KGaA v Merck Sharp & Dohme Corp & Ors, Court of Appeal - Patents Court, January 15, 2016, [2016] EWHC 49 (Pat)

Resolution Date:January 15, 2016
Issuing Organization:Patents Court
Actores:KGaA v Merck Sharp & Dohme Corp & Ors
 
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Case No: HC 13 B00955

Neutral Citation Number: [2016] EWHC 49 (Pat)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 15/01/2016

Before :

MR JUSTICE NORRIS

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Between :

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Henry Carr QC and Benet Brandreth (instructed by Bird & Bird LLP) for the Claimant

Geoffrey Hobbs QC and Guy Hollingworth (instructed by Linklaters LLP) for the Defendants

Hearing dates: 23, 24, 27, 28 and 30 April 2015

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JUDGMENTMr Justice Norris:

  1. The questions that lie at the heart of these proceedings are how a coexistence agreement dating from the 1950s can operate in the age of the Internet: and if its scope of operation is limited, then how the general law applies to the activities of the parties.

  2. The chemical and pharmaceutical businesses which are conducted under the Merck name have their origins in an apothecary's shop in Darmstadt, Germany in 1668. Over the years this family partnership business grew hugely under the name ``E. Merck''. In 1889 a member of the Merck family established a business in the USA in partnership with an outsider, and it was economically supported (though not owned) by the family business. In 1902 this US business was incorporated as ``Merck & Co Inc''. Its original activity was acting as a selling agent for E. Merck, but it established its own manufacturing business and developed its own export markets in the American continent during the First World War. After the end of the Great War E. Merck and Merck & Co Inc became separate independent businesses which informally cooperated with each other in relation to the business use of the name ``Merck''. In effect Merck & Co Inc only used the word ``Merck'' in the USA and its territories and dependencies, and in Canada; and E. Merck used the word in the in the rest of the world (with the exception of a small number of shared territories).

  3. There have been sundry restructurings and renamings: but for all practical purposes it may be taken that the Claimant in this action is the successor of ``E. Merck'', and the Defendants are the successors of ``Merck & Co Inc''. For convenience in this judgment (and not as an indication of any pre-judgment of the outcome) I will call the Claimant ``Merck Global'' and the Defendants ``Merck US'' (although the Third to Fifth Defendants are in fact European subsidiaries).

  4. In 1932 Merck Global and Merck US entered into a formal agreement (``the Treaty Agreement'') in which they formalised those arrangements, recognising the right of Merck US to the exclusive use of the word ``Merck'' in the US, its territories and dependencies and Canada, and the right of Merck Global to the exclusive use of the word ``Merck'' in the rest of the world (with certain designated shared territories). But the Treaty Agreement was attacked by the US Department of Justice under the Sherman Anti-Trust Act in proceedings brought against Merck US; and in 1945 it was cancelled by a Consent Decree in the New Jersey Courts. The 1945 Order contained provisions requiring Merck US to file with the Department of Justice notice of any intention to make any agreement with Merck Global relating to or affecting business policy; and further provisions enabling the parties to apply to the court for modification of the terms of the Order.

  5. The 1945 Order put Merck US in a difficult position. Being the older enterprise and having primarily been an export business, Merck Global held trade mark registrations in just about every country in the world, and was in a position to attack the right of Merck US to use the Merck mark and its corporate name. In 1948 Mr Carl Anderson, Assistant President of Merck US, visited Darmstadt to share with Merck Global the nature of the 1945 Order and the legal advice Merck US had received about it. Although further meetings and exchange visits followed, by 1955 Merck Global and Merck US found themselves in litigation in several jurisdictions each standing upon their local trade mark rights, with the volume of such conflicts progressively increasing. In 1953 Merck & Co Inc had merged with Sharp & Dohme, which had a large foreign operation and marketed a long line of pharmaceutical specialities through subsidiaries and pharmaceutical finishing plants in a number of countries. Merck US wanted to take advantage of those facilities and to expand them. So it made a vigorous and sustained effort to obtain the right to use ``Merck'' as a trade mark throughout the world: but by 1955 it had obtained only rights concurrent with Merck Global in eight relatively unimportant countries, and secured vulnerable registrations open to attack by Merck Global in 10 others. Throughout the rest of the world Merck US had either been unable to obtain any rights in the trade mark ``Merck'' or was engaged in litigation on the subject. The then current litigation related to further attempts in Italy, India, Hong Kong, Ceylon (as it then was), Australia and Thailand.

  6. This situation led to further proposals for co-operation and to a period of intensive negotiation in September 1955 which resulted in the signing of a settlement letter (``the 1955 Agreement'') on the 12 September 1955. Merck US subsequently submitted this to (and it was approved by) the U.S. Court, Judge Forman saying:-

    ``...from the fringe where I sit I think you have come out of the situation on the long end because I should think the Germans with their hold on this name could beat you in practically every foreign country except on home grounds perhaps...''

  7. In summary: (i) the 1955 Agreement allowed Merck Global to use its firm or corporate name in the USA and Canada so long as geographically identified with Germany, but not to use ``Merck'' as a trade mark; (ii) it allowed Merck US to use its corporate names in Germany so long as geographically identified with the USA or Canada, but not to use ``Merck'' as a trade mark; (iii) in the rest of the world Merck US could use its names so long as geographically identified but had to discontinue use of ``Merck'' as a trade mark (save that it could use the name ``Merck Sharp & Dohme'' as both a name and a mark); and (iv) there were concurrent rights in some excepted territories.

  8. In 1970 there was a change of corporate name by Merck Global. It therefore proposed modification of the 1955 Agreement to reflect this. The proposal resulted in an agreement dated 1 January 1970 (but it is common ground that it was actually signed at a later date) (``the 1970 Agreement''): with one subsequent alteration it is the agreement which still governs the relationship between Merck Global and Merck US.

  9. The 1970 Agreement begins with a series of definitions (including a definition of ``Germany'' which refers to its historic extent in 1935). It will make for clearer exposition if I retain the original definitions of the parties (rather than substitute the terms used in this judgment). ``Merck & Co'' is the equivalent of ``Merck US'': and ``E Merck'' is the equivalent of ``Merck Global''. Its key terms were as follows:-

    a) By clause 2(a) it was provided:-

    ``Merck & Co will not object to the use of the name E.Merck in the United States and Canada by E.Merck as all or part of a firm-name or corporate name provided such names are geographically identified with Germany as follows ``E.Merck, Darmstadt, Germany'' all words being given equal prominence'';

    b) By clause 3(a) it was provided:-

    ``E.Merck will not object to the use in Germany by Merck & Co of Merck & Co Inc or Merck & Co Limited as all or part of a firm name or corporate name provided such names are geographically identified with the United States ... as follows ``Merck & Co Inc., Rahway, N.J., U.S.A.'' ... all words being given equal prominence'';

    c) By clause 2(b) E. Merck recognised the exclusive right of Merck & Co to the use of the trademark ``Merck'' in the United States and by clause 3(b) Merck & Co recognised the exclusive right of E. Merck to the use of the trademark ``Merck'' in Germany and each agreed that it would not use or attempt to acquire rights in any trademark containing ``Merck'' in the territory of the other.

    d) In relation to all other countries by clause 4 E. Merck recognised that ``Merck Sharp & Dohme'' used as a trade mark or name was not confusingly similar to any of its trade marks or names.

    e) In relation to all other countries by clause 5 E. Merck agreed not to object to the use of ``Merck & Co Inc'' as a firm name or corporate name of Merck & Co Inc if used with words which identified it geographically with the United States such as ``Rahway, NJ, USA'', all words being given equal prominence.

    f) In relation to all other countries by clause 6 Merck & Co recognised that E. Merck was entitled to use the word ``Merck''

    ``..as a trade mark or name provided that any such marks or names adopted in the future shall not be confusingly similar to marks or names adopted or used by Merck & Co under paragraphs 4 and 5 above...''

    g) In all other countries Merck & Co undertook (the 1970 Agreement says ``has undertaken'') in clause 7

    ``...to cancel all existing registrations, withdraw all applications and discontinue all use of the trademarks ``Merck'' ... and ``Merck Merck Merck''.....''

    h) Clause 11 was in these terms:-

    ``Merck & Co and E.Merck will cooperate in the prompt termination of all litigation now pending between them involving trademarks or trade names containing Merck''

    i) Clause 12 made reference to the 1955 Agreement ``which is herewith replaced by this new agreement'' and stated

    ``This new agreement, which provides for formalistic amendments caused by a change of the company name of the German party, has been submitted to the United States Department of Justice for review. The Department has agreed that since the changes are formal only, they do not require...

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