Sun Microsystems (Sun), a US corporation, makes and sells computer systems and other related goods and services. It is the registered proprietor of a series of UK and European Community trademarks comprising or consisting of the word "Sun". M-Tech is an English company which trades in the secondary market for computer hardware originally sold by one of the major manufacturers, such as Hewlett Packard, IBM or Sun.

The particular activities giving rise to the action between the two parties concern Sun disk drives which M-Tech purchased from a broker in the US, imported into the UK and sold to a business in the United Kingdom. Sun is contending that the disk drives were put on the market by M-Tech in the UK without its consent. It is accordingly accusing M-Tech of infringing its registered trademarks.

The established European ruling is that, while the trademark shall not entitle its owner to prohibit its use in relation to goods which have been put on the market in the European Economic Area (EEA) by the owner or with his consent, the placing of goods on a market outside the EEA does not exhaust the trademark owner’s right to oppose the “parallel” importation of those goods into the EEA without his consent.

It was said in the High Court that much of the new product offered for sale by unauthorised brokers has been unlawfully imported by those brokers from other markets in the world. Sun contends that, like all vendors with a global sales and distribution model, is entitled to ring fence those markets from each other, as it is the price differential between markets that is being unlawfully exploited by grey market brokers and allows them to offer seemingly cheap products for sale.

Sun, it was also said, globally monitors the activities of unauthorised brokers and does act, when appropriate, to protect its intellectual property rights. It has taken legal action against some brokers involved in what it considered to be unlawful activity and, to date, won all the cases it has embarked on.

M-Tech resists Sun’s current action by contending that the provenance of goods produced under the licences granted by Sun is identifiable by a means not available to the public, as there is no published serial mark tracker. M-tech says that, as it does not publish a database, only Sun can identify where its goods have been marketed and is, thereby, always putting European resellers at risk of litigation. It submits that Sun has adopted practices which affect the free movement of goods within the European Union (EU).

While the High Court’s opinion was that Sun was entitled to judgment against M-Tech, the Court of Appeal had doubts. It did not indicate which party’s arguments should prevail in any subsequent case trial, but the Court of Appeal’s opinion was that summary judgment ought not to have been granted.

It has directed that Sun should make an application for a case management conference to be held as soon as practicable. The Court of Appeal recognised that the case has important financial and economic implications not just for the parties but also for others involved in the grey market in computer hardware and goods, and that the economic function of parallel imports and the grey market is controversial.

It also pointed out that a subsequent trial judge will have to consider whether to make a reference to the European Court of Justice to enable him to decide the issues in the action. The point, it said, “is not acte clair, and in this case where the issues involve questions of economic policy likely to affect the EU as a whole, and where this court has already considered the points of EU law in issue, there would be a good reason to make a reference without waiting for the case to reach this court again.”