Court of Appeal judgment in parallel imports litigation, 5 March 2004

United Kingdom

The Court of Appeal judgment was handed down on 5 March 2004 and has been written by Lord Justice Jacob, with whom Lord Justices Kennedy and Clarke agreed. The judgment considered:

· Reboxing in principle

· Co-branding and debranding

· The need for a reference to the ECJ

· Overstickering

· Notice to be given by importers.

Reboxing in principle

The Court upheld Laddie J's findings of fact on the need for reboxing generally on the UK market to obtain effective access, based on the evidence heard at trial. The Court made clear its view that this evidence clearly indicated a firm preference for reboxing and illustrated the problems caused by foreign language overstickering. Although the evidence showed that overstickered boxes could be sold, that was not enough and there would be a substantial hindrance to market access without reboxing. The Court also rejected the argument that each product should be considered on a case by case basis.

Co-branding and debranding

Subject to the need to refer to the ECJ (see below), the Court said that its view would be to allow the importers' appeals on the style of the reboxed products, based on an analysis of previous ECJ case law. Some of the boxes in question displayed the importers' own marks ("co-branding") and in some cases the trade mark owner's mark has not been replaced on outer packaging even though the mark appeared on inner packaging ("partial debranding").

The Court disagreed with Laddie J's analysis and the pharmaceutical companies' submissions that the criterion of necessity should govern the type of repackaging (as well as the need to rebox in principle).

It was said that the particular conditions set out in the ECJ judgments in the 1996 Bristol Myers cases ("the BMS conditions") were aimed at protecting the key function of a trade mark, being a guarantee of origin. Re-affixing the mark created a risk of jeopardising the mark's reputation, but that risk was removed if the BMS conditions were satisfied. This case concerned the BMS condition relating to damage to the reputation of the mark. The Court found that this condition is not limited to damaging reputation by means of poor and shoddy packaging, as the importers alleged. Any damage to reputation means non compliance with this condition. Co-branding and debranding were then considered against this background to assess whether they did harm reputation.

The Court's view was that in some circumstance co-branding may cause damage to reputation, for example if it created the perception that the importer's mark was the manufacturer's brand or that the parties were engaged in a joint venture. This was not the case on the facts here as there was no evidence of confusion. Given the BMS condition requiring the names of both the manufacturer and the repackager to appear on the box, this was not a case where damage to reputation was self evident.

With debranding the Court's view was that there was no damage to the reputation of the claimants or their marks. It was said that deprivation of incremental exposure of trade mark was not damage and there was no right requiring dealers in trade marked products to retain the trade mark on the product.

Reference to ECJ

The Court felt obliged to refer the case to the ECJ again as its view conflicts with the view of numerous other national courts. In particular a number of national courts in Denmark, Germany, Austria and Sweden have agreed with Laddie J's view on necessity, ie. that the necessity test applies to the type of repackaging as well as to the fact of repackaging. By contrast, the EFTA Court (which fulfils a similar function to the ECJ in relation to the EFTA states of Norway, Iceland and Liechtenstein) came to a different view in the Paranova -v- Merck case of 8 July 2003. It considered, as did the Court of Appeal here, that the necessity test does not apply to the type of repackaging and that the key factor is harm to the reputation of the trade mark. Further, in the EFTA Court case the European Commission was of the view that the necessity test applied only to the fact of repackaging and not the type of repackaging.

The Court of Appeal here noted that it was unfortunate that the claimants proposed some draft questions to the ECJ before Laddie J expressly covering co-branding and debranding which Laddie J did not refer.

Overstickering

Complaints relating to poor overstickering made by Glaxo and Boehringer were rejected, as there was no harm to the reputation of the claimants or their marks. However the Court rejected the importers' arguments that there was no need for an ECJ reference on overstickering, saying that it was currently unclear as to whether or not the form of overstickering could be challenged by trade mark owners, in particular, whether a sticker which unnecessarily obscured the trade mark on the original box could be objectionable (the Court did not think so itself, but was unsure of the ECJ's view).

Notice

The Court expressed doubt as to the logic of the notice rule which renders a product infringing if notice is not given to the trade mark owner by the importer. However, the Court clearly accepted that a firm rule as to notice had been laid down by the ECJ. The Court decided that there is no difference in the time taken to review an overstickered and a reboxed product and that Laddie J was in error to draw a distinction between the two. The period of notice should be 15 working days for all products. However it was unclear as to whether a failure to give notice enabled trade mark owners to claim damages or an account of profits and this question should also be referred to the ECJ.

The form of questions to be referred to the ECJ remains to be decided.

For details of the February 2003 High Court Judgment and also a separate judgment given in July 2003 by Mr Justice Laddie relating to further packaging designs, please refer to our previous Law-Now articles dated 6 February and 10 September 2003.

For further information or a copy of the Court of Appeal judgment, please contact Stephen Whybrow on tel: 0207 367 2175 or at [email protected] , or Lucy Kilshaw tel: 0207 367 2044 or at [email protected]