COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION – PATENTS COURT
The Hon Mr Justice Laddie
HC 1999 No 0017/HC 1999 No 1894/
HC 1999 No 2053/HC 1999 No 2051/
HC 1999 No 2054/HC 1999 No 2094/
HC 1999 No 3040
Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
THE RT HON LORD JUSTICE CLARKE
THE RT HON LORD JUSTICE JACOB
| (1) Boehringer Ingelheim KG
(2) Boehringer Ingelheim Pharma GmbH & Co KG
|- and -|
|(1) Boehringer Ingelheim KG
(2) Boehringer Ingelheim Pharma GmbH & Co KG
(3) Boehringer Ingelheim Limited
|Glaxo Group Limited
|Glaxo Group Limited
|(1) Smithkline Beecham plc
(2) Beecham Group plc
(3) Smithkline and French Laboratories Limited
|Eli Lilly and Company
Roiter Zucker) appeared on behalf of Dowelhurst Limited and
Mr Simon Thorley QC and Mr Geoffrey Pritchard (instructed by Messrs CMS
Cameron McKenna) appeared on behalf of Eli Lilly
Mr Michael Silverleaf and Mr Richard Hacon (instructed by Messrs
Jones Day) appeared on behalf of Glaxo Group Limited,
Boehringer Ingelheim and Smithkline Beecham plc
Hearing dates : 20-23 January and 20 February 2004
Crown Copyright ©
Jacob LJ :
"Manufactured by Lilly SA, Spain. Procured within the EC and repackaged by the licence holder who is:
Actually some of the boxes with which we were concerned did not say all these things, but no point is taken about that.
The Provisions of the Treaty and Trade Mark Directive
"Article 28 [EEC 30]
Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.
Article 30 [EEC 36]
The provision of Articles 28 and 29 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States."
"The registered trademark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:
(a) Any sign which is identical with the trademark in relation to goods or services which are identical with those for which the trademark is registered."
"The following, inter alia, may be prohibited under paragraphs 1 and 2:
a. Affixing the sign to the goods or to the packaging thereof;
b. Offering the goods, or putting them on the market or stocking them for those purposes under that sign, or offering or supplying services thereunder;
c. Importing or exporting the goods under the sign."
"Exhaustion of the Rights Conferred by a Trademark.
1. The trademark shall not entitle the proprietor to inhibit its use in relation to goods which have been put on the market in the Community under that trademark by the proprietor or with his consent.
2. Paragraph 1 shall not apply where there exist legitimate reasons for a proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market."
A Basic Unstated Assumption
The framework of the free circulation rules
The case law of the ECJ prior to this case
"Article 7(2) of Directive 89/104 must be interpreted as meaning that the trade mark owner may legitimately oppose the further marketing of a pharmaceutical product where the importer has repackaged the product and reaffixed the trade mark unless:
(1) it is established that reliance on trade mark rights by the owner in order to oppose the marketing of repackaged products under that trade mark would contribute to the artificial partitioning of the markets between Member States; such is the case, in particular, where the owner has put an identical pharmaceutical product on the market in several Member States in various forms of packaging, and the repackaging carried out by the importer is necessary in order to market the product in the Member State of importation, and is carried out in such conditions that the original condition of the product cannot be affected by it; that condition does not, however, imply that it must be established that the trade mark owner deliberately sought to partition the markets between Member States;
(2) it is shown that the repackaging cannot affect the original condition of the product inside the packaging; such is the case, in particular, where the importer has merely carried out operations involving no risk of the product being affected, such as, for example, the removal of blister packs, flasks, phials, ampoules or inhalers from their original external packaging and their replacement in new external packaging, the fixing of self-stick labels on the inner packaging of the product, the addition to the packaging of new user instructions or information, or the insertion of an extra article; it is for the national court to verify that the original condition of the product inside the packaging is not indirectly affected, for example, by the fact that the external or inner packaging of the repackaged product or new user instructions or information omits certain important information or gives inaccurate information, or the fact that an extra article inserted in the packaging by the importer and designed for the ingestion and dosage of the product doesn't comply with the method of use and the doses envisaged by the manufacturer;
(3) the new packaging clearly states who repackaged the product and the name of the manufacturer in print such that a person with normal eyesight, exercising a normal degree of attentiveness, would be in a position to understand; similarly, the origin of an extra article from a source other than the trade mark owner must be indicated in such a way as to dispel any impression that the trade mark owner is responsible for it; however, it is not necessary to indicate that the repackaging was carried out without the authorization of the trade mark owner;
(4) the presentation of the repackaged product is not such as to be liable to damage the reputation of the trade mark and of its owner; thus, the packaging must not be defective, of poor quality, or untidy; and
(5) the importer gives notice to the trade mark owner before the repackaged product is put on sale and, on demand, supplies him with a specimen of the repackaged product."
(1) Necessary to repackage to market the product;
(2) No effect on original condition and proper instructions;
(3) Clear identification of manufacturer and importer;
(4) Non-damaging presentation;
" It follows that it is for the national courts to examine whether the circumstances prevailing at the time of marketing made it objectively necessary to replace the original trade mark by that of the importing Member State in order that the product in question could be placed on the market in that State by the parallel importer. This 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 markets of the importing Member States. That would be the case if the rules or practices in the importing Member States prevent the product in question from being marketed in that State under its trade mark in the exporting Member State. This is so where a rule for the protection of consumers prohibits the use, in the importing Member State, of that trade mark used in the exporting Member State on the ground that it is liable to mislead consumers.
 In contrast, the condition of necessity will not be satisfied if replacement of the trade mark is explicable solely by the parallel importer's attempt to secure a commercial advantage."
The First Judgment of Laddie J on necessity and specific subject-matter
"'1. Can a proprietor of a trade mark use his trade mark rights to stop or hinder the import of his own goods from one Member State into another or to hinder their subsequent marketing or promotion when the importation, marketing or promotion causes no, or no substantial, harm to the specific subject-matter of his rights?
2. Is the answer to the previous question different if the ground relied on by the proprietor is that the importer or subsequent dealer is using his mark in a way which, although not prejudicial to its specific subject-matter, is not necessary?
3. If an importer of the proprietor's goods or a dealer in such imported goods needs to show that his use of the proprietor's mark is necessary, is that requirement met if it is shown that the use of the mark is reasonably required to enable him to access (a) part only of the market in the goods, or (b) the whole of the market in the goods; or does it require that the use of the mark was essential to enabling the goods to be placed on the market and if none of these, what does necessary mean?
4. If the proprietor of a mark is, prima facie, entitled to enforce his national trade mark rights against any use of his mark on, or in relation to, goods which is not necessary, is it abusive conduct and a disguised restriction on trade, in accordance with the second sentence of Article 30 [EC], to use that entitlement in order to hinder or exclude parallel imports of his own goods which do not threaten the specific subject-matter or essential function of the trade mark?"
The ECJ's answers on necessity and specific subject-matter
"Thus it is clear from settled case-law that the change brought about by any repackaging of a trade-marked pharmaceutical product - creating by its very nature the risk of interference with the original condition of the product - may be prohibited by the trade mark proprietor unless the repackaging is necessary in order to enable the marketing of the products imported in parallel and the legitimate interests of the proprietor are also safeguarded (see, to that effect, BMS, para 57). "
"2. Replacement packaging of pharmaceutical products is objectively necessary within the meaning of the Court's case-law if, without such repackaging, effective access to the market concerned, or to a substantial part of that market, must be considered to be hindered as the result of strong resistance from a significant proportion of consumers to relabelled pharmaceutical products".
The cross-appeals on the necessity to re-box
i) an independent research report by Taylor Nelson commissioned by the Association of the British Pharmaceutical Industry, whose members include all the claimants in this case;
ii) the oral evidence of some executives from the claimants;
iii) an internal document of 1998 of SmithKline Beecham;
iv) an opinion poll amongst 300 pharmacists conducted for the purposes of this case by the defendants' solicitors;
v) oral evidence from private practice and hospital pharmacists.
"There is little doubt what this means. First foreign language is a deterrent to the sale of parallel imported drugs. Second it is to the advantage of companies like Glaxo Wellcome to ensure that their packaging has a higher quality appearance than that used by parallel importers. Forcing the latter to use over-stickered boxes would hinder their ability to access the market for both reasons."
The Cross-appeal on Passing Off
Laddie J's Second Judgment on co and de-branding
"28. Although it is possible to derogate from the fundamental principle of free movement of goods where the proprietor of a mark relies on the mark to oppose the repackaging of pharmaceutical products imported in parallel, that is only to the extent necessary to enable the proprietor to safeguard rights which formed part of the specific subject-matter of the mark, as understood in the light of its essential function.
29. It is not in dispute that the specific subject-matter of a mark is to guarantee the origin of the product bearing that mark and the repackaging of that product by a third party without the authorisation of the proprietor is likely to create real risks for that guarantee of origin.
30. Thus, in paragraphs 7 and 8 of Hoffmann-La Roche, the Court considered that the proprietor's right to oppose the repackaging of pharmaceutical products bearing its mark is, having regard to that risk to the guarantee of origin, related to the specific subject-matter of the mark. According to that case-law, it is the repackaging of the trade-marked pharmaceutical products in itself which is prejudicial to the specific subject-matter of the mark, and it is not necessary in that context to assess the actual effects of the repackaging by the parallel importer."
"In the light of these passages it continues to be the law that a trade mark proprietor can only interfere with parallel importation of his own goods where it is necessary to do so in order to protect the specific subject-matter of those rights. However, Mr Thorley QC, who appears for SmithKline Beecham and Eli Lilly, is correct to summarise the effect of paragraph 30 of the judgment to mean that repackaging is deemed to be prejudicial to the specific subject-matter. It follows that even if, as here, it was not and could not be asserted that the repackaging adversely affected the quality of the goods and there was no real adverse impact on the mark's function as an indication of origin, damage or prejudice to the specific subject-matter must be assumed. This creates an irrebuttable legal fiction unconnected with the facts."
"19. That [i.e. a finding that reboxing was necessary], however, is not an end of the matter. Although an importer may be allowed to repackage, this does not give him a free hand to use whatever type or style of packaging he likes. At paragraph 32 of its judgment the ECJ states that repackaging must be
'done in such a way that the legitimate interests of the proprietor are respected. This means, in particular, that the repackaging must not adversely affect the original condition of the product and must not be such as to harm the reputation of the mark.'
20. This statement must be read in conjunction with the irrebuttable presumption that repackaging is prejudicial to the specific subject-matter of the mark. It seems to me that the result of this is that all repackaging must be treated as harmful and only to be tolerated to the extent that it can be shown to inflict the minimum collateral damage on the claimant's mark. In my view Mr Thorley is correct when he argues that, as a matter of principle, the repackaging should be as unobtrusive from a trade mark point of view as possible. Two forms of packaging, at least, can be said to meet this requirement. The first consists of packaging which imitates the original packaging save in respect of features which have no trademark significance whatsoever. For example, a parallel importer could repackage in boxes which bear exact copies of the claimant's get up and trade marks, save for changes in language (say German to English). The second consists of completely plain boxes which depict nothing but the claimant's trademark. In each case, of course, the trade mark owner cannot object to the inclusion of material on the packaging required, for example, by national legislation or jurisprudence of the ECJ. For that reason, placing on the boxes a notice identifying who the repackager is, as required by BMS, would not, of itself, allow the proprietor to complain of the repackaging. However, even in such a case, it would be necessary to show that the importer had applied the additional marking in a way which did not unnecessarily interfere with the proprietor's interests in his trade mark. Mr Thorley said that plain boxes could include the original brand name so as to be consistent with the brand name appearing on the internal packaging and the product itself. They could also contain some appropriate reference to the generic name of the active ingredient. The name and address of the manufacturer and of the Marketing Authorisation Holder should be included as should the name and address of the importer which should be no more prominent, in terms of script or location, than that of the manufacturer. I agree."
"98. It must be borne in mind that repackaging a product which bears a trademark, whether or not the trademark is reaffixed to the new external packaging or simply removed and not replaced, is a particularly intrusive form of trademark infringement."
He went on to say:
"Partial de-branding by removal of the mark from the outer packaging or significant diminution of its prominence may reduce the extent to which the proprietor can build up public awareness of and reputation in his mark. If such de-branding is not necessary to enable the importer to access the market, the proprietor can use his registered rights to prevent it."
"The second class consists of those cases where the importer reboxes in a livery which serves to build up his own reputation in his own mark or get-up on the back of the claimant's product. The use by an importer of his own mark or get-up alongside the proprietor's mark on the new boxes, was referred to as co-branding during the trial. The effect of this is likely to be to diminish to some extent the build up of the proprietor's exclusive reputation. To some extent, the goodwill generated by the use of the proprietor's mark will benefit the importer, not the proprietor. Once again, that adversely affects the proprietor's interest in his mark and, if it is not necessary to do this to enable the importer to access the market, it can be restrained."
The criticisms of the second judgment
" …. the consumer or final user of the product is not liable to be misled as to the origin of the product, above all where, as in this case, the parallel importer has [a BMS condition 3 notice]."
Here, if one looks at the packs (photos are at  EIPR 34) one can see that there was some de-branding.
The claimants' contentions concerning co and re-branding and the overstickering cross- appeal
"The power of the owner of trade mark rights protected in a Member State to oppose the marketing of repackaged products under the trade mark should be limited only in so far as the repackaging undertaken by the importer is necessary in order to market the product in the Member State of importation."
Paragraph 46 of Ballantine:
"The person carrying out the relabelling must, however, use means which make parallel trade feasible while causing as little prejudice as possible to the specific subject-matter of the trade mark right. Thus if the statements on the original labels comply with the rules on labelling in force in the member state of destination, but those rules require additional information to be given, it is not necessary to remove and reaffix or replace the additional labels, since the mere application to the bottles in question of a sticker with the additional information may suffice."
Conflicting Opinions – the need for a second reference
"Orifarm has introduced its own line for the imported and repackaged product when it designed the package and used the triangle logo and has this performed an actual co-branding with the commercial advantages involved. The repacked product appears – also without the defendant's name on the front – just as much as an Orifarm product as an Astra product. No matter if the defendant's design of the package will ease the pharmacies' identification of the parallel importer's product line the affixation of the defendant's triangle is not necessary to give the defendant effective access to market the product. Accordingly, and since a possible commercial reason for Orifarm's repacking procedure cannot cause a different result, the court finds Orifarm's repacking unwarranted."
"The parallel importer is obligated to interfere as little as possible in the trade mark holder's right to identify the product."
"A newly produced package might be more attractive in a certain respect. The substantial economic interest of the Defendant in the possibility to present itself better as a distribution company with such a package does not take priority over the interest of the trademark holder; the free movement of goods to warranted to the defendant is not affected as such."
"The first requirement [BMS 1] reveals that the modifications of the product imported in parallel must be objectively necessary to market the product in the Member State of importation."
"Whoever uses new self-stick labels must procure, in using means enabling parallel trade, the least possible impairment of the specific subject-matter of the trademark right."
"The protection of the trade mark as a guarantee of origin also requires that the repackaging must not be done in such a way that it is liable to damage the reputation of the trade mark and thus of its owner …. Impairment of the reputation of the trade mark and thus of its owner may therefore in principle constitute "legitimate reasons" within the meaning of Art. 7(2)"
"50. Moreover, the protection of the trade mark as a guarantee of origin also requires that the repackaging must not be done in such a way that it is liable to damage the reputation of the trade mark, and thus of its owner, (see, for comparison, BMS, at paragraph 75; and Dior, at paragraph 43). Impairment of the reputation of the trade mark, and thus of its owner, may therefore, in principle, constitute "legitimate reasons" within the meaning of Article 7(2)."
"52. In order to establish whether there is a risk of damage to the reputation of the trade mark, the national court will have to take account of whether there is an inappropriate presentation of the repackaged product. In such a case, the trade mark proprietor has a legitimate interest, related to the specific subject-matter of the trade mark right, in being able to oppose the marketing of the product. Apart from instances of defective, poor quality or untidy packaging the national court may also take account of circumstances outside the actual package design such as advertisements published by the Appellant. The Court is not aware of anything that would indicate that affixing coloured stripes along the edges of the product packaging could damage the reputation of the trade mark, and thus that of the Respondents."
"54, With regard to the suggestion that the Applicant is pursuing the goal of generating a "Paranova product range", the EFTA Surveillance Authority has rightly observed that the mere fact that a parallel importer gains additional advantage from a particular type of graphic design is, in itself, immaterial."
"55. The Respondents have observed that products under the same trade mark owned by them may be marketed by various parallel importers with various package designs. They have argued that this would evoke the risk of degeneration of the trade mark. The Court holds that such a risk may, in principle, constitute "legitimate reasons" within the meaning of Article 7(2) of the Directive. It is for the national court to make the necessary factual assessments. In its examination, the national court will have to take into account that the products in question are prescription drugs, and that decisions to use them are made by members of the medical profession on the basis of specialist knowledge and professional responsibility. Only if the coloured stripes constitute the main factor in creating the risk of degeneration, may that risk form a "legitimate reason" to oppose the use of those coloured stripes. This must be distinguished from other causes of degeneration, such as the trade mark owner's own conduct, or developments in the market. Furthermore, the common use of one trade mark by more than one undertaking is an inevitable consequence of the privilege conferred on parallel importers in recognition of their contribution to free trade."
"56. If coloured stripes affixed along the edges of the product repackaging could create a risk of confusion as to the identity of the manufacturer, that might in theory cause damage to the reputation of the trade mark. However, the repackager's duty to clearly state the name of the manufacturer as well as its own name is intended to counteract any blurring of the distinction between the manufacturer and the parallel importer. Therefore, the use of coloured stripes could not alone constitute a "legitimate reason" within the meaning of Article 7(2) of the Directive, as long as the names of the manufacturer and the parallel importer are adequately stated, i.e. whether the names in question are printed in such a way as to be understood by a person with normal eyesight, exercising a normal degree of attentiveness (see, for comparison, BMS, at paragraph 71)."
"The Commission of the European Communities submits that the necessity test applies to the act of repackaging, not to the presentation of the repackaged product. Under the trade mark's function of origin, however, the proprietor may oppose the presentation of the products if the presentation is liable to damage the distinctive character of the trade mark or if the presentation of the repackaged goods is liable to damage the reputation of the trade mark and its owner. In circumstances where it is established that the marketing of the repackaged goods is customary in the reseller's sector of trade, the recognition of "legitimate reasons" depends upon whether the use of the trade mark seriously damages its reputation."
The Period of Notice
"148. In the absence of guidance from the ECJ, it appears to me that the approach to notice, if it is a pre-condition, should be as follows. The purpose is to give the proprietor sufficient time to come to a fair decision as to whether to object or not. If no objection is to be made, that is a matter which should be conveyed to the importer as soon as possible so that any dislocation of inter-State trade is kept to a minimum. How long is needed for that exercise is something which is primarily within the knowledge of the proprietor. Therefore, if anything other than a very short time is needed, it is for the proprietor to demonstrate how long is necessary. In this case no attempt was made by Mr Silverleaf's clients to show that they needed anything more than a few minutes to make up their minds. Where, as here, the importers are well known to the claimants and readily accessible by phone, only a day or two at most would be reasonable. Of course if that sort of notice is all that is given and the response from the proprietor is a legitimate "no", this may cause dislocation and loss to the importer. However that is a problem he will have to shoulder if he decides to give such short notice. It has no impact on how long the notice should be for the purpose of allowing the proprietor to come to a fair decision."
"On the basis of the evidence before the Court, a period of 15 working days seems likely to constitute such a reasonable time where the parallel importer has chosen to give notice to the trade mark proprietor by supplying it simultaneously with a sample of the repackaged pharmaceutical product. That period being purely indicative, it remains open to the parallel importer to allow a shorter time and to the proprietor to ask for a longer time to react than that allowed by the parallel importer."
An injunction about notice in respect of other trade marks?
Documents for this appeal
Finally, I do not wish to part with this case without entering a strong protest about the bundles. We were originally sent nearly fifty bundles of documents. Most of these were fat ring binders. After the court made inquiries as to what they were all for, many of them were taken away before the case started. We were nonetheless left with about half. Of these, by my calculation, ten were never opened. In the case of others only a page or two were looked at. No attempt was made to comply with the Practice Direction to Part 52 15.11(A) which requires a core bundle of essential documents. On the contrary, no document was considered too unimportant to be included in the mass of files that confronted us. Nor were the files particularly logical. For instance the two judgments of Laddie J and the judgment of the ECJ were buried at the back of files with transcripts of evidence and argument, procedural orders of no consequence and other matter. Further, no file contained an inside label as has become good practice in all substantial litigation for a number of years. Consequently when a file was opened you could not see what its number was. Indexing was of a particularly uninformative kind – for example exhibit numbers were simply given rather than what the exhibit actually was. Whether or not the parties' lawyers ever co-operated in the documentation or if they did they ever considered what was really needed and how best it should be organised I do not know. It seems unlikely. The consequence of all this undoubtedly made the hearing more cumbersome and the writing of the judgment more difficult.