The High Court has held that a parallel importer infringed a pharmaceutical company’s trade mark by rebranding and marketing in the UK a drug which had not been put on the market in the EEA by or with the consent of the trade mark owner.
In Bristol-Myers Squibb v Paranova AS, the European Court of Justice (ECJ) ruled on circumstances where the parallel importer had applied the mark under which the product was sold in the importing country, which differed from the mark applied in the exporting country (C-427/93, C-429/93 and C-436/93). The ECJ set out a list of conditions (the BMS conditions) that parallel importers must fulfil in order to avoid a trade mark infringement claim, in cases concerning parallel trade in repackaged or relabelled pharmaceutical products. One condition is that enforcement of the trade mark proprietor’s rights would contribute to the artificial partitioning of markets between EU member states, for example if the proprietor put an identical pharmaceutical product on the market in several member states in various forms of packaging, so that repackaging by the parallel importer would be necessary in order to market the product in the member state of import.
The BMS conditions also require the importer to give notice to the trade mark proprietor before the repackaged product is put on sale and, on demand, supply him with a specimen of the product.
A trade mark owner is not entitled to prohibit a third party from using, in the course of trade, indications concerning the kind, quality or other characteristics of goods or services provided that he uses them in accordance with honest practices in industrial or commercial matters (section 11(2)(b), Trade Marks Act 1994) (section 11(2)(b)).
F sold a generic drug in the UK under the name Phenytoin Sodium Flynn and owned the UK registered trade mark and Community trade mark for the word FLYNN in respect of pharmaceutical products.
D planned to import the drug into the UK from other member states, where it was manufactured and sold by P under the brand name EPANUTIN, and rebrand it with the name Phenytoin Sodium Flynn. F claimed that this would infringe its trade marks.
D argued that its proposed use would not be “trade mark use” under section 11(2)(b), relying on a disclaimer which explained the distinction between the product and F. D also argued that even if its proposed use was “trade mark use”, the BMS conditions were fulfilled so D was not liable for infringement.
D argued that rebranding was necessary to market the drug in the UK. Doctors would not write prescriptions for the generic drug naming EPANUTIN, as parallel imports were not a guaranteed and stable source of supply for patients. The Medicines and Healthcare Products Regulatory Agency also required parallel imports to be marketed under the same name as used for the UK product, or alternatively the name under which it was marketed in the source country, or a proposed new name.
The ECJ held that D’s proposed use was trade mark use, and would infringe F’s marks.
Section 11(2)(b) did not apply because the use of the word FLYNN was not a description of the goods, as it had no association with medicines or ingredients that denoted the medicine’s qualities or ingredients. Despite D’s disclaimer, the use of the sign would still be perceived by consumers as a mark of origin and so was clearly trade mark use.
The ECJ analysed whether the contractual terms between the manufacturer and the marketing authorisation (MA) holder meant that they were legally the same entity for the purpose of exhaustion of trade mark rights.
To prevent F from asserting its trade marks on the basis of exhaustion of rights, the imported goods must have been placed on the market in the member state from which they were exported by F itself or with its consent. Consent in this context was a question of who controlled the use of the trade mark and the quality of the product. Although F was responsible for marketing the drug in the UK, P was independently responsible for placing EPANUTIN on the market in other member states. The corporate and contractual relationship between F and P obliged F to acquire the UK product from P, but this did not mean that the same entity directly or indirectly controlled the product EPANUTIN in the country of export and Phenytoin Sodium Flynn capsules in the UK. The more important question was who was responsible to the end consumer for the product quality.
So F’s trade mark rights in the name Phenytoin Sodium Flynn were not exhausted in respect of EPANUTIN placed on the market in other member states and it was entitled to enforce its trade marks to prevent the relabeling of the parallel imported products. The BMS conditions were not fulfilled.
The ECJ also noted that if F’s trade mark rights had been exhausted, the BMS conditions would have been satisfied and the proposed rebranding would have been necessary in order to market the drug in the UK.
If trade mark exhaustion had been established, D’s case here would have been helped by the narrow therapeutic index of the drug. As even a slight excess of the drug in the bloodstream could cause toxicity, two preparations of the drug from different sources might produce different effects on the patient. This would make it more difficult to enter the market under any name other than the established brand name of the product.
The judgment is also interesting for its analysis of the contractual terms between the manufacturer and the MA holder in the context of exhaustion of trade mark rights.
Case: Flynn Pharma Ltd v Drugsrus Ltd and another  EWHC 2759 (Ch).
First published in the December 2015 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.