Exhaustion of trade mark rights after B****t

If and when the UK crashes out of the EU (and whatever agreement is made to soften the blow, it will be a crash, certainly as far as trade marks are concerned) the Trade Marks Act 1992 will not be unchanged. The European Union (Withdrawal) Act 2018 sees to it that the government will be able to change it to take account of the new circumstances - using what have come to be referred to as Henry VIII powers, after that paragon of democracy and due process. One aspect of huge volumes of legislation that will need attention is that the statute book is peppered with references to the European Union, which when they were written included the UK. So, as in the case of public lending right about which I wrote the other day, it might be necessary to change it to "UK and EU". More often, I suppose, it will be changed from "EU" to "UK" - after all, that's what the Will of the People asked for (American readers please note, that statement is heavy with irony).

Section 12 says that the trade mark owner's rights are exhausted when the goods have been placed on the market in the European Economic Area by the trade mark owner or with their consent. Within a single market that's an important exception to the general idea of trade mark protection (or any other form of IP, come to that). So from E-day, or perhaps from the end of the transition period, section 12 should refer to placing the goods on the market in the UK.

Or must it? It's not many years ago - OK, it is quite a few years ago, but it's within living memory - that the UK government thought it would be a nice idea to replace the EU-exhaustion rule with an International-exhaustion one - so if the trade mark owner had placed the goods on the market anywhere in the world they would be unable to resist parallel imports into the EU. The government's idea seemed to be that this would ensure cheap designer clothes for the masses, who would then re-elect it. Our EU partners were almost unanimous in declining to support the UK government in this - as I recall, only Sweden agreed. But after withdrawal we won't have to worry what the EU27 (or the EEA members) think, and given that the government will be casting around for some benefit to highlight to the electorate I have a horrible feeling that this will be back on the agenda.

Parallel imports: consent under Australian law

In Australia, the Full Federal Court has confirmed the trend of recent decisions by reading restrictively the defence of "consent" available to the importers of grey or parallel goods (Paul's Retail Pty Ltd v Lonsdale Australia Limited [2012] FCAFC 130). There is a note of the case here courtesy of Clayton Utz.

Section 123 of the Australian Trade Marks Act is a statutory embodiment of the well established principle in the United Kingdom case, Champagne Heidsieck [1930] 1 Ch 330, which stated that trade marks were badges of origin, designating a genuine source, not badges of control. Just as in modern EU parallel import cases, the important question is whether the goods have been put into circulation by or with the consent of the trade mark owner.

In this case, Lonsdale Australia was a mere licensee, and the principle of implied consent when dealing with related companies had not been definitively accepted into Australian law for the purposes of parallel importation. The Australian licensee was not on the evidence linked to the goods and there was no evidence to suggest that it played any role in the application of the trade marks to any of the imported goods. The Full Court held that it was not necessary to decide the issues considered by the trial judge, because even if Paul's Retail could establish that Lonsdale Australia was bound by its related company's consent, the evidence showed that there was in fact no consent by that related company. But it's interesting to know that those abstruse arguments in which our courts have been obliged to involve themselves are just as important on the other side of the world.

The second-hand software market

The Court of Justice has decided in Case C‑128/11, UsedSoft GmbH v Oracle International Corp., that there can legitimately be a second-hand market for software licences, going in the opposite direction from that taken in the US (see my earlier posting about the Autodesk case, here). You can sell a licence for which you have no further use, but the one thing you can't do is sell excess user rights if you have paid for more users than you actually have working for you. The decision - a preliminary ruling on a reference from the Bundesgerichtshof - is based on the principle of exhaustion: the copyright owner's rights are exhausted once the software has been supplied on disk or downloaded from the Internet, so they cannot control subsequent sales.

No great surprise there, as the doctrine of exhaustion is central to the way intellectual property rights work in the European Union: but it seems at odds with the widely-used software distribution model that gives the end user only a licence. While it has been common practice to treat software as a good rather than a service (it doesn't fit happily into either category, does it?), assimilating software to audio CDs for certain purposes, the fact is that because "sales" of software are licensing transactions it isn't always appropriate to take this view. Of course, when a physical carrier is supplied there is a sale of goods involved too, but it's only an incidental part of the transaction, and focussing on that aspect gives a distorted idea of what the deal is all about. I think people take different views according to whether they are buying software or music: if I buy a CD I expect to be able to resell it, but if I buy a piece of software I'm not so sure about it - even if it's on disk, although clearly plenty of people do buy and sell software on disk. The Court directs us not to make such fine distinctions.

What is the software industry to do? There are technical solutions to part of the problem, of course, but it's not going to be possible to claw back those exhausted rights by technical means without getting into a whole new load of trouble. Perhaps more promising is the idea of granting licences for a limited time - most software licences, certainly the non-bespoke sort, are perpetual, which is only logical when a large sum of money is changing hands. But making licences expire and require renewal might be a good way forward - and can also assist customers along the upgrade path that software houses wish them to take rather faster than, left to their own devices, they would consider appropriate.

Dutch court holds Bulgarian decision contrary to public policy

It sounds like it should be none of their business, but, as that Dutch IP oracle Nauta Dutilh (and in particular Prof Charles Gielen, who coincidentally acted for the successful party in this case) explain in an article on their website, it's very much the business of the Dutch court when considering whether the Brussels I Regulation applies. Because the Bulgarian court's judgment was contrary to public policy, it did not have to be recognised by the Dutch court.

For a court to hold a foreign court's judgment to be contrary to public policy is powerful stuff. The case concerned Johnny Walker whisky, placed on the market outside the EEA but confiscated in Bulgaria at the instance of Diageo, the trade mark owner. The Sofia district court, on the basis of an interpretation of the relevant law by the country's Supreme Court, held that the importation into the EEA of goods placed on the market outside the EEA with the trade mark owner's consent did not amount to an infringement. That's a view of the rules about exhaustion which is perhaps more archaic than novel. It's certainly surprising. Equally surprising is that five judges dissented. How many judges does the Bulgarian Supreme Court have, for goodness' sake? A lot, apparently, but I can't find its judgments on the web, although I have learned some useful Bulgarian words (and letters in its version of the Cyrillic alphabet: съд is transliterated as "sud", the vowel being my new letter: the word means "court". The Russian sounds the same but with the phonetically equivalent letter у in the middle).

Because the trade mark registrations were held by Diageo's Dutch subsidiary (not an uncommon situation, for tax reasons) the confiscatee brought proceedings in Amsterdam to recover damages. Diageo contended that the Sofia district court's judgment was contrary to public policy within the meaning of Article 34(1) of the Brussels I Regulation. The Supreme Court had gone against the Silhouette judgment (which also involved parallel imports and Bulgaria, though at that time it was not an EU Member State) and should have made a reference to the Court of Justice under Article 267 of the Treaty. The Supreme Court had violated a fundamental principle of EU constitutional law, so not only the district court's judgment but also the Supreme Court's interpretation on which it was based was contrary to public policy.