Merck v Merck: a lesson on the practical implications of co-existence agreements and online use in the digital age

United Kingdom

The High Court recently handed down a decision in the long-running dispute between Merck KGaA and Merck Sharp & Dohme Corp and others in relation to use of the ‘Merck’ name. A full version of the judgment can be found here.

Merck Sharp (“Merck US”) had originally been the US subsidiary of Merck KGaA (“Merck Global”), but had split to become an independent business in the early 20th Century. Merck US traded in the US and Canada using the MERCK name. A coexistence agreement was signed between the two companies in 1955 which confirmed that Merck US would only use the brand name in the US and Canada. The agreement was updated in 1970, stipulating that each party could trade in the other’s territory if their full name was used.

The position of the parties was changed by the widespread use of the internet. Merck Global sued Merck US for infringing its trade mark in the UK by using MERCK websites including "merck.com", "merckformothers.com", "merckresponsibility.com", "merckmanuals.com", "merck-animal-health.com", "msd-animal-health.com", "msd-uk.com" and "msd-animal-health.co.uk". Merck US also undertook social media activities (some with UK specific content) accessible from those websites. These media activities did not use country-specific limitations that would have restricted access from users in the UK. The Court considered that websites and social media were "targeted" at users in the UK in the relevant sense.

The first instance trial was heard in 2016, with the appeal heard in 2018.

Whilst Merck Global won on the substantive issues at both hearings, the following issues were remitted back to the High Court, because the first instance judgment did not contain sufficiently detailed findings to enable the Court of Appeal to examine these issues:

  1. Further consideration of partial revocation of Merck Global's registered trade marks;
  1. Whether the disputed activities of Merck US constituted use in the UK in the course of trade in relation to relevant goods or services;
  1. Whether any uses identified in (2) should be regarded as de minimis;
  1. The form of relief that should be granted for the claims for breach of contract and for infringement;
  1. The interest that should be granted after setting aside orders for interim payments.

1. Partial Revocation

Merck US asserted that Merck Global's trade marks should be wholly or partially revoked for lack of genuine use "in relation to many if not all of the goods or services for which they were registered".

Merck Global had registered its trade mark for the broad specification of "pharmaceutical substances and preparations" and "medical products included in [Class 5]", but only the consideration of "pharmaceutical substances and preparations" was remitted. Merck US contended that Merck Global had only used Merck Global's trade marks for a specific number of indications (including the treatment of cancer, multiple sclerosis, infertility, etc) and that it had not shown use for several sub-categories of “pharmaceutical substances and preparations”. Merck Global therefore contended that Merck US’s trade marks should be partially revoked to restrict the specification to just those pharmaceutical substances for the used indications.

The judge at first instance maintained the specifications for "pharmaceutical substances and preparations", but the Court of Appeal judgment indicated that the specifications should be limited, and adopted the British National Formulary (BNF) classification to identify fifteen sub-categories for pharmaceutical products, nine of which were relevant to the trade mark in question.

In the remitted proceedings, Sir Alastair Norris considered that restricting the specification to "only those [categories] referenced by specific therapeutic indications" would be too narrow. He adopted the BNF categorisation system, as the Court of Appeal had, and used it as a framework. The BNF categories were used to determine what the "average consumer" would consider to be exemplified by the products sold under the relevant trade marks. This system may have been used because no specific evidence was presented regarding the likely opinion of general practitioners. The Court partially revoked the trade marks, which narrowed down Merck Global’s rights to reflect the specific pharmaceuticals they had used in the UK. However, this did not have any impact on the overall finding of infringement.

2. Use in the UK in the course of trade

The original complaint was made in relation to Merck US’s use of MERCK in promotional and informational material and in the course of general commercial activities. The question remitted for consideration was whether the use on websites and relevant offline material constituted “use in the course of trade”.

In relation to this issue, the Court of Appeal highlighted that:

"First, the expression "using in the course of trade any sign…. in relation to" goods or services in EU trade mark law means use for the purpose of distinguishing those goods or services from those of other suppliers…. Secondly, and equally importantly, the expression also means use such as to create the impression that there is a material link in the course of trade between the goods or services concerned and the undertaking from which those goods or services originate…".

The second of these issues was to be considered in the remittance hearings. The “material link” should engage the essential function of the trade mark and connect the goods or services concerned and the entity those goods or services originate from.

Having reviewed Merck US’s use of website, social media and email addresses with the MERCK name, the Court concluded that there was a material link between the trade mark and the relevant goods and services and there was therefore infringement.

3. De minimis

The Court found that the breaches of the co-existence agreement in relation to the contractual claim were not de minimis. However, Sir Alastair Norris considered that a different assessment by reference to the infringements (and not contractual breaches) was necessary.

Merck US attempted to demonstrate that the proportion of material at issue in the instant action was small compared to the material produced by Merck US in toto, but the judge did not consider these parameters relevant. Instead, it was necessary for the Court to determine whether the infringements were negligible or insignificant. This involved looking at (1) the numerical proportion of Merck US’s output targeted at the UK that was infringing; and (2) the content and significance of that material and its likely individual and cumulative impact.

The Court found that the infringements reflected a clear intent by Merck US to bring the sign MERCK into the UK, with the consequence that the impact of Merck Global's exclusive use of the MERCK mark in the UK was diluted. The judge therefore found that the infringement was not de minimis. In light of this, the Judge granted declarations that Merck US had (i) infringed the Claimant's trade marks and (ii) breached the Agreement, through use of "MERCK" in the UK.

Comment

This decision acts as a reminder to brand owners to always ensure specifications are drafted carefully and are focused on the goods or services that are considered commercially viable for the business. As always, in the event that brand owners seek to protect broad specifications which don’t reflect their commercial use, they run the risk that their registrations may be challenged for non-use after the 5 year grace period has expired.

This case also highlights the potential pitfalls associated with long term co-existence agreements and the need to include provisions which enable the parties to review and adapt the terms to reflect developments in the way businesses market and sell their products. If the parties had reviewed and updated the 1970 version of the co-existence agreement to include terms to deal with any potential uncertainty or ambiguity which might arise as a result of online marketing, the extensive costs associated with years of litigation might have been avoided.

As a matter of good housekeeping, it is important that companies conduct regular reviews of co-existence agreements that have a wide-reaching impact on the way they conduct their business.