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URL: http://www.bailii.org/ew/cases/EWHC/Ch/2013/3624.html
Cite as: [2014] ETMR 11, (2014) 136 BMLR 161, [2013] EWHC 3624 (Ch), [2014] RPC 11

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		Neutral Citation Number: [2013] EWHC 3624 (Ch)
		Case No: HC12B02174

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY

Royal Courts of Justice
Strand, London, WC2A 2LL

20/11/2013

B e f o r e :

MRS JUSTICE ASPLIN
____________________

Between:

	SPECIALITY EUROPEAN PHARMA LTD	Claimant
	- and -
	(1) DONCASTER PHARMACEUTICALS GROUP LTD (2) MADAUS GMBH	Defendants

____________________

Mark Brearely QC and Nicholas Saunders (instructed by Devonshires) for the Claimants
Martin Howe QC and Iona Berkeley (instructed by Maitland Walker) for the First Defendant
Hearing dates: 29, 30 and 31 October and 1 November 2013
____________________

HTML VERSION OF JUDGMENT
____________________

Mrs Justice Asplin :

This case is concerned with the issues of parallel imports and re-branding in relation to a pharmaceutical product containing the active ingredient trospium chloride.

The Claimant, Speciality European Pharma Limited, (SEP) specialises in the distribution and sale of pharmaceutical products, particularly in the fields of urology and urogynaecology. The second defendant, Madeus GmbH (Madeus), manufactures trospium chloride and held the patent to trospium chloride until 2009 when it expired. Among other things, Madeus markets and distributes trospium chloride products in various European countries. It is marketed in France as Céris, in Germany as uriVesc and in the United Kingdom as Regurin. On 7 May 2009, Madeus appointed SEP as exclusive licensee of the Regurin trade mark in the United Kingdom and Ireland and thereafter, SEP took over distribution of the 20mg Regurin product from the previous UK distributor, Galen Pharmaceuticals Limited (Galen). SEP launched the 60mg product in the United Kingdom in September 2009.

I should make clear that no relief is sought against Madeus and it was not represented before me. However, it was joined as a party to these proceedings and accordingly, will be bound by this decision.

The first defendant, Doncaster Pharmaceuticals Group Limited, (Doncaster) is a parallel importer of pharmaceuticals. It is not disputed that for many years it imported Céris into the United Kingdom from France by overstickering the box with the name of the generic active ingredient, trospium chloride. In late 2009, Doncaster started to import Céris by affixing the trademark Regurin instead. Thereafter, in 2011, Doncaster started to import uriVesc into the United Kingdom from Germany and to re- brand it as Regurin.

The question with which the Court is concerned is whether Doncaster is entitled under Articles 34 and 36 of the Treaty on the Functioning of the European Union (TFEU) to affix the Regurin mark to the pharmaceuticals which they import from other Member States in the European Union. Is it necessary for Doncaster to re-brand the products as Regurin in order to gain effective market access to the United Kingdom?

In summary, SEP argues that it is not necessary to use the trade mark Regurin in order to sell the parallel import in the United Kingdom. Doncaster on the other hand, contends that Regurin is in its own market and accordingly, it is entitled to use the brand name to gain effective market access. Doncaster also contends that by such means it is able to gain access to the wider market of prescriptions written by reference to the generic name trospium chloride because Regurin or any other brand name can satisfy prescriptions written generically.

The Relevant Law

The issues in this case arise as a result of Article 34 TFEU which provides that:

"Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States."

Article 36 of the TFEU provides that the provisions contained in Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on a number of grounds including the protection of industrial and commercial property. However, the final sentence of Article 36 states:

"Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States."

Article 5 of the Trade Marks Directive (as implemented in sections 9 and 10 of the Trade Marks Act 1994) provides that the proprietor of a mark has exclusive rights which may be infringed by use of that trade mark in the United Kingdom without his consent. A person uses a sign if, among other things, he affixes it to goods or their packaging and he infringes unless he can establish a defence. There are limitations on the effect of a registered trade mark and in particular those relating to exhaustion which are dealt with in Article 7 of the Directive (as implemented in section12 TMA 1994.) Article 7 provides as follows:

"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."

Although not directly relevant here, Article 7 has been the subject of detailed consideration by the European Court of Justice (the ECJ) in the context of re-boxing of pharmaceutical products. In Bristol-Myers Squibb & Ors v Paranova A/S,20 [1997] 1 CMLR 1151, the ECJ summarised the previous case law and set out five conditions which a parallel importer must establish in order to avoid infringement. They have become known as the 'BMS Conditions'. They are 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; ...

[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; ...

[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."

In relation to re-branding with which this case is concerned, Mr Brealey QC referred me to Pharmacia & Upjohn SA v Paranova A/S (Case C-379/97) [2000] 1 CMLR 51 where the ECJ considered a case in which the brand of a product was changed by a parallel importer. In that case Upjohn marketed an antibiotic using the trade mark 'Dalacin' in Denmark, Germany and Spain, 'Dalacine' in France and 'Dalacin C' in other Member States of the European Union. The Defendant, Paranova A/S, a well known parallel importer, purchased capsules of the antibiotic in France which had been placed on the market under the trade mark 'Dalacine' and injection phials which were placed on the market in Greece as 'Dalacin C'.

Subsequently, it imported both into Denmark and marketed them under the trade mark 'Dalacin'. Upjohn obtained an injunction under Danish law to prevent Paranova from selling the imported drugs under the trade mark. The injunction was challenged on the basis that the marketing system adopted by Upjohn amounted to an artificial partitioning of the market as referred to by the ECJ in the Bristol Myers Squibb case. As a result, the Danish court referred the question of whether Article 7 of Directive 89/104 precluded the proprietor of a trade mark from relying on its rights under national trade mark law to oppose a third party's purchase of a product in a Member State, repackaging it, affixing a trade mark belonging to the proprietor and importing it into another Member State, where the trade mark affixed to the product by the third party was that used by the trade mark proprietor in the country of import, to the ECJ.

The ECJ stated at [28] of the Judgment that Article 7 of the Directive does not apply in the situation where the parallel importer replaces the original trade mark with another mark. In such a case the respective rights of the proprietor of the trade mark and the parallel importer are to be determined by Articles 34-36 TFEU.

However, at [30] the ECJ concluded as follows:

" . . . Article 7 of the Directive, like Article 36 of the Treaty, is intended to reconcile the fundamental interest in protecting trade mark rights with the fundamental interest in the free movement of goods within the common market: it follows that those two provision which pursue the same result, must be interpreted in the same way."

The ruling was in the following form:

"The condition of artificial partitioning of the markets between Member States, as laid down in the judgments in Case 102/77 Hoffmann-La Roche v Centrafarm [1978] ECR 1139 and in Joined Cases C-427/93, C-429/93 and C-436/93 Bristol-Myers Squibb and Others v Paranova [1996] ECR I-3457, means that it is necessary, in order to determine whether the proprietor of a trade mark may, under national law, prevent a parallel importer of pharmaceutical products from replacing the trade mark used in the Member State of export by that which the proprietor uses in the Member State of import, to assess whether the circumstances prevailing at the time of marketing in the Member State of import make it objectively necessary to replace the original trade mark by that used in the Member State of import in order that the product in question may be marketed in that State by the parallel importer."

The central question for the national court is spelt out at [43] to [45] of the ECJ judgment in the following way:

"[43] 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 market of the importing Member State. That would be the case if the rules or practices in the importing Members State 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 the trade mark used in the exporting Members State on the ground that it is liable to mislead consumers.

[44] 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.

[45] It is for the national courts to determine, in each specific case, whether it was objectively necessary for the parallel importer to use the trade mark used in the Member State of import in order to enable the imported products to be marketed."

Mr Howe QC drew particular attention to use of "hinders" in [43] and to a similar passage at [17] of the judgment where the phrase "would contribute to the artificial partitioning of the markets between Member States" was used. He emphasized therefore, that it is not necessary to establish that a total barrier to the market exists which I accept.

Mr Howe QC also submits on behalf of Doncaster that the test of necessity in the case of rebranding is the same in principle as the test applied in the BMS judgment to repackaging, and therefore guidance can be obtained from BMS on its application in circumstances when the prohibition on rebranding would prevent access to a part of the market for a product. There is one passage of particular relevance to the issue which arises in the present case. At [54] of the BMS judgment, it is stated as follows:

"54. Where, in accordance with the rules and practices in force in the Member State of importation, the trade mark owner uses many different sizes of packaging in that State, the finding that one of those sizes is also marketed in the Member State of exportation is not enough to justify the conclusion that repackaging is unnecessary. Partitioning of the markets would exist if the importer were able to sell the product in only part of his market."

Mr Howe QC submits that on this basis it can be seen that it is well settled from the relevant authorities that a parallel importer such as Doncaster has a good defence to a claim of trade mark infringement if the prohibition against rebranding would "hinder effective access" to the market in the Member State, even if it is only in part of that market, in this case, the part met by goods bearing the Regurin mark. This is something to which I shall return below.

Whilst accepting that it was not binding and is not directly reflected in the judgment of the ECJ, Mr Howe QC also referred me to paragraphs [46] – [56] of the Opinion of Advocate-General Jacobs in the Upjohn case as to the relationship between hindering effective access and securing a commercial advantage. At paragraph 54, he opined that it was not helpful to postulate a category of 'purely commercial reasons' which can never fall within the concept of necessity, and that "the decisive test is whether in a given case prohibiting the importer from rebranding would constitute an obstacle to effective access by him to the markets of the importing State. Numerous and diverse factors may give rise to impediments to market access, some of which may naturally be regarded as commercial and others may not." He therefore rejected any rigid categorisation of what specific reasons for rebranding may be regarded as making it "necessary", and said that it was for the national court to assess necessity on a case-by-case basis.

Mr Howe QC also drew attention to paragraph 55 of the Advocate General's Opinion in which he stated:

"55 In general - at least where the importer is doing no more than using in the importing State the mark used by the proprietor there for identical products - the necessity test will be satisfied in the case of rebranding, since in most circumstances rebranding is consistent with the essential function of the mark because it serves to avoid confusion."

Mr Brealey QC on behalf of SEP says that that this is not a correct statement of the law and does not feature in the Judgment of the ECJ. He also points out that it is contrary to Jacob LJ's judgment in the Court of Appeal at [51] in Boehringer Ingelheim KG v Swingward Ltd [2008] EWCA Civ 83; [2008] ETMR 36, at which he considers the effect of de-branding and own branding. Jacob LJ stated at [51] that the practice of total de-branding with which he was not directly concerned, followed by the application of an "own brand" was not uncommon. He added:

"To say that removing (or not applying) the original supplier's mark to the goods amounts to an infringement would be absurd; ..."

Lastly, Mr Brealey QC points out that confusion was not pleaded.

It seems to me that reliance on confusion was somewhat of an afterthought. It is based solely on the passage in the Advocate General's Opinion which itself is not binding and is not reflected in the judgment of the ECJ. It is also not mirrored in the way in which the matter of de-branding and affixing of an own brand is dealt with by Jacob LJ in the Court of Appeal in the Boehringer. Furthermore, there is no evidence of confusion in this case. Accordingly, I do not consider it necessary to consider this aspect of the matter further.

Mr Brealey QC on behalf of SEP also referred me to a number of national court decisions where the Upjohn decision and the question of what constitutes commercial advantage has arisen. The first was the decision of the Court of Appeal in Boehringer to which I have referred. The report is of the judgment of the Court of Appeal on a resumed hearing following the judgment of the ECJ on two sets of questions referred to it by the Court of Appeal in respect of appeals and cross appeals arising from six sets of proceedings for trade mark infringment. The defendants were parallel importers which purchased, in a Member State other than the United Kingdom, original pharmaceutical products, packed in a way which was suitable for the market in the original Member State. The original packaging bore trade marks of the original manufacturer and the boxes contained information leaflets appropriate for the market in which the products were first marketed. The Defendants re-boxed the products in boxes designed for their importation and distribution within the United Kingdom market and inserted new information leaflets which complied with UK regulatory requirements. The re-boxing involved re-affixing the original trade mark. In some instances the original boxes were used but were over-stickered and the leaflets were replaced.

In the Joined Cases C-143/00 and C-443/99 Boehringer Ingelheim KG v. Swingward Ltd [2002] ECR I-3759 [2002] FSR 61, the ECJ had answered the "necessity" question as follows:-

"54. ... 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 a result of strong resistance from a significant proportion of consumers to re-labelled pharmaceutical products."

At [52] the ECJ had pointed out that:

"…there may exist on a market, or on a substantial part of it, such strong resistance from a significant proportion of consumers to relabelled pharmaceutical products that there must be held to be a hindrance to effective market access. In those circumstances, repackaging of the pharmaceutical products would not be explicable solely by the attempt to secure a commercial advantage. The purpose would be to achieve effective market access."

In the Court of Appeal, Jacob LJ who gave the substantive judgment with which the Master of the Rolls and Tuckey LJ agreed, considered the treatment of the term "necessary" in the ECJ in Upjohn at [29] + [30] in the following terms:

"29 The Court's judgment in Upjohn explains to some extent what is meant by "necessary." The context was that the importer wanted to apply the version of the trade mark used by the manufacturer in the country of intended sales instead of the version used in the country of purchase ("Dalacin" for "Dalacine"). The Court said:

"[43] 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.

[44] 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."

30 Quite what the Court had in mind by a "commercial advantage" I am afraid I do not understand. The Advocate General discussed the point at para.[54] but he did not think it helpful to "postulate a category of 'purely commercial reasons.'" He was clearly of the view that necessity to replace the trade mark was the overriding test, which had to be determined on a case-by-case basis by the national court. And it seems clear that a "commercial advantage" could not consist of merely access to the market for the parallel imported goods, though out of context most people would call such access "a commercial advantage".

At [37] and [38], Jacob LJ went further in this consideration:

"37 As to the necessity questions the court held:

"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".

38 This is important—"a strong resistance from a significant proportion of consumers" is enough to count as a "hindrance." The parallel importers are entitled to do more than just render the packaging lawful for UK marketing—they are entitled to replace the packaging if that is what is necessary to overcome a strong resistance in the market to relabelled boxes."

The Danish courts in Boehringer Ingelheim Danmark A/S & Ors v Orifarm A/S [2002] ETMR 20 considered a case in which a laxative marketed by the claimant in Portugal under one trade mark, was purchased by a parallel importer and repackaged for sale in Denmark under the different mark used by the claimant in that country. The Court of Odense held that the claimant's mark had been infringed that there was no objective necessity to rebrand the product to a name frequently used in Denmark. At [13] the Court held as follows:

"The Court does not find that there is necessity for relabeling according to this. In that connection, it is pointed out that the fact that LAXOBERAL is most frequently sold at the recommendation of a doctor other health service personnel is not found to be comparable to the existence of a prescription practice that necessitates the products being sold under the same name. The fact that the defendant might be able to obtain higher sales of the products by marketing it under the name LAXOBERAL is not found to be tantamount to the defendant's effective access to the market being prevented if the product is sold under the name GUTALAX."

Similar issues had been considered in the City Court of Stockholm in Aventis Pharma Aktiebolag v Paranova Lakemedel Aktiebolag [2001] ETMR 60. A strict approach to necessity was taken. It was noted that the ECJ in using the expression "objective necessity" must be considered to have set a "high level of justification before remarking is allowed". At [37] of the judgment in relation to "effective market access" it was stated:

" … that requirement is not fulfilled if the exchange of trade marks only is explained by the parallel importer's wish to achieve a commercial advantage."

The City Court also rejected the argument that if the parallel importer were unable to use the brand name IMOVANE in Sweden, effective market access would be denied because doctors were familiar with the name when prescribing drug. At [43] it was held that such circumstances were not to be regarded "as such an absolute obstacle as is demanded for an objective necessity."

Lastly, Mr Brealey QC referred me to a decision of the German Federal Court of Justice in Topinasal, Case R-207/02 (30 September 2004). The Federal Court confirmed the finding of the Court of Appeal that there was no objective necessity to rebrand imports 'Topinasal' in order to sell them in Germany, a conclusion supported by the fact that other parallel importers had sold the product by reference to the name 'Pulmicort nasal aqua' and had attained a market share of some 11.7%.

In addition, Mr Howe QC referred me to passages from chapter 14 of the edition of Wyatt and Dashwood's European Union Law published in 2011. He also pointed out that the national court decisions to which I was referred pre-dated the decision in Boehringer. He submitted that the artificiality in this case arose from the use of different trade marks in different Member States which prevented substitution of the product and was nothing to do with guaranteeing the origin of the goods which is the purpose of a trade mark.

It seems to me that the test to be applied is quite clear after the decision of the Court of Appeal in Boehringer in which Jacob LJ considered the judgment of the ECJ in Upjohn and applied its judgment in the Joined Boehringer cases. The application of the test is more difficult.

The Witnesses

Evidence was given by Mr Rakesh Tailor who is Vice President, Sales & Marketing and General Manager for SEP in the United Kingdom and also by Mr Patrick Banks, SEP's Chief Executive Officer. Mr Derek Wilson, the Managing Director of Doncaster gave evidence on its behalf. I found all of the witnesses to be honest, careful and reliable.

The products and their market in more detail

(i) 20mg

Trospium chloride is sold in two forms namely tablets which contain 20mg of trospium chloride ("20 mg") and delayed release capsules which contain 60mg ("60 mg"). It is not in dispute that in or around about 2005 Doncaster began parallel importing Céris and overstickered the product as trospium chloride 20mg. Mr Wilson had obtained a licence from the Medicines and Healthcare Products Regulatory Agency (the MHRA) to import and market the Spanish product in the United Kingdom and had notified the Regurin trade mark owner, which was Galen at that time, of Doncaster's intention to apply the Regurin mark to the imports. Galen objected and it was Mr Wilson's evidence that since the patent was still in force and therefore, there were no generics on the market, there was little or no difference in the selling price which he could achieve whether he marketed the product as Regurin or as trospium chloride. Accordingly, in order to avoid a dispute, he adopted the latter course. In cross examination he accepted that at this stage, Doncaster did not need to label the Céris product other than as trospium chloride in order to gain access to the United Kingdom market and that he was happy to compete in the United Kingdom with Galen and then with SEP who marketed the trospium chloride as Regurin.

As Mr Banks states in his witness statement, the parallel imports of Céris labelled as trospium chloride were hugely successful. It is not disputed that by 2009 the parallel imports accounted for approximately 60% of sales of trospium chloride 20mg as a whole and approximately 70% of the prescriptions written generically. In other words, seven times out of ten when a patient delivered a generic prescription to a pharmacist, a parallel import was dispensed rather than Regurin. Mr Wilson accepted in cross examination that at that stage, the parallel imported Céris overstickered as trospium chloride was sold at a considerable discount compared with branded Regurin and that Doncaster's parallel import was competing directly with the branded Regurin product. He also accepted that "the cost price differential between the trospium chloride and Regurin would overcome a lot of brand loyalty." In addition, he also accepted that the seven in ten statistic does not indicate a strong resistance from patients in accepting a product other than Regurin.

It was also suggested to Mr Wilson in cross examination that the high percentage of dispensed parallel imports doe not suggest that pharmacies only stock the branded Regurin because of a lack of space. Mr Wilson had suggested in his witness statement that that might be the case but in cross examination stated that pharmacists were a "mixed bag" and that "some do and some do not stock only Regurin". It was Mr Tailor's evidence that it was unnecessary for a pharmacist to stock two lines if they want to dispense generic trospium chloride. In cross examination he pointed out that in reality, trospium chloride was not prescribed that much and that in his experience, in 2009, out of the four chemists in Ruislip and Pinner none of them stocked the molecule in any form. His evidence was that a pharmacist would be likely to satisfy a prescription by seeking a delivery from the wholesaler within the day.

Trospium chloride came off patent in 2009 and as a result, it began to be manufactured and marketed in its generic form. For example, in 2010 Galen (which had previously held the rights to Regurin) marketed generically manufactured trospium chloride 20mg under the brand name Flotros in the United Kingdom. In addition, in 2011 a generics manufacturer, Auden McKenzie, began marketing a generic form of trospium chloride.

Doncaster notified Madeus of its intention to begin marketing parallel imported Céris and uriVesc in letters on 31 July 2009 and 28 June 2011 respectively. No reasons were given as to why rebranding as Regurin was considered necessary. However, it was Mr Wilson's evidence that as a result of the entry of generics onto the market, Doncaster could no longer sell Céris in the United Kingdom and make money unless it was branded as Regurin, rather than over-stickered as trospium chloride. SEP on the other hand, rely on data that shows that Regurin was on sale at £22.75, Flotros at £13.65 and the generics in a range between £6.59 and £15.96.

It was from around this stage that Doncaster began to purchase 20mg trospium chloride products sold under the brand Céris in France and rebrand them as Regurin by over-stickering the boxes and blister packs with the mark and marketing them in the United Kingdom. The packs contain an English leaflet which uses the Regurin mark. The evidence was that the change in source was because the French product was cheaper. When asked whether the decision to over-sticker with Regurin was motivated purely by profit, Mr Wilson replied that "it was to gain access to the market that was denied to me previously because the trademark was owned by a different entity."

As I have already mentioned, it was Mr Wilson's evidence that the wholesale demand for generic trospium chloride as a parallel import disappeared because he could not source it a price which would match the available generics. The price in November 2011 was around £5.50. He explained in cross examination that the best time for a parallel importer was is the initial three to six months during which there is only one such importer. After that, other importers participate in the market place and the benefits are eroded away. Mr Tailor accepted that on the pricing structure revealed in the evidence that would be true but for what he described as the quirks of the way in which pharmacists work. By quirks he meant that pharmacists fall into habits and order parallel imported trospium chloride in the belief that it will be cheaper despite the fact that sometimes it is not.

However, when asked in cross examination whether he was saying that Doncaster could not compete with Flotros which was sold at £13.65 by continuing to sell generic trospium chloride by way of parallel import, the list price for which was around £7.00, Mr Wilson's evidence was that:

A. I could have competed at a level, certainly.

Q. You could compete at a level?

A. Yes.

Q. Yes?

A. Yes, a much reduced level.

Q. A much reduced level, but you could compete at a level?

A. I could compete against a price of GBP 13.65, definitely.

Q. Yes.

A. Yes, absolutely."

It is not in dispute that 88.65% of prescriptions written for 20mg trospium chloride in the United Kingdom are written generically in the sense that they are written for trospium chloride 20mg. 8.61% are written as Regurin BD and approximately 2.74% are written by reference to other brands, for example, Flotros. It is also accepted that a prescription written generically can be satisfied either by a branded product such as Regurin or by a non-branded generic. On the other hand, prescriptions written for Regurin BD or Regurin XL in relation to the 60mg product must be satisfied by dispensing the branded product.

It is also not disputed however, that there is an incentive for pharmacists to buy the generic form of the product because they are reimbursed by the National Health Service at the rate of £26 odd per 20mg whether they purchase a branded version from the wholesaler or the cheaper generic. In fact, a report by the University of Southern Denmark of November 2011 states that the United Kingdom market strongly incentivized pharmacists and wholesalers to sell parallel imports. The report stated:

"If the cheapest sources is a parallel imported product, [the pharmacist] will invariably choose this source of supply if such suppliers are available."

Mr Wilson agreed with the conclusion save that he pointed out that Mr Tailor accepted that pharmacists did not act logically on every occasion. In cross examination therefore, Mr Wilson agreed that rather than "invariably choose" he would accept that pharmacists are 'more likely to choose" parallel imports if they are cheaper.

In cross examination, Mr Wilson also accepted that Doncaster competes with SEP for sale of the same product and that it competes both in relation to generically written prescriptions and as a result of the discounted price, with Regurin as well. However, Mr Banks accepted that Doncaster's parallel importing business was not comparable with the business of SEP which acts as a primary distributor for the manufacturer.

As I have already mentioned, in August 2011 Auden McKenzie commenced selling an unbranded 20 mg generic trospium chloride. As a result, the price to pharmacies and wholesalers reduced. However, a summary of prices at which the molecule was offered to pharmacists was captured by Wavedata for both the 20mg and the 60mg product at dates in 2009, 2010 and 2012 in for 20mg and 2009, 2010, 2011 and 2012 for the 60mg product. In cross examination, Mr Wilson accepted that the data suggests that parallel imports branded generically continued to be offered for sale throughout the period. However, he explained that the price lists from which the wavedata was compiled were not necessarily up to date. On the other hand, during the hearing, Mr Wilson emailed a Mr Freudenberg, the Chairman of the Association of European Parallel Distributors who account for approximately 50% of all parallel imported product from the UK. They were asked whether anyone was importing and re-labelling Céris as trospium chloride. All of the seven answers received were in the negative. Mr Brealey QC points out that the members of the association were not asked whether they had done so within the four year period prior to the request but only whether they were doing so now. Mr Wilson also did a check of his own group of companies overnight and stated that they did not have parallel imported Céris re-labelled as trospium chloride in stock as at April 2010, April 2012 and September 2012. In this regard, Mr Brealey QC complains that no supporting documentation was disclosed.

It is said by SEP therefore, that Doncaster has instant access to approximately 90% of the UK market by selling the product under its generic name and that the whole market for 20 mg trospium chloride is contestable, even the branded part because Doncaster could brand the product it imports and use a name other than Regurin. Mr Brealey drew my attention to the fact that initially Doncaster had been content to over- label the 20mg boxes as trospium chloride which he says is consistent with being able to gain effective access to the market by such means and that it was only when there was more competition in the market from generics that it was thought appropriate to use the Regurin mark. He says therefore, that the use of the Regurin mark is not necessary to gain effective access to the trospium chloride market but would enable Doncaster to make a profit by piggy backing on SEP's marketing of the Regurin brand with doctors.

In response, Mr Howe QC on behalf of Doncaster submits that of the prescriptions that are written generically, 31.67% are met with the Regurin branded product which he described as the penumbra. On this basis, Doncaster asserts that the market for the branded Regurin products is, in fact, approximately 40% (8.81% plus 31.67%) of the entire prescriptions written for the trospium chloride molecule and accordingly, that it is necessary to use the Regurin brand to gain effective access to the market. Furthermore, Mr Howe QC submits that it is clear that there is resistance amongst pharmacists to dispensing a generic alternative and that it is so strong that they dispense Regurin despite the strong financial incentive to dispense a generic instead.

He goes on to say that even if one were to focus solely on the 8.62% of prescriptions written for Regurin BD, the market segment is still substantial in quantity and even more in terms of value, as Regurin is sold for four or five times the price of generic trospium chloride. It is said therefore, that if Doncaster is prohibited from branding its parallel imported goods as Regurin, effective access to that substantial part of the market is hindered.

(ii) 60mg product

In 2010, Landmark Pharma Ltd, a related company to Doncaster applied for a parallel import licence to import trospium chloride 60mg from Germany where it is marketed as uriVesc. Unlike the 20mg product, the 60mg version is a slow release product. On 15 June 2011 the MHRA refused the application on the basis that the British Pharmacopia Commission had objected to the name uriVesc as a third party uses a similar name in the UK. The MHRA has also stated that (a) although prescriptions can be written generically, dispensation should be by brand (unlike in the case of 20 mg) but that (b) a parallel importer can use any brand name to satisfy a prescription written generically or written for that brand. At present, all of the 60mg product is dispensed under the brand Regurin because it is the only product on the 60mg market in the United Kingdom.

Therefore, although the 60mg product can be prescribed generically, it can only be dispensed under a brand name and uriVesc is not available for use in the United Kingdom. Mr Banks' evidence is that according to IMS data 68% of prescriptions are written by reference to the generic name, trospium chloride 60mg. Accordingly, Mr Brealey QC on behalf of SEP submits that Doncaster can obtain access to approximately 70% of the market as long as it brands the product and that there is no reason why it has to use Regurin as the brand name. He says that in seeking to do so, as with the 20mg product, Doncaster is seeking to piggyback on SEP's marketing strategy and seeks to gain purely a commercial advantage.

Conversely, Mr Howe QC on behalf of Doncaster, asserts that the IMS data used to reach the figure of 68% was based on mysterious and unclear codes and that instead by using the IMS data for the 60mg to March 2012, it is the case that 47% of prescriptions were written by reference to the generic product. Either way, Mr Howe QC submits, regardless of whether the percentage of prescriptions written by reference to the generic name is 68% or 47% (and accordingly therefore whether the percentage written for the branded product is 32% or 53%), it is clearly the case that a substantial number of prescriptions are written by reference to the branded product and therefore, that Doncaster is shut out of a core market.

In his fourth witness statement and in cross examination, Mr Wilson accepted that Doncaster has access to all prescriptions written by reference to the generic name provided that Doncaster markets the product under a brand name. Mr Wilson's evidence in cross examination about access to the market for the 60mg product by use of a different brand name was as follows:

"Q. Secondly, I remind you of your evidence yesterday, we don't need to turn it up, but it is at page 122 of the transcript. Your evidence was that if the cheapest source is a parallel import, a pharmacist would be more likely to choose the parallel import, do you remember that: "If the cheapest source is a parallel import, a pharmacist would be more likely to choose the parallel import." Do you remember saying that?

A. Yes, correct.

Q. I would suggest to you that that is an extremely effective marketing tool that you have at your disposal in order to incentivise pharmacies to take any new branded product?

A. Are we talking about the unbranded prescription market or the branded prescriptions market that I created.

Q. Let's take the unbranded prescriptions market first.

A. In terms of the unbranded prescriptions market, the pharmacist would be driven by price, yes.

Q. If you had a branded prescription Doncaster and a doctor prescribed it --

A. Yes.

Q. -- I think your evidence is that the pharmacist would love to buy your branded product?

A. They wouldn't be getting quite as good a price, to be fair, if it was my own branded product.

Q. They would still be getting a very competitive price, because you are parallel importing the product?

A. No, I would be in a monopoly position, they would get the price that they were offered, they would have no choice but to dispense my product, so they would get a monopoly price, they would get a very bad price."

However, he stated that re-branding with a name other than Regurin is not commercially viable for a parallel importer. He made clear that he did not view the role of a parallel importer as one which included marketing. Rather he described it as fulfilling rather than creating demand. He gave six reasons why he said it would not be commercially viable to market the 60mg product under a brand name. First, he stated that launching a new brand would require investment. His concern was not as to the rebranding itself the cost of which Mr Wilson accepted would be minimal. The exchange in cross examination was as follows:

"Q. I think we can put that bundle E away. Looking at the picture of the white box I would imagine that the cost of changing Regurin to, for example, Doncaster XL would be almost zero?

A. I mean the biggest cost would be throwing away all my boxes that have "Regurin XL" written on them and buying the new boxes with Doncaster.

Q. But after that?

A. There would be no difference in the price of repackaging as either, the cost of the income would be pretty negligible, I suspect."

The second issue was consent from Madeus. However, it was accepted by Mr Wilson in cross examination that the whole claim to which Madaus is a party is premised on the basis that Doncaster could re-brand using a mark other than Regurin.

The third, fourth and fifth points concerned the lack of control of the supply chain which is the lot of the parallel importer. The last point was that "our sales price would be restricted by our limited margin." However, Mr Wilson accepted that this did not apply to the 60mg product because there no generics on the market at present and the effective marketing tool was that generally pharmacists choose the cheaper option.

In any event, as to the 60mg product, Mr Wilson in cross-examination stated that he would be able to be commercially successful in a large proportion of the market:

"Q. In cross-examination a moment ago, Mr Howe put to it Mr Banks what would happen if Doncaster put a brand say on a white box. He said that he thought that it could probably capture about 50 per cent of the market, or 50 per cent of generic prescriptions segment, would you agree with that?

A. I guess there are two scenarios, one is if Doncaster Pharmaceuticals is the only parallel importer of the product or whether there are seven or eight parallel importers, which is probably the more likely scenario to be fair.

Q. Let's just put to one side other parallel importers and you are the only parallel importer in town for the next six months.

A. Excellent.

Q. Yes, and you feel that if you rebranded that white box under Doncaster you could make a bit of a killing?

A. I would have the opportunity to make a bit of a killing, it would all depend on the reaction of SEP to what I was doing in the marketplace.

Q. I put it to you that as far as your concern competing with SEP, and the possibility of at least making a killing, you do have effective market access to the UK market?

A. I have access to the prescriptions that are written generically, yes.

Q. To be able to make a killing, I would suggest to you, you do have effective access to the UK market?

A. My answer doesn't change, I would have the opportunity to make a killing in that part of the market, certainly.

Q. You would have the opportunity to make a killing in that part of the market?

A. Okay.

Q. If, for example, it is decided that the prescriptions' side of it account for 70 per cent of the overall market, I suggest to you that you do have effective market access to the overall UK market, because you have a chance of making a killing in a segment which represents 70 per cent of the total market?

A. I agree that I could make a killing in 70 per cent of the market, yes.

Q. Sorry?

A. I accept what you said, that I could make a killing in 70 per cent of the market, yes.

Q. If you can make a killing in 70 per cent of the market, I suggest to you that gives you effective market access to the UK market. It must follow, from your evidence?