England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
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 00017, HC 1999 Nos 01894, 02053
HC 1999 No 02051, HC 1999 No 02054,
HC 1999 No 02904, HC 1999 No 03040

		0682, 0689, 0690, 0691, 0692, 0693, 0694 Royal Courts of Justice Strand, London, WC2A 2LL
		21/02/2008

Lord Justice Jacob:

1. This is my judgment on the resumed appeals and cross appeals from two judgments of Laddie J ("Laddie 1" and "Laddie 2") of 28^th February 2000 (no neutral citation, [2000] IP & T 502) and 6^th February 2003, [2003] EWHC 110 (Ch). By Laddie 1 some questions were referred to the European Court of Justice ("ECJ"). The ECJ gave its response ("ECJ 1") on 23^rd April 2002, Case C-143/00. The hearing before Laddie J resumed for further argument; no more evidence was given. By Laddie 2, judgment was given principally for the trade mark owners. The defendants appealed. The claimants cross-appealed some issues of fact and other matters on which they had lost. We gave judgment on 5^th March 2004, [2004] EWCA Civ 129 ("CA 1"). Some matters were finally determined (passing off, the factual questions about necessity). Others we were not sure about and found it necessary to refer questions to the ECJ. Those questions were answered by a judgment ("ECJ 2") of 26^th April 2007 in Case C-348/04. The resumed appeal is the result of that judgment.
2. Notwithstanding the two references to the ECJ and its answers, each "side" (there are several claimant drug companies as claimants and two parallel importers as defendants) claims to have won. That is a sorry state of affairs. European trade mark law seems to have arrived at such a state of uncertainty that no one really knows what the rules are, outside the obviously core case of straightforward infringement (the use of a mark as a trade mark for the defendant's goods which is the same as or confusingly similar to a plaintiff's registered mark registered for the same or similar goods). Big brand owners want bigger rights; smaller players, no change or less. The compromises which have emerged have very fuzzy lines. So it is that in this case, notwithstanding two references (and a host of cases about relabelling parallel imports going back at least 30 years, see Hoffmann-La Roche v Centrafarm, Case 102/77 [1978] ECR 1139), there is still room for argument. There is indeed a yet further reference about the subject still pending before the ECJ, see below.
3. There is and never has been any dispute as to what the defendants are in fact doing. I described it briefly at [4 – 10] of my judgment in the CA 1 judgment:

[4] I begin by describing the various things the defendants are doing. In each case they purchase in a Member State other than the UK the original pharmaceutical, packed in cardboard boxes appropriate for that Member State containing an appropriate instruction leaflet for that Member State. Some of the goods are pills packed in blister packs. Others are inhalers (commonly called "puffers") on which is stuck a label. There is no dispute that under the free-circulation rules (and particularly Art. 28) of the EC Treaty they are entitled, so far as trade mark law is concerned, to import and sell these goods in the packaging in which they were purchased.

[5] The actual pharmaceuticals are the genuine goods, identical to those on the UK market. They may indeed come off the same production line since pharmaceutical production does not involve giant factories and distribution is cheap – you can get a lot of pills in a lorry. But the boxing, labelling and information leaflets as they stand are not suitable for this country. Information leaflets for this country must be in English and comply with our regulatory requirements which may differ from those in the country of origin. Moreover the boxes have instructions and details in foreign languages.

[6] The parallel importers therefore, for regulatory and market acceptability reasons, make changes. What they mainly do so far as this case is concerned is called "reboxing". They take the contents of the foreign boxes out, and put them in fresh boxes designed for the UK market along with fresh information leaflets in English which comply with UK regulatory approval. In the case of inhalers, not only do the importers rebox, they also stick appropriate English language labels on the inhalers themselves, labels which completely overcover the foreign language label.

[7] Reboxing generally involves re-affixing the original trade mark on the information leaflets and boxes. But in some instances the importer has instead only used the generic name of the drug on the box – not its trade mark. This was called "de-branding". In such a case the original trade mark is not removed from every aspect of the product – in particular blister packs and often the pills themselves bear it. For obvious reasons the mark cannot be removed from the pills or the blister packs without the risk of affecting the quality of the drugs themselves. So "de-branding" in the context of this case really means partial de-branding. The only affixing of the trade mark by the parallel importers is on the new information leaflet prepared for UK use.

[8] In other cases the defendants' new boxes not only bear the trade mark of the drug, but also have a get-up which may serve as being distinctive of the importer. This is called "co-branding." Such co-branding has always had on the side of the box in clearly legible, but less prominent, small print, the information mentioned below.

[9] An alternative operation is called "stickering". This involves sticking an appropriate label to an original foreign language box, having replaced the internal foreign information leaflet with an appropriate UK leaflet. Complaint is made of the form of some stickered products.

[10] Whether there is reboxing or stickering, for the purposes of this case it is agreed that we should proceed on the basis that the importer has indicated clearly on the new box or sticker that the goods were procured in the EU and repackaged by the importer. An example of the sort of thing involved reads:

"Manufactured by Lilly SA, Spain. Procured within the EC and repackaged by the licence holder who is:

DOWELHURST LTD"

Actually some of the boxes with which we were concerned did not say all these things, but no point is taken about that.

More detail of these activities is to be found in the Laddie 1 judgment and its annexes where many of the presentations complained of are illustrated.

4. By the CA 1 judgment the claimants' cross-appeals in passing off were dismissed. And they were dismissed on the basis that the activities complained of contained no false representations and did not cause any confusion – see [55-59] and Laddie 1 at [192]. More widely, in Laddie 1 it was held that none of the defendants' activities caused confusion or harmed the claimants' trade marks or reputation.
5. Mr Richard Arnold QC for the defendants took us in detail through Laddie 1 to show us the findings of fact in some repetitive detail. It is sufficient here to quote some of Laddie J's conclusions:

[165] …The claimants' assertions of serious damage to their respective trade marks are all at a high level of generality. No evidence has been furnished that any of the individual products and packagings in issue has caused any damage at all to the claimants.

[166] The claimants say that each of the pleaded packagings, whether reboxed or overstickered, is highly damaging to their reputation and exclusivity. Their pleaded trade marks are said to be gravely harmed by the defendants' activities. I have already said that there is no evidence to support these assertions in relation to any particular piece of packaging. But there is also no evidence to support the assertions at the high level of generality at which they are put by the claimants. Indeed, there is much to suggest that they are not accurate. Had the claimants' assertions been true one would have expected some material to be put before the court to show that the claimants had suffered. There is none. But more than that, the absence of such evidence is particularly striking in this case for at least two reasons. First, the defendants' activities have been on a large scale. They have made sales of tens of millions of pounds worth of parallel imported drugs in the packages in issue here and in similar packages for other drugs of the claimants. If damage was being inflicted, one would have expected some indications of it to have surfaced at some stage over the last few years.

[172] Furthermore, and perhaps even more telling, is the evidence relating to the large multiple retailers such as Boots and Lloyds chemists. Such retailers account for some 40 per cent of the retail pharmacy market, Boots and Lloyds alone accounting for some 25 per cent between them. Each of the claimants has entered into agreements with them under which the respective claimants supply some of their proprietary drugs to the retailer in packaging which bears the claimants' trade mark, but also the retailer's trade mark as well. Although the claimants have the right to object to the design of packaging to be used for these products, they have participated in putting on the market packages which are in get-ups which are wholly different to those used either by the claimants or the defendants.

6. In CA 1 this Court picked up and accepted those findings. In my judgment (with which the other members of the court agreed) I said:

[81] So far as co-branding is concerned, in some circumstances this might indeed cause damage to the reputation of the mark. This would be the case, for instance, if it were shown that the co-brand created a perception that it was a brand of the actual manufacturer, or that the importer and manufacturer were in some sort of joint venture. But that is not so on the facts of this case. It is true that one or two pharmacists indicated that there might be some confusion caused by the co-brand, but overall it is simply not proved that there is any such conception. Whether clear BMS condition 3 notices prevented any but the careless or the indifferent patients from taking the "co-brand" as emanating from the original manufacturer or whether they are just not confused anyway does not matter. If there had been significant confusion caused by the co-branding complained of here (essentially the Swingward "get-up" and the fancy "C" on Dowelhurst's boxes) it would have been proved. Nor is this the sort of case where damage to reputation is self-evident – given the condition 3 notices. It is worth noting that the Taylor Nelson report shows no concern about damage to reputation caused by co-branding. Laddie J in his first judgment at paragraph 164 specifically found on the facts that there was no damage to the claimants' reputation and exclusivity.

[82] As regards de-branding again I can see no damage to the reputations of the claimants or their trade marks. Both Mr Thorley and Mr Silverleaf contended that there was damage. They submitted that by reason of the reduced prominence of their clients' trade marks the reputation of these would be less than if the trade mark clearly appeared on the box. Deprivation of incremental exposure of the trade marks was, they submitted, damage. I would not accept that. I do not think that a trade mark owner has any right that requires subsequent dealers in his product to keep his trade mark on the product. We were told that French trade mark legislation expressly confers such a right. That does not help. There is nothing in the Trade Marks Directive about any such right.

[83] Looking at it another way, the only act which would be an infringement, unless saved by Art.30 last sentence and Art.7(2), is the act of affixing. The only such acts in the case of a "de-brands" are in relation to the leaflets (as to which no objection can be taken) and of the use of the manufacturer's name in the BMS condition 3 notice (which again is unarguably legitimate).

[84] Indeed the Judge, as I have said, in his 1st judgment, rejected claims to damage to the claimants' trade marks or their reputation either by co-branding or de-branding.

7. We have had a re-run of these points. Mr Michael Silverleaf QC for Glaxo, Boehringer and Smithkline Beecham (the first and last have now merged) and Mr Simon Thorley QC for Lilly submit that Laddie J and this court, in holding that there was no damage to the claimants marks' or their reputation, did so on a legally flawed basis. That submission now lies at the heart of this case. Before I consider the submission further, I must set out how it has become central.
8. I start with first principles by going to the legislation about infringement of a registered trade mark. Although going to the legislation sounds an obvious step, sometimes debates about trade mark rights go on without any reference to these fundamental definitions. Things are then apt to become abstract or metaphysical – often amounting to assertions and denials of faith rather than being based on what has been laid down in the legislation.
9. The definitions of the prima facie scope of protection are contained in Art. 5 of the Trade Marks Directive, 89/104 (enacted for the UK by s.10 of the Trade Marks Act 1994 and for the EU by Art. 9 of the Trade Marks Regulation, 40/94):

Article 5 - Rights conferred by a trade mark

1. The registered trade mark 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 trade mark in relation to goods or services which are identical with those for which the trade mark is registered;

(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.

2. Any Member State may also provide that the proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical with, or similar to, the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.

3. 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 these purposes under that sign, or offering or supplying services thereunder;

(c) importing or exporting the goods under the sign;

(d) using the sign on business papers and in advertising.

If a defendant's act falls within this definition, he will infringe unless he has a defence. The legislation goes on to set out positive defences in Art. 6 which I need not set out.

10. The defence with which we are concerned is contained in Art.7:

Article 7 - Exhaustion of the rights conferred by a trade mark

1. The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.

2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialization of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.

11. Although this provision has its origins in Arts. 28 and 30 of the EU Treaty (formerly Arts. 30 and 36 of the EEC Treaty), the case-law about these governs its interpretation), it is a free-standing provision. In one respect it is wider – it applies even if intra-Member State trade is not affected. So, for instance, if products were first sold by a trade mark proprietor in Wales with Welsh language boxes and information leaflets and some English defendants sold the product in England re-boxed and stickered in the same way as the defendants in this case have done, the result would be just the same.
12. The defendants say they are within Art. 7(1). The claimants say not so, that the activities complained of fall within Art. 7(2) because there are "legitimate reasons for the proprietor to oppose further commercialization." In particular it is claimed that "de-branding" and "co-branding" constitute such reasons.
13. Although this argument is suggested to be specific to the products in issue (and in a sense must be) the argument has in fact proceeded at a high level of generality. If it is right it will apply to all stickered or re-boxed products.
14. Bearing the statutory provisions in mind, I now turn to the case-law about Art.7. The key cases are Bristol-Myers Squibb v Paranova Joined Cases C-427/93, C-429/93 and C-436/93, [1996] ECR I-3457 ("BMS"), Parfums Christian Dior v Evora, C-337/95, [1997] ECR-I6013 ("Dior") and the two references in this case.
15. In BMS the Court was concerned with repackaged pharmaceuticals. Its ruling about Art. 7(2) reads as follows:

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 does not 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."

16. So the importer who repackages and re-applies the mark will infringe unless he satisfies all five of the BMS conditions. I summarise these as I did in CA 1.

(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;

(5) Notice.

17. In Dior the Court considered the right of a trade mark owner to prevent further commercialisation of its product (luxury imaged perfumes). The Court ruled:

2. On a proper interpretation of Articles 5 and 7 of Directive 89/104, when trade-marked goods have been put on the Community market by the proprietor of the trade mark or with his consent, a reseller, besides being free to resell those goods, is also free to make use of the trade mark in order to bring to the public's attention the further commercialization of those goods.

3. The proprietor of a trade mark may not rely on Article 7(2) of Directive 89/104 to oppose the use of the trade mark, by a reseller who habitually markets articles of the same kind, but not necessarily of the same quality, as the trade-marked goods, in ways customary in the reseller's sector of trade, for the purpose of bringing to the public's attention the further commercialization of those goods, unless it is established that, given the specific circumstances of the case, the use of the trade mark for this purpose seriously damages the reputation of the trade mark.

18. Ruling 2 of Dior is of general importance – for many shopkeepers, internet sellers and other middlemen make use of the manufacturer's trade mark in the course of their trade. Middlemen have always done this, and were it not generally permitted trade mark owners would have a virtual stranglehold on everything that happened to their goods after initial marketing.
19. Here Dior 2 provides an answer to Lilly's particular complaint about Dowelhurst's English language product information leaflet for Prozac. The complaint is that it uses the trade mark Prozac – is an application of the mark by Dowelhurst. Ruling 2 permits that, though not of course if what Dowelhurst does is otherwise objectionable, and in particular is damaging in the relevant sense (see below). The particular complaint adds nothing to the case.
20. One might have hoped that the Court's BMS ruling would have put an end to repackaging/reboxing cases. Such a hope would have been dashed, for the meaning of the ruling itself became the subject of more controversy. The main controversy before Laddie J the first time round was about the "necessary" condition. And mainly was it necessary to rebox at all? He referred a number of questions (set out at CA 1 [34]) to the ECJ. The court ruled, so far as is now relevant:

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.

21. So the "necessity" requirement of BMS condition 1 could be satisfied by proof of strong market resistance. Whether there was such resistance was an issue of fact which Laddie J determined in favour of the parallel importers and was a finding of fact that this court upheld in CA 1. Necessity is no longer challenged.
22. However, in the course of its reasoning (not in its actual ruling) the Court said:

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 paras. [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.

23. In Laddie 2, Laddie J said he understood this to mean:

[15] 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 Q.C., who appears for SmithKline Beecham and Eli Lilly, is correct to summarise the effect of para.[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. Therefore, if a parallel importer were to remove the proprietor's packaging and replace it by identical packaging (for example because the original packaging was soiled) and even where such repackaging was done in the most hygienic environment so that no adverse effect upon the quality of the goods was possible, that would be deemed to constitute harm to the origin or quality function of the mark. This was a submission made by the claimants at the original hearing before me. They were right. It follows that, prima facie the claimants can object to any repackaging of their products no matter what its nature and no matter how inoffensive it may be.

24. He went on to hold that:

[20] … 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.

25. Applying this principle of "minimal collateral damage" he went on to deal with de-branding and co-branding:

[22] If the mark is completely removed from all parts of the product and its packaging, the importer is no longer using it and there cannot be infringement which is a wrong which is dependent upon use of the mark. In para.98 of his Opinion, the Advocate-General was only considering removal of the mark from the outer packaging. He was not considering complete removal. On the other hand, this paragraph does lend support to the view that de-branding which results in the mark continuing to be used but reduces its prominence may be objectionable. In a case where the parallel importer removes the trademark from the external packaging but leaves it on the internal blister packs or patient leaflets, he is still using the mark. He must not do so in a way which adversely affects the proprietor's interest in it. 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.

[23] 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.

26. In relation to Lilly's complaints about the Prozac re-box he held:

[30] For reasons set out above, had all references to PROZAC been removed from this product then no question of trade mark infringement could have arisen. In fact such removal would have been nearly impossible to achieve because each of the capsules in the blister pack carries the mark. In any event, PROZAC is to be found on the strips of capsules as illustrated. Eli Lilly objects to the partial removal of its mark from the product, that is to say its removal from the front of the pack. It objects to the use of the Concept Generics name and get up. It objects to the placement of the defendant's name prominently on the blister packs. It also objects to the use of capital letters for the defendant's name on the sides of the boxes although it accepts that the name needs to be there for regulatory reasons. In my view all of these complaints are justified. All of them, separately and together, reduce or eliminate Eli Lilly's connection with PROZAC and project and emphasise, in a way which is not necessary either to achieve market acceptance or to meet regulatory requirements, Dowelhurst's (or Concept Generics) association with the products.

He went on to deal similarly with the complaints of the other claimants. I need not set it all out here.

27. The main issue on the appeal was whether he had interpreted ECJ 1 correctly. In particular was he right about the necessity requirement of BMS applying to each of the conditions? We had doubts and hence referred questions to the ECJ. So far as is relevant for the appeal (the consequences of the answers about notice and damages will be considered at first instance) the court ruled:

1.      Article 7(2) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, as amended by the Agreement on the European Economic Area of 2 May 1992, is to be interpreted as meaning that the trade mark owner may legitimately oppose further commercialisation of a pharmaceutical product imported from another Member State in its original internal and external packaging with an additional external label applied by the importer, unless

–        it is established that reliance on trade mark rights by the proprietor in order to oppose the marketing of the overstickered product under that trade mark would contribute to the artificial partitioning of the markets between Member States;

–        it is shown that the new label cannot affect the original condition of the product inside the packaging;

–        the packaging clearly states who overstickered the product and the name of the manufacturer;

–        the presentation of the overstickered product is not such as to be liable to damage the reputation of the trade mark and of its proprietor; thus, the label must not be defective, of poor quality, or untidy; and

–        the importer gives notice to the trade mark proprietor before the overstickered product is put on sale, and, on demand, supplies him with a specimen of that product.

2.      The condition that the repackaging of the pharmaceutical product, either by reboxing the product and re-applying the trade mark or by applying a label to the packaging containing the product, be necessary for its further commercialisation in the importing Member State, as one of the conditions which, if fulfilled, prevent the proprietor under Article 7(2) of Directive 89/104, as amended by the Agreement on the European Economic Area, from opposing such commercialisation, is directed solely at the fact of repackaging and not at the manner and style of the repackaging.

3.      The condition that the presentation of the pharmaceutical product must not be such as to be liable to damage the reputation of the trade mark and of its proprietor – as a necessary condition for preventing the proprietor, pursuant to Article 7(2) of Directive 89/104, as amended by the Agreement on the European Economic Area, from legitimately opposing further commercialisation of a pharmaceutical product where the parallel importer has either reboxed the product and re-applied the trade mark or applied a label to the packaging containing the product – is not limited to cases where the repackaging is defective, of poor quality, or untidy.

4.      The question whether the fact that a parallel importer:

–        fails to affix the trade mark to the new exterior carton ('de-branding'), or

–        applies either his own logo or house-style or get-up or a get-up used for a number of different products ('co-branding'), or

–        positions the additional label so as wholly or partially to obscure the proprietor's trade mark, or

–        fails to state on the additional label that the trade mark in question belongs to the proprietor, or

–        prints the name of the parallel importer in capital letters,

is liable to damage the trade mark's reputation is a question of fact for the national court to decide in the light of the circumstances of each case.

5.      In situations such as those in the main proceedings, it is for the parallel importers to prove the existence of the conditions that

–        reliance on trade mark rights by the proprietor 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;

–        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 trade mark and of its proprietor; thus, the repackaging must not be defective, of poor quality, or untidy; and

–        the importer must 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 repackaged product,

and which, if fulfilled, would prevent the proprietor from lawfully opposing the further commercialisation of a repackaged pharmaceutical product.

As regards the condition that it must be shown that the repackaging cannot affect the original condition of the product inside the packaging, it is sufficient, however, that the parallel importer furnishes evidence that leads to the reasonable presumption that that condition has been fulfilled. This applies a fortiori also to the condition that the presentation of the repackaged product must not be such as to be liable to damage the reputation of the trade mark and of its proprietor. Where the importer furnishes such initial evidence that the latter condition has been fulfilled, it will then be for the proprietor of the trade mark, who is best placed to assess whether the repackaging is liable to damage his reputation and that of the trade mark, to prove that they have been damaged.

28. Ruling 2 shows that Laddie J's understanding of ECJ 1 was wrong. There is no "necessity" requirement running through from not only the need to re-box or re-labelling, but also, if either of these is necessary, also to the manner in which that is done. Ruling 2 is a practical answer: you can re-box or sticker if that is the only way you can get market access. Otherwise you can't. Once the re-seller has overcome that necessity test, there is no more necessity requirement. So for instance the exercise of considering whether the size of the name of the importer on a label or box is necessary is not relevant. Necessity is not the test, only whether there is damage to reputation (Ruling 4).
29. Ruling 4 shows that Laddie J was also wrong in his concept of an irrebutable presumption of damage. Damage is a question of fact for the national court – quite what amounts to damage lies at the heart of the dispute now between the parties.
30. Ruling 1 merely re-affirms the BMS conditions as they related to overstickered product – so much was common ground. In the result therefore, as was also common ground, the question is now reduced to this: do the defendants comply with BMS 4? Is the presentation of their products "liable to damage the trade mark's reputation?" And that is a question of fact.
31. The defendants say they have positive findings in Laddie 1 and of this court to the effect that there is no damage to the trade mark's reputation – see above. So that is an end of the case.
32. The claimants say that those findings are on a legally false basis. This is because the Court in its reasoning (not its rulings) in ECJ 2 held that the concept of "damage" to a trade mark is wider than Laddie J or this court thought. Particular reliance is placed on several passages of the judgment:
33. First, as anticipated by this Court in CA 1 at [80], the Court held that damage to the reputation of the mark could be caused in cases other than bad packaging:

[41] It must be observed, as maintained by Boehringer Ingelheim and Others and the Commission, that the condition that the presentation of the repackaged product must not be such as to be liable to damage the reputation of the trade mark and of its proprietor cannot be limited only to the case where repackaging is defective, of poor quality, or untidy.

[42] The Court, in holding in paragraph 76 of the judgment in Bristol-Myers Squibb and Others that defective, poor quality or untidy packaging could damage the trade mark's reputation, merely referred to certain cases in which inappropriate presentation of the repackaged product is liable to damage the reputation of the trade mark and of its proprietor.

[43] Accordingly, a repackaged pharmaceutical product could be presented inappropriately and, therefore, damage the trade mark's reputation in particular where the carton or label, while not being defective, of poor quality or untidy, are such as to affect the trade mark'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 (see, to that effect, Bristol-Myers Squibb and Others, paragraph 76, and Case C-337/95 Parfums Christian Dior [1997] ECR I-6013, paragraph 45).

Hence Ruling 3.

34. Next the claimants go to [45] – [46]:

[45] As the Commission correctly argues in its written observations, the fact that a parallel importer does not affix the trade mark to the new exterior carton ('de-branding') or applies either his own logo or a house-style or get-up or a get-up used for a number of different products ('co-branding'), or positions the additional label so as wholly or partially to obscure the proprietor's trade mark, or fails to state on the additional label that the trade mark in question belongs to the proprietor, or prints the name of the parallel importer in capital letters is, in principle, liable to damage the trade mark's reputation.

[46]      However, precisely as with the question whether advertising is liable to create the impression that there is a commercial connection between the reseller and the trade mark proprietor and, therefore, constitute a legitimate reason within the meaning of Article 7(2) of Directive 89/104 (see Case C-63/97 BMW [1999] ECR I-905, paragraphs 51 and 55), the question whether the circumstances referred to in the previous paragraph of the present judgment are liable to damage the trade mark's reputation is a question of fact for the national court to decide in the light of the circumstances of each case.

35. They then refer to [15], re-emphasised by [49]:

[15] According to the case-law of the Court, 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 (see Boehringer Ingelheim and Others, paragraph 30).

[49] As stated in paragraph 15 of the present judgment, it is the repackaging of the trade-marked medicinal 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 repackaging by the parallel importer.

36. So, it is submitted, co-branding and de-branding are "in principle" liable to damage a trade mark's reputation. And that extends to more than merely doing it untidily or the like. And "it is not necessary to assess the actual effects."
37. Further it is submitted that it is not Laddie 1 which contains the relevant findings of fact, but Laddie 2, particularly at [30].
38. I do not accept these submissions. First their effect, if right, would be to reinstate an irrebutable presumption of damage caused by co- or de-branding. Yet the Court has specifically said that whether or not these activities cause damage is a question of fact. The passages relied upon, [15] and [49], and the "in principle" passage, although perhaps at first blush saying something wider must be read in that context. That context is consideration of the fundamental purpose of a trade mark. [15] of ECJ 2 is immediately preceded by:

[14] It must be borne in mind that the specific subject-matter of a mark is to guarantee the origin of the product bearing that mark and that 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 (see Boehringer Ingelheim and Others, paragraph 29).

39. Further, the probable explanation of [15] of ECJ 2 and [30] of ECJ 1 is as explained by Sharpston AG in her observations in ECJ 2:

[46] That statement [i.e. [30] of ECJ 1] in fact was paraphrasing Hoffmann La Roche. With respect I am not convinced that the summary is wholly correct. What the Court actually said in Hoffmann La Roche was that the guarantee of origin enables the consumer to be certain that a trade-marked product has not been subject to unauthorised interference by a third party 'such as to affect [its] original condition'

40. But whether that is so or not, the passages relied upon must be read as subject to the key decision and ruling that damage is a question of fact.
41. And as I see it, "fact" means just that. Mere assertion or counter-assertion will not do. I do not accept that Laddie 2 "reverses" the findings of fact made in Laddie 1. [30] of Laddie 2 is based on his erroneous understanding of ECJ 1. He is not re-finding fact at all. He is simply working on the basis that anything which goes beyond that which is necessary is deemed to be damaging.
42. I turn to the two specific activities complained of. First co-branding. The high point of Mr Silverleaf's submissions about this was a reference to the evidence of a Mr Cooper of a pharmaceutical wholesaler called Munro. It went like this:

(Q) What you have done, it is fair to say, is it not, is to put all four inhalers in a common style of package. (A) Yes.

(Q) With your own little motif on it? (A) Yes.

(Q) Is it a lion rampant? (A) It is, yes.

(Q) That is a stylized pack design. (A) Correct.

(Q) It is intended to say to anybody that that it is a MUNRO product. (A) Well, it does say on it that it is imported by MUNRO, so, yes.

(Q) But the common style and theme of the packaging is intended to tell anybody who sees more than one of them that that is the same source as the other one. (A) Correct, yes.

(Q) If you have a patient who is prescribed ATROVENT and subsequently prescribed BECLOFORTE, and he gets each of those in succession, he would have the impression that they came from the same source, would he not? That is the idea. (A) Yes.

43. I am quite unable to see how it follows that that there is damage to either of the trade marks Atrovent or Becloforte. True it is that Munro have promoted their own mark. But it is made plain in context that it is an importer's mark. Nothing is done so as to disparage the claimants' trade marks. Nor so as to suggest that Munro have any commercial association with the manufacturers. If this harmless type of co-branding were illegal many an importer or dealer would find himself in trouble. Harrods are apt to put their name on everything they sell. Berry Brothers and Rudd, the distinguished wine dealers, often put their own label on the back of the wine bottles they have imported. Should all this stop if the manufacturer or other ultimate source says so? Just because the dealer or importer is promoting himself? The answer is obviously not. And the reason is that no harm, no damage, is done.
44. Putting it another way, it all depends on how the co-branding is done. The ECJ clearly had this in mind in its analogy with the BMW case. For the "in principle" paragraph [45] relied upon is followed by this:

[46] However, precisely as with the question whether advertising is liable to create the impression that there is a commercial connection between the reseller and the trade mark proprietor and, therefore, constitute a legitimate reason within the meaning of Article 7(2) of Directive 89/104 (see Case C-63/97 BMW [1999] ECR I-905, paragraphs 51 and 55), the question whether the circumstances referred to in the previous paragraph of the present judgment are liable to damage the trade mark's reputation is a question of fact for the national court to decide in the light of the circumstances of each case.

Whether a non-BMW approved second-hand car dealer and repairer was causing damage to the BMW trade mark depended entirely on how he advertised. And that was to be assessed by the national court.

45. I turn to "de-branding." First the facts. I take the Prozac case as essentially typical of all in issue. Mr Thorley began by emphasising that his client's trade mark, Prozac, was very famous – so famous that it had found its way into dictionaries with the customary warning that it is a proprietary name. He showed us Lilly's Prozac boxes which of course used the trade mark prominently. There were two boxes, the one in use until 1999 and that thereafter – in a rather fancier colour. The change was probably a marketing move prior to the anticipated patent expiry in 2000. At that time about 35% of the market was being met by parallel importation of Prozac. There was not yet any market for the generic product because the patent was still in force.
46. Mr Thorley then showed us some packaging of which no complaint was made – a stickered Lilly box imported from Spain. It had Dowelhurst in capitals on the sticker but left the trade mark Prozac prominent. He said "our trade mark was being de-branded to a certain extent" (because Prozac was underneath the label) but the mark "is still being put prominently before the public."
47. He then showed us the packaging complained of (which was not quite the same as that shown in an initial trade advertisement – nothing turns on the difference). It is shown at Annex E2 of Laddie 1. It consists of a box with the prominent words "FLUOXETINE CAPSULES 20mg". In smaller type there are the words "fluoxetine hydrochloride." There is a swirl device (so there is a bit of "branding" in that the swirl, a stylised letter "C" is a creation of Dowelhurst and is used on other products sold by them). On the side of the box it says, in fairly small print:

Manufactured by Lilly SA. [a Spanish address is given] and procured within the EC by the licence holder who is DOWELHURST LTD [address given]

On the back is more reference to the generic name, storage instructions and the like.

48. Inside is the leaflet to which I have referred already. It is headed "PROZAC 20mg CAPSULES FLUOXETINE CAPSULES 20mg." I have already held that the leaflet adds nothing to the case. But it is worth mentioning a startling contradiction in Lilly's argument. It complains on the one hand of de-branding, yet here is an instance where complaint is made of precisely the opposite – branding. The actual product within the box is contained in blister packs. They are those produced by Lilly, Spain, completely unaltered. They have the word Prozac prominently on the packaging and the capsules themselves.
49. Of course what Lilly are really complaining about and fear is that by the partial de-branding complained of, patients will come to understand that the chemical (generic) name of Prozac is fluoxetine – so they would more readily accept a generic version of the drug when the product came off patent. One can well understand the commercial objection to this – but a commercial objection is not in itself damage of any sort.
50. Before I consider the position further I should mention the findings in Laddie 1 about what Lilly have in fact tolerated:

[172] Furthermore, and perhaps even more telling, is the evidence relating to the large multiple retailers such as Boots and Lloyds chemists. Such retailers account for some 40 per cent of the retail pharmacy market, Boots and Lloyds alone accounting for some 25 per cent between them. Each of the claimants has entered into agreements with them under which the respective claimants supply some of their proprietary drugs to the retailer in packaging which bears the claimants' trade mark, but also the retailer's trade mark as well. Although the claimants have the right to object to the design of packaging to be used for these products, they have participated in putting on the market packages which are in get-ups which are wholly different to those used either by the claimants or the defendants.

The packaging of the Boots (and other licensee) products are shown in Annexes E3 and 4 to Laddie 1. They are as much a "de-branding" as those complained of. Lilly were unable to point to any damage (still less damage to their trade marks or their reputation) caused by these substantial activities. Mr Thorley submitted that Lilly had to put up with them as a commercial reality (to get the business which would otherwise be met by these important customers selling parallel imports or going generic on patent expiry). But that is no answer to the fact that no damage was shown. And besides, Laddie J went further and held that Lilly could have objected to the packaging and did not do so – an extremely telling point.

51. So we are not considering a total de-branding – where all traces of the trade mark sued upon are removed. Total de-branding in general is far from uncommon. For instance a supermarket may package up flour or coffee as an "own brand". It will have bought the product in bulk from one or more suppliers who have used their own trade mark one way or another in relation to the goods. To say that removing (or not applying) the original supplier's mark to the goods amounts to an infringement would be absurd: traders have broken bulk and applied their own trade marks to goods for centuries. There is no harm in it.
52. Going back to the legislation, such total de-branding is clearly not an infringement. There is simply no use of the trade mark in any shape or form. Total de-branding does not fall within Art. 5 at all. No defence is needed. Mr Thorley QC for Lilly so accepted. Mr Silverleaf QC for Glaxo was rather less willing to concede but grudgingly did so in the end. There is simply no answer to the proposition "no use, no infringement."
53. So a trade mark owner has no right to insist that his trade mark stays on the goods for the aftermarket. Because that is so, it seems to me impossible to say that partial de-branding is damaging in itself. The claimants argued that, save for cases where the "de-branding" was slight, as in the case of the stickered Prozac I have mentioned above, all partial branding was damaging because the trade mark had less exposure than it otherwise would have. But given that the trade mark owner is not entitled to any exposure of his mark after he has sold the product, some exposure, even if not as prominent as he would wish, is more than he has a right upon which to insist. It cannot be damaging as such.
54. Now it is true that the Court said that damage is not limited to poor presentation, and that it said that partial de-branding is "in principle" damaging. But all that must be understood in the context that the question of whether there is damage is a question of fact. The manner or form of partial de-branding could indeed in principle hurt the image or prestige of a trade mark. It would all depend on how it was done. It is a fact specific question, not one to be answered at the level of generality of the claimants' arguments. Indeed if the claimants were right, all partial de-branding (save for de minimis cases) would be damaging. That is just what the Court did not say.
55. I conclude that Laddie J's conclusion of fact, that the specific de-branding complained of here does not damage the claimants' trade marks, is not shown to be wrong and must accordingly stand.
56. I should briefly mention a point, taken by Mr Silverleaf but not by Mr Thorley. It is about onus. Ruling [5] makes it clear that it is for the parallel importer to prove compliance with the BMS conditions. So, Mr Silverleaf submitted, it was for the parallel importers to lead positive evidence that condition (4) (presentation not liable to damage reputation of trade mark or proprietor) was satisfied. He submitted that no evidence on the point had been led by the defendants. Only if there had been, would it have been necessary for the claimants to lead rebuttal evidence.
57. I reject that. Firstly this case is miles past any question of initial onus of proof. Both sides had a full opportunity of leading evidence before Laddie J and did so. He made his ultimate findings of fact on the evidence as a whole. Secondly the defendants did lead evidence as to what they were and had been doing – it was never really in dispute. They were entitled to ask the court to infer that no damage was caused by either the co- or de- branding in issue and in effect to challenge the claimants to prove otherwise. They had satisfied the initial burden of proof by showing activities which on their face did no apparent harm.
58. I should also mention two post-ECJ 2 cases. These are Sanofi-Aventis v Kohlpharma Case I ZR 173/04, 14^th June 2007 in the German Supreme Court and AstraZeneca v Paranova Denmark, 3^rd December 2007 in the Danish Supreme Court. Mr Arnold submitted that these cases showed that these courts had permitted co-branding and de-branding of the sort complained of here and did so based on their understanding of ECJ 2 which was in accordance with his submissions. The claimants said not so, that the facts in those cases were different or at least so unclear that one could not say they were the same as in the present cases.
59. I do not believe it to be a useful exercise to go far into these cases. It suffices to say that in each the parallel importer was successful and in both cases the relevant court held that damage could not be assumed – applying ECJ 2. Clearly there was some form of co-branding going on in the German case and some form of de-branding in the Danish case. These decisions therefore do provide some support for Mr Arnold.
60. Accordingly, overall, but for what I am about to come to, I would allow the appeals now. But Mr Silverleaf drew our attention to yet another reference to the ECJ about re-packaging. It is from the Austrian Supreme Court in Case C-276/05, Wellcome v Paranova. The reference was made as long ago as 24^th May 2005. The questions asked clearly overlapped with those asked by this court. Instead of dealing with them at the same time the ECJ stayed the Austrian reference pending the decision in ECJ 2. Following ECJ 2 the Austrian Court told the ECJ that it would like to maintain its reference. The ECJ has agreed to do so in part.
61. The first question asked is in two parts:

1(a) Are Article 7 of the Trade Marks Directive [full title set out] and the case-law of the Court of Justice of the European Communities which has been pronounced on it to be interpreted as meaning that proof that reliance on the trade mark would contribute to an artificial partitioning of the market must be furnished not only as regards the repackaging in itself, but also as regards the presentation of the new packaging?

If the answer to this question is in the negative:

(b) Is the presentation of the new packaging to be measured against the principle of minimum intervention or (only) against whether it is such as to damage the reputation of the trade mark and its proprietor?

62. One might be forgiven if one had thought that question. 1(b) was answered by the rulings in ECJ 2. From these one gets this: that the necessity requirement of the BMS conditions applies only to the need to re-label or re-box, not to the form in which that is done. And that once re-boxing or re-labelling is necessary, the form of presentation must not cause damage to the mark, that being a question of fact. Question 1(b) is surely answered – there is no further principle of "minimum intervention" on top of the BMS conditions. Yet it is only Question 1(b) which is being maintained by the Austrian court.
63. However one would be wrong if one thought the point had been decided, for the ECJ has, at the request of the Austrian court, re-opened the Austrian reference rather than simply referring it to ECJ 2. Mr Silverleaf suggests that this is because there may be a conflict between [46] of the decision in Loendersloot v Ballantine, Case C-349/95 ("Ballantine") and ECJ 2. [46] of Ballantine reads:

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.

64. For myself I cannot see any such conflict. If there is any damage to the specific subject matter then BMS 4 is not complied with. Whether there is damage is a question of fact. That is what ECJ 2 decided.
65. Moreover were a principle of "minimum intervention" to be upheld, it would in effect be adding a 6^th BMS condition – one that has never been expressed before. Quite what it would be, and how it could be worked in practice by national courts would remain to be seen. The test could be nearly unworkable, as indeed was found when Laddie J had to consider minutiae such as whether the importer's name should be in large or small type and several similar issues.
66. However, given that the Court is taking the case, we cannot rule out the possibility that, notwithstanding the absence of any damage in fact, there is some further rule about minimum intervention. In those circumstances the claimants asked us to defer making a final decision if we concluded, as we have, that there is no damage. I see no option but to accede to this request.
67. Accordingly what I would do for the present is hold that the defendants have complied with BMS condition 4 and in particular that their activities by way of re-boxing and re-labelling have not caused and will not cause damage to the reputation of the claimants' trade marks.
68. I propose that the parties be invited to make written submission about the consequence of this ruling.

Lord Justice Tuckey:

69. I agree.

The Master of the Rolls:

70. I also agree.