UK: ECJ to be Asked for Guidance on Cobranding, De-branding and Notice in Relation to Parallel Imports

Last Updated: 21 April 2004
Article by Sumati Parikh

Boehringer Ingelheim KG & Anr -v- Swingward Lt; Boehringer Ingelheim KG & Ors -v- Dowelhurst Ltd; Glaxo Group Ltd v Swingward Ltd; Glaxo Group Ltd v Dowelhurst Ltd; Smithkline Beecham plc & Ors v Dowelhurst Ltd; and Eli Lilly v Dowelhurst Limited

Court of Appeal [2004] EWCA (Civ) 129 05/03/04

This parallel imports re-packaging case came before the UK Court of Appeal early this year having been through UK first instance decisions and the European Court of Justice ("ECJ"). Unfortunately, the matter is yet to be resolved as a further reference to the ECJ is being made for guidance on co-branding, de-branding and notice to a trade mark proprietor in relation to parallel imports.

Background:

The Claimants in the various actions (Boehringer Ingelheim, Glaxo, SmithKline Beecham and Eli Lilly) are well known pharmaceutical manufacturers. The Defendants (Swingward Limited and Dowelhurst Limited) are parallel importers of trade marked pharmaceuticals and dealers in generic pharmaceuticals. The actions were principally for infringement of registered trade marks although Boehringer Ingelheim also claimed passing off.

The goods in question were genuine pharmaceutical products – either pills packed in blister packs or labelled inhalers. These goods were purchased in a European Economic Area ("EEA") Member State outside the UK and then either re-boxed in English language boxes with information leaflets in English or over-labelled with English language labels before being sold in the UK. In some instances the importer had used only the generic name of the drug on the box and not its trade mark ("de-branding"). In some other instances the importers’ new boxes carried the trade mark of the drug and a "get up" which was distinctive of the importer ("co-branding").

Irrespective of whether there was re-boxing or stickering, the importer indicated clearly on the new box or the sticker that the goods had been procured in the EU and had been re-packaged by the importer.

Issues:

The Court of Appeal had to decide on the following:

  • can importers re-box at all, and if so, whether the way they had done it was lawful;
  • can the importers co-brand or de-brand; and
  • what is the notice period required to be given by the importer to the trade mark proprietor.

According to Article 7 of the Trade Marks Directive once goods have been put on the market in the EEA under a trade mark by the proprietor or with his consent, the proprietor cannot restrict the use of the trade mark in relation to those goods unless there exist legitimate reasons for a proprietor to oppose further commercialisation of the goods (such as where the condition of the goods is changed or impaired).

The trade mark proprietors argued that they had legitimate reasons to oppose further commercialisation of the pharmaceutical products. On the other hand, the parallel importers said that enforcement of the trade mark rights in this case would constitute "disguised restriction on trade between Member States" and thus contravene Article 30 of the EC treaty. They also denied the existence of any legitimate reasons under Article 7.

Outcome:

Repackaging- The Court of Appeal judgment was given by Jacob LJ. He said that when an importer repackages and reapplies the mark, he infringes the mark unless he satisfies all five conditions laid down in the case of Bristol-Myers Squibb v Paranova by the ECJ ("the BMS conditions"). These conditions are that:

  1. it was necessary for the importer to repackage the product in order to market the product in the Member State of importation;
  2. there is no effect on the original condition of the product inside the packaging and the product carries proper instructions with it;
  3. the new packaging clearly states who repackaged the product and the name of the manufacturer in print;
  4. the presentation of the repackaged product is not such as to be liable to damage the reputation of the trade mark and of its owner; and
  5. the importer has given notice to the trade mark proprietor before the repackaged product is put on sale and, on demand, supplied him with a specimen of the repackaged product.

Jacob LJ’s view was that parallel importers are entitled to replace the packaging if that is what is necessary to overcome a strong resistance from a significant proportion of consumers in the market to relabelled boxes. On reviewing the evidence before him, Jacob LJ concluded that if parallel importers cannot re-box they face a substantial hindrance to sale.

Passing off- Jacob LJ rejected Boehringer’s argument that the use of only the generic name of the drug on the box made a false representation that the drug inside was sourced from a generic manufacturer chosen by Dowelhurst, and that this led to damage and passing off. Jacob LJ said that the generic name on the box was true – for instance the box saying "Meloxican tablets 15mg," contained just that. There was no evidence that any pharmacist or patient had ever been deceived notwithstanding significant sales of the products.

Co-branding and de-branding- Jacob LJ criticised the judgment given at first instance by Laddie J on these two issues. He said that Laddie J was wrong in his view that the ECJ had created an "irrebuttable presumption that re-packaging is prejudicial to the specific subject matter of a trade mark".

Jacob LJ’s view was that, so far as co-branding is concerned, in some circumstances it may cause damage to the reputation of the mark, for instance, if the co-brand created a deception that it was a brand of the actual manufacturer, or that the importer and the manufacturer were in some sort of joint venture. However, this was not so on the facts of this case. Moreover notices were present on the product in accordance with BMS condition 3. Therefore damage to reputation was not self-evident.

On de-branding, again Jacob LJ saw no damage to the reputation of the Claimants or their trade marks. The Claimants had submitted that the ever decreasing exposure of the trade marks will cause damage. Jacob LJ rejected this stating that the trade mark owner does not have any right that requires subsequent dealers in his product to keep his trade mark on the product.

Looking at it another way, he said that the only act which would be an infringement is the act of affixing the trade mark. The only such acts in the case of a de-branding exercise are the affixing of the trade mark on the patient information leaflets as to which no objection can be taken and the use of the manufacturer’s name in the BMS condition 3 notice, which again is unarguably legitimate.

Jacob LJ concluded that Laddie J had got it wrong and that if it was left to him he would allow the appeals. However, due to the substantial disparity of views across the EU he said that a reference to the ECJ was necessary.

He mentioned four EU cases concerning co-branding and use of a distinctive mark of the parallel importer. All such packaging had been held by the respective EU national courts to be infringing.

On the other hand, the EFTA Court of Appeal concerned with exactly the same problem had come to an opposite conclusion in a judgment of 8 July 2003 in Paranova v Merck. The EFTA Court was of the view that use of coloured stripes on packaging in accordance with the importer’s housestyle could not by itself constitute a legitimate reason within the meaning of Article 7 as long as the names of the manufacturer and the parallel importer are adequately stated on the packaging.

Period of notice- Jacob LJ said there should be no difference in the period of notice needed by a trade mark proprietor to consider a stickered product and that needed to consider a re-boxed product. In relation to both, there is not just a question of appearance involved but also, at least a preliminary factual assessment of whether a damage to reputation is likely. He held that an appropriate notice period in relation to all the re-boxing and stickering or over-labelling in dispute in this case was 15 working days.

Suggestions for reference- Jacob LJ suggested that there should be a question about what "necessary" means (in BMS condition 1). Guidance is required on the rules for stickering and re-boxing and on whether parallel imports made without giving notice to the proprietor must be regarded as infringement with the particular consequence that an importer must pay damages or render an account of the profits he has made.

Comment

It is unlikely that any guidance from the ECJ will fully resolve the problems being faced by various EU national courts. It is also unlikely to bring about a uniformity in approach to the interpretation of the rules for packaging set out in various ECJ judgements so far. At the end of the day, it will be left to the national courts to decide issues of infringement on the facts of a particular case, the type of get-up and the use of the mark(s) on the packaging. In fact, although Jacob LJ was able to decide on all issues in this case based on the facts before him, he decided not to give judgment and instead make a reference to the ECJ as he felt it necessary that the disparity between EU national courts and the EFTA Court of Appeal be resolved. We wait and see.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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