• Game Over for Sony Parallel Imports

    The role of the Internet in commerce is large and growing. The average consumer uses it more and more as a means of buying goods and services, and retail chains are scrambling to adapt to consumers’ increasing preference for the ease of Internet buying.

    In this new world, can a parallel importer escape liability for trade mark infringement in Europe by selling genuine branded products into the European Economic Area via a website set up outside? The High Court recently examined this issue in KK Sony Computer Entertainment and Another v. Pacific Game Technology (Holding) Ltd. ([2006] EWHC 2509).

     

    Facts

    The case concerned alleged infringing sales of SONY PLAYSTATION game consoles into the EEA, and specifically into the United Kingdom.

    Pacific, a Hong Kong-based company, had set up a website outside the EEA through which consoles put on the market by Sony in Japan, and described in packaging as “For Sale and Use in Japan Only,” could be bought by and shipped to consumers in the EEA. A test purchase from the U.K. resulted in the shipment of such a console to a buyer here, complete with packaging and instruction manual in Japanese.

    Parallel imports into the EEA of genuine branded goods from outside the EEA, to whose marketing in the EEA the brand owner has not consented, can infringe registered trade mark rights in the EEA (following cases such as Zino Davidoff v A&G Imports Ltd./Levi Strauss v. Tesco Stores Ltd. and Costco (Wholesale) Ltd. [2002] Ch 109, [2002] RPC 403). The court in Sony had to decide whether Sony had consented, expressly or impliedly, to the sale of the consoles in question in the EEA, and whether the goods were in fact being offered here through the foreign-based website.

     

    The Court’s Findings

    The court held that Sony had not in fact consented to the marketing of the goods in the EEA. There was no argument that the goods were genuine Sony products from Japan. Sony had not expressly authorised anyone to export them to the EEA. On the contrary, however, it had stated expressly in English on its Japanese packaging that the goods were for sale in Japan only. Reinforcing this was the fact that its supporting instructional manuals and leaflets were only in Japanese. Nothing on the facts suggested, therefore, that Sony had given an implied consent.

    On the question of where the goods were being marketed, the judge followed the guidance in a previous High Court case, Euromarket Designs Inc. v. Peters and Crate & Barrel Ltd. [2001] FSR 20. Not every use of a mark on every website would be regarded as use in every country from which the website could be accessed. It was necessary to take a pragmatic view and assess whether, on a fair reading, the website would convey to the average consumer an offer for sale in the EEA.

    On that point, the judge took into account that although Pacific’s website was set up outside the EEA, the site was in English, prices and promotions were quoted in pounds sterling by default and the goods on the site were described in various European languages. In addition, the site contained testimonials from U.K. purchasers, and the test purchase shipped to the U.K. had contained a false EC Certificate of Conformity.

    Taking all of these factors into account, the judge concluded that the website was indeed directed at markets within the EEA, including the U.K. He found that Pacific had placed the goods on the EEA market without Sony’s consent, and handed down judgment for the claimant.

     

    Comment

    The game was swiftly over for Pacific, who did not even appear at the hearing of the case. Indeed, it is difficult to see how it could have put forward any plausible defence, given the clear European slant of its website and Sony’s packaging warnings that the products were for sale only in Japan.

    The decision in Sony does not break new ground, but it is a reminder that brand owners are in a strong position to control the first marketing of their branded goods in Europe, provided they have rights here. Sony’s rights were a combination of national and Community trade marks, registered designs and copyright, and these, as well as unregistered design right, could all be relevant in similar cases.

    The decision also highlights the pragmatic approach of the British courts to determining whether the offer of goods via a website based outside the EEA constitutes an offer here. The mere fact that a would-be parallel importer sets up a site abroad will not on its own avoid infringement if the sales are at least partially targeted at the EEA.

    Although it would have succeeded in any event, Sony’s case was no doubt eased by its foresight in stating expressly on packaging that the products in question were for sale only in Japan. The absence of such a warning, on its own, is not enough to allow the courts to infer the proprietor’s consent to marketing elsewhere as the law currently stands. However, it is a factor that could be taken into account. Brand owners targeted by grey market traders should consider whether similar statements on their own foreign packaging are warranted, too, to help them win the match point against parallel imports.