Glaxo summary judgment claim unfit, rules Court of Appeal

United Kingdom

In Glaxo Group Limited v Dowelhurst Limited, the UK Court of Appeal has dismissed Glaxo's appeal from a decision of the High Court refusing its application for summary judgment against Dowelhurst. The court held that it was not clear whether Dowelhurst's sale in the European Economic Area (EEA) of pharmaceuticals that Glaxo had supplied to third parties for export to Africa amounted to trademark infringement, as the contracts between Glaxo and the third-party purchasers did not prohibit the sale of the goods within the EEA.

The High Court had denied the relief sought by Glaxo in 15 out of 16 allegations of infringement as it was unclear whether the products destined for Africa had been placed on the market within the EEA when sold to the third parties who subsequently supplied Dowelhurst. Glaxo appealed and Dowelhurst cross-appealed in relation to the one finding against it, where Glaxo had shipped a consignment direct to Africa, which was subsequently parallel imported into the EEA.

It was not in dispute that parallel importation of trademarked products that are first placed on the market outside the EEA infringes the trademark owner's rights when the goods are imported into the EEA without consent of the trademark owner. However, in the 15 cases appealed by Glaxo, the sale had been to a party in the EEA, although it was Glaxo's intention that the products (mostly drugs for the treatment of HIV) be supplied to Africa.

The Court of Appeal dismissed Glaxo's appeal. In the 15 cases appealed, the contractual documentation did not require the buyer to take the goods to Africa, although Africa was specified as the ultimate destination. The buyers were contractually free to sell the goods within the EEA. The court was critical of the fact that Glaxo had not brought the High Court's attention to a case from the German courts, which decided on very similar facts that goods are put on the market with consent where the buyer has the power of disposal within that market. In addition to the German case, the Swedish Court of Appeal had referred a question to the European Court of Justice (ECJ) concerning whether products should be deemed to have been put on the market when they were sold with restrictions on further sale within the EU common market. Due to the existence of these legal doubts, Glaxo had failed to show that there was no real prospect of a successful defence - the test required to succeed in summary judgment. However, no reference was ordered to the ECJ as the full facts of the contractual relationship were not yet known and there were other issues in the case that required examination at full trial.

Dowelhurst was successful in reversing the one finding against it by the High Court as the Court of Appeal held that because the consignment in that case was to be shipped Cost Insurance Paid to Africa there was an arguable case that as risk passes when the goods are delivered to the carrier, property also passes at that stage, which would have enabled the purchaser to redirect the goods to the EEA.

Therefore, unless settled, this case will proceed to full trial where the UK courts will be able to examine the issues concerning when a product is placed on the market in the EEA more thoroughly.

Jane Mutimear, Bird & Bird, London

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