Whose link is it anyway?

5th Jun 2019

Rose Smalley answers a crucial question. [2019] EWHC 599 (IPEC), Nomination Di Antonio E Paolo Gensini SNC & Anor v Brealey & Anor (t/a JSC Jewellery), High Court, 13th March 2019.

[2019] EWHC 599 (IPEC), Nomination Di Antonio E Paolo Gensini SNC & Anor v Brealey & Anor (t/a JSC Jewellery), High Court, 13th March 2019

Key points

• Manufacturers and retailers should consider express restrictions on distributors and agents for the disassembly and resale of parts of complex products
• Resellers should be careful that any repackaging complies, at all times, with the BMS conditions

Is the purchaser of a product sold under a trade mark entitled to disassemble the product and sell component parts thereunder? This is the question addressed in this case. 

The Claimants (Nomination) were responsible for the sale and marketing of a “composable bracelet”, comprising individual links that could be detached and relinked. The links available included “base links” that bore the mark NOMINATION, protected by EU and International trade mark registrations in class 14 (the Mark). 

The Defendants, husband and wife, traded as a partnership named JSC Jewellery (JSC). In 2011, JSC’s eBay listing for its own composable charm bracelet – sold since 2004 under a UK trade mark logo for “Daisy Charm” – was amended to state that the product “fits Nomination”; this was subsequently removed in 2013 due to a change in eBay’s rules. 

Shortly thereafter, JSC began purchasing Nomination “base bracelets” (no decorated or charm links) and disassembling them to sell the individual links alongside its own. When repackaged, Nomination’s base links were separated from JSC’s links and put in either a separate blister pack, or a plastic bag that bore the label “Manufactured by Nomination Italy Repackaged by JSC Jewellery UK”. These bundles were sold on JSC’s eBay site.

Nomination issued proceedings alleging trade mark infringement in relation to JSC’s advertising and sale of bundled base links, and that JSC had passed off the bundles as being goods made or authorised by, or otherwise associated with, Nomination. 

Use considered

Counsel for JSC argued Nomination had exhausted its rights in the Mark under Article 7(1) of Directive 2008/95/EC (the Directive). Counsel suggested that Nomination had never previously contractually or otherwise expressly restricted retailers from selling individual base links, even though the possibility must have been foreseen given the nature of the product. His Honour Judge Hacon considered such arguments briefly but believed the case could be decided by reference to Article 7(2) of the Directive, although he stated his doubts regarding whether “Nomination had reached any decided view about the sale of their individual base links” at the appropriate time.

Under Article 7(2) of the Directive, HHJ Hacon considered a number of “legitimate reasons” put forward by Nomination, including: 

• Nomination’s retailers were not entitled to sell base links, or base bracelets without a charm link; 
• Nomination’s high-quality packaging; 
• The written guarantee included within Nomination’s packaging; 
• The failure of JSC to identify itself as having repackaged Nomination’s links on some of the packaging; and
• The potential physical damage the repackaging could cause to Nomination’s products.

HHJ Hacon dismissed reasons (1) and (3) simply on the evidence presented. Reasons (4) and (5), which mirror the second and third conditions of the test set out in Bristol-Myers Squibb v Paranova A/S (BMS), were also dismissed, the judge holding that the facts in BMS could be distinguished from the present case. This was because BMS concerned pharmaceuticals that require a clear supply trail and are much more sensitive to the packaging used to contain them. 

HHJ Hacon did, however, accept reason (2). Referring to the fourth condition set out in BMS, namely “the presentation of the repackaged product is not liable to damage the reputation of the trade mark and of its owner”, he referred to the luxury impression that the high-quality packaging used by Nomination gave its product, and contrasted this with the blister packs and plastic bags used by JSC (of which he noted “no one could say that… packaging conveys an impression of quality”). HHJ Hacon was therefore satisfied that JSC’s packaging was likely to damage Nomination’s luxury reputation. 

As a result, the judge held that Nomination had legitimate reason to oppose JSC’s sales of Nomination base links, and such sales infringed the Mark. 

The judge also considered whether JSC had used the Mark in relation to its own links. He held the advertising of the bundled Nomination and JSC links sent a “blurred message about the manufacturing source” and that JSC had, therefore, infringed the Mark. 

Passing off

While Nomination’s goodwill had already been accepted by JSC, HHJ Hacon further held that the blurred advertising and subsequent confusion (evidenced in letters sent to retailers by disgruntled customers of bundled links from JSC) showed that misrepresentation had occurred and had caused damage to Nomination. 

Ultimately, although the judgment found in Nomination’s favour, the judge remarked that they did not appear to have considered their position on the resale of parts from disassembled products. Perhaps, rather than permit such leniency for such rights-holders in future, the judge’s comments signal that manufacturers and retailers should consider including express restrictions (in contracts or brand/product guidelines) if such disassembly is not permitted, given that this is now a known issue. 

It also seems that Nomination has been somewhat fortunate that JSC made some mistakes by: (i) using inferior repackaging; and/or (ii) not making it consistently clear which links had been manufactured by which party. With regard to the former, one queries whether the BMS condition would bite in circumstances where the repackaged product was more elaborate than the original if, for example, the original brand has a reputation for affordable, attainable products – given that this has the potential to “damage the reputation of the trade mark and its owner”. 

HHJ Hacon’s comments also make clear that the BMS conditions are not always applicable in an identical fashion to products other than pharmaceuticals; certain types of goods (sensitive, perishable) may be more susceptible to damage depending on the packaging used.

Rose Smalley is an Associate Solicitor at Womble Bond Dickinson (UK) LLP

Co-authored by Simon Wyatt, Trainee Solicitor at Womble Bond Dickinson (UK) LLP

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