In the recent decision of Boehringer Ingelheim KG v Swingward Limited1, the Court of Appeal has considered and applied the ECJ decision of April 2007 after a second reference from the English Courts in the same proceedings on the issue of repackaged pharmaceutical parallel imports within the EEA. It holds in favour of the parallel importers but reserves its final judgment pending the outcome of a related Austrian reference to the ECJ.
BACKGROUND
This case concerns the circumstances in which a proprietor may rely on his trade mark rights to prevent a parallel importer from marketing products he has repackaged bearing the trade mark. The claimants are pharmaceutical companies and the defendants are parallel importers of pharmaceuticals manufactured and marketed within the EEA by the claimants. The case first came before the English High Court in January 2000 (see [2000] F.S.R. 529). In April 2002, the ECJ handed down its decision in Boehringer 1 (see [2002] E.C.R. I-3759). On 6 February 2003, Laddie J. applied Boehringer 1 to the facts before him and concluded that its effect was that the co-branding and debranding which the pharmaceutical companies objected to, did amount to an infringement of their trade mark rights (see [2003] EWHC 110 (Ch)). His decision was appealed and cross-appealed. On 5 March 2004, the Court of Appeal (Kennedy L.J., Clarke L.J. and Jacob L.J) indicated its views which favoured the importers' arguments and felt compelled to refer a second series of questions to the ECJ. On 26 April 2007, the ECJ gave its answers to the questions referred (Case No. C348/04) (Boehringer 2). The Court of Appeal has now considered and applied Boehringer 2 in the resumed appeal. It accedes, however, to the claimants' request to hold off a final decision until a pending Austrian reference has been dealt with by the ECJ.
LEGAL ISSUES
Article 30 EC And The Trade Marks Directive
Under Article 30 EC prohibitions or restrictions on imports between Member States which are justified on the grounds of the protection of industrial and commercial property are authorised as long as they do not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States. Article 7(1) of Directive 89/104 provides for the exhaustion of a proprietor's trade mark rights once goods have been put on the market in the EEA by the proprietor or with his consent. However, under Article 7(2), exhaustion will not apply where there exist legitimate reasons for the proprietor to oppose further commercialisation of the goods. Various ECJ decisions deal with how Article 7(2) should be interpreted.
The Five BMS Conditions
The key post-Directive ECJ jurisprudence is contained in the case of Bristol-Myers Squibb v Paranova [1996] ECR I -3457. The ECJ formulated five conditions, breach of which would trigger the trade mark proprietor's right to object to the further commercialisation of its products. Thus, repackaging will constitute a legitimate reason' to object within the meaning of Article 7(2) unless:
- the repackaging is necessary for market access;
- the repackaging cannot affect the original condition of
the product;
- the new packaging shows the name of the importer and the
manufacturer;
- the presentation is not such as to be liable to damage
the reputation of the mark and its owner; and
- the importer gives notice to the owner.
COURT OF APPEAL JUDGMENT
The key issue before the Court of Appeal on the resumed appeal was the claimants' argument that Laddie J and the Court of Appeal had, in holding the importers caused no damage to the claimants' marks or their reputation, done so on a legally flawed basis.
Jacob LJ traces the history of the various decisions in the case. Laddie J, following Boehringer 1 held that so far as the requirement of "necessity" was concerned, this could be satisfied by evidence of "strong resistance from a significant proportion of consumers to relabelled pharmaceutical products" (Boehringer 1) but only to the extent "necessary to enable the proprietor to safeguard rights which formed part of the specific subject matter of the mark, as understood in the light of its essential function" (Boehringer 1) which Laddie J interpreted to mean that there was an irrebuttable legal fiction of harm to the specific subject matter caused by repackaging which meant it could only be tolerated to the extent it could be shown "to inflict the minimum collateral damage on the claimant's mark".
Consequently he held that the de-branding and co-branding at issue in the case were infringing the claimants' trade marks.
Jacob LJ sets out the answers from the ECJ in Boehringer 2 and highlights two particularly significant ones on the issue of damage:
- in answer to the question: "Does the requirement
that repackaging be necessary apply merely to the fact of
reboxing or to the precise manner and style of the reboxing
and if so, how?", the ECJ confirmed that the requirement
applies merely to the fact of reboxing or relabelling not to
the precise manner and style of it.
- in answer to the question: "Are certain (specified)
methods of repackaging necessarily damaging to the reputation
of a trade mark or is damage to reputation a question of
fact?" the ECJ commented that in its view, in principle
co-branding and de-branding are liable to damage the
reputation of the trade mark but that it is ultimately a
question of fact for the national court to decide in the
light of the circumstances of the case.
The claimants argued that in Boehringer 2 the concept of damage to a trade mark is wider than Laddie J or the Court of Appeal had allowed for and included detracting from the image of reliability and quality attaching to a product and the confidence it is capable of inspiring in the public; that de-branding' and co-branding' are in principle, liable to damage the trade mark's reputation; and that repackaging of the trade-marked medicinal products in itself is prejudicial to the specific subject-matter of the mark.
The Court of Appeal rejects this interpretation of Boehringer 2 saying it would effectively reinstate an irrebutable presumption of damage caused by co- or de-branding while the ECJ has specifically said that whether these activities cause damage is a question of fact for the national court.
On the issue of co-branding, Jacob LJ states that he cannot see any damage flowing from patients thinking 2 drugs manufactured by different manufacturers emanate from the same source. He likens it to Harrods branded goods or Berry Brothers and Rudd who add their own labels to the back of the packaging. As regards de-branding, Jacob LJ says that crucially, the pharmaceutical companies tolerate de-branding by companies such as Boots and cannot point to any damage arising from that. Moreover, Jacob LJ adds, "traders have broken bulk and applied their own trade marks to goods for centuries. There is no harm in it". There is also no use of the trade mark in de-branding. Accordingly, but for one matter, the Court of Appeal would allow the importers' appeals.
The one matter is a pending reference to the ECJ from the Austrian Supreme Court in Wellcome v Paranova (Case C- 276/05) which asks whether the presentation of the new packaging is to be measured against the principle of minimum intervention or (only) against whether it is such as to damage the reputation of the trade mark and its proprietor. Jacob LJ expresses his opinion that he does not think such an additional requirement (in effect a BMS Condition 6) exists but that the possibility cannot be ruled out until the ECJ has given its decision in the Austrian case.
THE COMMERCIAL IMPLICATIONS
Predictably the importers have (almost) won on the basis that the Court of Appeal considers there is no damage to the trade marks or proprietors' reputation caused by the importers' activities. That is ultimately within its sole discretion despite the ECJ's comments that de-branding and co-branding are in principle liable to damage the trade mark's reputation. The German and Danish Supreme Courts' have (since Boehringer 2) similarly permitted co-branding and de-branding of the sort complained of here. The only hope for the pharmaceutical companies now is that the pending Austrian reference may clarify that there is some further rule of minimum intervention which the parallel importers are required to satisfy and that this will influence the final outcome in front of the Court of Appeal.
Footnotes
1 [2008] EWCA Civ 83 Jacob LJ, Tuckey LJ and the Master of the Rolls
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