Sportswear Company Spa & Anor v Ghattaura (t/a "Gs3")

A breach of Article 81 of the EU Treaty does not, without a sufficient nexus, provide a defence to trade mark infringement or make trade mark rights unenforceable. Competition-law arguments may remain relevant under section 12(2) of the Trade Marks Act 1994 where Community law independently makes enforcement impermissible. An agreement to fund or sanction brand-protection litigation does not establish that proceedings were brought pursuant to an anti-competitive agreement where it imposes no obligation to sue. The relevant defence paragraphs were therefore struck out.

The claimants owned and distributed genuine clothing bearing the STONE ISLAND trade mark. The defendants sold that clothing after labels and garment-identification codes had been removed. The goods had been placed on the market in the EEA by, or with the consent of, the claimants.

The defendants relied on alleged anti-competitive agreements and Article 81 of the EU Treaty. They argued that the alleged illegality affected the legitimate-reasons exception in section 12(2) of the Trade Marks Act 1994, or otherwise deprived the claimants of injunctive relief. The claimants applied to strike out the relevant defence paragraphs. The central issue was whether the pleaded competition-law breach had a sufficient nexus with the trade mark claims and relief.

1. Nexus requirement. An alleged breach of Article 81 does not release a defendant from liability for trade mark infringement unless there is a sufficient connection between the breach and the relief claimed. A proprietor does not become unable to enforce all intellectual-property rights merely because it has acted unlawfully in another context.
2. Section 12(2). Section 12(2) must be construed against the background of Community law. Article 81 was irrelevant to the defendants’ proposed argument because the complaint concerned enforcement of trade mark rights to identify supply routes and restrict parallel trade, not an Article 81 infringement capable of affecting the legitimacy of the reasons under section 12(2). An independent Community-law defence might still be available where enforcement itself caused artificial market partitioning or another relevant breach.
3. Proposed amendment. The proposed pleading alleged that the proceedings were brought pursuant to article 13 of the 2004 Distribution Agreement. That provision funded and sanctioned brand-protection activity but did not oblige either party to commence proceedings and could operate lawfully. It therefore did not establish the pleaded nexus or an arguable Article 81 defence.
4. Additional observation. Concerted commencement of infringement proceedings might, in some circumstances, constitute an Article 81 breach. Even then, relief would need to restrain improper collaboration without removing the individual proprietor’s right to sue for infringement.
5. Order. The applications to amend the defences were refused, and paragraphs 16 to 18 of each defence were struck out.