Avoiding trade mark infringement in the aftermarket: lessons from the AGA case

A registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market in the UK or EEA by the trade mark proprietor or with their consent. However, the exhaustion defence does not apply where there are legitimate reasons for the proprietor to oppose further dealings in the goods (section 12 TMA). 

The effect of section 12 TMA is to provide a defence on the basis that the rights conferred by a trade mark are exhausted once goods have been sold by the proprietor or with their consent, enabling the proprietor to realise the economic value of the mark. However, as the Court of Appeal's judgment emphasises, this defence is not absolute and the trade mark proprietor can object to further dealings in those goods where there are legitimate reasons to do so. 

There are three broad categories of situations that have been accepted to constitute legitimate reasons to oppose further dealings: 

1. where the condition of the goods has been changed or impaired; 
2. where further dealings might seriously damage the reputation of the mark; and 
3. where the dealings give the impression that there is a commercial connection between the defendant and the trade mark proprietor. 

UKIG appealed the High Court's decision on two grounds, namely that: 

1. the judge erred in applying the "with difficulty" test (see below); and 
2. the judge's findings of fact were rationally unsupportable. 

The "with difficulty" test 

The High Court judge had held that the legal test was that AGA must show that customers would be unable, or would be able only "with difficulty", to ascertain whether the refurbished cookers originated from AGA or from a third party. However, this test was derived from cases concerning keyword advertising and was not applicable to this case. Nonetheless, the Court of Appeal found that, although the judge had referred to this test, he had not applied this less stringent test when making his findings. 

Rationally unsupportable? 

The Court of Appeal also held that the judge was entitled to conclude that composite terms like "eControl AGA" or "AGA eControl" were likely to indicate to customers that the cooker was a product in AGA's range, particularly since some AGA products have a model named in a similar way, such as the AGA eR7 model. The court refused UKIG's suggestion that there was no other way to refer to the converted product and found there was nothing necessary or inevitable about the use of a single composite label (such as "eControl AGA" or "AGA eControl"). The fact "eControl" was the name UKIG gave its system did not mean there was an unfettered right to use that word alongside AGA in that way. This ground of appeal was, therefore, also unsuccessful. 

There was also a dispute about whether UKIG had infringed copyright in AGA's design drawings by making control panels reproducing those drawings. The High Court held that the design drawing was an original drawing and protected by copyright, and it had been indirectly copied by UKIG. However, UKIG had a defence under section 51 of the Copyright, Designs and Patents Act 1988 (CDPA) because the article made to the design (i.e. the control panel) was not, itself, an artistic work. 

AGA cross-appealed against this finding arguing that the control panel was a graphic work (i.e. an artistic work) and that section 51 CDPA was incompatible with assimilated EU law. The Court of Appeal dismissed the cross-appeal and upheld the High Court's finding that the control panel, viewed as a whole, was primarily a functional object, not a graphic work. In light of that, the issue of compatibility with EU law became a purely academic one and the court declined to deal with it (whilst this approach flowed from the court's finding, it is disappointing not to have the Court of Appeal's view on this complex issue).