Sun Microsystems European Trade Policy

May 15, 2008

Background

Manufacturers of computers and plug-compatible peripheral products have traditionally been neutral to supportive of the secondary market in their legacy products; none have been down right adverse.  Some manufacturers go as far as to actively support the market for their used products by approving license transfers, selling parts and subassemblies while others offer support and maintenance.  

In supporting such trading activity, it is the position of the Association of Service and Computer Dealers International (ASCDI) that the ability to transfer and sell used products throughout the world, across borders and across continents, sustains not only the value of these used products, but facilitates the sale of new products and gives stability and dependability to the marketplace as a whole. Sun Microsystems UK, Ltd. (Sun) is an exception to the norm.  Sun does not support trade in its legacy products as evidenced by Sun’s newly adopted approach to trade in the European Union (EU).  

Sun’s Behavior

In 2005 Sun sued a UK dealer engaging in the sale of used products by objecting to the importation of certain products into the EU, as a violation of Sun’s trademark rights.  In the case of Sun vs. Amtec Corporation (Amtec), High Court of Justice, Chancery Division, Case No: HC 05 C 01743, the court concluded that Amtec’s importation of the Sun products from Israel, a non EU country, into the UK, an EU country, constituted trademark infringement entitling Sun to a variety of relief including damages.  

The court determined that, under UK intellectual property law, only products originally sold within the EU by Sun or its authorized distribution channel, were eligible for importation back into the EU without Sun’s permission.  Permission from Sun must be obtained to import the same make and model product into the EU if the product in question was originally sold by Sun or its authorized distribution channel outside of the EU.  No other manufacturer of high tech products is known to object to the international trade in its or their legacy products in this manner. Parenthetically, this is not the law in the rest of the world.  Except for the UK, the trademark holder loses the right to control the sale or importation of its trademarked product after the first sale.

Were this the end of the conclusion, the secondary market and other interested parties including leasing companies, equipment financers and large end-users, may have accepted the result and moved on; this was not the conclusion however.  After the decision in the Amtec case, Sun announced that it would strictly enforce its trademark rights and not honor requests for provenance information on a given product by third parties seeking to avoid infringement by mistakenly importing or selling a Sun product whose origin could not be determined.  This had the effect of chilling the market for trade in used Sun product.  Buyers and sellers were prevented from determining, in advance, whether a given product was or was not of genuine EU origin.  Sun went further however when it announced that it would provide provenance information only in cases where the product was purchased and installed at the end user site and then upon payment of a fee of €1,400.  If the product in question was determined to be imported, without permission, the infringement would have occurred exposing the buyer/reseller to damages for infringement and Sun would not support the product in the hands of the end user.

Quite naturally this had the effect of chilling all sales of used Sun product, even product of EU origin.  The problem now is that imported products can not be distinguished those of EU origin, because there is no way to distinguish a domestic product from an imported product of the same make or model; serial numbers and box labels are of no help in determining provenance.  As if to add insult to injury, for those ASCDI members who went to Sun directly to ask for the provenance of a specific product, Sun demanded the member’s history of Sun products sold and openly threatened suit if the inquiring member had sold infringing product in the past or persisted in selling used Sun products in the future.  

ASCDI's Actions

Believing Sun’s behavior in the UK and EU generally, to be anti-competitive, the ASCDI filed a petition with the UK Office of Fair Trading asking for review of Sun’s practices in the belief that Sun’s refusal to identify even domestic Sun products eliminated competition.  The ASCDI asked that provenance information be made available in advance to a potential buyer or seller for a reasonable fee, as the court had ordered, in the Amtec case.  The UK Office of Fair Trading refused to consider the petition.