UK: When Are Goods First Put on the Market in the EEA?

Last Updated: 28 April 2004
Article by Sumati Parikh

Originally published September 2003

Glaxo Group Limited v Dowelhurst Limited & Another

31 July 2003 (High Court)

Summary

This was a judgment on an application for summary judgment made by Glaxo, the pharmaceutical company, against Dowelhurst, a parallel importer. A qualified injunction was granted by the judge in respect of the consignments for which it had been demonstrated that the right of disposal had not been acquired by the consignee within the European Economic Area ("EEA"). Summary judgment in favour of Glaxo was refused in respect of other consignments in respect of which there was a possibility that the goods will be shown to have been placed on the market in the EEA by Glaxo or with its consent.

Facts and Issues

This case concerned three anti-retroviral drugs, used for treating HIV infections, Trizivir®, Combivir® and Epivir® and a respiratory drug, Serevent®. Each of these words was registered as a trademark in respect of such drugs. Glaxo’s complaint was that consignments of pharmaceuticals bearing these trademarks, which had been supplied to various parties at low prices on the understanding that they were for use in Africa, were fraudulently diverted to a Swiss company and then sold by them to Dowelhurst, who then imported them into the UK and sold them to hospitals here. Glaxo argued that Dowelhurst had infringed the registered trademarks since the consignments in issue had been sold for markets outside the EEA and it had not consented to the resale within the EEA.

Dowelhurst argued that the goods in question had been first put on the market within the EEA by Glaxo, and not by Dowelhurst because Glaxo had sold and delivered the goods to initial purchasers in France, not Africa. As such, their trademark rights were exhausted and they could not complain.

Nearly 99% of the goods in question were supplied by Glaxo to Keren, Intermed and Uniworld Uganda, all of whom had agents who took physical delivery in France. The other 1% were supplied to L’Afrique aide L’Afrique in Africa as part of a humanitarian scheme initiative by Glaxo’s agent. In relation to L’Afrique, a memorandum of understanding and a contract were produced by Glaxo which prescribed that the goods were not to be used outside Africa and not to be sold to anyone without Glaxo’s consent. No such documents were produced in respect of the other three consignees. An important issue to be decided in this case was whether the goods were first put on the market inside or outside the EEA when they were sold and delivered to the initial purchasers by Glaxo.

Dowelhurst also pointed out that these were genuine goods and had been supplied by Glaxo in packaging which was appropriate for the European market. They even bore a European product licence number and there was nothing to advise traders that they were meant for Africa and must not be sold on the European market.

Outcome

It was held that, in respect of L’Afrique aide L’Afrique, it had been demonstrated that it had not acquired the right of disposal over the goods whilst in the EEA. It was also impossible to say that Glaxo had unequivocally signified its consent to these goods being re-exported to Europe. Hence these goods had not been first put on the market in the EEA by Glaxo or with its consent. Only a qualified injunction was granted in respect of the products supplied to L’Afrique aide L’Afrique as the judge was of the view that trademark owners should adopt sensible precautions such as labelling their products "not for resale in the EEA" or making the tablets in a different colour to prevent confusion with legitimate products which could be sold within the EEA. He said that if trademark owners do not adopt such sensible precautions, it may constitute an unacceptable barrier to trade and an abuse of law by the trademark proprietor. Adoption of such sensible measures, in his view, would enable honest parallel traders to avoid products intended for Africa.

In respect of the other consignments, the judge was of the view that the property in the goods would have passed on delivery, or at least it was arguable that it did. Hence, the initial purchasers had the ability to divert the goods to non-African destinations as they became the owners of those goods and could issue commands to their agents for diverting the goods. Dowelhurst therefore had an arguable defence and it was possible that it would be shown at trial that the goods were placed on the market in the EEA by Glaxo or with its consent. He therefore refused to grant a summary judgment in favour of Glaxo with respect to the other consignments.

Over to You

It would be interesting to see how other national courts in the EEA interpret "first putting on the market in the EEA" and whether this would in any way conflict with the ECJ decision in Zino Davidoff and Levi Strauss [2001] ECR I-8691 where it was held that consent, to be effective, must be unequivocally demonstrated. Will the national courts shift the burden of proof on to a trademark proprietor to show that he did not consent to the goods being put on the market within the EEA, even in those cases where the trademark proprietor is not marketing his products in such a way as to partition the national markets? (In Van Doren + Q the Advocate General observed that, where it can be established that there is a real risk of partitioning of national markets, the burden of proof will be on the trademark proprietor to establish that the products were initially placed on the market outside the EEA by him or with his consent).

As always, we would be interested to hear your views on this.

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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