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What the dispute between the pharma firms and parallel traders is about?

The European Court of Justice ruling on repackaging is good news for trademark owners

The European Court of Justice gave a long awaited judgment on April 26, 2007 in a case (Boehringer Ingelheim & others v Swingward & others, Case C348/04) concerning the repackaging of parallel imported pharmaceuticals in Europe. Parallel imported pharmaceuticals need to be repackaged to some extent to meet regulatory requirements - notably to ensure that the labelling and patient information leaflet is in the language of the country of import.

Q: What is the dispute between the pharma firms and parallel traders about?

A: This case involves several pharmaceutical companies and two parallel traders in a dispute which began in the late 1990s and has since visited the High Court, Court of Appeal and, uniquely, the European Court of Justice on two separate occasions.

The dispute concerns various types of repackaging, including:

  • overstickering - where stickers are applied to the brand owner's original packaging, also termed overlabelling or relabelling
  • reboxing - where the importer discards the original outer box and creates its own new one
  • de-branding - being the removal of the brand owner's mark
  • co-branding - being the addition of the importer's trademark to the brand owner's trademark.

Over a year ago, the Advocate General had firmly supported freedom of move-ment of goods over trademark rights. However, this latest judgment is more positive for trademark owners.

The European Court of Justice has considered the repackaging of branded products by importers in a string of cases going back a number of decades.

One particularly significant case, brought by Bristol-Myers Squibb (BMS) in 1996, confirmed the rights of trademark owners to oppose further dealings in goods, where the importer has repackaged the product and reaffixed the trademark.

Q: What was the outcome of the case brought by Bristol-Myers Squibb in 1996?

A: As part of the ruling the following criteria were given which, if adhered to, meant that the trademark owner could not oppose further dealings:

  • it is necessary for the goods to be repackaged
  • it is shown that the repackaging cannot affect the original condition of the product inside the packaging
  • the new packaging clearly states who repackaged the product and the name of the manufacturer
  • the presentation of the repackaged product is not such as to be liable to damage the reputation of the trademark and of its owner; thus, the packaging must not be defective, of poor quality, or untidy
  • the importer gives notice to the trademark owner before the repackaged product is marketed and, on demand, provides a sample of the repackaged product.

The case brought by Boehringer concerns the interpretation of these criteria in relation to the different types of repackaging.

Overstickering
The importers had argued that the BMS criteria only apply to reboxed packs and not where the original box has been overstickered. In the most controversial part of her Opinion the Advocate General had agreed with this. However, the European Court of Justice now confirms that the rules apply to all repackaging, including overstickered packs.

The European Court of Justice stated
that overstickering is prejudicial to the trademark and puts the guarantee of origin, which the trademark provides, at risk, undermining its integrity.

This confirms that importers are required to give advance notice of overstickering to trademark owners, before marketing a product.

The necessity test
Previous case law had established that the trademark owner may oppose any repackaging not necessary for the product to be marketed in the country of import.

It was not clear whether the importer simply had to demonstrate that the product needed to be repackaged or if the particular way in which it had been repackaged had to be justified.

The European Court of Justice clarifies that the necessity test applies to the decision to rebox (rather than just overlabel) and not to the manner or style of repackaging.

Reputation
The European Court of Justice now confirms that defective, poor quality or untidy packs are only listed as examples of the type of damage to reputation which may occur because of repackaging.

This criterion also applies where the pack or label: are such as to affect the trademark's value by detracting from the image of reliability and quality attaching to such a product and the confidence it is capable of inspiring in the public concerned, the court stated.

Q: Who rules on whether the brand has been damaged?

A: The Court agrees that methods of repackaging such as co-branding, de-branding and overstickering are, in principle, liable to damage the reputation of the mark. However, whether or not such damage has occurred is for the national court to decide in each case. There is no further guidance given, leaving the way open for further litigation in national courts, and the probability of differences of opinion between national courts in different Member States.

Burden of proof
The Advocate General had ruled that the burden of proving each of the BMS criteria be shared between the trademark owner and importer.

The European Court of Justice has decided that this is the sole responsibility of the importer. In relation to the requirements that the original condition of the product must not be affected and that there must not be damage to the reputation of the mark, the importer must provide evidence leading to a reasonable presumption that these criteria have been fulfilled.

Given the Court's view that, in principle, actions such as de-branding or co-branding are liable to damage the reputation of the mark, it is difficult to see how an importer will be able to prove that no damage to the mark has occurred.

Q: Will there be a lesser penalty for not giving notice to the trademark owner?
A: The European Court of Justice ruling also makes clear that lack of notice is a trademark infringement and should incur a proportionate, effective and a sufficient deterrent.

The importers had argued that to impose the same level of financial sanctions for not notifying the trademark holder as for other kinds of infringement would be disproportionate.

The Advocate General had agreed that a lesser sanction would be applicable for this than for other breaches of the BMS criteria.

The European Court of Justice however, sees no reason why the same type of financial remedy imposed by national law for any other kind of trademark infringement should be said to be disproportionate. This is good news for trademark owners, who in principle, can seek damages or an account of profits for infringement arising from a lack of notice.

The European Court of Justice's judgment is surprisingly short and lacks detailed reasoning. It is favourable to trademark owners, but in practical terms, and in particular, in the consideration of specific types of repackaging, the national courts will play a crucial role.

The Boehringer case will now return to the Court of Appeal.

The Authors
Sarah Hanson and Lucy Kilshaw, CMS Cameron McKenna's international lifesciences practice

19th June 2007

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