UK: Latest ECJ Ruling On The Parallel Importation Of Repackaged/Relabelled Drugs

Last Updated: 21 May 2007
Article by Rosalind Miller

On 26 April 2007 the ECJ handed down its latest judgement in relation to the long running dispute between various pharmaceutical producers, including GlaxoSmithKline and Boehringer Ingelheim KG and a number of parallel importers. The ECJ has ruled that the so-called "Bristol Myers Squibb" or "Paranova" conditions which need to be made out by a parallel importer to avoid a claim of trade mark infringement, apply both to the repackaging of pharmaceutical products and to cases of "over-stickering" where new labels are affixed to goods. The decision is generally favourable to brand owners although on one key point the ECJ decided in favour of the parallel importers and the detailed application of the principles has been left to the national courts.

Pharmaceutical products are often the subject of parallel importation, given the variations in the prices at which they are marketed in different member states of the European Union. Parallel importers will purchase these goods in a low priced state such as Spain, then repackage, relabel or rebrand the goods as necessary to comply with the local laws of the high priced member state, such as the United Kingdom or Germany, into which they can then resell these goods.

Legal Principles

Article 28 of the EC Treaty prohibits any quantitative restriction on trade between member states which means that trade mark rights cannot be used in one member state to stop parallel imports from other member states. Article 30 of the EC Treaty creates an exception to this rule, by providing that Article 28 is not to preclude restrictions on trade which are justified on the grounds of the protection of intellectual property rights.

These provisions are incorporated in the EC Trade Marks Directive, which provides under Article 7 (1) that a trade mark owner may not prohibit the use of his trade mark in relation to goods which have been put on the market in the EU under that mark by the owner or with his consent. Article 7(2) provides the exception to this rule, where there exist legitimate reasons for the trade mark owner to oppose further commercialisation of the goods, and in particular where the condition of the goods has been changed or impaired after they have been put on the market.

Background

In the late 1990s, four drug companies pooled their resources to bring proceedings against various parallel importers who were repackaging their pharmaceutical products for sale in the United Kingdom. Due to UK regulatory requirements, the patient information leaflets needed to be revised and the goods reboxed and relabelled for to be acceptable for sale on the UK market. The commercial significance of the "get-up" of these products to their owners is such that considerable litigation has ensued as to what is the correct balance to be struck between the rights of the trade mark owner and the free movement of goods principles enshrined in Articles 28 and 30 of the EC Treaty. The trade mark owners have sought to uphold what they consider to be the correct balance by focussing their attention on (a) the concept of whether repackaging by parallel importers is necessary and (b) the lack of notice given to the trade mark owners by the parallel importers of their intention to import trade marked goods for resale.

In an initial reference on these points, by the English High Court, the ECJ held broadly in favour of the trade mark owners by finding that:

  • repackaging is "necessary" if without the repackaging effective access to the market concerned is hindered as the result of strong resistance to products which have simply been relabelled from a significant proportion of domestic consumers.
  • parallel importers must give prior notice of the repackaging to the trade mark owner and, if requested, supply a sample of the repackaging. If notice is not given, the marketing of the repackaged product constitutes trade mark infringement. The ECJ considered that a notice period of 15 working days was likely to be reasonable if a sample of the repacking was provided with the notice.

This judgment was applied by the High Court to rule in favour of the claimants in the main proceedings which they had brought for trade mark infringement. The High Court’s decision was appealed by the parallel importers up to the Court of Appeal, which entailed this further reference to the ECJ.

Decision

The ECJ first pointed out, before delivering its judgment, that the specific subject matter of a mark is to guarantee the origin of the product bearing that mark and that repackaging of that product, in itself, by a third party without the authorisation of the trade mark owner is likely to prejudice that guarantee of origin. To this extent, it was not necessary to assess the actual effects of the repackaging.

The Court then went on to consider the "Bristol Myers Squibb" or "Paranova" conditions, which need to be satisfied by a parallel importer to avoid a claim of trade mark infringement. The conditions can be summarised as follows:

  1. The trade mark owner's opposition to the parallel imports contributed to the artificial partitioning of the individual markets within the European Union. This would be the case where the repackaging was "necessary" in order to market the product in the importing territory.
  2. The repackaging did not affect the original condition of the packaged product.
  3. The new packaging clearly stated who repackaged the product and the name of the manufacturer.
  4. The presentation of the repackaged product was not liable to damage the reputation of the trade mark and of its proprietor.
  5. The importer gave notice to the trade mark proprietor before the repackaged product was put on sale and, on demand, gave him a specimen of that product.

Disagreeing with the view of the Advocate – General in this case, the ECJ ruled that these conditions would also apply to cases of over-stickering i.e. the attachment of a label to the original packaging as well as re-boxing.

Manner and Style of Repackaging

As to the first condition, the claimants had argued that the requirement that the repackaging be necessary to market the product should also apply to the "manner and style" in which the product is repackaged by the parallel importer. The Court held that the concept of necessity, extended only to the fact of the repackaging and not the manner in which it was carried out.

Damage to the Reputation of the Mark

Turning to the fourth condition, that the presentation of the repackaged product must not damage the reputation of the mark, the Court held that damage was not limited to cases where the repackaging was defective, of poor quality or untidy, but also to cases where the presentation of the repackaged product was such as to affect the trade mark’s value by "detracting from the image of reliability and quality attaching to the product". The Court went on to state that the following acts, on the part of the parallel importer, were in principle liable to damage the trade mark’s reputation:

  • "De-branding" the goods by failing to affix the trade mark to the new exterior carton;
  • Appling an "own name" logo or a house style or get-up used for a number of different products i.e. "co-branding"
  • Positioning the additional label so as wholly or partially to obscure the owner’s trade mark
  • Failing to state on the additional label that the trade mark in question belongs to the trade mark owner; or
  • Printing the name of the parallel importer in capital letters.

but that whether these acts were liable to damage a mark’s reputation were questions of fact which were for the national court to decide in the light of the circumstances of each individual case.

Burden of Proof

The Court held that where it has been established that that medicinal products have been repackaged, it is for the parallel importers to prove the existence of the Bristol Myers Squibb conditions which, if fulfilled, would prevent the trade mark owners from lawfully opposing further commercialization of those goods. However, as regards the second and fourth conditions, that the packaging could not affect the original condition of the goods, and that the presentation of the repackaged product was not liable to damage the reputation of the trade mark and its proprietor, the Court held that it would be sufficient for the parallel importer to provide evidence that would lead to a reasonable presumption that these conditions had been fulfilled. If the parallel importer was able to provide evidence to support the latter condition, it would then be for the trade mark owner to prove that the repackaging had damaged the reputation of the mark and himself.

Prior Notice of Repackaging

The fifth Bristol Myers Squibb condition provides that the parallel importer is to give the trade mark owner prior notice of his intention to repackage to avoid a finding of trade mark infringement. The Court expanded on this requirement by holding that since Community law did not lay down any sanctions for trade mark infringement, each national authority would need to adopt appropriate measures to deal with such a situation and these measures should be proportionate and a sufficiently effective deterrent to ensure that the Trade Mark Directive was fully effective. The national court would need to determine the financial remedies according to the circumstances of each case, in the light in particular or the extent of damage to the trade mark proprietor caused by the parallel importer’s infringement and in accordance with the principle of proportionality.

Comment

Unusually, the ECJ has overturned the AG’s opinion which was that over-stickering should be allowed and would not require compliance with the Bristol Myers Squibb conditions. Advocate General Sharpston held that the trade mark owner enjoyed a right to prevent any use of the trade mark which was liable to impair its function as a guarantee of origin and that that over-stickering did not constitute the type of use which would impair the mark, which would be affixed to genuine goods with no risk of affecting the original condition of the product itself. The ECJ’s opinion was that over stickering could impair the function of a trade mark as a guarantee of origin, notwithstanding that the mark would be applied to original goods. Such risks could arise, for example, from the quality of the image of the "stickered" mark or the manner in which it was affixed to the original product and it could therefore be argued that the ECJ had been correct to come to the decision it made in this respect.

The ECJ’s decision that the concept of necessity in the first of the Bristol Myers Squibb conditions extended only to the fact of the repackaging and not the manner in which it was carried out will have come as a relief to parallel importers who will now be allowed some degree of flexibility in how they repackage goods. The AG had commented that the travaux préparatoires to the Trade Marks Directive suggested that the necessity requirement should apply to the fact of repackaging only and that expanding the concept of necessity to cover the manner and style of repackaging was too broad an interpretation of the notion of the condition of the goods being impaired contained in Article 7(2) of the Trade Marks Directive.

However, there are aspects of the decision which will have come as a relief to trade mark owners too. Most importantly, the fourth of the Bristol Myers Squibb conditions on damage has been substantially expanded to include not only sub standard repackaging or labelling, but also such acts as de-branding and co-branding which could impair the reputation of the trade mark. This broader interpretation of damage will act as some constraint on the manner in which repackaging can be conducted and should provide additional grounds on which trade mark owners can bring infringement actions against parallel importers. However it is possible, if not likely that different national courts will disagree as to what acts could damage the reputation of a trade mark. Such lack of certainty is likely to lead to further litigation. In addition, the Court held that the onus of proving that the Bristol Myers Squibb conditions had been fulfilled, as a defence to infringement, would mainly rest with the parallel importers and finally, that failure to give advance notice of repackaging would infringe the trade mark owner’s rights even in any subsequent importation which took place without notice.

The Court of Appeal’s application of this ruling, which comprises the next chapter in this seven year (and counting) dispute, will be eagerly awaited by all the interested parties.

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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