Re-branding of parallel imports not 'objectively necessary' to access market

In Speciality European Pharma Ltd v Doncaster Pharmaceuticals Group Ltd ([2013] EWHC 3624 (Ch), November 20 2013), the High Court has found that it was not "objectively necessary" for the parallel importer of a pharmaceutical product to oversticker the parallel imports with the trademark used to market the product in the United Kingdom to gain effective access to the market.  

Speciality European Pharma Ltd (SEP) is a pharmaceutical company which is the exclusive licensee in the United Kingdom of the trademark REGURIN, used for a pharmaceutical product containing trospium chloride. REGURIN is the trademark of Madaus GmbH, which until 2009 held a patent for trospium chloride. Madaus markets its trospium chloride product under different brand names across Europe, including Céris in France and uriVesc in Germany. SEP distributes Regurin in 20mg and 60mg products in the United Kingdom.

Doncaster Pharmaceuticals Group Ltd is a parallel importer of pharmaceutical products into the United Kingdom. For many years Doncaster imported Céris from France and overstickered the box with the generic name trospium chloride. In late 2009, however, Doncaster began overstickering the imported Céris with the trademark REGURIN. 

SEP brought trademark infringement proceedings against Doncaster (Madaus was also joined as a defendant however no relief was sought against it). Doncaster sought to rely on Articles 34 and 36 of the Treaty on the Functioning of the European Union, namely that it was necessary for Doncaster to rebrand the product as Regurin to gain effective market access in the United Kingdom, and that if Doncaster were prohibited from doing so, this would constitute an unlawful restraint of trade between European member states.

There is a long line of case law, both before the European courts and national courts, that concern parallel imports and the practice of overstickering products. The majority of these concern the national implementation of Article 7 of the Trademarks Directive (2008/95/EC), which concerns the extent to which a trademark holder can prevent the further commercialisation of goods put on the market within the European Community. It is clear from Paragraph 28 of Pharmacia & Upjohn SA v Paranova A/S (Case C-379/97) that Article 7 does not apply in cases where a parallel importer replaces a product’s original trademark with another mark owned by the same proprietor; instead the rights of the trademark proprietor and the parallel importer are to be determined under Articles 34 to 36 of the Treaty on the Functioning of the European Union. The Court of Justice of the European Union (ECJ) went on to say, however, that both Article 7 of the directive and Article 36 of the treaty have the same purpose, and thus should be interpreted in the same manner.

According to the ECJ in the same case, the question that the national court needs to answer when confronted with such a scenario is:

“whether the circumstances prevailing at the time of marketing made it objectively necessary to replace the original trademark 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.” 

The ECJ described the “objectively necessary” criterion as being satisfied if “the prohibition imposed on the importer against replacing the trademark hinders effective access to the market of the importing member state”. It would not be satisfied where the rebranding was sought by the parallel importer to “secure a commercial advantage”.

In the present case, it thus fell to Mrs Justice Asplin to consider whether a prohibition on Doncaster overstickering its parallel imports with the trademark REGURIN would hinder Doncaster’s effective access to the market. In order to do this, the judge first needed to define the market itself. Doncaster submitted that the market should be defined as the market for Regurin alone. Doncaster relied on the fact that, if Regurin was prescribed, then a pharmacist was obliged to fulfil the prescription with the branded product and was unable to substitute a generic alternative. In relation to the 60mg version of Regurin, Doncaster further submitted that the Medicines and Healthcare products Regulatory Agency currently only permits dispensation of trospium chloride in this dosage by brand name. This means that all 60mg product currently dispensed in the United Kingdom is Regurin. 

The judge disagreed with this approach, finding that its logic was circular. The judge found that it made little difference to her approach whether she defined the market as that for trospium chloride in general or defined the market further by dosage. Evidence in the trial had demonstrated that nearly 90% of prescriptions for the 20mg dosage and 60% of the prescriptions for the 60mg were written in the generic name of the product, rather than Regurin. It was also shown that it is National Health Service policy that prescriptions should be written generically rather than by brand. This, the judge considered, pointed in favour of Doncaster trying to gain a commercial advantage from the use of the trademark REGURIN. 

Further factors in favour of this conclusion included the fact that a new brand of trospium chloride had recently entered the market, and Doncaster had already engaged successfully in parallel imports of the product overstickered with the generic name. In respect of the 60mg dosage, the judge found that the situation was slightly different, but all that was required of Doncaster was to gain an import licence for its own brand name, which Doncaster accepted in evidence would be of minimal cost. The judge accordingly found that the REGURIN mark had been infringed by Doncaster and there was no objective necessity for re-branding Doncaster’s parallel imports with the REGURIN mark.

As Doncaster had already successfully sold overstickered product under the generic name trospium chloride in the United Kingdom prior to its use of the trademark REGURIN, it should not come as a great surprise that its arguments that it was objectively necessary to use the trademark REGURIN failed. The judge concluded that Doncaster’s use of the trademark was in fact to gain the benefit of the trademark’s reputation and the marketing that had accompanied it.    

Leigh Smith, McDermott Will & Emery UK LLP, London