Sony sends grey market PlayStation retailer offline

In Sony v Pacific Game Technology, the High Court of England and Wales has issued an uncontested judgment in favour of Sony against a parallel importer of its PlayStation Portable (PSP) from Hong Kong, sold via the defendant's Hong Kong-based website.

Sony brought action against Pacific Game Technology, a Hong Kong company which operates the website 'www.lik-sang.com', selling games consoles, such as the PlayStation 2, Xbox 360 and PSP, as well as games for those consoles, and shipping those products worldwide. This action was aimed at Pacific's sale of handheld PSP consoles, which it sold for a little more than £100, compared to the £179 or so the product is sold for in the United Kingdom. There was no doubt that the PSPs were genuine, although they were produced for sale and distribution in Japan and, as such, came in packaging and with instructions printed largely in Japanese. The consoles were also marked "For sale and use in Japan only".

Sony relied on a number of its registered trademarks, registered designs for the PSP and a variety of copyright works, including the PSP system software and the surface design of the packaging, which it said Pacific infringed by selling PSPs in the United Kingdom and Europe.

The High Court first looked at whether there could in fact be said to be no infringement of Sony's IP rights by the sale of PSPs into the United Kingdom and Europe because those goods had been put on the market in the European Economic Area (EEA) with the consent of Sony. Under Section 12(1) of the Trademarks Act 1994, there is no infringement of trademark rights in such a case. Similar provisions exist for registered designs (Section 7A(4) Registered Designs Act 1949, Article 21 of Community Design Implementation Regulation) and copyright (Section 18(2) Copyright, Designs and Patents Act 1988).

The issue of "exhaustion of rights" or "Community exhaustion", was considered by the European Court of Justice (ECJ) in Zino Davidoff v A&G Imports/Levi Strauss v Tesco Stores, in the context of trademarks, but the court accepted that its principles applied equally to causes of action in designs and copyright. In Zino Davidoff, the ECJ held that consent of the trademark proprietor to the marketing of goods within the EEA bearing that trademark which had previously been placed on the market outside of the EEA by the proprietor or with its consent, could be implied as well as express, giving the following guidance:

• Consent could be implied by facts and circumstances around the time that the goods were put on the market outside of the EEA, which unequivocally demonstrated that the proprietor had renounced its right to oppose the marketing of the goods inside the EEA.
  
  
• Implied consent could not be inferred from:
  
  
  • the failure of the proprietor to communicate to all subsequent purchasers that it did oppose such marketing;
    
    
  • the lack of a warning to that effect on the goods; and
    
    
  • the lack of appropriate contractual reservations in contracts transferring ownership of the goods.
    
    
• It is not relevant to exhaustion of rights that the importer of goods bearing the trademark is not aware that the proprietor objects to their being placed on the market within the EEA, or that authorized retailers or wholesalers, knowing of the proprietor's opposition, have not imposed contractual reservations on their customers setting out such opposition.

Although the court did not then explain how it applied these points to the present case, given that the consoles were marked that they were "Only to be sold in Japan", its decision that the acts complained of were made without Sony's consent is unsurprising.

Pacific had claimed that its business and website had no trading presence in the United Kingdom or the EEA, and that its name, Lik Sang, only had meaning in Cantonese, in order to argue that it had not been offering to sell PSPs in the United Kingdom (or the EEA). Referring to the judgment in Euromarket Designs Inc v Peters [2001] FSR 20, in which the court considered whether a sign placed on an Irish website could amount to use of that sign in every jurisdiction from which it was accessible, and, therefore, constitute an infringement where rights in a trademark identical to that sign existed in the United Kingdom. In Euromarket, the court held that the Irish website, which was promoting an actual store in Dublin, had not given an internet user from outside of Ireland any reason to think that the website was directed at him. The website did not actively seek out worldwide trade, advertise its business in other jurisdictions or make any real supply of its products to other countries. However, in Pacific's case, the website was quite different:

• the website was in English and English was its default language;
  
  
• the prices quoted were in sterling and sterling was the default currency when the site was accessed from the United Kingdom. Promotions were given in sterling as well;
  
  
• PSP manuals were available on the website in various European languages, including English;
  
  
• there were a number of testimonials on the website from UK purchasers;
  
  
• Pacific ran a free shipping promotion until the very day before the PSP was launched in Europe; and
  
  
• a spurious EC Certificate of Conformity was included with the product shipped to Europe.

In view of these facts, the court had no trouble in finding that Pacific had focused its website at least in part on the EEA. It concluded "it would make no sense if IP rights in the EEA could be avoided merely by setting up a website outside the EEA crafted to sell within it".

The decision confirms that there is no concept of worldwide exhaustion of rights, and that consent to such exhaustion will not be permitted without "unequivocal" renunciation of rights by the trademark proprietor and indeed the proprietor of design rights and copyrights. It also confirms that an importer cannot hide behind a 'foreign' website when infringing IP rights if it is clearly pursuing UK or European customers.

Mark Shillito and Darren Meale, Herbert Smith, London