M-Tech given Court of Appeal boost in Sun row

Harvey Stringfellow: This case provides a warning to trademark holders to be careful in the enforcement of their rights

M-Tech Data has got the better of Oracle as the Court of Appeal refused to reinforce the High Court's ruling that the distributor infringed the vendor giant's trademarks.

In December, three months prior to its acquisition by Oracle, Sun Microsystems collared M-Tech for importing its products into the European Economic Area (EEA) without authorisation. The High Court of Justice ruled that the Mancunian distributor had violated Sun's trademarks.

M-Tech had bought second-hand Sun kit from a US firm and was bashed for bringing goods into the EEA, which did not bear an EEA trademark. The distributor has maintained all along that Sun has no place enforcing its trademark rights as independent traders are unable to tell the provenance of products.

The vendor and its registered channel can make reference to serial numbers and databases to ascertain from where a product originated. But M-Tech claims the fact that independent traders are not given access to this information, coupled with the vendor's "aggressive litigation strategy", negates its trademark rights.

The firm believes Sun's policy has led to "artificial partitioning" of the market. The fact that Oracle authorised distributors are banned from buying through independent channels is also anti-competitive, according to M-Tech.

The Court of Appeal today announced that it has not backed the High Court's summary judgment in favour of Oracle. The court has ruled that M-Tech has grounds for defence and the matter is now set to go to trial, the ramifications of which could impact the entire industry.

“This case clearly has important financial and economic implications not just for the parties involved, but also for others involved in the grey market in Oracle [goods], and possibly other computer hardware and goods," said the court. "The economic function of parallel imports and the grey market is controversial.”

The court also pointed out that, in 2007, sales of IT hardware in the EU were worth €260bn (£213bn), of which €160bn was contributed by independent resellers. Harvey Stringfellow of Hill Dickinson LLP, which has been representing M-Tech, claimed today's ruling could buoy other traders on the wrong end of trademark rulings.

“This judgment has very important consequences for the parallel market because it is often the case that the independent sector cannot determine the provenance of branded goods and thus are often sued for inadvertent trademark infringement as a result of trap purchases by brand owners," he said.

"This case provides a potential defence to parallel importers and a warning to trademark holders that they may have to be careful in the enforcement of their rights."