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Beware Global Co-Existence Agreements in the Internet Age

The High Court has recently decided an interesting case on the interpretation of trade mark co-existence agreements in light of advances in technology. The judge also gave some helpful obiter guidance on whether global websites can infringe UK trade marks.

The High Court has recently decided an interesting case on the interpretation of trade mark co-existence agreements in light of advances in technology. The judge also gave some helpful obiter guidance on whether global websites can infringe UK trade marks.

Background

The Merck pharmaceutical companies have shared a long and complicated history of co-existence concerning the MERCK brand. The general understanding is that Merck Sharp & Dohme (“Merck US”) has exclusive rights to use MERCK as a standalone trade mark in the US and Canada whereas Merck KGaA (“Merck Global”) has the exclusive right to use MERCK as a standalone mark in the rest of the world. There have been a number of co-existence agreements over the years but the latest was a 1970 agreement and slightly later protocol, both governed by German law.

The dispute arose because Merck US was operating a number of websites using the MERCK brand on its own. As the websites were accessible globally, Merck Global claimed this was in breach of the 1970 Agreement. The judge therefore had to decide how to give effect to the 1970 agreement, as interpreted under German law,  in the Internet age.

Contractual issues

Mr Justice Norris first concluded that the 1970 Agreement governed the use of MERCK as a trade mark or trade name on the Internet. The agreement was intended to be an all encompassing co-existence agreement, negotiated by parties who were aware that technology evolved. He rejected the argument that the websites were really targeted at the US/ Canada and disagreed that accessibility from the UK was unfortunate and unpreventable “overspill”. The website sought to recruit people with UK qualifications to jobs based in the UK and solicited UK suppliers. A technique called “geo-targeting” is available to restrict access to websites from enquirers from certain locations but Merck deliberately did not use this because it wanted to treat the internet as an “open space”.

Merck US were also using the “merck.com” domain name and the “@merck.com” email address. Although Merck Global had taken no action to stop this, the use had been recently extended on Twitter, Facebook and other social media. The doctrine of forfeiture (a German equivalent of estoppel) did not apply as Merck US did not genuinely believe that Merck Global would never exercise its rights under the Agreement and in fact knew that any extension of its use was contentious.

Accordingly Merck US was in breach of the 1970 agreement.

Infringement of UK trade marks

Although the dispute was decided on a contractual basis, the judge also considered obiter the position under general UK trade mark law. He confirmed that the fact that a US website is accessible in the UK is not a sufficient basis for concluding that the website is targeted at UK consumers. He referred to the Diddy v P.Diddy judgment that stated that the fundamental question is whether or not the average consumer within the UK would regard the advertisement and site as being aimed and directed at him. In this case, the judge was satisfied that the US websites were directed at commercial activity in the UK as they contained UK specific content directed at UK based job-applicants, suppliers etc. It was sufficient that those seeking information were redirected to the US website and received information under the MERCK brand.

The judge did not agree that it is also necessary to establish “goodwill” in the UK, which requires customers in the UK (see Starbucks v BSkyB). The tests for trade mark infringement and passing off are different.  He concluded that there would be infringing use of an identical mark for identical services and also likelihood of confusion because consumers were likely to believe that the goods/ services originated from the same undertakings. Finally, the Merck Global marks have a reputation in the UK and the use by Merck US was without due cause and took advantage of the repute which Merck Global has built up. There was a deliberate and transparent attempt to push the boundaries of a long established co-existence arrangement and to promote the brand outside the area within which it had the exclusive right to use it.

There was no “own name” defence because Merck US is known by its customers in the UK as Merck Sharp & Dohme. Using “Merck” alone in the UK is therefore not using its own name.

 Comment

This case serves as a warning to those agreeing trade mark co-existence arrangements that they are expected to take into account future advances in technology and consider how goods and services may overlap in the future. It is also a warning to those involved in webpage design that, should they wish to avoid the jurisdiction of overseas Courts, they should employ available technological techniques to prevent access to the site from those locations.

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