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Boehringer Ingelheim Pharma Gmbh & Co KG v. Munro Wholesale Medical Supplies [2003] ScotCS 238 (12 August 2003)

OUTER HOUSE, COURT OF SESSION

A1406/03

OPINION OF LORD NIMMO SMITH

in the cause

BOEHRINGER INGELHEIM PHARMA GmbH & CO KG

Pursuers;

against

MUNRO WHOLESALE MEDICAL SUPPLIES LTD

Defenders:

________________

Pursuers: Currie, Q.C., Lake, Maclay Murray & Spens

Defenders: Cormack; McGrigor Donald

12 August 2003

[1] In this Opinion I shall refer to the parties as "BI" and "Munro" respectively. BI is part of a group of companies which specialise in the development, production and distribution of pharmaceutical products for human use. This action relates to a product with the generic name of tiotropium bromide monohydrate ("the product"). Tiotropium is a bronchodilator for the maintenance treatment of chronic obstructive pulmonary disease ("COPD"). BI is the proprietor of community trade mark E789529 SPIRIVA, in Class 05 (pharmaceutical, veterinary and sanitary preparations and substances), which was registered on 3 April 1998 ("the mark"). The product is sold in the United Kingdom under this name. It takes the form of hard capsules of powder for inhalation. It is inhaled from a device with the name HandiHaler. The dose is the contents of one capsule once daily. The capsules are supplied in blister strips of ten capsules each. BI sells in the United Kingdom Combopacks, each containing one HandiHaler device and 30 capsules, and refill packs of 30 capsules. I shall refer to the latter as "30-packs". BI sells Combopacks and 30-packs under the same name in several other European countries. In Germany it sells refill packs of 60 capsules ("60-packs").

[2] Munro trades as a wholesaler of pharmaceutical products in the United Kingdom. It imports such products into the United Kingdom from other European markets and sell them to retailers. Products which are purchased in another EU or EEA State and imported into the United Kingdom other than by the producer or the local licence-holder of the product are known as parallel imports. In order to market medicines in the United Kingdom, it is necessary that they comply with requirements as to packaging and information stipulated by the Medicines and Healthcare Products Regulatory Agency (formerly the Medicines Control Agency) (the "MHRA"). The information required by the MHRA must be given in English. As a result, where the text on the packaging is in a language other than English, this information must be added in English. This can be done by sticking labels in English on the original box and other packaging such as blister strips ("relabelling"). In cases of relabelling, the product remains in its original packaging. In some cases it may be put in different packaging from that in which it was originally supplied ("reboxing"). In Beecham Group plc v Munro Wholesale Medical Supplies Limited 2002 SLT 263 I dealt with some of the issues arising from relabelling and reboxing of a product by Munro, having regard to the state of the law as it stood on 8 December 2000, the date of my Opinion in that case. In the present case Munro proposes to make parallel imports of Combopacks and to relabel them for sale in the United Kingdom. BI does not object to this in the present proceedings. Munro also proposes to make parallel imports of 60-packs of the product from Germany, to relabel the blister strips and to rebox them as 30-packs for sale in the United Kingdom. To this end, it has obtained a product licence from the MHRA for the period from 15 May 2003 to 14 May 2008.

[3] In reboxing the product, Munro intends to apply the mark as part of the printed material on the outside of each box. In the present action BI concludes inter alia for interdict of Munro from infringing BI's exclusive rights in the mark and in particular from (1) affixing the mark to packaging for medicines except for the purposes of lawful relabelling or (2) offering or exposing for sale or otherwise medicines in relation to which it has affixed the mark to the packaging of those medicines except for the purposes of lawful relabelling. On 12 August 2003 I pronounced interim interdict in these terms.

[4] At the hearing of BI's motion, which lasted for a full day, I heard submissions from Mr Currie, Q.C., for BI and from Mr Cormack for Munro. It was clear from the correspondence which had been lodged that Munro's position had been fully prepared, and it had a caveat in place. It was known from 8 August that the motion was to be heard on 12 August, but no written defences were tendered on behalf of Munro, and indeed none have yet been lodged. At the conclusion of the proceedings I delivered an ex tempore opinion, in which I gave what were intended to be intelligible reasons for my decision. I have been informed that Munro has marked a reclaiming motion against my decision, which makes it necessary to me to prepare this written opinion. As yet, Munro has not lodged grounds of appeal. I have therefore to prepare this Opinion in ignorance of Munro's position at any stage except as stated in the correspondence and by Mr Cormack in the course of the hearing.

[5] Mr Currie opened his submissions with a reference to the current state of the law. He referred to Council Regulation (EC) 40/94 of 20 December 1993 on the Community trade mark, Articles 9 and 13; to a series of decisions by Laddie J. in Glaxo Group Limited & Others v Dowelhurst Limited & Others, particularly [2003] EWHC 110 (Ch); and to the decision of the European Court of Justice on a reference by Laddie J, in the same proceedings, Case C-143/00, under the name Boehringer Ingelheim KG & Others v Swingward Limited & Others, 23 April 2002. The Court held that a trade mark proprietor may rely on its trade mark rights in order to prevent a parallel importer from repackaging pharmaceutical products unless the exercise of those rights contributes to artificial partitioning of the markets between Member States. 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. At para. 47 the Court said:

"Such an impediment [ie. the hindering of effective access of the imported product to the market in the importing Member State] exists, for example, where pharmaceutical products purchased by the parallel importer cannot be placed on the market in the Member State of importation in their original packaging by reason of national rules or practices relating to packaging, or where sickness insurance rules make reimbursement of medical expenses depend on a certain packaging or where well-established medical prescription practices are based, inter alia, on standard sizes recommended by professional group and sickness insurance institutions...."

At para. 48, the Court said that, in contrast, the trade mark proprietor may oppose the repackaging if it is based solely on the parallel importer's attempt to secure a commercial advantage. Laddie J. summarised the effect of this decision as creating an irrebuttable presumption that the repackaging is prejudicial to the specific subject matter of the registered mark. The result is that the trade mark proprietor is entitled to defend the use of the mark for repackaging of a product unless it can be shown that the repackaging is necessary, having regard to the test for necessity set out by the European Court of Justice. Mr Cormack did not take issue with any of this.

[6] Turning to the facts, Mr Currie referred to correspondence between the parties, in the course of which Munro stated "the United Kingdom pack size is 30". He said that the product had been on the United Kingdom market since September 2002. Although BI supplied 30-packs for sale as refill packs in the United Kingdom, counsel referred to an opinion by Dr Robert Drysdale, a general medical practitioner of Bearsden, Glasgow. In the course of this Dr Drysdale stated:

"I would note that [the product] is used for a chronic condition [COPD] and therefore most of the patients are on repeat prescription. Accordingly, most of them will be receiving prescriptions for 60 at a time. In my view the great part of the market will be in repeat medication where 60 tablets are being prescribed at one time."

He also said that if a 60-pack works out less expensive per capsule than a 30-pack then the tendency will be for the pharmacist to buy the 60-pack. Other parallel importers, b eta Kb ix Ltd and P.I.E. Pharma Limited, to whom the appropriate licences had been granted by the MHRA, made parallel imports of 60-packs of he product which they relabelled for sale in the United Kingdom. Counsel said that there was such demand for the product in Scotland that there was an excess of demand over supply. There was no indication that there was market resistance to 60-packs as such. Nor was there any evidence of market resistance to relabelling of the product, as Munro proposed to do with the Combopack starter pack. Munro relabelled, without repackaging, a number of other products of BI which were the subject of parallel imports by it. Given that it could not be disputed, having regard to the state of the law, that BI had a prima facie case, counsel submitted that it was a strong case, and that the balance of convenience favoured the granting of interim interdict. Any loss sustained by BI would be extremely difficult to quantify. In correspondence, on 14 July 2003 Munro gave an undertaking in terms of which inter alia it confirmed that it had not marketed and/or sold any reboxed product under the name SPIRIVA in the United Kingdom. It was accordingly a matter of surprise that Munro appeared from the productions to have received orders for reboxed 30-packs of the product. The procedure laid down by the European Court of Justice required the parallel importer to give notice to the trade mark proprietor so as to give the proprietor an opportunity to object and if necessary to apply to the Court, as was being done here. In the circumstances it was not open to Munro to rely on the value of any orders it had obtained as a factor in the balance of convenience. In any event Munro would be in a far better position than would BI to assess any losses.

[7] Mr Cormack opened his submissions by referring to the alleged breach of the undertaking. He said that Munro's customers were aware of the existence of the parallel import licence which permitted the reboxing of the product. The customers had made approaches to Munro, who had made it clear that it could not conclude any contract for supply of the product until the outcome of the present proceedings was known. There had accordingly been no breach of the undertaking. In opposing the motion, Mr Cormack accepted that BI had a prima facie case. He submitted, however, that there was a strongly arguable line of defence of the ground that there was objective necessity for reboxing of the products, which gave Munro very good prospects of ultimate success. This was a factor to be weighed in the balance of convenience. Munro held a licence from the MHRA to rebox 60-packs as 30-packs, although it was accepted that it was Munro's choice to apply for such a licence rather than one which would have permitted it to relabel 60-packs. Relabelling was only appropriate where the quantity of the product in question was that appropriate for the United Kingdom market. There was a well-established medical prescription practice which justified the reboxing. In any event, there was strong resistance to the relabelled product among a significant proportion of consumers (i.e. pharmacists). In any event, there was artificial partitioning of the market in the EC, having regard to the marketing practices adopted by BI. Reference was made to Case 102/77 Hoffmann-La Roche [1978] ECR 1139, which was discussed by the European Court of Justice in Boehringer Ingelheim KG at paras.12 to 14, and to Case C-436/93 Bristol-Myers Squibb & Others [1996] ECR I-3457, discussed at paragraph 15 of the judgment. In certain circumstances repackaging was necessary to allow the product imported in parallel to be marketed in the importing state. In the present case Munro was effectively excluded from a substantial part of the United Kingdom market by reason of the prescription practices of general practitioners unless it were able to rebox 60-packs as 30-packs. If it were able to do so, it would satisfy a great bulk of the market demand. BI supplied 30-packs, not 60-packs, for the United Kingdom market and these were the quantities referred to in BI's own published information and in lists to which pharmacists might make reference. Reference was made to the August 2003 issue of the Chemist and Druggist and to the March 2003 issue of the British National Formulary. In subsequent discussion about the fact that the 60-packs relabelled and sold in the United Kingdom by other parallel importers, of which there is no mention in these publications, Mr Cormack accepted that pharmacists have alternative sources of information about parallel imports. On the question of prescription practices, Mr Cormack referred to information from the Primary Care Information Group to the effect that 81% of repeat prescriptions for the product in Scotland were for 30-packs. This was borne out by evidence of four pharmacies operated by Munro in the Glasgow area, where 77% of repeat prescriptions were for 30-packs. Mr Cormack said, under reference to Dr Drysdale's opinion, that there was a historic tendency in the United Kingdom generally to give repeat prescriptions for one month at a time. One month or two months' supply was regarded as optimal for most drugs. Pharmacists were unlikely to sub-divide 60-packs, since this would involve them in additional costs. There was accordingly a resistance on the part of pharmacists, who were Munro's customers, to buying 60-packs. On the basis of the statistical evidence, therefore, there was artificial partitioning, with the result that there was a strongly arguable line of defence in favour of the objective necessity for reboxing the product. On the question of the balance of convenience, Mr Cormack pointed out that BI was unable to point to any actual damage to the mark which would arise from reboxing of the product. There would be damage to Munro if it was unable to supply a full range and thus meet the market demand for the product.

[8] In reply to these submissions, Mr Currie referred to the extremely short history of the sale of the product in the United Kingdom. The parallel importers had only been in the market with 60-packs for about two months. There was thus an extremely short history of prescription practice. The statistical information fell to be contrasted with Dr Drysdale's opinion. It was wrong to conclude that repeat prescriptions for 30-packs would continue at the level of 81%. The concept of consumer resistance discussed by the European Court of Justice related to resistance to relabelling, for which there was no evidence in the present case. All Munro was seeking to do was to obtain a commercial advantage, using the mark, and it was not open to it to do this.

[9] I gave the following reasons for my decision. On the information before me, Munro could have obtained a licence from the MHRA to sell relabelled 60-packs in the United Kingdom. It had chosen to apply for and obtain a licence for reboxing 60-packs as 30-packs. Having regard to the requirement to give notice, and to the terms of the undertaking given by Munro, it was appropriate to treat this as a case where Munro had not yet come to market with the product. I therefore disregarded information about possible orders that might be placed with Munro in deciding on the balance of convenience. Having regard to the irrebuttable presumption of prejudice to the specific subject matter of the mark, I considered that the loss to BI if no interim interdict were granted was at least as great as the loss to Munro if it were granted, so these two considerations cancelled each other out. It had been conceded that BI had a prima facie case, so the question was whether the strength of the case was such that BI was more likely than not to succeed in the end of the day. The test was as set out in the decision of the European Court of Justice referred to above. This was not a case of consumer resistance to relabelled products. It was simply a case where some GPs gave repeat prescriptions for quantities of 30, while others gave them for quantities of 60. It was not inconsistent with best practice for repeat prescriptions to be for quantities of 60, particularly where the product was for long term use by the patient. There was conflicting information about GPs' actual prescription practices. At most for Munro, it could be said that in the very short period to date about 80% of repeat prescriptions were for 30-packs rather than for 60-packs. About 20% of repeat prescriptions were therefore for 60-packs. (This means, though the point did not occur to me at the time, that about one-third of the total quantity of capsules which are the subject of repeat prescriptions are supplied in quantities of 60.) On the information before me, therefore, it did not appear to me that it was necessary for Munro, in the sense discussed by the European Court of Justice, particularly in the paragraph quoted above, to rebox the product in order to sell it in the United Kingdom. A substantial part of the market is for quantities of 60, and it is open to Munro, after obtaining the appropriate licence, to relabel 60-packs in order to compete for this substantial part. It appeared to me that the reboxing of 60-packs as 30-packs would be a response not to the dictates of necessity, but to a desire for commercial advantage.