Sportswear SpA & Four Marketing Ltd v Stonestyle Ltd (CA)
Reference:  EWCA Civ 380;  FSR 2
Court: Court of Appeal
Judge: Waller, Longmore and Lloyd LJJ
Date of judgment: 11 Apr 2006
Summary: Trade marks - Infringement - Defence - Trade Marks Act 1994, s.12 - Goods distributed within EEA with consent of owner - Competition law - EC Treaty, Art 81 - Anti-competitive agreements - Striking out
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Instructing Solicitors: Wedlake Bell for SS and FML; McDermott, Will & Emery UK LLP for SL
SS, a clothes manufacturer, owned word and graphic trade marks. FML was its exclusive distributor in, inter alia, the UK. SL sold clothes bearing the marks in the UK, imported from other parts of the EU. They had been distributed in the EEA with the consent of SS. SS could ordinarily ascertain to which of its customers it had sold goods by their labels, but the labels on the goods sold by SL had been defaced or removed. SS brought proceedings for infringement. SL’s defence included a claim that the distribution agreement between SS and FML breached EC Treaty Art 81 (prohibition of anti-competitive agreements) as it was aimed at a geographical separation of the marketing of the goods. Warren J struck out that part of the defence. SL appealed.
Whether a breach of Art 81 by the mark proprietor could provide a defence to the infringement action.
Allowing the appeal; the judge had been wrong to strike out the passages of the defence relating to breach of Art 81. There were unresolved issues of Community law which may be relevant, depending on the findings of fact at trial. It was not clear that a breach of Art 81 could not provide a defence. It was arguable that there was a sufficient nexus between that breach and the issue of “legitimate reasons” under s.12(2). Both points were sufficiently arguable for it to be wrong to strike them out.
The tensions between the principle of free movement of goods and trade mark rights have resulted in a considerable amount of litigation. This case focused on s.12 TMA 1994, which provides that marks cannot be infringed by using it on goods put onto the market in the EEA by or with the consent of the owner, unless the owner has “legitimate reasons … to oppose further dealings in the goods”. As the Court held, the owner entering into an agreement in breach of Art 81 may be relevant as to whether the owner’s reasons for opposing the dealing in goods bearing his mark are legitimate. This case may well lead to a reference to the ECJ for a preliminary ruling.