From the summer of 1996 to the spring of 1998, the US corporation Medgen Inc. developed a natural health care product for the alleviation or prevention of snoring. The spray product's efficiency was claimed to lie in the fact that, when sprayed into the mouth, it coated the soft tissues at the back of the throat, the vibration of these tissues apparently being the usual cause of snoring.
A name for this product, Snorenz, was coined by Medgen during the early part of 1997 and they filed a US trade mark application for the mark in May of that year. The product was sold in the US on a small scale during its development, but its major trade launch took place at a trade fair held in California in March 1998.
At that trade fair was a representative of the UK company Passion for Life Products (PFL), who specialise in the sale of natural health products. Business contacts were made between Medgen and PFL and these developed into more serious negotiations aimed at the sale of Medgen's product in the UK. On 20th March 1998, PFL wrote to Medgen saying that they had done some initial market research and, as a result, believed that they could sell Snorenz successfully in the UK. In that letter, PFL said "We have decided that we would rather import the product under your (that is, Medgen's) brand". However, Medgen, at this stage at least, made it clear to PFL that they were not concerned which trade mark was used to market the anti-snoring product in the UK. As a result of these negotiations, PFL was appointed Medgen's exclusive UK distributor until the end of 1998. The precise terms under which this exclusive distributorship was to operate were never expressed either in writing or in any other way.
In June 1998, PFL ordered about 4000 Snorenz bottles and these were promptly delivered. The product received by PFL in response to this order was identical to the product Medgen sold in the USA. Initially, PFL marketed the product by mail order rather than retail sales. Within a very short time, it was having an impact on the UK market.
On 2nd August 1998, PFL filed a Community trade mark application for Snorenz in Classes 5, 10 and 20. They followed this, on 15th August 1998, with a UK trade mark application for the mark in Class 5. Both applications were filed in the name of PFL. Medgen were not informed about either of these filings. During the prosecution of the UK application, an earlier UK registration for the trade mark Snoreeze was cited. PFL overcame this objection by purchasing the registration for Snoreeze.
At the same time as PFL were filing their CTM and UK trade mark applications, they also informed Medgen that, in order to continue selling the Snorenz spray in the UK, the product labelling would have to be redesigned to comply with European Union regulations. PFL also wanted to use this relabelling opportunity to create a new UK label for retail sales which would have a more "pharmaceutical"...