Schneider Electric IT Corporation v Northamber PLC

In trade mark exhaustion disputes, the alleged infringer ordinarily bears the burden of proving proprietor consent. That burden may be adjusted where there is a real risk of market partitioning or comparable supply-chain information asymmetry, but any adjustment is blended and may return to the defendant once the proprietor proves an external first marketing.

Extended disclosure must address key disputed issues and remain reasonable and proportionate. A split liability and quantum trial may be appropriate where combining individual product issues with quantum would cause excessive complexity. Trial by samples or specimens requires a rational basis connected with efficiency, expedition or the overriding objective.

The claimant brought trade mark infringement proceedings concerning alleged parallel imports of APC UPS Products. The defendant relied, among other matters, on exhaustion under section 12 of the Trade Marks Act 1994, limitation, contributory negligence and failure to mitigate.

At the first case management conference, the court was asked to determine principles concerning the burden of proving consent, the scope of trial, trial by sample, and extended disclosure. The court also considered whether the pleaded contributory negligence and mitigation issues should affect case management.

1. Burden of proof. The starting position is that a defendant relying on consent must prove consent on the balance of probabilities under section 12 of the Trade Marks Act 1994. The burden may be adjusted where the defendant establishes a real risk of partitioning national markets, or circumstances such as selective distribution, no territorial indication on the goods, refusal of information by the proprietor and unwillingness of suppliers to disclose their sources. The adjustment is blended: after the proprietor proves that the goods were first placed outside the relevant territory by it or with its consent, the burden returns to the defendant to prove consent to subsequent marketing. The question requires full argument on the facts at trial.
2. Disclosure. Some disclosure from both parties was necessary. The defendant’s broad supply-chain requests were not reasonable or proportionate. Disclosure of serial numbers and SKUs for the defendant’s dealings in APC UPS Products during the relevant six-year period was reasonable and potentially probative. Supplier identities and associated details were premature. References to affiliates were impermissibly wide, and several proposed disclosure issues concerning prevention, awareness and mitigation were better dealt with at the quantum stage.
3. Trial structure. A split trial on liability and quantum was ordered under rule 3.1(2) of the Civil Procedure Rules 1998. Liability would require consideration of individual products or properly identified categories, while adding quantum would create excessive complexity. The trial was not limited to the pleaded examples because there was evidence of wider dealings and admissions concerning other products.
4. Sampling. Sampling or specimen-based determination can be appropriate in intellectual property litigation, but there must be logical reasoning underpinning the selection or an identifiable efficiency benefit. Further disclosure was required before categorisation or sampling could fairly be assessed. The parties were directed to liaise on appropriate disclosure requests and later product categorisation.
5. Contributory negligence and mitigation. The court declined to determine whether those pleaded defences were legally available. No strike-out application had been made, and deciding the issues at the case management stage would impermissibly interfere with matters for trial. Because the defences were pleaded only if liability were established, they were to be addressed in any subsequent quantum trial.