Re-branding and parallel imports - free trade trumps trade mark rights?

Has the Court of Appeal offered fresh hope to pharma importers seeking to improve their access to markets by using third party’s trade marks?
Speciality European Pharma Ltd v Doncaster Pharmaceuticals Group Ltd and another [2015] EWCA Civ 54,[2015] All ER (D) 87 (Feb)
 concerns parallel imports of pharmaceutical products and considers the balance between ensuring free trade in the EU while protecting trade mark rights. The issue on appeal was summarised by the court as:

‘[…] when a pharmaceutical manufacturer markets the identical product in EU Member State A under trade mark X and in EU Member State B under trade mark Y, in what circumstances can a parallel importer take the goods (marked X) from state A to state B and re-brand them with mark Y?’

What is the background to this case?

SEP sold and distributed pharmaceutical drugs in Europe including a drug called tropsium chloride which SEC sold as ‘Regurin’ in the UK (its right to do so arising from an exclusive trade mark licence agreement with the manufacturer). SEP sold the same drug as ‘Céris’ in France and ‘uriVesc’ in Germany.

Doncaster originally imported SEP’s tropsium chloride from France (Céris) to the UK where it over-stickered the box with the drug’s generic name, tropsium chloride. Over-stickering is common practice in parallel imports along with repackaging and de-branding. Doncaster sold its imported product at a significant discount to SEP’s Regurin.

In 2009, around the time when SEP’s patent for tropsium chloride expired, Doncaster continued to import the drug from France but instead of over-stickering boxes with the drugs generic name, it began to re-brand it as ‘Regurin’ (the trade mark exclusively licensed to SEP). Doncaster did the same when it imported the drug (uriVesc) from Germany. In an effort to enforce its rights in the mark REGURIN, SEP brought a claim against Doncaster for trade mark infringement.

(c) opensourceway / flickr

(c) opensourceway / flickr

Does the law permit use another party’s trade mark without consent in parallel imports?

If certain conditions are fulfilled, a parallel importer may use a third party’s trade mark when it repackages goods.

Article 34 of the Treaty on the Functioning of the European Union (TFEU) prohibits quantitative restrictions on imports and all measures having equivalent effect. Article 36 provides some exceptions to the principle of free trade set out in Article 34 where it can be justified on the grounds of protection and commercial property (which would include trade mark rights). However, such restrictions must not constitute a disguised restriction on trade.

Key to an assessment of legitimate trade mark use in parallel import cases are the five conditions laid down in the joined cases of Bristol-Myers Squibb v Paranova; Eurim Pharm v Beiersdorf; MPA Pharma v Rhone-Poulenc(C-427/93, C-429/93 and C-436/93) and clarified in Boehringer Ingelheim KG and another v Swingward Ltd and other cases: C-348/04 [2007] IP & T 683. A trade mark owner will not be able to enforce its rights when a parallel importer affixes the trade mark to a re-packaged product (ie re-brands) when:

  • the repackaging is necessary, and invoking its trade mark rights constitutes artificial partitioning of the EU market
  • the repackaging does not affect the original condition of the product inside
  • the repackaging clearly states who repackaged product, and the name of manufacturer
  • the presentation is not liable to damage the reputation of the trade mark and its proprietor
  • the importer gives notice and, on demand, supplies a specimen to the trade mark owner

What was the High Court’s decision?

In Speciality European Pharma Ltd v Doncaster Pharmaceuticals Group Ltd and another [2013] EWHC 3624 (Ch), [2013] All ER (D) 291 (Nov) the High Court considered whether it was objectively necessary for Doncaster to replace the original trade marks (CÉRIS/URIVESC) with that used in the importing member state (REGURIN) in order to gain effective access to the tropsium chloride market in the UK.

The High Court found that Doncaster had infringed the REGURIN mark by way of its re-branding. With reference to various facts such as the proportion of prescriptions specifying Regurin instead of the generic drug (8.61%), the court did not accept Doncaster’s contention that prevention of its use of the REGURIN mark hindered its access to a significant portion of the market.

On what basis did Doncaster appeal the High Court’s ruling of trade mark infringement?

Doncaster appealed on various grounds. Its key arguments were:

First, the judge erred by deciding that it was enough for Doncaster to have access to part of the market for tropsium chloride. Doncaster submitted that preventing its use of the REGURIN mark, it would not have access to a substantial part of the market.

Second, the judge erred in deciding that Doncaster was in a position to compete for sales of tropsium chloride. This applied both at pharmacist level (where it is against the law to substitute a prescription for a branded product with a generic or other-branded product) and at doctor level (where it is unrealistic to expect a parallel importer to brand its product and market it to doctors without converting itself into a totally different type of business to that of a normal parallel importer). Pharmaceutical companies invest heavily in marketing to doctors. The supply line of a parallel importer is precarious and therefore it would be unrealistic, irresponsible even, to market an ‘own brand’ to doctors where it could not guarantee a consistent supply.

How did the Court of Appeal reach its decision that Doncaster had not infringed?

The key question facing the Court of Appeal was whether Doncaster could realistically compete for the whole of the market for tropsium chloride without using the REGURIN mark.

The Court of Appeal accepted that, despite generic competition, there remained a proportion of the market which demanded REGURIN. The court accepted evidence that it was not realistic for Doncaster (as a parallel importer) to adopt its own brand to compete in the part of the market where REGURIN continued to be prescribed by brand. By contrast, where a company markets its own product and can control its supply, it would be realistic to market the product under its own brand.

The Court of Appeal summarised:

‘This was not a solely commercial decision taken by Doncaster as a matter of their own commercial choice: it was an aspect of the interstate trade which the free movement rules are there to protect…Re-branding goes no further than is necessary to overcome artificial barriers to effective market access by Doncaster.’

Accordingly, enforcement of SEP’s trade mark against Doncaster would create an unlawful restraint of trade and therefore fall foul of Articles 34 and 36 of the TFEU.

Where does this leave us with the practice of ‘re-branding’ in the context of parallel imports?

Where a court can establish artificial partitioning of the market, the rights of the trade mark owner are trumped by the principle of free movement of goods. This ruling may be welcomed by pharma importers seeking to gain or improve their access to markets by using third party’s trade marks. However, this case is not necessarily a green light for parallel importers—it is important to remember that cases turn on their individual facts. This Court of Appeal ruling highlights how one interpretation of the facts may wildly differ to another (that of the High Court) particularly when this appeal essentially involved a re-trial of the facts.

Jessica Stretch, solicitor in the Lexis®PSL IP & IT team.

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