Use of registered mark when rebranding imported drug held to be infringing
In Flynn Pharma Ltd v Drugsrus Ltd ( EWHC 2759 (Ch)), the claimant, Flynn Pharma Ltd, traded in generic medicines and speciality brands, all of which carried its FLYNN name and logo, the former being registered both as a Community trademark and as a UK trademark for pharmaceutical and medical preparations. The defendants, Drugsrus Ltd and Tenolol Ltd, are both part of the same group companies, the arrangement being that Drugsrus wholesales the products in the United Kingdom while Tenolol holds the licences. The defendants planned to import into the United Kingdom pharmaceutical products which had been sold in other member states under the brand name Epanutin and affixing to them the name Phenytoin Sodium Flynn.
The claimant claimed that this proposed use of its mark would infringe under the Trademarks Act 1994, Section 10(1), since it constituted the use of an identical sign for goods identical to those for which the sign was registered. The defendants argued that such imports would not infringe the claimant's marks either:
(i) because they were not using the mark as a trademark but as a description of the goods so had a defence under Section 11(2)(b) of the act; or
(ii) because the reliance by the claimant's on its trademark rights under domestic legislation to stop the imports constituted a disguised restriction on trade contrary to the free movement provisions of the Treaty on the Functioning of the European Union (TFEU).
Mrs Justice Rose rejected the defendant's allegation as to descriptive use, finding the word 'Flynn' was not a description of the goods. It did not denote the ingredients of, or the qualities or characteristics of, the medicine. The decision of the Court of Justice of the European Union (ECJ) in Arsenal Football Club v Matthew Reed (Case C-206/01) showed that the decision in Opel (Case C-48/05) was of narrow application.
The defendants offered a disclaimer by including on the packaging and the patient information leaflet a statement that FLYNN was a trademark of Flynn Pharma Ltd and that the product was not sold or marketed by them.
Again the judge rejected the defendants' argument. The Arsenal case illustrated some of the difficulties in trying to overcome a trademark objection with a disclaimer. She considered that the patient would still be unsure of the relationship between the defendants' product and Flynn. The mark FLYNN was clearly a brand name. Its significance as a trademark could not be denied by 'small print' explaining it was not manufactured or sold by the entity owning the rights to the name.
Although Article 34 of the TFEU prohibits quantitative restrictions on imports, or equivalent measures between member states, Article 36 tempers that apparently absolute provision by allowing prohibitions or restrictions on imports that are justified in protecting industrial or commercial property so long as they do not constitute a disguised restriction on trade.
The ECJ laid down some basic rules for deciding whether enforcement of a trademark would amount to a disguised restriction on trade in Bristol-Myers Squibb v Paranova (Joined Cases C-427/93, C-429/93 and C-436/93). Where the importer repackages the goods, the trademark owner can enforce the mark except where a set of five conditions ('the BMS conditions') apply. The most important condition for this decision was: "where the owner has put an identical pharmaceutical product on the market in several member states in various forms of packaging, and the repackaging carried out by the importer is necessary in order to market the product in the member state of importation".
For the defendants to be successful, they would have to show that the product they sought to import had been placed in the exporting member state with the consent of, or by, the same entity that later tried to prevent its import. Flynn had acquired the marketing authorisation from Pfizer, had a fully paid up licence to exploit related medical information, and was supplied with the capsules by Pfizer. On the facts, neither the contractual nor the corporate links between Pfizer and the claimant established that the same entity had control over the production of Epanutin capsules in the exporting state and Phenytoin Sodium Flynn capsules in the United Kingdom. The relevant BMS condition was therefore not engaged. On this basis, the claimant's trademark rights were not exhausted and the claimant was perfectly entitled to prevent the relabelling of the defendants' parallel imports. This was despite the fact that the first instance decision found that the defendants have established that it was necessary for them to rebrand imports of Epanutin as Phenytoin Sodium Flynn in order to gain effective access to the UK market.
This decision seems relatively straightforward and upholds the status quo. However, the finding of fact would assist the defendants in any appeal if the Court of Appeal were to take a different approach to the BMS conditions.
Sunny Kumar, Clifford Chance, London
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