ITMA 322 APRIL 2005

Stone Island
CASE COMMENTS
Sportswear Company Spa and Four Marketing Ltd v Sarbeet Ghattaura and Stonestyle Ltd (27 & 28 June 2005)
before the Honourable Justice Warren
The court had to determine whether the requirement
of having garment codes in the clothing supplied by
the claimant Sportswear Company to its distributors
would constitute a breach of Article 81 of the EU
Treaty, and whether this would disentitle the
claimants from initiating a trade mark infringement
proceedings against the defendants. Article 81 prohibits
an agreement or concerted practice which may
affect trade between member states and whose object
or effect is to prevent unfair competition. It requires
that the effect on trade be appreciable, which is determined
by an economic analysis of the relevant market
and the trader’s place in, and share of it. This has
been explained by the ECJ in Volk v Vervaecke [1969]
EC 295 and Miller v EC Commission [1978] 2 CMLR
334.
The claimants, Sportswear Company, alleged
infringement of their trade mark STONE ISLAND
and wanted to prevent the sale of their clothing under
the brand name by the defendants, Sarbeet Ghattaura
and Stonestyle Ltd, because they have been selling
Stone Island clothing with labels defaced and/or
swing tags cut out and defaced. The labels had garment
codes which help the claimants to find out to
which of its distributors/customers their clothing was
originally sold. The defendants alleged that the intention
of the claimants is mainly to locate the person to
whom the clothing was originally supplied through
the garment codes, so that they can cut off supplies
and ruin the defendants’ business.
Beside this, the defendants also rely on the agreements
made by the claimants, which the defendants
believe to be anti-competitive and in breach of Article
81 of the EU Treaty. This refers to Section 12(2)1 of the
Trade Marks Act, 1994, which states that Section 12(1),
which refer to exhaustion of proprietors’ rights, does
not apply where there exists legitimate reasons for the
proprietor to oppose further dealings in the goods (in
particular, where the condition of the goods has been
changed or impaired after they have been put on the
market).
The defences did not clearly state two issues, ie
how the agreements affect trade between member
states in the context of “appreciable effect of trade”,
because the claimants had stated that they are a small
undertaking and therefore their activities would not
have an appreciable effect on trade, and even if there
be a breach of Article 81, how it would be a defence to
a trade mark infringement.
The defendants accepted that they were wrong with
respect to the above point and were given an opportunity
to amend the pleadings. The claimants stated
that there is no nexus between the relief sought and
the breach of Article 81. Actually, the defendants
claim the right to do what they would otherwise be
prohibited because of some contractual relationship
between the claimants and third parties. In this
regard, the judgment of Sir Robert Megarry VC in
Imperial Chemical Industries v Berk Pharmaceuticals,
[1981] FSR 1, 2 CMLR 91 was relied by the judge in
arriving at a decision regarding the defence. In that,
the judge struck out a paragraph in the defence which
pleaded that by reason of breaches of Article 86 [now
Article 82] the plaintiffs were debarred from relief
against passing off on the ground of the lack of nexus
between the abuse pleaded and right claimed by the
defendants. It was decided that there is no nexus
between the alleged anti-competitive agreement made
by the claimants and the current trade mark infringement
proceedings. The judge also relied upon Sandvik
v Pffifner [2000] FSR 17 at p 62, in that Neuberger J
made the point that there needs to be a nexus
between the alleged anti-competitive agreement and
the proceedings in the context of a patent infringement
action where defenses based on breach of
Community law were raised.
The defendants and the claimants referred to the
decision of Laddie J in Philips Electronics NV v Ingman
Ltd [1999] FSR 112. The defendants further relied on
the decision of Court of Appeal in Intel Corporation v
Via Technologies Inc [2002] EWCA Civ 1905 to show
that a breach of Article 81 can give rise to a defence to
patent infringement proceedings and the same
applies to trade mark infringement proceedings.
However in the Philips case, the complainant had
forced the defendant to enter into a licence agreement,
which violated Article 81. Therefore, it was
decided that both the cases were not appropriate to
the current issue.
The defendants submitted arguments to show that
there is a nexus between EU competition law and the
Trade Marks Act 1994. They relied on what was said
in the ECJ case, Frits Loendersloot t/a Loendersloot
Internationale Expeditie v George Ballantine & Sons Ltd.
This case involves removal of identification numbers
from whisky bottles. Paragraph 43 states:
“Where it is established that the identification numbers
have been applied for purposes which are legitimate
from the point of view of Community law, but
are also used by the trade mark owner to enable him
Continued on page 20
1 12 (1) A registered trade mark is not infringed by the use of the trade mark in relation to goods which
have been put on the market in the European Economic Area under that trade mark by the proprietor or
with this consent.
(2) Subsection (1) does not apply where there exist legitimate reasons for the proprietor to oppose further
dealings in the goods (in particular, where the condition of the goods has been changed or impaired after
they have been put on the market).
December 2005 ITMA Review 19