Steven Sidken, a London practitioner, writes that a recent UK decision leaves open the possibility that infringement of competition law will override infringement of a trade mark.
STONE ISLAND is a brand owned by Sportswear Company SpA. It is distributed in the UK by Four Marketing Limited.
STONE ISLAND marked clothes were sold in the UK by Stonestyle Limited. However, the labels were defaced and swing tags cut out or defaced. The labels included garment codes containing information about the retailer of the goods, the order, and the quantity. As a result Sportswear and Four Marketing brought trade mark infringement proceedings against Stonestyle on the basis that the removal of the garment codes constituted a trade mark infringement.
The claimants argued that the garment codes were necessary to enable them to establish whether goods sold under the STONE ISLAND mark were genuine. The codes also allowed Sportswear to track, administer, and identify orders for retail customers.
In contrast it was claimed by the defendant that the codes were used to enable the claimants to police and enforce territorial exclusivity granted by the distribution agreements between the claimants. As such they formed part of an illegal anti-competitive arrangement between the claimants which was contrary to EU competition law. In addition the defendant claimed that the claimants’ action against it was in itself anti-competitive.
The claimants applied to strike out these parts of the defendant’s defence. In particular the claimants argued that even if there had been an infringement of competition law, it would not provide a defence to a claim for trade mark infringement as there was an insufficient connection between the two.
The claimants were successful in the High Court. However, the defendant appealed to the Court of Appeal.
The Court of Appeal was unimpressed with the claimant’s arguments. It decided that:
(i) the earlier High Court decision was wrong. There could be a sufficient connection between the alleged anti-competitive agreement and whether the claimants could legitimately challenge the distribution of the STONE ISLAND goods for trade mark infringement.
(ii) it was possible that the defendant’s argument that there had been a breach of competition law would override the claimants’ argument that there had been an infringement of the STONE ISLAND trade mark.
Certainly until (or, perhaps, unless) there is a final decision in the STONE ISLAND case, parallel importers who can point to an infringement of competition law will be able to use that as a defence to a claim of trade mark infringement. The reason for “unless” is that it is possible that the STONE ISLAND case could be settled out of court.
It is also important insofar as it shows how easily distributors (and agents) can find themselves caught up in legal battles between brand owners and parallel importers.
Finally it is important insofar as it demonstrates the need for brand owners to exercise care when establishing networks in order not to infringe competition law.
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