Factual and Procedural Background
This opinion concerns appeals against a judgment and consequential order relating to a dispute over the use of the word "Merck" in connection with pharmaceutical businesses. The dispute involves two successor entities: the claimant referred to as "Merck Global" and the defendants collectively as "Merck US". The origins of the dispute date back to the establishment of a family business in Darmstadt, Germany in 1668 and a separate business established in the USA in 1889. Over time, the parties made several agreements to regulate their respective rights to use the word "Merck" in different territories, including the 1932 Treaty Agreement, the 1955 Agreement, the 1970 Agreement, and the 1975 Protocol.
The 1932 Treaty Agreement, which divided territorial rights between the parties, was cancelled in 1945 following a US Department of Justice challenge. Subsequent agreements sought to clarify and regularise use of the mark "Merck" worldwide, with each party having exclusive rights in certain territories and consent arrangements for use of corporate and trade names with geographical identifiers.
Following a 2009 merger involving Merck US, Merck Global became concerned about increased use by Merck US of the word "Merck" outside its permitted territories, including extensive use on multiple websites and social media platforms targeting UK audiences. Attempts to resolve these concerns failed, leading Merck Global to initiate proceedings in 2013 alleging breach of contract and infringement of registered trade marks.
A preliminary issue concerning the governing law of the agreements was resolved in favour of German law. The trial before Norris J lasted five days in April 2015. The judge found Merck US in breach of contractual obligations and that the defendants infringed the registered trade marks. The judgment included findings on partial revocation of some trade mark registrations and granted injunctive and other relief. Both parties were granted permission to appeal.
Legal Issues Presented
- Whether the 1970 Agreement and related protocols restrict Merck US’s use of the word "Merck" as a trade mark and as a corporate, firm or trade name outside the USA and Canada, particularly in the UK.
- Whether the use of the word "Merck" by Merck US on various websites, social media, and offline materials constituted a breach of clause 7 of the 1970 Agreement and infringement of Merck Global’s registered trade marks.
- Whether the activities of Merck US were targeted at the UK for the purposes of establishing breach and infringement.
- The proper interpretation under German law of the 1955 and 1970 Agreements and the 1975 Protocol, including the scope of clause 7 and whether it applies to services as well as goods.
- Whether the judge’s findings and relief exceeded the pleaded case, particularly in relation to breaches of contractual provisions other than clause 7.
- The applicability of doctrines such as de minimis, honest concurrent use (equilibrium), and the own name defence under UK trade mark law.
- The scope and terms of injunctive relief appropriate in light of the findings.
- Whether partial revocation of trade mark registrations was warranted based on non-use.
- Whether online use of trade marks and domain names constitute use “in relation to” goods or services under UK and EU trade mark law.
Arguments of the Parties
Appellant's (Merck US) Arguments
- The claim for breach of contract was limited to clause 7 of the 1970 Agreement; findings and relief based on other clauses were impermissible and unfair.
- Clause 7 restricts use of "Merck" only as a trade mark in relation to goods, not as a corporate or trade name or in relation to services.
- Most online uses complained of were not targeted at the UK, so did not constitute breach or infringement.
- Any use outside the permitted scope was de minimis and not actionable.
- The parties had established a long-standing modus vivendi or equilibrium permitting some degree of overspill without objection.
- The defendants had an own name defence under s.11(2)(a) of the Trade Marks Act 1994.
- The judge’s relief was disproportionate, unclear, and failed to protect freedom of commercial expression adequately.
- The judge failed to provide adequate reasons for the form of final order and did not give Merck US a proper opportunity to make representations.
- Partial revocation of trade mark registrations should have been broader, particularly excluding "pharmaceutical substances and preparations".
Appellee's (Merck Global) Arguments
- The judge correctly interpreted the 1970 Agreement under German law as precluding Merck US from using "Merck" alone as a trade mark or corporate name in the UK.
- The claim was properly pleaded as breach of clause 7, which should be interpreted broadly to cover all relevant uses of "Merck".
- Merck US’s use of "Merck" on websites, social media, and offline materials was targeted at the UK and constituted breach and infringement.
- The judge’s findings on targeting and breach were well supported by evidence including website content, architecture, and visitor data.
- The relief granted was appropriate, necessary, and proportionate to protect Merck Global’s rights and avoid confusion.
- The judge’s partial revocation order was correct given the evidence and the broad scope of the product categories involved.
- The own name defence and honest concurrent use were not applicable given the extent and nature of the breaches and infringements.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Murphy v Wyatt [2011] EWCA Civ 408 |
Fairness in deciding cases on unargued points; requirement to give parties opportunity to address new points. |
The court endorsed the principle that judges may decide on points not argued but must ensure parties have fair opportunity to respond; applied to reject unfairness claim regarding judge’s findings beyond pleaded clause. |
| Pammer v Reederei Karl Schlütter GmbH & Co. KG and Hotel Alpenhof GesmbH v Heller [2010] ECR I-12527 |
Criteria for determining whether internet activity is targeted at consumers in a particular Member State. |
Applied to assess whether Merck US’s websites and online activities were targeted at the UK, finding that multiple factors indicated targeting. |
| L'Oréal SA v eBay International BV [2011] ECR I-6011 |
Use of trade marks in online offers for sale targeted at consumers in the EU constitutes use in the territory. |
Applied to hold that accessibility alone is insufficient; use must be targeted. Court found Merck US’s online use was targeted at UK consumers. |
| Football Dataco Ltd v Sportradar GmbH [2013] 1 CMLR 29 |
Use of data and online activities targeted at users in a given territory constitute use in that territory. |
Analogously applied to confirm importance of targeting in internet-related infringement claims; supported finding of targeting here. |
| 800 FLOWERS Trade Mark (1-800 Flowers Inc v Phonenames Ltd) [2000] ETMR 369 |
Use of trade mark on website does not automatically constitute use in every territory where accessible; targeting and intention relevant. |
Applied to reject argument that mere accessibility of websites equated to use in UK; detailed analysis of targeting required. |
| Euromarket Designs Inc v Peters [2000] ETMR 1025 |
Application of targeting principles to online and offline advertising; use in course of trade in relation to goods or services. |
Applied to distinguish between advertising aimed at UK consumers and incidental exposure; relevant to social media and offline uses. |
| Reckitt Benckiser (España) SL v OHIM (ALADIN) [2005] ECR II-2861 |
Principles for partial revocation of trade marks based on non-use and identification of relevant product subcategories. |
Applied in assessing whether Merck Global’s registrations should be partially revoked; court found subcategories should be identified. |
| Roger Maier, Assos of Switzerland SA v ASOS Plc [2015] EWCA Civ 220 |
Approach to partial revocation balancing actual use and reasonable scope of protection. |
Referred to in relation to balancing protection and fair specification of goods for trade mark registrations. |
| C line SARL v C line SA [2007] ECR I-7041 |
Definition of "use in relation to goods or services" for trade mark infringement. |
Applied to distinguish use as company name from use as trade mark; relevant to whether Merck US’s use constituted infringement. |
| IPC Media Ltd v Media 10 Ltd [2014] EWCA Civ 1439 |
Honest concurrent use defence in trade mark law. |
Considered in relation to Merck US’s defence of honest concurrent use; court found defence inapplicable given facts. |
| Reed Executive plc v Reed Business Information Ltd [2004] EWCA Civ 159 |
Requirement that injunctions be clear and certain; own name defence. |
Applied in assessing clarity of injunctions and the availability of the own name defence to Merck US. |
| Attorney General v Punch Ltd [2002] UKHL 50 |
Requirement for injunctions to be clear, precise and no wider than necessary. |
Applied in assessing the form and scope of injunctive relief granted by the judge. |
| Tommy Hilfiger Licensing LLC v Delta Center a.s. (C-494/15) |
Enforcement Directive requirements for injunctions to be fair, proportionate and not create barriers to legitimate trade. |
Referenced in considering proportionality and fairness of injunctions granted. |
Court's Reasoning and Analysis
The court undertook a detailed analysis of the history and terms of the parties' agreements, applying principles of German contract law to interpret the 1955 and 1970 Agreements and the 1975 Protocol. The court emphasized that under German law, contracts are construed with regard to the true objective intention of the parties, considering the context, negotiations, and subsequent conduct.
The court found that the 1970 Agreement was intended to settle disputes and regulate the use of the word "Merck" worldwide, granting Merck US certain permissions but also imposing restrictions, including that use of "Merck" alone outside its home territories (USA and Canada) was prohibited unless accompanied by a geographical identifier of equal prominence.
The court rejected the argument that clause 7 of the 1970 Agreement applied only to trade mark use in relation to goods, holding that it applied more broadly to use as a corporate, trade or business name and extended to services as well as goods. The court found that the parties had recognised the distinction between trade mark and corporate name use but intended to prevent confusing use of "Merck" alone in each other’s territories.
Regarding the internet and online activities, the court applied EU and UK jurisprudence on territorial targeting, concluding that Merck US’s websites and social media were targeted at the UK, given their content, architecture, visitor data, and integration with UK-specific sites and activities. The court held that use of "Merck" in these contexts without proper geographical identifiers breached clause 7 and infringed registered trade marks.
The court considered defences raised by Merck US, including de minimis use, equilibrium (honest concurrent use), and own name defence. It rejected the de minimis and equilibrium defences in relation to most uses, finding that Merck US had disturbed the previously established equilibrium by expanding its use aggressively post-merger. The own name defence was also rejected as Merck US’s use was not in accordance with honest commercial practices.
On partial revocation of trade mark registrations, the court applied established principles to balance the need to prevent unjustified monopolisation with reasonable protection for the proprietor. It found that while the category "pharmaceutical substances and preparations" was broad enough to contain subcategories, the judge had not been provided sufficient assistance to determine fair subcategories and therefore remitted the issue for further consideration.
On infringement, the court found that the judge had correctly identified the principles but had not provided sufficient detailed findings or reasoning on which uses constituted infringement, particularly in relation to websites, social media, and offline materials. The court concluded the infringement findings were unsustainable and remitted the matter for rehearing.
Regarding relief and the final order, the court emphasized the importance of procedural fairness, clarity, proportionality, and respect for fundamental rights including freedom of expression. It found that Merck US was not given adequate opportunity to be heard on relief, and the judge failed to provide reasons for the final order. The court remitted the issue of relief for reconsideration.
Holding and Implications
The appeals of Merck US and Merck Global are allowed in part.
The court remits to the High Court for rehearing the following issues:
- Partial revocation of the registered trade marks to properly define the specification of goods.
- Whether the impugned activities of Merck US constituted use in the UK in the course of trade in relation to relevant goods or services.
- Whether any such uses are negligible or de minimis.
- The appropriate form of any relief to be granted for breach of contract and infringement of registered trade mark.
The court upheld the interpretation of the 1970 Agreement as applying broadly to use of "Merck" alone outside Merck US’s home territories, including as a trade mark and as a corporate or trade name, and covering services as well as goods. It confirmed that the contested online and offline uses were targeted at the UK and breached the agreement and infringed trade marks.
However, the court found deficiencies in the judge’s infringement findings and relief order, requiring further detailed consideration. The decision clarifies the application of German law principles of contract interpretation to international co-existence agreements, the application of EU and UK trade mark law to internet use and targeting, and the procedural requirements for fairness and clarity in relief.
No new precedent was established beyond these determinations; the direct effect is to remit key issues for further judicial consideration in the High Court.