How should a brand coexistence agreement, made long before the internet gained any kind of popularity, apply to global online use? This was the question before the courts in Merck KGaA v Merck Sharp & Dohme Corp and others [2016] EWHC 49 (Pat). Add to that the complication of a contract under foreign law and a shared history of branding, and this dispute provides a useful insight into the English courts’ approach to international trade mark disputes.

The murky past

The Merck name has long been associated with the pharmaceutical industry, with the first apothecary business appearing in Germany in the 17th century. The brand grew and spread its wings internationally. As with several others at the time, the US wing of Merck was nationalised during the first world war and re-established as a separate business under independent ownership. The US business later merged with Sharp & Dohme and subsequently spread into Canada.

In the meantime, the German-based Merck continued to grow, such that it was operational around the world. The split history of the two businesses using the same name naturally led to concerns about confusion.

In a series of agreements from the 1930s to 1970s, the parties entered into a coexistence arrangement. Roughly put, the German-based business (labelled ‘Merck Global’ by the judge in this case) was entitled to use the ‘Merck’ name freely outside the US and Canada, and to use the name within the US and Canada in the form ‘E.Merck, Darmstadt, Germany’.

The US business (‘Merck US’) was entitled to use the ‘Merck’ name freely within the US and Canada, but in the rest of the world it must distinguish itself by using the form ‘Merck & Co, Rahway, NJ, USA’. Merck Global also agreed that the name ‘Merck Sharp & Dohme’ was not confusingly similar to any of its trade marks. It was also recognised that there could be some practical issues concerning correspondence, business cards and the like, as well as advertisements in, say, a German journal which was later distributed in the US. The parties therefore agreed that the other could use its domestic stationery in foreign correspondence, and that it could use the ‘Merck’ name when advertising in journals emanating from its own side of the geographical boundary.

When these agreements were concluded in the mid-1970s, the internet was little more than a grand research project, with only a handful of sites within the US. The beginnings of the world wide web as we know it would not be imagined for another 15 years.

Fast forward to the 21st century and both Merck businesses have significant online presences, accessible from anywhere in the world, dealing in a range of pharmaceutical products. The question was asked of the English courts: how does the coexistence agreement apply?

An international dispute

In an earlier hearing ([2014] EWHC 3867 (Ch)), it was determined that the governing law of the coexistence agreement was German. It therefore fell to the English courts to apply German law in its judgment. The principal issues included the use by Merck US of websites under domain names such as ‘merck.com’, and the use of the ‘Merck’ name and the ‘MERCK Be Well’ logo on those websites, and whether that use had taken place within the UK.

It was common ground that the website was accessible in the UK. The court noted that it included a section on licensing which listed contacts in various regions, including the UK, which linked to an ‘@merck.com’ email address. There were also careers pages and supplier pages, including for example UK-specific terms and conditions, which used the phrase ‘Life at Merck’ and the ‘MERCK Be Well’ logo. The websites also included various other links and information on products and projects which were described as ‘global’ or otherwise contained information specific to the UK, using the ‘Merck’ name in some way.

Merck US pointed to the fact that the website’s terms of use expressly stated that it was ‘intended for use by residents of the US’. The website was, they say, targeted only at the US and Canada, and any overspill was unfortunate and unpreventable. They argued that any online use outside the US and Canada was de minimis, with UK access to the merck.com website averaging around 3% per annum. Furthermore, even if there were significant use of the brand outside the US and Canada, this was permitted by the coexistence agreement, since it allowed advertising which emanated from its own territories.

The judge was not convinced. It is important to remember that this was a decision made applying German law (in particular, German contract law), however one might expect that a similar conclusion would be reached under English law.

  • The judge found that the website was directed at the UK. The evidence pointed to the website being ‘global’, and specifically targeted scientists, potential employees and suppliers within the UK. The statement in the terms of use was a ‘fig leaf’, contradicted by the website content.
  • The de minimis argument was acceptable under German law, but it did not succeed. While UK access accounted for 3.5% of all global traffic to the website, it accounted for 26% of traffic outside the US and Canada, that is, in the territories where use of the name was restricted.
  • As regards the analogy to advertising in journals, there was a marked difference between the distribution, outside of a party’s control, of third-party material containing the name, and the liberal use of the name in a party’s own website.

The court held that Merck US was therefore in breach of the coexistence agreement. For good measure, it also went on to find infringement of Merck Global’s registered trade marks. Merck Global was entitled to appropriate injunctions, ending deployment of the ‘merck.com’ domain name in the UK (for which some form of geo-targeting would be sufficient), and where links are followed to the US website, a pop-up should properly explain the distinction around the use of the ‘Merck’ name. Email addresses would also have to be localised.

Tomorrow’s world

This is the latest in a range of cases that have had to deal with the moulding of historic agreements to unforeseen changes in technology or circumstances, flowing through, for example, Apple Corps v Apple Computers, World Wide Fund for Nature v World Wrestling Federation, and Dearlove v Combs. The additional dimension of having to apply a foreign law was another complicating factor.

Nevertheless, the case should serve as a worthwhile guide to the global use of trade marks online, and provide yet more tips for practitioners in preparing settlement agreements. While it is perhaps impossible to 100% future-proof any brand coexistence agreement against the ever-changing technological landscape, brand owners should now be well aware of the way in which trade marks can be used online and how business can be targeted at the UK and other countries.

The internet has made the world a smaller place, and where brand coincidence cannot be avoided, greater care is needed to avoid brand confusion.

Jim McDonnell, DLA Piper

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