Further guidance from ECJ required in drugs repackaging case

In Glaxo Group Limited v Dowelhurst Limited, the UK Court of Appeal has overturned a decision of the High Court, which held that the repackaging of parallel-imported pharmaceuticals created an irrebuttable presumption of harm to the manufacturer's trademark.

The Court of Appeal's decision is the latest ruling in a long-running battle between the claimants, various leading pharmaceutical firms (including Boehringer Ingelheim KG, Glaxo Group Limited, Eli Lilly and Company and Smithkline Beecham plc), and two parallel importers - Dowelhurst Limited and Swingward Limited (the defendants). The defendants imported into the United Kingdom genuine goods marketed by the claimants in other countries in the European Union. The defendants either (i) repackaged these products into new boxes in their own livery, or (ii) relabelled the original boxes. The claimants brought actions for trademark infringement, claiming that the changes in packaging were "not necessary" to market the products in the United Kingdom.

In its first judgment in 2000, the High Court found that the defendant's actions did not cause actual or substantial damage to the claimants' trademarks. However, it was unsure of the application of Article 7(2) of the Community Trademark Directive, which relates to the exhaustion of rights, and it referred questions on this issue to the European Court of Justice (ECJ) for clarification. The ECJ ruled that repackaging is objectively necessary if it is required for effective access to the market concerned.

The High Court issued a second judgment in 2003, in which it interpreted the ECJ's ruling and reversed some of its original findings. It held that even if repackaging did not affect the quality of the goods, damage to the trademark must be assumed. The mark owner could oppose the import of repackaged goods unless the repackaging was "necessary" to give access to the market. It held that the test of necessity applied not only to repackaging per se but also to the style and manner of the repackaging. In the case at hand, the court found that although repackaging was necessary to gain access on to the market, the style of packaging used by the defendants did not respect the legitimate rights of the mark owners.

The defendants appealed on the grounds that the High Court had misunderstood the ECJ's ruling. They claimed that the ECJ did not decide that repackaging created an irrebuttable presumption of harm to the manufacturer's trademark. Their interpretation of the ECJ's ruling was that repackaging is allowable if the importer can satisfy the five conditions set out in Bristol-Myers Squibb v Paranova, namely:

• the repackaging is necessary to market the product;
  
  
• the repackaging has no effect on the original condition of the product and includes the proper instructions;
  
  
• the repackaging features a clear identification of manufacturer and importer;
  
  
• the presentation of the repackaging is not damaging; and
  
  
• the party repackaging the product has given notice to the mark owner.

The claimants cross-appealed on the basis that the defendants' method of relabelling, by which they placed stickers over the original boxes, was unlawful. They claimed that the stickers obscured their trademarks, gave unnecessary prominence to the defendants' names and did not make reference to the claimants' names.

The Court of Appeal overturned the High Court's decision and held that repackaging does not create a legal presumption of harm. The court reaffirmed the findings in Bristol Myers-Squibb, stating that Article 7(2) of the Community Trademark Directive must be interpreted as meaning that an importer who repackages and reapplies a trademark will infringe it unless he satisfies all five conditions.

However, the court held that, as the case law in this area was unclear, further guidance from the ECJ was required. Although the exact questions to be referred are yet to be decided, they will relate to the form and necessity of repackaging and relabelling, and whether trademark infringement exists until direct notice is given by an importer.

For background information on this case, see Repackaging of parallel-imported drugs restricted.

Amarjit Purewal and Ian Starr, Ashurst, London