the independent secondary market in Sun hardware is not attributable to the offending network of agreements between Sun and its authorised distributors but to the inability of independent traders to ascertain the provenance of the Sun hardware in which they are dealing."

The court allowed the summary judgement.