• EUROPEAN PERSPECTIVES

    Parallel Importation in the EU

    Can the original mark be replaced? 
    In a recent judgement (Pharmacia & Upjohn SA v Paranova A/S), the European Court of Justice has cast further light on the rules under which parallel importers must operate in the European Union (EU).

    In this case, the product in question was the antibacterial drug, clindamycin. Upjohn, the drug’s developer, had originally identified the trade mark Dalacin for use on a worldwide basis. However, as is often the case in the world of pharmaceutical trade marks, this mark conflicted with trade mark rights owned by another drug company, American Home Products. Eventually a settlement was reached under which Upjohn would use the trade mark Dalacin in Denmark, Germany and Spain, the trade mark Dalacine in France and the trade mark Dalacin C elsewhere, in particular in Greece.

    Paranova, the aggressive and creative Danish parallel importer, identified clindamycin as a potentially profitable drug for importation and sale in Denmark. They therefore began importing Dalacine capsule packs from France and Dalacin C injection phials from Greece. As is their general practice, Paranova repackaged both products for sale on the Danish market. However, in this case, they went one stage further than usual. On their new (repackaged) products they applied the Danish trade mark Dalacin, rather than the original, French and Greek trade marks, Dalacine and Dalacin C.

    Upjohn were unhappy with Paranova’s activities and therefore sought an injunction from the Danish Bailiff’s Court prohibiting their (Paranova’s) sale of Dalacin capsules and phials in Denmark. The Bailiff’s Court dismissed Upjohn’s application. However, on appeal to the Regional Court, this ruling was overturned and the injunction was granted. In further proceedings before the Handelsret, held to confirm the injunction, the Court decided to stay proceedings and to refer certain questions on the interpretation of Article 7 of the EU Trade Marks Directive (which deals with the exhaustion of trade mark rights) and Articles 30 and 36 (now 28 and 30) of the EC Treaty (which attempt to reconcile the protection of intellectual property rights with the principle of the free movement of goods in the EU) to the ECJ.

    The questions posed can be summarised as follows:

    i) Do the relevant Articles of the Directive and the EC Treaty prevent Upjohn from opposing Paranova’s repackaging of Dalacine capsules and Dalacin C phials and their application of the trade mark Dalacin to the new packs for sale in Denmark?

    ii) If Upjohn uses different trade marks in France and Greece to that which it uses in Denmark for its own (subjective) reasons, for example, its French company decided to add the letter “e” to the mark to make it more easily pronounceable in French, would this fact affect the answer to question (i)?

    iii) If the answer to question (ii) is yes, is Paranova required to provide evidence that Upjohn’s choice of different trade marks was intended to partition the EU market artificially?

    iv) If Upjohn uses different trade marks in France and Greece to that which it uses in Denmark for reasons beyond its control, for example, because of the requirements of national health authorities or because of the trade mark rights of a third party, would this fact affect the answer to question (i)?

    The ECJ began by reviewing its case law on parallel importation in general and the repackaging of pharmaceuticals in particular. It then made the following important pronouncements:

    • Article 7 of the Directive is only applicable where, after repackaging the product, the original (identical) trade mark is reaffixed to the import pack.

    • Since, according to the view of the Danish Court, the trade mark Dalacin was not identical with the trade marks Dalacine or Dalacin C, Article 7 did not apply to the case under consideration. In the present case, the rights of the trade mark proprietor and the parallel importer should therefore be determined by Article 36 of the EC Treaty.

    • Given that Article 7 and Article 36 were both directed at reconciling the protection of trade mark rights with the principle of the free movement of goods, the two provisions must be interpreted in the same way.

    • A trade mark owner may oppose both an importer’s repackaging of a product with the reaffixing of the original trade mark (e.g. Dalacine and Dalacin C) or their replacement of the original trade mark with the different trade mark used in the country of import (e.g. Dalacin), unless it is established, in particular, that their opposition contributes to the artificial partitioning of the EU market.

     

    The same rules apply to both re-packaging/re-affixing and replacement, unless reasons outside the control of the two parties justify different treatment of the two situations.

    • Whether the trade mark owner intended to partition the EU market by the use of different trade marks in different member states is not a question that needs to be assessed by the national Court when deciding a parallel importation case.

    • The national Court should, however, decide whether it is objectively necessary (emphasis added) for the importer to replace the original trade mark (e.g. Dalacine and Dalacin C) with the “import” mark (e.g. Dalacin) in order to market the product in question in the country of import (e.g. Denmark). This question should be decided in the light of the circumstances prevailing at the time of marketing.

    • The “condition of necessity” is satisfied if, in a specific case, the prohibition imposed on the importer against replacing the trade mark hinders effective access to the import market.

    • An example of when the “condition of necessity” would be satisfied would be if the rules or practices of the country of import (e.g. Denmark) prevented the product in question being marketed under the original trade mark (e.g. Dalacine and Dalacin C). Such a rule might be imposed to prevent consumers in the country of import being misled.

    • The “condition of necessity” would not be satisfied if the replacement of the original trade mark is effected simply to give the importer a commercial advantage.

     

    Comment

    It is believed that the rulings made by the ECJ in this case will be generally welcomed by the pharmaceutical research industry. It clearly places limits on parallel importers’ freedom to replace the original trade mark with a different mark used in the country of import. Further, it confirms that repackaging and reaffixing the original mark to an import pack will only be allowed in certain circumstances. In most cases there will be no justification for a parallel importer to create its own pack and therefore they will be forced simply to apply an explanatory label to the original pack marketed in the country of export.

    In a recent German case, heard by the Hamburg Court of Appeal, involving the import of Berodual packs from Spain/Portugal to Germany (Boehringer Ingelheim Pharma KG v Eurim-Pharm), the Court, in ruling for Boehringer, commented as follows:

    “Although a newly produced outer package may seem more appealing in certain respects than the original packs with additionally affixed labels, this is not in the interest of the Plaintiff, but only in those of the Defendant, which is thus able to use such a separate box to better present itself as a distributor - e.g. with its own company logo and special colouring and shaping of the outer carton. These significant economic interests of the Defendant do not take priority over the interests of the trademark owner and do not, as such, affect the Defendant’s rights concerning the free movement of goods within the European Union”.

    It therefore appears from the above that the ECJ and, in their wake, EU national courts are developing a reasonable compromise between the commercial interests of the research industry and parallel importers. The compromise seems to be that the parallel importer should trespass upon the trade mark rights of the originator as little as possible.

    Although the pharmaceutical research industry will never be happy to face competition from parallel importers, it would appear that both the Dalacin decision and other recent ECJ cases have shifted the commercial balance between the originators and the importers somewhat in favour of the originators.