Exhaustion Defence - Section 12 TMA

 

At the time the acts complained of were committed, Section 12 TMA provided that where goods had been put on the market with AGA's consent, it could only object to the use of its trade marks in relation to those goods where it had "legitimate reasons" for doing so. These included where the condition of the goods had been changed or impaired, or where the further dealings might seriously damage the reputation of the trade mark or give the impression that there is a commercial connection between the parties.

 

The judge held that AGA cookers were long lived products and that it was foreseeable that works will have been done to maintain, service or update them or even to convert them from running on a fossil fuel to running on electricity. In those circumstances, it was not unreasonable for a person who has done such work to put some sort of label on the product to indicate their work. Indeed, that might even be preferable in order to draw attention to those changes.

 

On the conversion works, the judge noted that AGA does not object to the Defendants supplying eControl systems to be fitted to AGA cookers, so it was hard to see how it could object to those converted cookers coming onto the second hand market for sale or object to the Defendants fitting those systems to cookers and then re-selling them. Since customers knew they were purchasing a second hand cooker, there was also little risk of the converted cookers reflecting poorly on AGA as they would not necessarily associate any potential quality issues with AGA itself. 

 

The Defendants' references to “eControl AGA” and the eControl System on its website, however, were likely to be seen as part of a brand name and perceived by consumers as refences to a system that was connected with AGA, and the Defendant did nothing during its interactions with customers to dispel this impression. This gave AGA a legitimate reason to object to the Defendants’ use of the marks, depriving the Defendant of the Section 12(2) defence.

 

Comment

 

This decision demonstrates that the bar for what level of change or impairment is required to amount to a legitimate reason to object is reasonably high. Consumers purchasing second hand goods will understand that they are likely to contain replacement parts and do not necessarily expect them to be of the same quality as the original parts.

 

It is also significant that AGA did not object to the Defendants supplying customers with the eControl System to be fitted to existing AGA Cookers, meaning it was hard to justify why it should be able to prevent the Defendants from re-selling AGA cookers which it had acquired and fitted with its eControl System, provided it had not led customers to believe that the Defendants and/or their eControl System were commercially connected to AGA. Providers of refurbished or upcycled goods may therefore wish to consider including a clear disclaimer on their website and any relevant marketing communications to make it clear that there is no commercial connection between the original manufacturer of the good at issue.

 

This judgment also included an early application of Lifestyle Equities v Ahmed in respect of director liability, a trend which is likely to continue and one which will be welcomed by company directors.