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Law and Order

Solicitor Alex Chapman explains Sony's case against Lik-Sang.

Okay, so here's the deal. If a business (like Sony) has a trademark (like 'Sony'), and puts the trademark on a product (like PSP), that trademark can be used to stop others importing said product into the European Union. Unless, that is, the trademark owner consented to the product being put on the market in the EU, or has done so itself. That, in a nutshell, is where the problems begin for retailers importing Japanese PSPs.

Various questions have been raised over whether the situation is fair, and that is what the law was designed for. But that is the law, and will remain so until someone successfully fights to change it. Lik-Sang, Electric Birdland and Nu Player all gave it a go, but on the day the judge declined to accept their arguments.

So what do retailers who are considering their options with regard to importing need to know? Well, as far as Japanese products are concerned, that's the law as outlined above.

But if a retailer was to import PSPs from France, say, to the UK, there would be little - if anything - Sony could do to stop them. The principle of exhaustion of rights stops trademark owners from restraining the free movement of goods, if the products bearing the trademark have been put on the market in the EU with their consent.

On the other hand, if Sony had consented to the import of PSPs from Japan, or had acted in such a way as to imply consent, then the company's arguments would have been defeated.

The name game

As regular readers will know, Lik-Sang named a number of senior Sony execs who allegedly bought imported Japanese PSPs. There's certainly a question over whether Lik-Sang was right to do this, but there's also a question over the Sony execs' actions.

Sony claims the purchases were for investigatory purposes. But if Sony execs and those doing business with the company were openly importing PSPs, should Sony be allowed to prevent others importing the same products?

Here comes the science bit: the European Court of Justice says that, "The consent of a trademark proprietor to the marketing within the EEA of products bearing that mark, which have previously been placed on the market outside the EEA by that proprietor or with his consent may be implied, where it is to be inferred from facts and circumstances prior to, simultaneous with or subsequent to the placing of the goods on the market outside the EEA which, in the view of the national court, unequivocally demonstrate that the proprietor has renounced his right to oppose placing of the goods on the market within the EEA."

The ECJ also says that implied consent cannot be inferred from the silence of the trademark owner or the fact that a trademark owner has not communicated his objections; or from the fact that the goods don't carry any warning against placing them on the market within the EU. In addition, consent cannot be inferred from the fact that the trademark owner sold the goods bearing the trademark without imposing contractual reservations.

The question here, therefore, is whether Sony's conduct unequivocally demonstrated that it renounced its right to oppose placing of the goods on the market.

It will be interesting to see what happens if this question comes before the courts. It will also be interesting to see what happens when the PlayStation 3 launches outside the EU.

Judgement day

As long as the law is enforced in this way, trademark owners will continue to make use of it - and why not? Their argument is that they should be able to control the manner and means of distribution of their products, and that it is unfair for third parties to trade in their products ahead of them.

A similar argument applies to retailers breaking street dates - yet there seems to be a lot more sympathy for the publishers setting the street date than there is for Sony and its decision to take on parallel importers.

This might be because street dates are set to create a level playing field for all retailers and, some might argue, Sony's decision to launch the PS3 in the US, Japan and Europe at different times does the opposite of that.

However, Sony's strategy does create a level playing field in all 25 countries of the EU, and for all retailers in the EU. So if a parallel importer enters the market and sells imported products - i.e., breaks the street date - then the rest of the retailers suffer.

The other reason why the breaking of street dates is perceived so negatively is the issue of piracy. Stories abound of games being "cracked" and available early through various BitTorrent sites because a retailer somewhere in Scandinavia broke the street date.

At the end of the day, it is up to Sony and other brand owners to police their brands and devise their marketing strategies as they think best. If companies decide to delay launches and sue importers, it is their right to do so.

Legal lessons

The fact is that a number of businesses have been forced to close down, and staff members have lost their jobs. In their wake they have left comments concerning the courts' decisions, but very little of substance.

For now the matter appears to be closed, at least as far as the PSP is concerned. So what lessons can be learned?

Well, here's a word of advice for trademark owners: if you want to release a product outside the EU in advance of its European launch, you should make sure your conduct does not unequivocally demonstrate that you renounce your right to oppose the placing of that product on the market in the EU.

And some advice for retailers: if you are planning on importing products into the UK, don't source them from a non-EU country - unless you can show that the trademark owner has consented. Also, if someone claims that you have infringed on their rights, talk to a lawyer. You may find the matter can be settled without any need to go to court.

Alex Chapman is a solictor at Briffa, a law firm specialising in matters relating to the games industry.