Schneider Electric IT Corporation v Northamber PLC

This is my judgment determining certain points of principle and extended disclosure requests raised by the parties at the first CCMC in these trade mark infringement proceedings.

The underlying proceedings broadly concern allegations relating to “parallel imports” and the “exhaustion of rights” as a matter of trade mark law. It is alleged that the Defendant has traded in products bearing the Claimant’s trade marks which the Claimant contends were intended for sale outside of the EEA/UK, for which the Claimant did not provide consent to be put on the market in the EEA/UK.

Counsel for the parties sought the determination of the following points of principle which were said to impede the progression of the proceedings, and/or which otherwise require determination in order to facilitate agreement between the parties.

The parties contend that these points of principle form (at least in part) the “foundation” of their respective positions and approach to disclosure and their proposed directions to trial.

The issues are as follows:

The parties’ submissions also gave rise to an issue of whether the concepts of “contributory negligence” and/or a “failure to mitigate” can be properly pleaded as a defence to trade mark infringement and whether these issues should have a particular impact upon the approach the Court should take in managing this case.

The Claimant's business includes the supply of uninterruptible power supplies and related goods. The Claimant owns trade mark registrations for (amongst other things) the words “APC” and “SMART-UPS” in relation to UPS Products. The Claimant's uninterruptible power supplies and related goods are branded with one or both of those trade marks are referred to in the Particulars of Claim as “APC UPS Products”.

The Defendant, a UK company, that has been trading for many years, is a distributor of IT equipment.

The Third Party, also a UK company, was joined as a party by the Defendant on the basis that the Defendant contends that the specific products complained of in the Claimant’s Particulars of Claim were purchased by the Defendant from the Third Party. The Third Party alleges, in turn, that they purchased those products from a UK and German company.

The Claimant’s Particulars of Claim (at paragraphs 15-24) list examples of 23 specific products that the Claimant complains of. The Claimant infers that the examples are illustrative of a more extensive business the Defendant has conducted in respect of certain similar products.

The Defendant does not admit that the example products are unauthorised APC UPS Products and puts the Claimant to proof on that issue. It does not admit that they were not put on the market in the UK or EEA (or subsequently dealt in) by the Claimant or with its consent. The Defendant also relies on, among other things, a defence under section 12 of the Trade Marks Act 1994, limitation defences insofar as the Claimant seeks a remedy for dealings more than 6 years prior to the issue of the claim form and alleges contributory negligence against the Claimant.

The Claimant also seeks disclosure of any alleged unauthorised APC UPS Products beyond the example products. The Defendant disputes this.

I briefly summarise certain of the overarching principles relating to disclosure here, but for the sake of concision, I do not propose to set out the detail of the Practice Direction, or the judgments to which I refer:

Section 10 of the Trade Mark Act 1994 sets out the essential elements of a trade mark infringement claim, which include the following at sections 10(1) and 10(2):

“(1)

A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.”

“(2)

A person infringes a registered trade mark if he uses in the course of trade a sign where because

(a)

the sign is identical with the trade mark and is used in relation to goods or services similar to those for which the trade mark is registered, or

(b)

the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered,

there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trade mark.”

Section 12 of the Trade Marks Act 1994 (as amended), provides a defence of “exhaustion” of a trade mark proprietor’s rights as follows:

The concept of exhaustion of rights has remained a feature of the Trade Marks Act 1994 notwithstanding the United Kingdom’s withdrawal from the European Union and is today a species of “regional” exhaustion, in the sense that goods which have been placed on the market in the UK or the EEA by the proprietor or with their consent will qualify for the purposes of the defence.

The parties disagree as to the proper operation of the burden of proof in cases where an exhaustion defence has been raised. It is clear that their positions have influenced their approach to Extended Disclosure, and in particular, the Issues for Disclosure and Proposed Models they say are appropriate.

As is further described below, the Defendant contends that the burden of proof is on the Claimant to prove that it did not consent to the goods being imported into the EEA/UK and that in order for the Court to try this case fairly, disclosure from the Claimant as to “what happened at [its] end of the supply chain” is therefore necessary.

Counsel for the Defendant further submits (in summary) that:

Counsel for the Claimant resists these submissions and (in summary) submits:

In my judgment, the starting point as to the burden of proof in exhaustion cases is clear from the decision of Zino Davidoff and Levi Strauss [2002] Ch 109 (CJEU), at [54] – [58], namely, that it is for the alleged infringer seeking to rely on a defence of consent to prove its case on the balance of probabilities:

“It follows that it is for the trader alleging consent to prove it and not for the trade mark proprietor to demonstrate its absence.”

However, it is also clear, in my view, that the Court “may” (or may be required) to shift the burden of proof to the Claimant in specific circumstances, namely where:

Those decisions make clear that any “shift” of the burden of proof is in fact blended, in the sense that if circumstances necessitating a shift of the burden are established and the trade mark proprietor evidences that the goods at issue were first placed outside of the relevant territory (in this case, the EEA/UK) by them or with their consent, then the burden shifts back to the defendant to prove consent.

Given that the decisions to which I refer above derive from EU law principles, (including Article 13(1) of Regulation No 207/2009 and Article 15(1) of Regulation 2017/1001, in conjunction with Arts. 34 and 36 TFEU), it may be open to argument as to whether this Court should in the present case adopt the approach exemplified therein, given that the issue at hand is a rule of evidence, a principle which in any event, is typically governed by national rules and procedures; a matter which will need to be dealt with at trial.

The resolution of this issue between the parties will of course require full argument on specific facts. As to the effect of the abovementioned point of principle on the appropriate ambit of disclosure, in my view, it is clear that some degree of disclosure from both parties is necessary in order to fairly resolve the issue.

It would appear that the issue of who bears the burden of proof has become “so significant” in this CCMC, in part, because of course neither disclosure (nor cross-examination) has yet taken place and there is therefore an absence of material before the Court (and the parties) to consider the issues in detail (see, by analogy, Procter and Gamble International Operations SA v Star Global Trading Ltd[2016] EWHC 734 (Ch) at [57]).

I would not however, accede to the Defendant’s impermissibly wide requests for disclosure and do not therefore accept Counsel for the Defendant’s submissions that this point of principle necessitates the extent of disclosure sought in its specific requests outlined below; such an approach is likely to give rise to a substantial number of documents relating to the Claimant’s supply chain and is not necessary, reasonable or proportionate in the circumstances.

I shall deal with the reasonableness and proportionality of the specific requests for disclosure in turn, below.

Counsel for the Claimant seeks a split trial between liability and quantum in line with the long-established practice illustrated in Island Records v Tring [1996] 1 WLR 1256, 1258 (Lightman J) and makes the overall point that there are substantial costs savings to be achieved in deferring disclosure and evidence on quantum until after the full extent of infringement has been determined.

Counsel for the Defendant resists this approach on a number of grounds, including submissions that:

In my judgment, a split trial on liability and quantum is appropriate in this case and I would exercise my discretion pursuant to CPR rule 3.1(2) to direct accordingly.

In light of the various issues to be determined in this case, it is clear that a split trial is the best course to ensure the dispute is adjudicated as “fairly, quickly and efficiently as possible” (Electrical Waste Recycling).

In my view, the trial on liability will inherently involve some material consideration of each individual product, (or at least categories of products, if such categories can be determined) alleged to be infringed and for which there is a defence of consent pleaded.

I remind myself that for there to be consent within the meaning of section 12 of the Trade Marks Act, such consent must relate to “each individual item of the product in respect of which exhaustion of rights is pleaded” (see Mastercigars Direct Ltd v Hunters & Frankau Ltd [2007] EWCA Civ 176 at [29(iii)] and [30] and Sebago Inc v GB Unic SA (Case C-173/98).

Adding the issue of quantum into the same trial as an individual assessment of products (or categories of products) would seem to me to lead to excessive complexity and diffusion of the issues for both the parties (and the Court).

Counsel for the Defendant’s overall submission is that the 23 (or 26) specific products identified by the Claimant in its Particulars of Claim should be addressed as a form of “test case”. It is said that expansion of the trial beyond these products heavily burdens the action (increasing cost and complexity) and that the appropriate course is to limit the trial to these specific products because once the parties know what the position is on those, they should be in a better position to work out what to do about any other supplies or suppliers.

Counsel for the Claimant submits that this is not an appropriate case for trial by sample as this is not a case in which items by way of sample can be taken from a total category of products in a manner which is capable of resolving common issues in relation to one type of item.

It is submitted that the products in the Claimant’s Particulars of Claim are simply the result of test purchases and are necessarily random selections of products that the Defendant has been dealing in and that a list of the other APC UPS Products the Defendant has dealt in must first be provided in order for any sampling or specimen exercise to be considered.

In my judgment, it is not appropriate for the trial in this action to be limited to the specific products currently listed in the Claimant’s Particulars of Claim, particularly in circumstances where: (i) there is evidence of the Defendant dealing with products beyond those listed in the statement of case; and (ii) the Defendant (whilst denying infringement) has admitted dealing in other APC UPS Products.

I do however accept the proposition that, particularly in intellectual property infringement claims, trial by reference to samples or specimens often enables the Court to deal with cases justly and at proportionate cost in accordance with the overriding objective.

This has been reflected in the approach adopted in many intellectual property infringement cases, including Thom Browne v Adidas[2024] EWHC 257 (Ch) at [17] – [27] and [22] and reflects what is a very well-established practice adopted by the court in relation to disputes involving intellectual property rights.

The corollary of this approach is that the Court essentially takes a pragmatic view at the quantum stage of a trial once a claimant has established a right to relief in relation to examples or specimens and a claimant is not “shut out” from seeking relief or an inquiry as a result of the lack of specific consideration of products beyond those specifically considered at the liability stage (see Carr J in AP Racing v Alcon Components [2016] EWHC 815 (Ch); [2016] FSR 28 at [23] – [24] and Birss J (as he then was) in Warner Music UK Ltd v TuneIn Inc [2019] EWHC 3374 (Ch) at [22]).

In my view, there must be some logical reasoning underpinning the selection of the samples or specimen advanced for the purposes of determining liability at trial, or at least some identifiable benefit in terms of efficiency, expedition or some other factor consistent with the overriding objective in order for that approach to be appropriate. It would then be for the Court in a particular case to balance those factors as a matter of case management to determine the correct way forward.

In the present case, there is insufficient material before the Court in order to determine the appropriateness of any trial by sample and in my judgment, further disclosure is necessary from the Defendant before any form of sample or categorisation of products can be reasonably determined. I reject the submission that the currently pleaded examples arising from test purchases would give rise to the efficiencies contended by Counsel for the Defendants.

It would seem that in the present context, where there is clearly evidence of additional dealings in similar products, an approach which defers or which otherwise excludes them from consideration will likely give rise to satellite litigation which will, overall, increase cost and involve a greater use of court resources.

I therefore accept, as a matter of principle, the Claimants' submission that the provision of a list by the Defendant of its dealings in APC UPS Products pursuant to the specific Issue for Disclosure described below represents a reasonable and proportionate approach to disclosure. I will deal with the specific requests below.

Counsel for the parties addressed the Court at length on their position as to the proper interpretation and operation of the Law Reform (Contributory Negligence) Act 1945.

The first point was whether a plea of contributory negligence is available at all where the claim is one of strict liability and the second, broadly whether a plea of failure to mitigate has been confused in this case with the concept of prevention or not.

I would note that there is no formal application to strike out any element of the Defence; I therefore regard it as premature to determine the issue raised by the parties and decline to do so.

It remains the case that there is an issue raised on the pleadings and a determination by the Court now on these would impermissibly interfere with what is to be considered at trial.

In any event, the Defendant’s pleaded defences of contributory negligence and failure to mitigate are both expressed as being “insofar as the Defendant is held liable to the Claimant”. In light of that plea and my decision above in relation to a split trial, I am satisfied that these issues should be dealt with in any subsequent trial on quantum.

I now turn to the specific requests for disclosure.

The contested formulation of issues 1 and 2 for disclosure in section 1A of the DRD are as follows:

For Issues 1 and 2, at this time, I do not have the necessary information to determine the appropriate scope of the requests, particularly in light of my decision that the “example” APC UPC Products requires further interrogation before appropriate categorisation can be determined.

As indicated below, it seems likely that the formulation of this issue may need to be revisited once disclosure has been provided pursuant to Issue 5.

I would indicate that the concept of “Affiliates” included in a number of the Issues for Disclosure is, in my judgment, impermissibly wide and would not result in an appropriate, reasonable and proportionate search, not least because any defence of consent in the present case will likely turn on the consent of the trade mark proprietor themselves, not of activity conducted by affiliates.

Issue 3 (sought by the Defendant and resisted by the Claimant) is as follows:

In my judgment, Issue 3 is too wide in its current form and is inappropriate for a Model D request and would result in a disproportionate search for documents, particularly given the use of the phrase “usual territories”. In my view (an adequately reframed) issue for disclosure relating to express or implied permission granted by the Claimant to distributors would be more appropriately dealt with by Model B.

Issue 4 (sought by the Claimant and resisted by the Defendant on the basis that the request is unnecessary) is as follows:

In my judgment, it would be premature to order disclosure in respect of issue 4 at this time. In my view, given my conclusion on Issue 5 below, it does not appear as though this issue for disclosure is necessary, particularly if the Claimant receives disclosure of the product serial numbers and/or SKUs from which it can presumably determine whether or not the relevant products are authorised for sale in the EEA/UK.

Issue 5 (sought by the Claimant and resisted as “fishing” by the Defendant):

In my judgment, whilst I agree with Counsel for the Claimant that the provision of serial numbers and SKUs of products supplied by the Defendant is reasonable and proportionate, I do not regard the second stage of disclosure sought – i.e. disclosure of suppliers and associated details as appropriate at this time.

I reject Counsel for the Defendant’s overall submission that this issue constitutes “fishing”. A Claimant is entitled in an extant action in which there is a pleaded case of infringement to seek disclosure which is reasonable and proportionate and which may form a vital ingredient in the further pleading of their case, particularly where it is clear that the disclosure sought centres upon a “key issue in dispute”, which will need to be determined “with reference to contemporaneous documents”. I am satisfied that the serial numbers and SKUs will have probative value in supporting or undermining a party's claim or defence given the claims to infringement and exhaustion of rights that have been advanced.

Issue 6 focuses on details of suppliers and for the reasons set out in the paragraph above, I do not regard this Issue for Disclosure to be reasonable and proportionate or appropriate at this time.

Issue 7 (sought by the Defendant and resisted by the Claimant) is as follows:

In my judgment, it is not immediately clear that details of distribution agreements and/or arrangements will be probative of the issues in dispute, particularly in light of the decisions in Davidoff at [58] (andCoty Prestige Lancaster Group v Simex Trading AG (C-127/09) indicating that consent cannot be inferred from the failure of a trade mark proprietor to communicate their opposition to marketing in the EEA through the absence of contractual restraints. The current formulation of the issue certainly isn’t reasonable and proportionate.

However, I accept that the crux of what is sought by the Defendant goes to a key issue in dispute. The issue as currently drafted would need to be much more limited in scope and degree and likely limited to Model B in order to represent a reasonable and proportionate request.

Issues 8, 9 and 14 (sought by the Defendant) are as follows:

These Issues for Disclosure clearly derive from the Defendant’s Defence (at paragraph 12), which (in material part) states as follows:

“If and insofar as the Defendant is held liable to the Claimant, the Defendant will say that the Claimant has caused and/or contributed to the said liability and/or that the Claimant failed to mitigate its loss:…” (my emphasis)

In my view, issues 8, 9 and 14 for are therefore more appropriately dealt with as part of the quantum trial and I would decline to order Extended Disclosure with reference to these issues at this time.

Issues 10 – 13 of the DRD (which for the sake of concision, are not repeated in this judgment) are also all, in my view, issues which relate to quantum and it is not therefore reasonable or proportionate to make an order for Extended Disclosure on those issues at this time.

In light of the above, I direct that the parties liaise on the nature of specific requests that are appropriate under the DRD in light of this judgment. If the parties are unable to agree specific requests they shall provide a concise updated composite updated DRD with their respective positions together with short explanations on their points of difference and I will determine the issues accordingly.

Further, I would direct that once Extended Disclosure has been provided pursuant to Issue 5 of the DRD, the parties should liaise on whether (and if so what) appropriate categorisations or groups of APC UPS Products may be considered by the Court in order to streamline the efficient management of the trial in this action.