Uncertainty remains in repackaging case pending ECJ decision

In Boehringer Ingelheim KG v Swingward Limited ([2008] EWCA Civ 83, February 21 2008), the Court of Appeal of England and Wales has held that the de-branding and co-branding of pharmaceuticals in the European Economic Area (EEA) aftermarket did not damage the reputation of the trademarks originally applied to the goods and thus could not constitute a 'legitimate reason' not to apply the general principle of exhaustion of rights. However, the court deferred a final decision pending the outcome of a reference by an Austrian court to the European Court of Justice (ECJ) on similar issues.

The English court's ruling comes in light of the ECJ's answers to preliminary questions referred to it in 2004. The ECJ's decision in Boehringer (C-348/04), released in April 2007, appeared to strengthen the position of brand owners. The ECJ stated that full and partial overstickering (de-branding) and co-branding are damaging "in principle" and thus could be a legitimate reason for the brand owner to oppose further commercialization of branded goods, including parallel imports within the EEA.

Although a brand owner's rights would usually be exhausted once its trademarked goods are placed on the market in the EEA with its consent, a rights holder may oppose the use of its mark in relation to further commercialization of the goods where there are legitimate reasons for doing so. Repackaging of those goods is usually one such legitimate reason, unless the repackager can show that the repackaging has not damaged the reputation of the trademark or its proprietor. A repackager is required to satisfy a series of conditions - termed the 'BMS conditions' after the ECJ's ruling in Bristol-Myers Squibb (Joined Cases C-427/93, C-429/93 and C-436/93) - to show that there is no danger of damage to the trademark's reputation.

In Boehringer, the ECJ concluded that the requirement that repackaging does not damage the reputation of the trademark or of the proprietor is not limited to cases where the repackaging is defective, of poor quality or untidy. The ECJ stated that any de-branding, co-branding or overstickering which obscures (wholly or partly) the trademark, fails to state that the mark belongs to its proprietor or prints the name of the parallel importer in capital letters is, in principle, liable to damage the trademark's reputation. Whether the de-branding, co-branding or overstickering actually causes such damage is a question of fact for the national court to decide in light of the circumstances of each case.

Having digested the ECJ's answers to its questions, the Court of Appeal acknowledged that the ECJ had found that damage is not limited to poor presentation, and that co-branding, de-branding and partial de-branding were "in principle" damaging. However, the court noted that the ECJ had specifically left it to the national courts to decide as a matter of fact whether damage was liable to occur or had occurred.

In the court's opinion, the co-branding in this case did not cause damage and thus could not form the basis of a non-exhaustion argument. Therefore, there were no legitimate reasons to prevent further commercialization.

In relation to de-branding, the court reasoned that there can be no infringement as there is no use of the trademark. It stressed that total de-branding does not fall within Article 5 of the First Trademarks Directive (89/104/EEC). As for partial de-branding, the court explained that:

"a trademark owner has no right to insist that its trademark stays on the goods for the aftermarket. Because this is so, it seems to me impossible to say that partial de-branding is damaging in itself."

The court also commented on whether partial de-branding that gave the original trademark less exposure than it otherwise would have was damaging:

"[G]iven that the trademark owner is not entitled to any exposure of its mark after it has sold the product, some exposure, even if not as prominent as it would wish, is more than it has a right upon which to insist. It cannot be damaging as such."

However, a final decision was deferred pending the outcome of another ECJ reference by an Austrian court, which had itself been stayed pending the ECJ's decision in Boehringer. Aspects of the two references overlapped, but the following element of the Austrian reference has been maintained and now awaits determination by the ECJ:

"Is the presentation of the new packaging to be measured against the principle of minimum intervention or (only) against whether it is such as to damage the reputation of the trademark and its proprietor?"

The English Court of Appeal was of the opinion that any principle of minimum intervention would in effect be adding a new BMS condition ("one that has never been expressed before"). As there was a possibility that the ECJ could decide that there is some further rule about minimum intervention, the court deferred a final decision.

Therefore, the saga of repackaging cases continues, with uncertainty remaining over the principles to be applied in relation to repackaging of pharmaceuticals imported from another member state.

Joel Smith and Rachel Montagnon, Herbert Smith LLP, London