Litigation annual review 2002: Intellectual property

Parallel imports and repackaging

Despite decades of case law there is still much uncertainty surrounding the status of repackaged parallel imports within the European Economic Area (EEA). However, the issues may soon be clarified by a forth-coming decision from the European Court of Justice (" ECJ"), Boehringer Ingelheim & others v Swingward & others. This is of particular concern to manufacturers who have struggled, largely unsuccessfully, for many years to prevent parallel traders from repackaging their branded products, due to the overriding principle of freedom of movement of goods within the EEA.

Why is this an issue?

Repackaging by parallel importers is a significant issue because the scale of parallel importation is so large. Because of different economic conditions in different countries and sometimes because of legal and regulatory requirements, the pricing can vary enormously from country to country. Parallel importers take advantage of this by purchasing in a cheap country and selling in an expensive country. In recent years, parallel importers have exploited not only pricing differentials but also the opportunity actively to promote their own brand names by incorporating them into new packaging.

Why is repackaging allowed at all?

Case law (much of it at the highest level in the ECJ) has established that trade marked products can be repackaged by parallel importers if there is a NECESSITY to do so for legal or regulatory reasons. For example, pharmaceutical products placed on the market in Spain by a brand owner and imported for the UK market will have to be repackaged to replace the Spanish language labelling with an English language version. For this purpose, such products have commonly been overstickered following importation. The consumer has typically received from the pharmacist a product bearing the original Spanish outer pack-aging package with an English language label stickered over any Spanish wording.

Why is the law uncertain?

The current uncertainty has been caused by the meaning of Necessity. It is clear that the brand owner's original packaging may be changed if there is a legal or regulatory reason for the change. However, more recent case law, and in particular the Advocate General's opinion in the Boehringer case has referred to Necessity as including other factors which deny effective access to the market in question. In the Boehringer case there has been particular focus on the impact of foreign language packaging, with the parallel importers alleging that a sector of the market prefers not to receive overstickered foreign language packaging and much prefers reboxed product. Reboxing involves the removal of the brand owner's original outer packaging and the creation of completely fresh outer boxing in the English language into which the foreign product is placed. This is generally disliked by brand owners for the following reasons:

· often their trade mark is removed (known as "debranding");

· often the importer places his own marks on the packaging which may appear in conjunction with the brand owner's mark (" known as co-branding");

· the original product appears to the consumer in boxing which is entirely different from the brand owner's and is not immediately recognisable as such;

· parallel importers are able to build up their own "house style" by reboxing in a similar fashion a variety of different products, which in fact emanate from different manufacturers.

The Advocate General's Opinion

The Advocate General's Opinion in the Boehringer case was given in July 2001. His view was that Necessity could include wide-spread and substantial consumer resistance to overstickered product, which had the effect of the excluding the parallel importer from part of the market. It would be up to a national court to determine if there were such resistance. If there were, then repack-aging should be carried out in the least intrusive way. Interference with the original pack simply to allow the importer to enhance his own sales should not be permitted.

The Advocate General also confirmed previous case law, which had required the parallel importer to give notice to the brand owner prior to placing any repackaged product on the market. The purpose of this is to allow the brand owner to check the packaging and make any appropriate objections regarding inaccuracies. The Advocate General thought that a period of three to four weeks notice would be appropriate (the English Court having previously suggested only two days, which would be unworkable in practice).

The likely outcome

The ECJ's judgment is expected early this year and is likely to agree with the Advocate General's opinion. Where a clear obstacle to marketing can be demonstrated, reboxing (as opposed to oversticking) should be allowed, but only in the least intrusive way. The question then arises as to how the new box is to appear. It is highly unlikely that co-branding or debranding would meet the requirement of minimal interference. There are at least two possibilities:

· creation of a new box which as closely as possible replicates the brand owner's packaging (with the appropriate notice to indicate that the product has been reboxed); or

· creation of a plain white box giving only compulsory details but no trade mark or brand indications.

It is to be hoped that the judgment in Boehringer Ingelheim & others v Swingward & others will provide clear answers which will give much needed certainty both to brand owners and parallel importers, and also encourage consistency in the very many similar cases which are being fought on the same grounds in national courts throughout the EEA.

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For further information on this article please contact the author Stephen Whybrow by telephone on +44(0)20 7367 2175 or by e-mail at [email protected].

For further information on this review in general, please contact Tim Hardy on +44 (0) 20 7367 2533 or by e-mail at [email protected].