The governing law of a trade mark settlement agreement, or other contract, is less often the subject of pre-settlement haggling than the question of which court will have jurisdiction but, when Merck KGaA, Germany ("Merck Global") sued Merck Sharp & Dohme Corp, USA ("Merck US"), the governing law had a decisive impact on the claim for breach of contract.
The companies had been run separately since the early 1920s, and though from time to time differences had arisen they had cooperated to iron these out. It was the use of the word MERCK by Merck US on websites, in social media, and in email addresses, that led to this dispute. Merck US had not offered for sale, or sold, goods in the UK by reference to the mark MERCK. Nevertheless it operated an integrated group of websites and social media sites which, amongst other things, sought licensing opportunities in the UK and to recruit people with UK qualifications to jobs in the UK. In 2013 Merck Global issued proceedings in the UK against Merck US for infringement of registered trade mark and breach of contract.
The court had to consider the terms of coexistence agreements ("the Agreements") which the parties had entered into in 1955, and subsequently in 1970. The Agreements were governed by German law.
The interpretation of contracts in writing under German law is very different from that under English law. The German court will seek to ascertain, objectively, the true intention of the parties and will be much more ready than an English court to go beyond the wording of a contract in order to give effect to its purpose. The behaviour of the parties and the content of their negotiations leading up to the contract, as well as their conduct and any statements they have made since the contract was entered into, may all be relevant for the court's assessment. Interestingly, if the language of the contract does not explicitly cover a particular situation, the German court will use its interpretative tools to assess whether this is an "unintentional gap" such that the contract can be read as covering it. The court will consider what the parties would reasonably have agreed on had they thought of the situation, for example the advent of CDs would be covered by an earlier agreement about vinyl records.
Although the Agreements specifically addressed only the use of MERCK as a trade mark, the court acknowledged the significance of various communications between the parties since the Agreements were entered into; these revealed that the parties recognised and understood that they had in fact agreed not to use MERCK on its own as a corporate, trade or business name in each other's territories. Therefore, according to the German law reading, there was no credible argument that use of MERCK on its own as a firm or company name was acceptable under the terms of the Agreements.
One of the defences advanced by Merck US to the trade mark infringement claim was the long period of honest concurrent use. It was accepted that Merck US had not consciously acted in breach of the Agreements. However, this defence was dismissed in short order on the basis that the infringing uses breached the terms of the Agreements and, considered in context, must have affected the essential function of the claimant's trade marks. The shelter of the honest concurrent use defence was therefore denied to Merck US.
Also at issue was the extent to which the counterclaim to revoke Merck Global's UK registration should succeed. This covered "pharmaceutical substances and preparations" which, the court noted, included a number of subcategories. It was accepted that the mark had been used for preparations for the treatment of cancer, multiple sclerosis, infertility, endocrine disorders, cardiovascular diseases, peripheral vascular disorders, alcohol dependence, asthma, depression, parasitic worm infections, endometriosis and intestinal disorders. The court expressed concern that these descriptions had been expressed too narrowly. However, its role was to find a balance between fair specification and exorbitant protection, and it was not satisfied that Merck Global was entitled to maintain the registration for all pharmaceuticals. This issue has been remitted for further assessment.
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