England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
Peter Prescott QC (sitting as a Deputy High Court Judge)
HC03 00464

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th March 2004

Lord Justice Jacob:

1. These are appeals and cross-appeals from judgments dated 31^st July and 8^th December 2003 of Mr Peter Prescott QC sitting as a Deputy Judge of the Chancery Division. The claimants are Glaxo Group Limited, represented by Mr Peter Leaver QC and Mr Guy Hollingworth. The first defendants are Dowelhurst Limited, and the second defendant is their principal shareholder, Mr Richard Taylor. They are represented by Mr Guy Burkill QC.
2. The Deputy Judge was concerned with an application under Part 24 of the CPR. The claim is for trade mark infringement. The Deputy Judge summarised the complaints and defence in paragraphs 5-7 of the judgment which, for convenience, I repeat here:

"5. The claimants say that they sold certain pharmaceuticals, bearing their registered trade marks, to various parties at low prices on the understanding that they were for use in Africa. Instead of being utilised for this humanitarian purpose the goods were fraudulently diverted to a Swiss company called Horn & Cie. Horn & Cie sold them on to the First Defendants. The First Defendants imported them into the UK and sold them to hospitals. Hence the First Defendants infringed the registered trade marks. Furthermore the Second Defendant was the person who saw to it that the goods were sourced from Horn & Cie and put on the market here. Thus he is jointly liable with his company: not in mere virtue of being a director, as such, but because he personally directed the acts complained of.

6. Amongst other relief the Claimants seek an injunction in absolute terms: in other words, the Defendants would breach the injunction and would be in contempt of court if they were to infringe the trade marks again, even inadvertently. The Claimants say it is up to the Defendants to satisfy themselves that any given consignment of goods is legitimate; and if it is not, they act at their peril.

"7. The Defendants point out that these were the genuine goods of the Claimants and were supplied by the Claimants in packaging which was appropriate for the European market. They even bore a European product licence number. There was nothing to advise traders that they were meant for Africa or must not to be sold on the European market – not even a sticker. On the facts, the goods were first put on the market within the European Economic Area by the Claimants, and not the Defendants. This is because the Claimants sold and delivered the goods to initial purchasers in France, not Africa. It follows that their trade mark rights were exhausted and they cannot complain, see Trade Marks Act 1994 s.12. Even if that is not so, the court should not exercise its discretion by granting an injunction in absolute terms. It is never possible to be sure about the past trading history of a given consignment of goods emanating from the Claimants, hence an absolute injunction would be a deterrent to legitimate trade."

3. It is of course well settled that goods put on a market outside the European Economic Area ("EEA") under a registered trade mark may not be imported into the EEA where they bear a trade mark registered in the relevant territory of the EEA unless the registered proprietor has given his consent. The chain of cases consisting of Silhouette International v Hartlauer (Case C-355/96 [1998] FSR 729), Zino Davidoff v A&G Imports (Case C-414/99 [2002] RPC 20) and van Doren v Lifestyle Sports (Case C-244/00 [2003] ETMR 75) confirms that this is so.
4. It is equally well established that where goods are put on the market within the EEA by the proprietor, or with his consent, he is taken to have exhausted his intellectual property rights including particularly his trade marks. This rule goes back as far as Centrafarm v Winthrop [1974] ECR 1183. Art.7 of the Trade Marks Directive (EEC 89/104), enacted in the UK by s.12 of the Trade Marks Act 1994, embodies the Centrafarm principle. It provides:

"Exhaustion of the rights conferred by a trade mark

1. The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.

2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialization of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market."

(The reference to the Community is now to the EEA by virtue of the EEA Agreement. Nothing turns on this.)

5. Glaxo's registered trade marks in suit are Trizivir, Combivir, Epivir and Serevent. The first three are used for drugs for treating HIV infections, the last for a respiratory drug. Glaxo originally sold the drugs concerned to buyers called Keren, Intermed, Uniworld and L'Afrique aide L'Afrique who in turn sold them to Horn et Cie. It is common ground that Dowelhurst bought 16 consignments of these drugs from Horne et Cie, imported them into the UK and sold them there. The drugs as bought were in Glaxo's standard French packaging. This included the appropriate EMEA (European Medicines Evaluation Agency) number indicating approval by the Agency for sale within the EEA.
6. As any student of the repackaging cases would know, to be able to sell in the UK product which is freely on the market elsewhere within the EEA, it is necessary to repackage medicines so that they have appropriate English language information leaflets and an appropriate indication that they have been imported and who the importer is. The case law also indicates that it is necessary for the parallel importer who proposes to re-package to give the trade mark owner notice including details of his proposed pack or stickered product. In the case of Trizivir, Dowelhurst sent a sample of their box with a sticker and its information leaflet to Glaxo. Glaxo made no objection at the time. This shows at the very least that it was not obvious to those responsible at Glaxo for overseeing parallel imports that this was an illegitimate parallel import. Looked at from the Dowelhurst point of view the product had been sent for indications of possible objection and none came until the present action about a year later.
7. Glaxo submit that each importation into the UK and the subsequent sales are clear cases of infringement. They say it is clear beyond reasonable argument that none of the original batches were destined for the European market and that they were not put on the market in the EEA by them or with their consent. Glaxo say the position is so clear that they should have judgment pursuant to CPR Part 24.2 on the grounds that "the defendant has no real prospect of successfully defending the claim" and "there is no other compelling reason why the case …. should be disposed of at a trial."
8. As to the principles to be applied in relation to Part 24.2 there was no relevant dispute that the Judge set them out correctly in paragraphs 9-18 of his judgment. It would serve no useful purpose to repeat them here, or to recite again familiar passages from the well-known speeches in Three Rivers DC v Bank of England [2001] UKHL 16.
9. Applying those principles the Deputy Judge held that there were real prospects of successfully defending the claim in respect of 15 out of the 16 batches. But he thought that there was no prospect of successful defence in relation to the remaining batch. Because there was success in relation to that batch, he granted an injunction against Dowelhurst prohibiting future infringement. That he qualified, however, in a manner objected to by Glaxo. He awarded an account of profits against Dowelhurst in respect of that batch. He also found that the second defendant, Mr Taylor, was responsible in law for that infringement and, as against him, also awarded an account of profits. He decided to apportion costs, awarding Dowelhurst the lion's share (90% of the main hearings and 100% of a minor one).
10. With the permission of the Deputy Judge (and myself in relation to costs), Glaxo appeal:

i) The refusal of summary judgment in respect of the 15 batches;

ii) The decision to qualify the injunction;

iii) The costs order.

11. Also with the permission of the Deputy Judge, the Defendants cross-appeal:

i) The finding of liability in respect of the single batch;

ii) The finding of liability against Mr Taylor.

The defendants also seek to support the finding as regards the 15 batches on additional grounds.

Put on the EEA market by Glaxo

12. I turn first to Mr Leaver's principal point – the "put on the market" point. If one looks at the contractual documentation (or at least the invoices) for the 15 consignments concerned (only 11 can be pinpointed exactly from batch numbers) one can see that in every case, an ultimate destination in Africa is identified. On the other hand there is, on what we have seen, no requirement on the buyer actually to take the goods to the ultimate destination mentioned. It seems, at present, that as a matter of contract the buyers were free to sell the goods within the EEA. It may be, accepts Mr Leaver, that possession or ownership of the goods actually passed to the customer within the EEA. But he says that is not enough. Even if the customer is at liberty to resell within the EEA, if it is the seller's intention that the goods should only go on the market outside the EEA they cannot be regarded as put on the market within the EEA by the seller. That is so, either if the intention is unexpressed to the buyer or alternatively (which is good enough here) if the buyer knows of that intention.
13. In short, Mr Leaver submits that "put on the market" does not mean merely "sold in the market". The seller's intention comes into it too. He relies on a Commission publication Guide to the Implementation of Directives based on the New Approach and the Global Approach. This contains a passage saying:

"Placing on the market is the initial action of making a product available for the first time on the Community market, with a view to distribution or use in the Community."

And, in a little more detail:

"A product is placed on the Community market when it is made available for the first time. This is considered to take place when a product is transferred from the stage of manufacture with the intention of distribution or use on the Community market (30). Moreover, the concept of placing on the market refers to each individual product, not to a type of product, and whether it was manufactured as an individual unit or in a series."

Here, he says, there was no "view to distribution or use in the Community."

14. Glaxo's position on the facts is summarised by Mr El-Alaoui, Glaxo's General Manager, Pharmaceuticals International zone of West and Central Africa:

"In the case of supplies for ultimate destination in African Francophone countries we regularly deliver to the addresses in France of our customers' freight forwarders. This is so that the customers can collect all products from all their suppliers in one place, thereby enabling them to ship consignments out in a more cost effective manner."

And Mr Thoin, their export distribution manager in Evreux, France, put it this way:

"GSK's responsibility ended as soon as we delivered the goods to the customer's agent. In Keren's case the freight forwarder was Egetra. In Intermed's case, the freight forwarder was AFSA. The two freight forwarders are based in France. Finally, in Uniworld's case, the products were collected directly by Uniworld's freight forwarders, Barbiero, in GSK's premises located in Evreux."

15. Mr Leaver submits that there was cheating by the buyers who bought the goods on the pretence that they would go to Africa and then diverted them to Europe. And that may be so, though if they broke no contract, it is perhaps difficult to characterise them properly as "cheats." Nor is it self-evident that Dowelhurst, two stages down the chain, should be regarded as implicated in some way with the cheating.
16. An important national court, the Hanseatisches Oberlandesgericht in Hamburg has held (in an interim decision) on essentially the same facts as those, that goods are put on the market where the buyer has the power of disposal within the market. The case is Glaxo v Kohlpharma decided on 20^th March last year. Mr Cox, Glaxo's chief deponent in these proceedings, was also their representative in those proceedings. Some criticism is, I think, justifiably to be levelled at Glaxo (though not those representing them before us) for not drawing attention to this decision. Mr Leaver told us that unfortunately Mr Cox was in and out of hospital at around that period. But he was well enough to be making a witness statement in support of the Part 24 application on 15^th April some three weeks after the decision. Those concerned with litigation of identical or closely similar points in various national courts around Europe must expect criticism if they fail to draw to the attention of one court concerned with the point highly relevant to a decision of another court of which they are aware.
17. What the Oberlandesgericht said in respect of certain of the consignments which it had to consider was:

"Even on the basis of the facts presented by the Applicants, the trademark rights have been exhausted with regard to these pharmaceuticals, since the Applicant No 1) itself marketed these pharmaceuticals in the European Union by handing them over to the companies INTERMED respectively COGEZAF.

"The goods are marketed by the trademark owner, once it transfers the power of disposal of the goods to a third party (Ingerl/Rohnke, "Markengestez", Sec. 24 no 7; "Markenrecht"; Schultz Sec.24 no.15). In a case where a trademark owner transfers this power of disposal to a purchaser or an independent third company, e.g. an intermediary, within the European Economic Area, this constitutes marketing of the goods (Schultz, "Markenrecht", Sec 24 no 17 seq.) In this respect, marketing of the goods by a member company of a group of companies is equal to the marketing by the trademark owner (Ingerl/Rohnk, "Markengesetz", Sec.24 no 7 with further references). It is disputed whether this also applies to a case in which a national producer hands over the goods to a national forwarding agent requiring of it that the goods be delivered abroad (supported by Ingetl/Rohnke, "Markengestez", Sec.24 no. 7.), or whether the supply to a transport company instructed by the trademark owner just as the supply to a member company of a group of companies cannot be considered to constitute marketing of the goods (supported by Schultz, "Markenrecht", Sec.24 no.15; Higher Regional Court Karlsruhe, GRUR 1999, 343, 345 – "REPLAY-Jeans"; see on the dispute also Althammer/Ströbele/Klaka, "MarkenG", 6^th Edition 2000, Sec. 24 no.7). This controversy, however, is not relevant in the present case, since the power of disposal was transferred to the companies COGEZAF and INTERMED, from whom PharmaJet and AD Pharm received the pharmaceuticals, by GSK France in France as independent intermediaries and not only as a forwarding agents. "

18. One of the buyers in the present case, as in Kohlpharma, was Intermed. Moreover the facts are essentially the same. So, as Mr Burkill pointed out, if we acceded to Mr Leaver's arguments there would be one national court of appeal saying the goods were lawfully on the market and another saying the opposite.
19. Mr Leaver was unable to distinguish what the Oberlandesgericht said. He was driven to submit that it would have decided otherwise if the Commission Guide which I have quoted had been shown to it. I am far from convinced that is so because:

i) The Guide explicitly warns that it is "not the last word on anything."

ii) It is essentially dealing with a general approach, particularly for things like product safety.

iii) It is only concerned with post-1985 Community legislation whereas the concept of putting on the market for intellectual property purposes is much older.

iv) Even on its face, the Guide contemplates something narrower than that contended for by Mr Leaver. Note 30 says "Thus imports for own use are also considered as being placed on the market at the moment they enter the Community." This excludes any notion of onward distribution which is essential to (or a large part of) Mr Leaver's case. A single owner within the Community may be enough.

20. It will be noted that the Oberlandesgericht expressed the view that goods were "on the market" even where the buyer is under a contractual duty to export them. I am not convinced of that but it seems to me to be clear that the point is arguable. Curiously Mr Leaver could not say whether, in the present case, Glaxo intended to allege such a contractual term – he said that was a matter for Glaxo's reply.
21. That served to highlight the fact that we do not at present know all the details about Glaxo's contracts of sale. In particular, as Mr Burkill QC pointed out, all the documentation which may be relevant to Glaxo's sales in question, has not yet been made available. The customers' orders, Glaxo's order acknowledgements, its standard terms of trade (if applicable) and the documents concerning payment by the customers have yet to be disclosed. If it is relevant (and it may be, particularly if the wider view taken by the Oberlandesgericht is right) the precise place of passing of property would or may depend on such documents. Moreover there is, perhaps, also the question of whether, notwithstanding what may be in the documents, Glaxo, at least at some level, knew and must be taken to have consented, to some of the goods going on the EEA market. It is, at first blush, surprising that one of the customers, Keren, was apparently a leather goods dealer with no known pharmaceutical business and apparently did not have the money to buy the drugs. It is suggested that Glaxo must have realised that the finance might come from onward sale within the EEA. I must make it clear that I do not accept that this is so – merely that a full trial should make things clear when they are not at present.
22. Kohlpharma is not the only decision casting considerable doubt on Mr Leaver's case. In Peak Holding v Axolin-Elinor a Swedish Court of Appeal in a decision of 19^th December 2002 felt doubt about the position where there is a sale to a buyer within the EEA on terms that he will not sell them there. It asked the ECJ (amongst other questions):

"3. Should goods be deemed to have been put on the market because they have been transferred by the trade mark owner to another company in the internal market, if the trade mark owner imposes restrictions upon the purchaser at the time of transfer that the latter may not sell the goods on within the common market? "

23. So the Swedish court felt doubt even where there is a contractual restriction. I rather suspect it assumed that absent such a restriction the goods were on the market if transferred to another company in the internal market. What can almost certainly be said is that if the ECJ answers "yes" to this question (thereby agreeing with the wider view of the Oberlandesgericht) then Mr Leaver's "intention" argument must be wrong.
24. Quite apart from the German and Swedish decisions it seems to me that Mr Leaver's "seller's intention" argument has considerable difficulties. Normally when one buys goods one can resell them. The sale conveys the right of onward disposal to the buyer. A buyer who initially buys goods in the EEA with one intention (e.g. export to Africa) is free to change his mind (sell within EEA). They are his goods. And it is not only buyers who can change their minds – sellers may do so also. It seems unlikely that "put on the market" can depend purely on the vagaries of an unenforceable and a freely changeable intention of either side.
25. Moreover Mr Leaver's argument seems to lead to a very odd position. If he is right, then although the goods were sold and handed over in France, they were not at that point put on the EEA market. But they clearly were not at that point put on the market of Glaxo's intended destination either – they had not even reached it and never did. That means though sold and delivered, they were not put on any market at all. Mr Leaver did not shrink from so contending, but it seems to me at the very least arguable that there is no halfway house – when sold, the goods are put on the market either in or outside the EEA.
26. Nor do I find Mr Leaver's reliance on the mere transit case of Commission v France Case C-23/99[2000] ECR I-7653 helpful. There the French authorities interfered with the transit of some spare parts made lawfully in Spain to Italy where they could be lawfully sold. It would, under French design law, have been unlawful to sell them in France. The interference was held unjustified. Mr Leaver suggested this case decided that intention was the governing factor – that because there was no intent to sell in France the goods were not regarded as "put on" the market in France. But it was far from being decided on that ground. The ECJ said that the impediment to free movement could not be justified on the grounds of the protection of industrial and commercial property – it was not the place of design law to provide impediments to goods in transit. The facts in the present cases are miles from transit.
27. With these expressions and doubts over the law, it is manifest, so far as the 15 consignments where the buyers took control of the goods in France (even, as emerged late and after a Glaxo assertion to the contrary, before they were cleared through Customs), that Glaxo are miles from showing that there are no real prospects of a successful defence. The Judge was right so to hold.
28. During the argument Mr Leaver adopted the fallback position of suggesting a reference. He proposed the following questions:

i) Have goods been put on the market in the EEA for the purposes of Article 7(1) of Directive 89/104 if the goods have been delivered by the trade mark proprietor to a purchaser within the EEA, but it is the proprietor's intention that the purchaser take the goods to a destination outside the EEA for onward sale?

ii) In considering question (1) are the following matters indicative or decisive:

a) Whether the proprietor's intention has been communicated to, understood by, or agreed to by the purchaser;

b) Whether there is a contractual term between the parties requiring the goods to be taken to a destination outside the EEA?

If the matters set out in questions (1) and (2) do not determine whether the goods have been put on the market in the EEA, how is the question of whether goods have been put on the market in the EEA for the purposes of Article 7(1) of Directive 89/104 to be determined? In particular, is it relevant:

i) Where the purchaser is geographically located;

ii) Where the contract of sale is concluded;

iii) Where the purchaser acquires the right of disposal in the goods, and whether that right is absolute or qualified?

29. I do not think we should make a reference at this stage. At present the full facts are not known, yet the detail may matter if there is a grey area between putting on the market in and out of the EEA. Moreover there are a number of other matters to go to trial, for instance the precise position of Mr Taylor, whether or not Mr Burkill's other defences (see below) succeed and so on. Finally it may be that the ECJ decision in Peak or the decision of the German courts in the full trial of Kohlpharma (or by the ECJ on any reference from it) will determine the points or at least some of then. The Kohlpharma trial is due shortly and the ECJ is, we were told, to hear Peak in the reasonably near future.

Other possible defences

30. So far as the 15 consignments are concerned it is not necessary to go further. But Mr Burkill raises other defences which apply across the board to all 16 consignments and therefore also to the single consignment the subject of his cross-appeal. Accordingly I must consider whether these defences have real prospects of success.
31. At their heart lies the fact that for all the world the products looked like those on the French home market. That in itself is not enough to provide a defence for goods imported into the EEA. That follows from Davidoff. The ECJ said:

"41 It therefore appears that consent, which is tantamount to the proprietor's renunciation of his exclusive right under Art. 5 of the Directive to prevent all third parties from importing goods bearing his trade mark, constitutes the decisive factor in the extinction of that right "

And the Court made it clear that only express consent would do:

"53 …. consent must be expressed positively and that the factors taken into consideration in finding implied consent must unequivocally demonstrate that the trade mark proprietor has renounced any intention to enforce his exclusive rights."

32. Mr Burkill says there is, arguably at least, such an unequivocal demonstration here. He relies upon the following passage in Mr Taylor's evidence:

"The product's packaging all bore an EMEA licence number which is considered a clear indication that the goods that the goods were placed on the market in the EEA by Glaxo or with their consent. It is common knowledge that where an originator wishes to sell products outside of the EEA, they either adopt a different pack design to that used by them in Europe, apply a non-EEA product licence number to them and/or attach stickers to the packaging stating that they are not for sale within the EEA"

33. If that statement is proved, then, says Mr Burkill, by their conduct Glaxo have given an unmistakeable signal that the goods are in free circulation. The Deputy Judge expressed some surprise that Glaxo had not taken any precautions to mark the drugs or packaging in some way and went into it at some length. Mr Leaver complained that his clients had not had an opportunity of commenting on the difficulties of such precautions. In the end I think these matters are peripheral – though I accept that it may be necessary and time consuming to get regulatory approval for the use of different dyes for the drugs themselves. Whether just deleting the EEA approval number or providing a sticker would be a serious impediment I wonder, though there is no need to go into this further at this stage.
34. Mr Burkill alternatively suggests that there is consent or estoppel under English law. I cannot see that these matters amount to more than another legal analysis of the unequivocal demonstration point.
35. Mr Leaver suggests that Mr Taylor and Dowelhurst must have known that the goods were not intended for Europe – he particularly relied upon the low prices at which Glaxo sold them. But those prices were to Glaxo's customers, not the price which Dowelhurst paid. Mr Taylor said that that price paid by Dowelhurst was of the same order as were paid for these drugs which were in free circulation and that the prices were not such as to put him on notice. Mr Leaver challenged that, saying Mr Taylor must have realised there were lower prices up the chain and so he must have known that the original sale price was much lower. But I do not see why – sellers seldom let their buyers know what profit they are making. On present information one cannot say Dowelhurst must or should have known that the goods were intended for Africa. This is not the sort of point which can be resolved on a summary application.
36. Whichever way it is put, on the basis of Mr Taylor's evidence there is enough to go to trial on this point. I would therefore reverse the Deputy Judge's finding that there is no real prospect of success in relation to the 16^th consignment and allow all the transactions to go to trial.

A particular defence concerning the 16^th consignment

37. There is another reason for so doing at this stage. The Deputy Judge held that they were delivered to the customer (L'Afrique aide L'Afrique) by the vendor's agent – "as if the claimants had carried the goods to Dakar in Senegal themselves". On that basis he held that Glaxo did not put the goods on the EEA market and there was no exhaustion defence.
38. Mr Burkill first submitted that that even if that analysis of the transaction is right there is an arguable defence. For this he relied upon a different translation of the Kohlpharma case to the one I have quoted above. In that translation it appeared that the court might have considered that mere delivery to the seller's carrier was enough to put the goods on the market. I do not think the Oberlandesgericht was endorsing that view – it merely said it did not have to decide it. I cannot believe that handing goods to your own carrier to take them out of the EEA amounts to putting them on the market within EEA. If that were Mr Burkill's only point I would have rejected it.
39. But there is another. The contract was "CIP Dakar." Mr Burkill took us to the definition of CIP which is to be found in an ICC publication. This says:

""Carriage and Insurance paid to …" means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any additional costs occurring after the goods have been so delivered. However, in CIP the seller also has to procure insurance against the buyer's risk of loss or damage to the goods during the carriage.

So, submitted Mr Burkill, even though the seller has to pay the insurance and pays the cost of carriage, it does not follow that the property in the goods does not pass before delivery at the destination. Risk (and perhaps property) passes when the goods are delivered to the carrier. So the buyer can, if he choses, re-direct the goods. If that is right then, submits Mr Burkill, the buyer has been given the right of subsequent disposal within the EEA and the goods are in free circulation. The position is rather like the host paying for the guest's taxi – it leaves the guest free not to take the taxi if he so pleases.

40. This analysis seems at least arguable. And Mr Leaver did not answer it specifically. It is fit to go to trial. In these circumstances there is no need to go to Mr Burkill's other point which was based on a particular clause in the LAL contract. The Deputy Judge rejected it, and, if it had been the only point, I would have done so too.

Other Issues

41. Since I hold the view that all consignments should go to trial, it follows that all other points in issue fall away including the injunction. I shall only mention a couple of them.
42. First there is the question of a qualified injunction. The Deputy Judge qualified the injunction by adding that there would be:

"no breach of the injunction if the defendant believed and had reasonable grounds for believing that the goods had been put on the market in the EEA under the trade mark by the proprietor or with his consent."

43. Glaxo submitted that there should be no qualification. But there are two difficulties with that. First there is clear unreported authority of this court that this sort of injunction is within the discretion of the Judge, Microsoft v Technology 15^th July 1999 [1999] EWCA Civ 1854. In that case Microsoft sought summary judgment in respect of infringement of both copyright and registered trade mark. The defendants offered an undertaking not to deal in infringing Microsoft software but with a qualification. The qualification was "which it knows or ought upon reasonable inquiry to know are Infringing Products." Microsoft said that would not do and it should have an absolute injunction, both as regards copyright and trade marks. The deputy judge accepted the qualified undertaking. Microsoft appealed saying it was entitled to an unqualified injunction. This court dismissed the appeal holding that the form of the injunction was a matter for the judge's discretion. Of course all will depend on the circumstances – if the infringement has been inadvertent that is one thing. If on the other hand the defendant has knowingly infringed or behaved recklessly that may be another. If there is to be an injunction at the end of the day in this case, its form will be a matter for the judge who will be possessed of all the facts.
44. The second problem with an unqualified injunction arises as a result of EU law. If the defendant cannot tell whether goods are or are not in free circulation then an absolute injunction may put him in real difficulty. It follows that an absolute injunction may have the practical effect of impeding inter-State trade. A lot might therefore depend on how readily one can distinguish between goods from outside and those from inside the EEA. This may include how readily the trade mark owner is prepared to co-operate in such identification. I say no more about the form of the injunction at this stage.
45. I turn to the position of Mr Taylor. The Deputy Judge held that he was personally liable. The documents show it was he who negotiated to buy the goods from Horn et Cie. He did so on the basis that the goods were in free circulation and the contracts remarkably pre-date the purchase by Horn. There is no evidence that Mr Taylor actually dealt with any of the subsequent administration by way of getting the goods into the UK or paying for them. It is unlikely that he did – although he and his family own Dowelhurst and he and his wife are the principal officers, it has 350 employees.
46. It is by no means clear to me that in those circumstances Mr Taylor should be held a wrongdoer. Chadwick LJ in MCA v Charly Records [2002] FSR 26 at paras. 47-48 accepted that the question of whether a director should be liable with the company was "elusive". It is very – to use a phrase in vogue – fact sensitive. If it should prove that all Mr Taylor did was to cause the company to enter into a contract to purchase lawful goods but the supplier substituted unlawful goods, that is one thing. If on the other he is shown to have known that he was dealing with a less than reputable dealer, particularly if he knew that it was unlicensed, that may be another. Mr Leaver suggested that was the position here, but whether or not it is so requires a trial. The question of whether or not Mr Taylor has personal liability is another reason for this case to go to trial.
47. In the circumstances the question of costs falls away and I would dismiss the appeal and allow the cross-appeal.
48. Lord Justice Tuckey: I agree.
49. Master of the Rolls: I also agree.
Order: Case No 2003/1975 Appeal allowed; Case No 2003/1978 and 2003/2727 Appeals dismissed. Defendant's cross-appeal allowed. Order as per counsel's agreed minute. (Order does not form part of the approved judgment)