Lauren Millward, Solicitor, Browne Jacobson LLP

In recent times trade mark law in the UK has developed to comply with the fundamental principles of the EU including the free movement of goods and services within the EU. The decision of the Court of Appeal in the UK in Speciality European Pharma Ltd v Doncaster Pharmaceuticals Group Ltd is important in this respect and relates to parallel importing of pharmaceutical products within the EU.

Speciality European Pharma (SEP) sold a drug (tropsium chloride) in the UK, under an exclusive licence. The drug was sold under the trade mark REGURIN in the UK, CERIS in France and URIVESC in Germany.

Doncaster, a parallel importer of pharmaceutical drugs had, for many years, imported CERIS from France but over-stickered the box with the name of the drugs’ active ingredient, tropsium chloride.

Shortly after expiry of the patent in the drug, generics manufacturers entered the market in the UK. Doncaster, as a parallel importer, could not compete on price with those generics manufacturers and instead began importing the drugs CERIS from France and URIVESC from Germany into the UK and re-branding those drugs with the UK trade mark REGURIN.

SEP argued that Doncaster’s rebranding in these circumstances infringed SEP’s trade mark in the REGURIN mark.

The Trade Mark Directive deals with exhaustion of the rights of the trade mark owner at Article 7, however it doesn’t precisely apply in this case as it relates to the use of a trade mark where goods have been put on the market in the EU under that mark. The drug in these circumstances had been put on the market under the CERIS and URIVESC marks respectively but the claim related to use of the REGERIN mark.

The court therefore looked outside of the provisions of the Trade Mark Directive at the Treaty on the Functioning of the EU. In particular, Article 34 prohibits between Member States quantitative restrictions on imports and all measures having equivalent effect. There is an exception to this in Article 36 where prohibitions or restrictions on imports are justified on grounds of the protection of industrial and commercial property (such as trade marks). Such prohibitions or restrictions must not however constitute a means of arbitrary discrimination or a disguised restriction on trade.

The judge considered that the enforcement of a National trade mark having territorial effect in one Member State could be a measure having the effect of a prohibition on imports, however, enforcement of that trade mark would not be prevented by Article 34 where that enforcement is justified for the protection of that trade mark. The principle of free movement of goods must therefore be balanced against the protection of the relevant trade mark.

By having in place different trade marks for the same product in different Member States the court held that there was an unjustified “artificial partitioning of the market” by the trade mark owner constituting a disguised restriction on trade.

Although Article 7 didn’t apply in these circumstances, the court considered that the case law under that Article concerning re-packaging of products was relevant. The cases of Bristol-Myers Squibb v Paranova and Boehringer II in particular held that where a parallel importer re-packages goods, the following conditions must be satisfied to prevent infringement:

  1. The repacking must be objectively necessary to avoid market partitioning;
  2. The condition of the product must not be effected;
  3. The manufacturer and the importer must be clearly identified;
  4. The reputation of the mark and its owner must not be damaged; and
  5. The importer must give notice to the trade mark owner.

The court considered in particular whether the re-branding of the product from CERIS and URIVESC was objectively necessary to avoid market partitioning. Overturning the first instance decision, it was held that it was objectively necessary. Doncaster was effectively excluded from a proportion of the market where the brand REGERIN was prescribed, rather than the generic version. Although that was a small proportion of the overall market (the majority of the prescriptions were made under the generic name), that proportion was a substantial part and therefore the enforcement of the trade mark REGERIN by SEP was unlawful partitioning of the market.

This decision makes it difficult for trade mark owners to benefit from the strong brand built up under a trade mark during patent-protection. It was held that it was unreasonable to expect Doncaster to create its own brand and to compete with the trade mark owner, particularly considering the high costs of marketing and Doncaster’s lack of control as a parallel importer over its own supply chain (meaning that it is unlikely that doctors would rely on Doncaster’s brand). Re-branding to the REGURIN brand was therefore necessary in these circumstances to allow for effective access to the market.

Although each case will turn on its facts considering, this decision is in favour of parallel importers in the EU and suggests that, in the majority cases, the principles of free movement of goods will prevail over the rights of a trade mark owner.