Merck KGaA v Merck Sharp & Dohme Corp & Ors

A long-term coexistence agreement governed by German law was to be construed by reference to the parties’ objectively ascertained intention, the agreement’s function, its negotiations and subsequent conduct. On that construction, a promise to discontinue use of a word as a trade mark could preclude its standalone use as a corporate, trade or business name when that use would defeat the agreement’s purpose.

For online use, accessibility in the United Kingdom is insufficient. The court must decide objectively, and by reference to all the circumstances, whether the activity is targeted at United Kingdom users and is use in the course of trade in relation to relevant goods or services. Findings of trade mark infringement must identify the particular uses found infringing and give adequate reasons.

The claimant, Merck Global, and the defendants, Merck US, were pharmaceutical businesses with a long history of agreements regulating their use of the word “Merck” in different territories. Merck Global alleged that Merck US’s websites, social-media activity and other material targeted at the United Kingdom breached the 1970 Agreement and infringed its registered trade marks.

Norris J held that Merck US had breached the agreement and infringed the marks, but partially revoked the marks for non-use: [2016] EWHC 49 (Pat). He later made injunctions. Both sides appealed. The central issues included the contractual scope of clause 7, targeting of online activity, use in relation to goods or services, partial revocation, defences of honest concurrent use and own name, and the fairness and adequacy of the final order.

1. The appeals were allowed in part. Kitchin LJ gave the judgment, with which Floyd and Patten LJJ agreed. The court upheld the principal contractual conclusions but set aside the infringement findings and final order to the extent stated, remitting specified issues to the High Court.

2. The pleaded allegation was confined to breach of clause 7, but it was not unfair for the judge to determine whether the pleaded uses breached that clause otherwise than as trade mark use. Applying the procedural-fairness principles in Murphy v Wyatt [2011] EWCA Civ 408, the court held that the issue was raised by the pleadings and arguments, that clause 7 was properly construed in its contractual context, and that Merck US suffered no prejudice.

3. Under German-law construction, the 1955 and 1970 agreements were intended comprehensively to regulate use of “Merck” in connection with the parties’ businesses, goods and services, except for genuinely future names left open. Clause 7 therefore precluded Merck US, in the United Kingdom, from using “Merck” alone as a trade mark and as a standalone corporate, trade or business name when promoting its business. It also extended to services and to domain names and email addresses used without sufficient distinguishing matter.

4. Online activity had to be targeted at the United Kingdom. Mere accessibility was insufficient. Applying the approach in Pammer and L’Oréal SA v eBay International AG, the court upheld the finding that the integrated websites and social-media activities were so targeted. Their United Kingdom-specific content, links from United Kingdom sites, recruitment, licensing, supplier and purchasing activity, and integrated architecture were material.

5. However, trade mark infringement required identification of use in the United Kingdom in the course of trade in relation to particular relevant goods or services. The judge’s findings were too general, inadequately reasoned and at points inconsistent. The court remitted infringement and the related de minimis issue for rehearing. Honest concurrent use and the own-name defence could not excuse any non-trivial infringing use because Merck US had disturbed the prior equilibrium and acted outside the agreed regime.

6. The partial-revocation issue was also remitted. “Pharmaceutical substances and preparations” was broad enough to contain independent subcategories, for which therapeutic indication was important. Finally, the judge had not fairly explained why the contested injunctions were appropriate after receiving detailed submissions. Relief and the form of final order were remitted.

• Court of Appeal (Civil Division): Allowed both appeals in part and remitted partial revocation, trade mark infringement, de minimis and relief: [2017] EWCA Civ 1834.

• High Court, Chancery Division, Intellectual Property: Norris J found breach of contract and trade mark infringement, ordered partial revocation for non-use, and granted consequential relief: [2016] EWHC 49 (Pat).

• High Court, Chancery Division: Nugee J determined that German law governed the 1955 and 1970 agreements: [2014] EWHC 3867 (Ch).