The Court of Appeal has applied the European Court of Justice's decision in Class v Colgate-Palmolive1 on the meaning of "import" for trade mark infringement so as to prevent rights-owners from stopping shipments of branded goods through the UK under Customs supervisory procedures.
The action, Eli Lilly v 8PM Chemist2, concerned pharmaceuticals ordered by patients in the US from Canadian internet pharmacies. The patients had prescriptions issued by US doctors but, because of the high drugs prices in the US, wanted to take advantage of the cheaper prices available through the internet pharmacies. The internet pharmacies source the pharmaceuticals they sell from around the world. In this action it was Turkey. A pharmacist in Turkey would put the prescribed drugs into a plain brown box addressed to the individual US patient. A large number of these boxes would then be packed together in a consignment and sent to the UK where 8PM would receive the consignment, unpack the addressed boxes and post or courier them to the US patient. There were no trade marks visible on the boxes. The unpacking and posting was carried out under the customs procedure known as "Inward Processing Relief - Suspension" which requires the person receiving the goods to declare that the goods are for re-export in order to exempt them from duties.
This trade came to Lilly's attention when one of the consignments from Turkey to 8PM was detained by UK customs on suspicion of containing counterfeits. It did not in fact contain any but Lilly, whose branded products were included in the consignment, sued 8PM for trade mark infringement. 8PM defended relying on the decision of the European Court of Justice ("ECJ") in Class. Class concerned a consignment of toothpaste held in Rotterdam under the Customs warehousing procedure. Colgate sued for trade mark infringement but failed as the ECJ held that as long as the goods were under the Customs external transit or warehousing procedures, so there was no release of the goods into free circulation, their mere physical introduction into the territory of the Community was not "importing" or "using the [trade mark] in the course of trade" for the purposes of trade mark infringement. The rationale for the decision was that, without release for free circulation, there is no interference with the trade mark owner's right to control the initial marketing of its goods in the Community.
Returning to the Lilly case, and Lilly's application for an interim injunction, the High Court considered it arguable that Class was distinguishable. This was partly because the name and address of a UK pharmacy that appeared on the dispensing label stuck to the pharmaceuticals by the Turkish pharmacist, together with the UK frank or stamp on the outer box, might give the false impression to US patients that they were getting UK drugs. The judge also thought it arguable that the customs status of goods should not determine whether they were imported under trade mark law. He therefore injuncted 8PM and refused its cross-application for summary judgment against Lilly. In an expedited appeal the Court of Appeal took the opposite view considering that Class and other ECJ authorities were clear: as long as the drugs did not become Community goods they did not interfere with Lilly's right of first marketing and there was no infringement. The contrary was unarguable and what the US patients thought was irrelevant. Accordingly, Lilly's action was dismissed, the injunction discharged and an inquiry into damages caused to 8PM by the injunction was ordered.
While this decision applies Class to other customs supervisory procedures than those specifically considered by the ECJ, it is on all fours with the rationale of that decision and the passages within it showing that the ECJ envisaged that wider application. As the Court of Appeal observed, the touchstone for asserting trade mark infringement against an importer or parallel trader is whether the goods have become Community goods. If not, the movement of the goods through the UK cannot be stopped. The decision stresses throughout that it applies to genuine goods only and so should no more affect customs' and rights-owners' abilities to take action against counterfeits than the original decision in Class. The extent to which the reasoning in Class is applicable to the infringement of other intellectual property rights also remains to be considered by the courts. Lilly is seeking to appeal to the House of Lords.
Footnotes
1. Class International v Colgate-Palmolive (Case C-405/03) [2005] ECR 1-8735
2. Eli Lilly and Company v 8PM Chemist Ltd [2008] FSR 11 (High Court) & [2008] FSR 12 (Court of Appeal) 8PM is represented by Fasken Martineau Stringer Saul LLP and IP consultant, Anna McKay
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