- These appeals and cross appeals are from two judgments of Laddie J of 28th February
2000 and 6th February 2003. Having heard the evidence prior to
the first judgment, Laddie J made findings of fact. On the basis of these
he referred some questions to the ECJ. The ECJ gave its answers on 23rd April
2002. The parties could not agree its effect, hence the need for further
argument and a second judgment.
- The claimants in the various actions are well-known pharmaceutical manufacturers.
The two defendants are parallel importers of trade-marked and dealers in
generic pharmaceuticals. This case is about the defendants’ parallel imports
of trade-marked pharmaceuticals bought in other member states of the EU.
Before us Mr Simon Thorley QC and Mr Geoffrey Pritchard appeared for Eli
Lilly, Mr Michael Silverleaf QC and Mr Richard Hacon appeared for Glaxo (who
have merged with SmithKlineBeecham) and Boehringer Ingelheim. Mr Nicholas
Green QC and Mr Richard Arnold QC represented the defendants.
- The actions were principally for infringement of registered trade marks.
In addition Mr Silverleaf advanced a case of passing off on behalf of Boehringer
Ingelheim. Laddie J rejected that in his first judgment. In his second judgment,
he held that all the trade mark actions about reboxing succeeded but those
about relabelling failed. Hence it is that the main appeals are by the parallel
importers. Boehringer cross-appeals the rejection of its passing off claim.
Glaxo and Boehringer cross-appeal the rejection of their objections to certain
manners of relabelling. All the claimants submit that the 2nd judgment
should be upheld on the further ground that it was not proved that reboxing
of parallel imported goods was necessary to achieve effective access to the
UK market. Certain minor matters are also raised by way of cross-appeal.
- I begin by
describing the various things the defendants are doing. In each case they
purchase
in a Member State other than the UK the original pharmaceutical,
packed in cardboard boxes appropriate for that Member State containing an
appropriate instruction leaflet for that Member State. Some of the goods
are pills packed in blister packs. Others are inhalers (commonly called "puffers")
on which is stuck a label. There is no dispute that under the free-circulation
rules (and particularly Art. 28) of the EC Treaty they are entitled, so far
as trade mark law is concerned, to import and sell these goods in the packaging
in which they were purchased.
- The actual pharmaceuticals are the genuine goods, identical to those on
the UK market. They may indeed come off the same production line since pharmaceutical
production does not involve giant factories and distribution is cheap – you
can get a lot of pills in a lorry. But the boxing, labelling and information
leaflets as they stand are not suitable for this country. Information leaflets
for this country must be in English and comply with our regulatory requirements
which may differ from those in the country of origin. Moreover the boxes
have instructions and details in foreign languages.
- The parallel
importers therefore, for regulatory and market acceptability reasons, make
changes.
What they mainly do so far as this case is concerned
is called "reboxing". They take the contents of the foreign boxes
out, and put them in fresh boxes designed for the UK market along with fresh
information leaflets in English which comply with UK regulatory approval.
In the case of inhalers, not only do the importers rebox, they also stick
appropriate English language labels on the inhalers themselves, labels which
completely overcover the foreign language label.
- Reboxing generally
involves re-affixing the original trade mark on the information leaflets
and boxes.
But in some instances the importer has instead
only used the generic name of the drug on the box – not its trade mark. This
was called "de-branding". In such a case the original trade mark
is not removed from every aspect of the product – in particular blister packs
and often the pills themselves bear it. For obvious reasons the mark cannot
be removed from the pills or the blister packs without the risk of affecting
the quality of the drugs themselves. So "de-branding" in the context
of this case really means partial de-branding. The only affixing of the trade
mark by the parallel importers is on the new information leaflet prepared
for UK use.
- In other cases
the defendants’ new boxes not only bear the trade mark of the drug, but
also have a get-up
which may serve as being distinctive of
the importer. This is called "co-branding." Such co-branding has
always had on the side of the box in clearly legible, but less prominent,
small print, the information mentioned below.
- An alternative
operation is called "stickering". This involves
sticking an appropriate label to an original foreign language box, having
replaced the internal foreign information leaflet with an appropriate UK
leaflet. Complaint is made of the form of some stickered products.
- Whether there is reboxing or stickering, for the purposes of this case
it is agreed that we should proceed on the basis that the importer has indicated
clearly on the new box or sticker that the goods were procured in the EU
and repackaged by the importer. An example of the sort of thing involved
reads:
"Manufactured
by Lilly SA, Spain. Procured within the EC and repackaged by the licence
holder who is:
DOWELHURST
LTD"
Actually some of the boxes with which we were concerned
did not say all these things, but no point is taken about that.
- This dispute is mainly about whether the defendants can rebox at all, and
if so whether the way they have done it is lawful. Can the defendants co-brand
or de-brand? It is the object of the claimants (a) to prevent re-boxing at
all, and if that fails (b) to require that the parallel importer’s box both
carries the original trade mark and is otherwise as plain as possible.
The Provisions of the Treaty and Trade Mark Directive
- Arts. 28 (formerly 30) and 30 (formerly 36) of the Treaty provide:
"Article
28 [EEC 30]
Quantitative restrictions on imports and all measures having
equivalent effect shall be prohibited between Member States.
Article 30 [EEC 36]
The
provision of Articles 28 and 29 shall not preclude prohibitions or restrictions
on
imports, exports or goods in transit justified on grounds
of public morality, public policy or public security; the protection of health
and life of humans, animals or plants; the protection of national treasures
possessing artistic, historic or archaeological value; or the protection
of industrial and commercial property. Such prohibitions or restrictions
shall not, however, constitute a means of arbitrary discrimination or a disguised
restriction on trade between Member States."
- Art. 5(1) of the Trade Mark Directive provides that:
"The
registered trademark shall confer on the proprietor exclusive rights therein.
The proprietor shall be entitled to prevent all
third parties not having his consent from using in the course of trade:
(a)
Any sign which is identical with the trademark in relation to goods or
services
which are identical with those for which the trademark
is registered."
- Art. 5.3 of the Directive provides:
"The
following, inter alia, may be prohibited
under paragraphs 1 and 2:
- Affixing the sign to the goods or to the packaging thereof;
- Offering the goods, or putting them on the market or stocking them for
those purposes under that sign, or offering or supplying services thereunder;
- Importing
or exporting the goods under the sign."
- Art. 7 of the Trade Marks Directive provides as follows:
"Exhaustion
of the Rights Conferred by a Trademark.
1. The
trademark shall not entitle the proprietor to inhibit its use in relation
to goods which have been put on the market in
the Community under that trademark by the proprietor or with his consent.
2. Paragraph
1 shall not apply where there exist legitimate reasons for a proprietor
to oppose further commercialisation of the goods,
especially where the condition of the goods is changed or impaired after
they have been put on the market."
- The UK Trade Marks Act 1994 implemented Art. 5(1)(a) of the Directive in
s.10(1), Art 5.3 in s.10(4) and Art. 7 in s.12. Nothing turns on this. I
shall use the numbering of the Directive.
- It is common ground that Art. 7 embodies the existing case law of the Court,
neither adding to it nor subtracting from it. So cases decided before as
well as after the coming into force of the Directive are equally in point.
A Basic Unstated Assumption
- Running through all the cases about reboxing or relabeling parallel imports,
including this case, is the assumption that the reaffixing of the trademark
to the goods would, unless it is permitted by the free circulation rules,
infringe the registration. No one has questioned the assumption in this case
– or in any of the many ECJ cases. Nonetheless it is a little odd. Most people
would think that there could be no infringement by simply applying the owner’s
trade mark to his original goods or by using his trade mark when marketing
them. It happens every day, for instance where a shop-keeper or internet
seller writes onto packaging of his own the trade mark of the goods contained
in the packet or a shopkeeper puts up a sign to say he has the trade-marked
goods in stock, or second-hand goods are sold by reference to the trade mark.
However the language of Art.5.3 of the Directive is wide – it covers, for
instance, what retailers do all the time, offering the goods for sale under
the mark. And it draws no distinction between doing the prohibited act in
relation to the genuine goods of the trade mark owner or spurious goods.
- Most everyday cases of affixing or marketing by reference to the mark in
relation to genuine goods are indeed lawful. This is probably because there
is an implied consent to do that which is reasonably necessary to market
the goods. There are obviously further problems to be explored here – for
instance suppose the manufacturer imposed a sell-by date. Would it be an
infringement to sell after that date – even if the trader pointed out the
goods were past it? And one can imagine cases where implied consent must
be ruled out by an express prohibition on further use of the mark – for instance
in an attempt to prevent a second-hand market in the goods. In the present
case there is no question of implied consent.
- Personally I still have some doubts as to whether the law of registered
trade marks needs to be stretched to cover conduct readily caught by more
general unfair competition rules. Thus out-of-date goods have been dealt
with easily by passing off e.g. Spalding v Gamage (1915) 32 RPC 273
(outmoded footballs sold as the new and improved ones), Wilts UD v Robinson [1958]
RPC 94 (outdated condensed milk sold as current). Sometimes I wonder whether
courts concerned with just an isolated question about registered trade mark
law overlook the fact that unfair competition rules can and do deal with
the problem. There is more than one way to skin a cat.
- All that is by-the-by: it is common ground here that in all cases where
the trademark has been reapplied by the importer, there would be infringement
unless the importer can come within the free circulation rules.
The framework of the free circulation rules
- Since the goods were put on the market in the Community under their respective
trade marks by the proprietors, Art. 28 EC and Art.7(1) of the Directive
prima facie apply.
- By way of response
the trademark owners say, as regards Art. 30 EC, that their trademark rights
are justified on the grounds of the protection of
industrial property (Art. 30 first sentence). As regards Art. 7.2 of the
Directive, they say they have "legitimate reasons to oppose further
commercialisation (Art.30, 2nd sentence).
- In riposte
the parallel importers say that enforcement of the trademark rights in
this case would
constitute a "disguised restriction on trade
between member states" (Art. 30 second sentence) and they deny the existence
of any "legitimate reasons" (Art.7.2).
- It is common
ground that there is no distinction between these last two points. If there
are
no "legitimate reasons" there is a "disguised
restriction" and vice versa.
The case law of the ECJ prior to this case
- Over the years the ECJ has been faced with many repackaging cases. Most
have concerned pharmaceuticals, but not all. It is not necessary to refer
to them all here. At this stage I refer to just four, the key cases prior
to the reference in this case. These cases are: Hoffmann-La Roche v Centrafarm, Case
102/77 [1978] ECR 1139; Bristol-Myers Squibb v Paranova, Joined Cases
C-427/93, C-429/93 and C-436/93, [1996] ECR I-3457 ("BMS"); Loendersloot
v Ballantine, Case C-349/95 ("Ballantine") and Upjohn
v Paranova, Case C-379/97, [1999] ECR I-6927.
- The upshot of these cases is contained in the Court’s answers to the questions
in BMS. It said (I have added my own numbering):
"Article
7(2) of Directive 89/104 must be interpreted as meaning that the trade
mark owner may legitimately oppose the further
marketing of a pharmaceutical product where the importer has repackaged the
product and reaffixed the trade mark unless:
(1) it
is established that reliance on trade mark rights by the owner in order
to oppose the marketing of repackaged products under
that trade mark would contribute to the artificial partitioning of the markets
between Member States; such is the case, in particular, 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,
and is carried out in such conditions that the original condition of the
product cannot be affected by it; that condition does not, however, imply
that it must be established that the trade mark owner deliberately sought
to partition the markets between Member States;
(2) it
is shown that the repackaging cannot affect the original condition of the
product inside the packaging; such is the case,
in particular, where the importer has merely carried out operations involving
no risk of the product being affected, such as, for example, the removal
of blister packs, flasks, phials, ampoules or inhalers from their original
external packaging and their replacement in new external packaging, the fixing
of self-stick labels on the inner packaging of the product, the addition
to the packaging of new user instructions or information, or the insertion
of an extra article; it is for the national court to verify that the original
condition of the product inside the packaging is not indirectly affected,
for example, by the fact that the external or inner packaging of the repackaged
product or new user instructions or information omits certain important information
or gives inaccurate information, or the fact that an extra article inserted
in the packaging by the importer and designed for the ingestion and dosage
of the product doesn’t comply with the method of use and the doses envisaged
by the manufacturer;
(3) the
new packaging clearly states who repackaged the product and the name of
the manufacturer in print such that a person with
normal eyesight, exercising a normal degree of attentiveness, would be in
a position to understand; similarly, the origin of an extra article from
a source other than the trade mark owner must be indicated in such a way
as to dispel any impression that the trade mark owner is responsible for
it; however, it is not necessary to indicate that the repackaging was carried
out without the authorization of the trade mark owner;
(4) the
presentation of the repackaged product is not such as to be liable to damage
the reputation of the trade mark and of its
owner; thus, the packaging must not be defective, of poor quality, or untidy;
and
(5)
the importer gives notice to the trade mark owner before the repackaged
product
is put on sale and, on demand, supplies him with a
specimen of the repackaged product."
- So the importer who repackages and re-applies the mark will infringe unless
he satisfies all five of the BMS conditions. I summarise these:
(1) Necessary to repackage to market the product;
(2) No effect on original condition and proper instructions;
(3) Clear identification of manufacturer and importer;
(4) Non-damaging presentation;
(5) Notice.
- The Court’s judgment in Upjohn explains
to some extent what is meant by "necessary." The context was that the importer wanted to apply
the version of the trade mark used by the manufacturer in the country of
intended sales instead of the version used in the country of purchase ("Dalacin" for "Dalacine").
The Court said:
"[43] It
follows that it is for the national courts to examine whether the circumstances
prevailing at the time of marketing
made it objectively necessary to replace the original trade mark 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. This condition
of necessity is satisfied if, in a specific case, the prohibition imposed
on the importer against replacing the trade mark hinders effective access
to the markets of the importing Member States. That would be the case if
the rules or practices in the importing Member States prevent the product
in question from being marketed in that State under its trade mark in the
exporting Member State. This is so where a rule for the protection of consumers
prohibits the use, in the importing Member State, of that trade mark used
in the exporting Member State on the ground that it is liable to mislead
consumers.
[44] In
contrast, the condition of necessity will not be satisfied if replacement
of the trade mark is explicable solely by the
parallel importer’s attempt to secure a commercial advantage."
- Quite what
the Court had in mind by a "commercial advantage" I
am afraid I do not understand. The Advocate-General discussed the point at
paragraph 54 but he did not think it helpful to "postulate a category
of ‘purely commercial reasons.’" He was clearly of the view that necessity
to replace the trade mark was the overriding test, which had to be determined
on a case-by-case basis by the national court. And it seems clear that a "commercial
advantage" could not consist of merely access to the market for the
parallel imported goods, though out of context most people would call such
access "a commercial advantage".
The First Judgment of Laddie J on necessity and specific
subject-matter
- When these
cases came before Laddie J for the first time the major dispute was over
the "necessary" condition – what did it mean and was it "necessary" to
rebox at all? On the facts he dealt with the "need to rebox" at
paragraphs 176-189. He held that: "there is widespread resistance to
over-stickered boxes" (para. 178); "this case is awash with indications
that the resistance to [overstickered] products not only exists but is significant
(para 186); and "there is widespread and substantial resistance to parallel-imported
pharmaceuticals supplied in over-stickered boxes" (para. 188)."
- It was not
clear that such resistance could satisfy the "necessary" test
– after all, the stickered boxes could be sold lawfully, if not in such quantities
as reboxed product. There was no legal necessity in the same way as it is
legally necessary to produce an English language information leaflet.
- Laddie J also
held that the defendants’ activities did not harm the "specific
subject-matter" of the proprietors’ trade mark rights.
- These two findings lay at the heart of his first four questions to the
ECJ. These were:
"'1.
Can a proprietor of a trade mark use his trade mark rights to stop or hinder
the import of
his own goods from one Member State into another or to hinder their subsequent
marketing or promotion when the importation, marketing or promotion causes
no, or no substantial, harm to the specific subject-matter of his rights?
2. Is the answer to the previous question different if the
ground relied on by the proprietor is that the importer or subsequent dealer
is using his mark in a way which, although not prejudicial to its specific
subject-matter, is not necessary?
3. If an importer of the proprietor's goods or a dealer
in such imported goods needs to show that his use of the proprietor's mark
is necessary, is that requirement met if it is shown that the use of the
mark is reasonably required to enable him to access (a) part only of the
market in the goods, or (b) the whole of the market in the goods; or does
it require that the use of the mark was essential to enabling the goods to
be placed on the market and if none of these, what does necessary mean?
4.
If the proprietor of a mark is, prima facie, entitled to enforce his national
trade mark rights against any use of his mark on,
or in relation to, goods which is not necessary, is it abusive conduct and
a disguised restriction on trade, in accordance with the second sentence
of Article 30 [EC], to use that entitlement in order to hinder or exclude
parallel imports of his own goods which do not threaten the specific subject-matter
or essential function of the trade mark?"
The ECJ’s answers on necessity and specific subject-matter
- The ECJ answered those questions. As to the specific subject-matter questions
the Court held that:
"Thus
it is clear from settled case-law that the change brought about by any
repackaging of a trade-marked pharmaceutical product
- creating by its very nature the risk of interference with the original
condition of the product - may be prohibited by the trade mark proprietor
unless the repackaging is necessary in order to enable the marketing of the
products imported in parallel and the legitimate interests of the proprietor
are also safeguarded (see, to that effect, BMS, para 57). "
- So repackaging inherently threatened the specific subject-matter and could
only be justified if the BMS conditions were satisfied. It was not
necessary to ask separately whether the specific subject-matter was damaged.
- As to the necessity questions the court held:
"2. Replacement packaging of pharmaceutical products
is objectively necessary within the meaning of the Court's case-law if, without
such repackaging, effective access to the market concerned, or to a substantial
part of that market, must be considered to be hindered as the result of strong
resistance from a significant proportion of consumers to relabelled pharmaceutical
products".
- This is important
– "a strong resistance from a significant proportion
of consumers" is enough to count as a "hindrance." The parallel
importers are entitled to do more than just render the packaging lawful for
UK marketing – they are entitled to replace the packaging if that is what
is necessary to overcome a strong resistance in the market to relabelled
boxes.
The cross-appeals on the necessity to re-box
- The claimants
attack Laddie J’s conclusions quoted at paragraph 30 above. They say the
evidence
does not warrant them. Moreover, they say, each product
should be considered on a case-by-case basis – that one should look at the
individual product to see whether it can be stickered properly and neatly
and if that were done it is not shown that there would be any "strong
resistance."
- The Judge’s conclusions are hardly surprising. Over the years – from at
least Hoffmann-La Roche v DDSA [1969] FSR 410 - the law reports
abound with cases about the appearance of pharmaceuticals. Clearly appearance
matters to a significant proportion of patients, concerned that all is well
with their medication.
- Nor are the reasons for those conclusions found by Laddie J surprising.
They were that some patients have a concern about foreign writing (not necessarily
xenophobia – an anxiety that they are missing some important information
is enough) and others are concerned by the unprofessional look of a stickered
packet.
- These concerns
are in respect of stickered packets as a generality. Mr Thorley, for Lilly,
invited
us to look at a neatly stickered pack of Lilly’s
Prozac. He suggested that such a pack would, or ought to be, perfectly acceptable
to patients – there was no need to re-box. But the pack displays partially
covered Spanish writing and, neat though the stickering is, does not convey
the same impression as a "proper" box.
- Laddie J’s conclusions were based on a number of types of evidence:
- an independent research report by Taylor Nelson commissioned by the Association
of the British Pharmaceutical Industry, whose members include all the claimants
in this case;
- the oral evidence of some executives from the claimants;
- an internal document of 1998 of SmithKline Beecham;
- an opinion poll amongst 300 pharmacists conducted for the purposes of
this case by the defendants’ solicitors;
- oral evidence from private practice and hospital pharmacists.
- We were taken to the first of these. Laddie J quotes the key passages in
his paragraphs 179-80 He drew his conclusions at paragraph 181:
"There
is little doubt what this means. First foreign language is a deterrent
to the sale of parallel imported drugs. Second it
is to the advantage of companies like Glaxo Wellcome to ensure that their
packaging has a higher quality appearance than that used by parallel importers.
Forcing the latter to use over-stickered boxes would hinder their ability
to access the market for both reasons."
- I would draw
the same conclusions. This is a very powerful indication that Laddie J’s
overall
conclusions on the necessity to rebox were right. For
the Taylor Nelson report was not done to prove a point in litigation – it
was done for the ABPI to identify a strategy for "reducing the impact" of
parallel imports. It tells us why this case is happening.
- Mr Silverleaf submitted that only lesser conclusions were warranted – that
there was in relation to some relabelled packs of unknown quality resistance
of an unknown extent by an unknown proportion of customers. I reject that.
This was not a survey about particular packs: it was a serious exercise designed
to get a proper picture of the position generally – and the picture painted
is of substantial resistance to relabelled packs generally, whether the labelling
was done neatly or not.
- Mr Silverleaf had very little to say about the SmithKline Beecham report
– merely saying that reboxing was done to remove potential customer animosity
with respect to foreign languages on relabelled packs. He failed to suggest
any reason why anyone would go to the expense of repackaging, unless that
animosity was significant.
- As to the evidence
of the two executives, Laddie J deals with them in paragraphs 181-183.
He
accepted the evidence of Ms Edwards of Glaxo "I do not think
there is any doubt that there is, or may be, resistance from some patients
to foreign writing."
- These materials alone would justify Laddie J’s conclusions. But there is
more. Mr Silverleaf directed his main attack at the further material. I turn
to the questionnaire sent out to between 3,500 and 4,000 of the nearly 10,000
independent pharmacies in the UK. Mr Silverleaf attacked its form and pointed
out that question 1 seems to have varied between two alternatives. Question
1 in either form was indeed inept. But the pharmacists who responded were
invited to give their reasons for a preference as between a relabelled and
a reboxed product. Without any prompting a clear preference for reboxing
and a clear indication of the problem with foreign language appearing emerges.
- Mr Silverleaf
suggested that none of this mattered – that pharmacists could overcome
the patient
hostility by more explanation to patients. This is not
the real world – poorly people want their pills, not explanations (adapting
Lord Macnaghten’s aphorism "thirsty folk want beer not explanations" in Montgomery
v Thompson [1891] AC 217). Moreover pharmacists have better things to
do than to explain things to concerned patients. They have to ask themselves
whether the cost in time of explaining a stickered box is worth the extra
profit to be made by buying parallel imports.
- Most significant
to my mind was the overwhelming response to the last question: "if
all pharmaceutical products of European origin were reboxed rather than over-labelled
would you (a) buy more (b) buy less (c) buy the same. That seems to me to
be a fair question and the answers were overwhelmingly in favour of (a).
- Finally there were the pharmacists who came to give oral evidence. Mr Silverleaf
took us through some of their evidence. He did not shift the overall impression
that new boxes were easier to deal with than relabelled, that labelling was
a hindrance.
- I turn to the suggestion that the matter should be approached on a case-by-case
basis. First I note that the ABPI and Taylor Nelson did not think so – they
thought it sensible to look at the overall position. If that is the sensible
approach for the industry I do not see why it is not the sensible approach
for the court. Next the suggestion overlooks that problems with stickering
are bound to be generalised – some significant bad stickering will give all
stickering a bad name. Thirdly Mr Silverleaf invited us to look at the evidence
of individual pharmacists about the individual boxes in suit. This goes some
way to showing that relabelled boxes could be sold – but that is not enough
– the question is whether an inability to rebox is a hindrance to sale.
- I conclude that the attack on Laddie J’s findings of fact wholly fails.
If parallel importers cannot rebox they face a substantial hindrance to sale.
I pass from this point by observing that if this were not so I cannot imagine
why the claimants are spending so much effort on this case or why the defendants
are bothering to defend.
The Cross-appeal on Passing Off
- The complaint
here is in relation to "de-branding". It is made
only by Boehringer, though if the claim were good it would hold for other
claimants too. It is said that Dowelhurst’s reboxed products, which use only
the generic name of the drug on the box, make a false representation leading
to damage. The misrepresentation is said to be that the drug inside was sourced
from a generic manufacturer – and one chosen by Dowelhurst. It is said that
when the drugs come off patent, Dowelhurst will simply cease buying parallel
imports and substitute a "true generic" in virtually the same packets
(the only difference being that the BMS condition 3 statement will
be dropped).
- The case is likened to that of Gloag v Welsh Distillers [1998]
FSR 718. In that case the defendant put Scotch whisky in bottles labelled
Welsh
whisky. His idea was to build up a reputation for his Welsh whisky that way
– and in due course to use Welsh whisky instead. Laddie J refused to strike
out a passing off claim as unarguable. Reliance is also placed on the so-called "reverse
passing off" type of case – where the defendant seeks to get sales for
his goods by falsely representing that work actually done by the claimant
was done by him, Bristol Conservatories v Conservatories Custom Built [1989]
RPC 455.
- In those cases
the defendants were plainly telling lies. The only question was whether
the law of passing
off gave the plaintiff a remedy – was he damaged?
Here things are different. The generic name on the box is true – for instance
the box saying "Meloxicam Tablets 15mg" contains just that. If
one opens the box one finds, to be sure, that the there is also use of Boehringer’s
trade mark Mobic. But that does not mean there is any false representation
on the box.
- To my mind the alleged misrepresentation is no more than a lawyer’s ingenious
construct. There is no evidence that any pharmacist or patient has ever been
deceived, notwithstanding significant sales of the products. The best that
Mr Silverleaf could muster were a few answers from some pharmacists that
there might be some slight, quickly passing, confusion or queries. Nothing
substantial was shown. Yet, if there had really been significant confusion,
given the effort put into this case, Boehringer would have found it.
- So Laddie J was right to dismiss the passing off claim.
Laddie J’s Second Judgment on co and de-branding
- In his second judgment Laddie J applied what he understood the ECJ’s answers
to mean. He quoted paragraphs 28-30 of the judgment:
"28. Although
it is possible to derogate from the fundamental principle of free movement
of goods where the proprietor of a
mark relies on the mark to oppose the repackaging of pharmaceutical products
imported in parallel, that is only to the extent necessary to enable the
proprietor to safeguard rights which formed part of the specific subject-matter
of the mark, as understood in the light of its essential function.
29. It
is not in dispute that the specific subject-matter of a mark is to guarantee
the origin of the product bearing that mark and
the repackaging of that product by a third party without the authorisation
of the proprietor is likely to create real risks for that guarantee of origin.
30. Thus,
in paragraphs 7 and 8 of Hoffmann-La Roche,
the Court considered that the proprietor’s right to oppose the repackaging
of pharmaceutical products bearing its mark is, having regard to that risk
to the guarantee of origin, related to the specific subject-matter of the
mark. According to that case-law, it is the repackaging of the trade-marked
pharmaceutical products in itself which is prejudicial to the specific subject-matter
of the mark, and it is not necessary in that context to assess the actual
effects of the repackaging by the parallel importer."
- Then he said:
"In
the light of these passages it continues to be the law that a trade mark
proprietor can only interfere with parallel
importation of his own goods where it is necessary to do so in order
to protect the specific subject-matter of those rights. However, Mr Thorley
QC, who appears for SmithKline Beecham and Eli Lilly, is correct to summarise
the effect of paragraph 30 of the judgment to mean that repackaging is deemed
to be prejudicial to the specific subject-matter. It follows that even if,
as here, it was not and could not be asserted that the repackaging adversely
affected the quality of the goods and there was no real adverse impact on
the mark’s function as an indication of origin, damage or prejudice to the
specific subject-matter must be assumed. This creates an irrebuttable legal
fiction unconnected with the facts."
- A little later he said:
"19.
That [i.e. a finding that reboxing was necessary], however, is not an end
of the matter. Although an importer may be allowed
to repackage, this does not give him a free hand to use whatever type or
style of packaging he likes. At paragraph 32 of its judgment the ECJ states
that repackaging must be
‘done in such a way that the legitimate interests of the
proprietor are respected. This means, in particular, that the repackaging
must not adversely affect the original condition of the product and must
not be such as to harm the reputation of the mark.’
20. This statement must be read in conjunction with the
irrebuttable presumption that repackaging is prejudicial to the specific
subject-matter of the mark. It seems to me that the result of this is that
all repackaging must be treated as harmful and only to be tolerated to the
extent that it can be shown to inflict the minimum collateral damage on the
claimant’s mark. In my view Mr Thorley is correct when he argues that, as
a matter of principle, the repackaging should be as unobtrusive from a trade
mark point of view as possible. Two forms of packaging, at least, can be
said to meet this requirement. The first consists of packaging which imitates
the original packaging save in respect of features which have no trademark
significance whatsoever. For example, a parallel importer could repackage
in boxes which bear exact copies of the claimant’s get up and trade marks,
save for changes in language (say German to English). The second consists
of completely plain boxes which depict nothing but the claimant’s trademark.
In each case, of course, the trade mark owner cannot object to the inclusion
of material on the packaging required, for example, by national legislation
or jurisprudence of the ECJ. For that reason, placing on the boxes a notice
identifying who the repackager is, as required by BMS, would not,
of itself, allow the proprietor to complain of the repackaging. However,
even in such a case, it would be necessary to show that the importer had
applied the additional marking in a way which did not unnecessarily interfere
with the proprietor’s interests in his trade mark. Mr Thorley said that plain
boxes could include the original brand name so as to be consistent with the
brand name appearing on the internal packaging and the product itself. They
could also contain some appropriate reference to the generic name of the
active ingredient. The name and address of the manufacturer and of the Marketing
Authorisation Holder should be included as should the name and address of
the importer which should be no more prominent, in terms of script or location,
than that of the manufacturer. I agree."
- On this basis Laddie J went on to hold that both de-branding and co-branding
were objectionable. In relation to partial de-branding he referred to paragraph
98 of the Advocate-General’s opinion:
"98.
It must be borne in mind that repackaging a product which bears a trademark,
whether or not the trademark is reaffixed to the
new external packaging or simply removed and not replaced, is a particularly
intrusive form of trademark infringement."
He went on to say:
"Partial
de-branding by removal of the mark from the outer packaging or significant
diminution of its prominence may reduce the
extent to which the proprietor can build up public awareness of and reputation
in his mark. If such de-branding is not necessary to enable the importer
to access the market, the proprietor can use his registered rights to prevent
it."
- As to co-branding he said:
"The
second class consists of those cases where the importer reboxes in a livery
which serves to build up his own reputation
in his own mark or get-up on the back of the claimant’s product. The use
by an importer of his own mark or get-up alongside the proprietor’s mark
on the new boxes, was referred to as co-branding during the trial. The effect
of this is likely to be to diminish to some extent the build up of the proprietor’s
exclusive reputation. To some extent, the goodwill generated by the use of
the proprietor’s mark will benefit the importer, not the proprietor. Once
again, that adversely affects the proprietor’s interest in his mark and,
if it is not necessary to do this to enable the importer to access the market,
it can be restrained."
- On the basis
of this reasoning he held that both the "de-branded" boxes
(those with just the generic name of the product and the BMS condition
3 notice) and the boxes which had a get-up which suggested a trade source
infringed.
The criticisms of the second judgment
- Mr Green attacks
this reasoning. His primary case was that Laddie J simply misunderstood
the
ECJ’s ruling. He began by attacking Laddie J’s notion that
the ECJ had created an "irrebuttable presumption that repackaging is
prejudicial to the specific subject-matter". He said the Court decided
no such thing. All it was saying is that if it were shown that reboxing was "necessary" the
parallel importer could do so provided he satisfied the 5 BMS conditions.
That, he submitted, his clients did. Laddie J’s fundamental error, submitted
Mr Green, was to hold that the "necessity" test applied not only
to repackaging as such but also to the details of the manner of repackaging.
- Furthermore, he submitted, as regards de-branding, that paragraph 98 of
the Advocate-General’s opinion is wrong, even if understood as only applying
to partial de-branding. To remove a trade mark wholly from a product and
sell it on under no or a different mark is perfectly permissible – it is
not an act restricted by the infringement provisions of the Trade Marks Directive.
Any trader who breaks bulk and puts his own name on the goods rather than
that of a supplier would otherwise infringe. It follows that if a trade mark
owner cannot insist on his trade mark remaining on the goods altogether,
he cannot complain of the lesser act of partial removal. He submitted further
that the Advocate-General had overlooked Pfizer v Eurim-Pharm [1981]
ECR 2913 where a trade mark owner could not enforce his trade mark against
re-packaged goods placed in transparent packaging which carried a BMS condition
3 notice. This was because:
" ….
the consumer or final user of the product is not liable to be misled as
to the origin of the product, above all where, as
in this case, the parallel importer has [a BMS condition 3 notice]."
Here, if one looks at the packs (photos are at [1982] EIPR
34) one can see that there was some de-branding.
- As regards co-branding, Mr Green’s first submission was that since this
is not mentioned in any of the BMS conditions, once repackaging was "necessary" there
was nothing wrong in it. The only condition which might be relevant is condition
4 (not to damage the reputation of the trade mark) but this was limited to
poor packaging. In the course of argument he rather accepted a fallback position:
that co-branding was lawful provided there was no damage of any sort to the
reputation of the trade mark. There was debate as to whether co-branding
could somehow reduce the distinctiveness of the trade mark in the market
by giving the impression that the co-brand was connected with the trade mark
or its owner – what was called in argument "muddying the mark" (a
phrase borrowed from GE TM [1969] RPC 418 at 459, where a form of
co-branding was held to be non-deceptive). This was also called "blurring" by
the EFTA Court of Appeal (see below).
- Mr Green submitted in relation to the fallback position that, even if
co-branding might in some cases cause damage to the reputation of a mark,
that was simply not proved here. It was, he submitted, actually wholly improbable.
Pharmacists were not confused. And any patient who cared – who had normal
eyesight and was reasonably circumspect - would clearly read the BMS Condition
3 compliant notice on the box. He would not get the notion that there was
some sort of commercial association between the parallel importer or his "co-brand" (be
it a trade name or just a get-up) and the trade mark or its owner.
- Mr Green further submitted that the Court was concerned to lay down clear
rules. If the necessity test pervaded all the BMS conditions parallel
importers and courts would be placed in an impossible position – how in particular
was one to judge when a get-up was unnecessary? He illustrated his point
by reference to Laddie J’s 3rd judgment in this case on 11th July
2003. Laddie J had instituted a regime whereby the court could vet proposed
packaging. Two proposed packs were held to be permissible but they are (and
I agree) not significantly different from packs held impermissible under
the 2nd judgment. Laddie J held that a house style of the parallel
importer was impermissible (as not being "necessary") but where
does house style begin and mere decoration end? What is "the minimum
collateral damage to the claimant’s mark?" or "no significant trade
mark impact?" This is particularly unanswerable given that the fresh
package must comply with BMS condition 3 requiring the importer to
put his name on the goods as repackager. Putting his name on the goods in
that way is trade mark use: trade marks are not limited to those of manufacturers
– dealers can have trade marks too.
- Finally Mr
Green submitted that the "necessary" test – if added
to all the BMS conditions, imposed an impossible burden on the parallel
importer – to prove he had done no more than was necessary – that his box
does not unnecessarily intrude on the reputation of the trade mark This was
a probatio diabolica (diabolical burden) which risks thwarting free
movement of goods.
- There is this
further point. If one examines the cases where the court has used the "specific subject-matter" concept,
one finds that it is expressed in essentially negative terms – as a right
to exclude others,
see Hoffmann-La Roche, para 7, Centrafarm v American Home Products [1978]
ECR 1827 para.11, Pfizer v Eurim-Pharm, para. 7, HAG II [1990]
ECR I-3711, para. 13, IHT v Ideal Standard [1994] ECR I 2789, BMS para.
44, Pharmacia v Upjohn, para. 15 and this case, para. 28. Essentially
the purpose of a trade mark is a guarantee of origin. This requires a legal
right to keep others out where that guarantee is jeopardised – it is that
legal right which is the specific subject-matter. Now that substantive European
trade mark law has been harmonised one can say that the harmonised specific
subject-matter really consists of the bundle of rights set out in the Directive
in paras. 5.1 and 5.2.
- Specific subject-matter in other words is the legal right. The legal right
is conceptually different from its purpose. The latter is protection of the
reputation in the trade mark including not only its function as a guarantee
of origin directly (as for instance in counterfeiting cases) but also indirectly
(particularly its distinctiveness which, if eroded, may affect that guarantee).
- If one looks at the BMS conditions one can see that they are all
about protecting the reputation of the mark. A fair summary of the position
may be that (1) re-affixing creates a risk of jeopardising the reputation
(2) but if the conditions are satisfied that risk is removed.
The claimants’ contentions concerning co and re-branding and the overstickering
cross- appeal
- The judge’s "irrebuttable presumption" was
not supported as such by Mr Thorley or Mr Silverleaf. Their point was simpler,
that reboxing creates
a risk of damage, that the importer must overcome that risk but if he does
so, his box should also comply with the requirement of necessity. He can
only do that which is necessary and no more. Necessity runs through everything,
whether he can re-affix the trade mark at all, whether he should sticker
rather than rebox and, so far as this case is concerned, as to the form and
positioning of any sticker or what is written on the new box.
- Reliance was particularly placed on paragraph 56 of BMS and paragraph
46 of the Ballantine case. Paragraph 56 of BMS reads:
"The
power of the owner of trade mark rights protected in a Member State to
oppose the marketing of repackaged products under the
trade mark should be limited only in so far as the repackaging undertaken
by the importer is necessary in order to market the product in the Member
State of importation."
Paragraph 46 of Ballantine:
"The
person carrying out the relabelling must, however, use means which make
parallel trade feasible while causing as little prejudice
as possible to the specific subject-matter of the trade mark right. Thus
if the statements on the original labels comply with the rules on labelling
in force in the member state of destination, but those rules require additional
information to be given, it is not necessary to remove and reaffix or replace
the additional labels, since the mere application to the bottles in question
of a sticker with the additional information may suffice."
- It was on that basis that Glaxo and Boehringer not only said Laddie J was
right in his 2nd judgment but that he was wrong to hold lawful
some overstickered products imported by Dowelhurst and Swingward. I take
by way of typical example the Atrovent Inhaler, whose packaging is shown
at Annex C1 to Laddie J’s first judgment. Objection is taken that the claimant’s
trade marks or marks are obscured by the label, unnecessary prominence is
given to the importer’s name (printed in capitals on the BMS condition
3 notice), no indication is given that the claimant’s trade mark is that
of the claimant or that it is a trade mark at all.
- The Judge rejected these complaints, holding that they do no harm to the
specific subject-matter of the claimant’s marks. I would agree – but I would
put it that they do no harm to the reputation of the claimants or their marks.
- It may be noted that Lilly do not make a similar complaint in respect of
the relabelled Prozac. The logic of their argument about reboxing suggests
they could have done. If it is right, although trade owners have to put up
with parallel imports in principle, in reality they will not have to put
up with much. This is because the owners will have a stranglehold on the
parallel imports by way of policing and restricting their appearance - Arts.
20 and Art.7(1) giveth but Art. 30 and Art. 7(2) taketh away. Sometimes I
think the law may be losing a sense of reality in this area – we are, after
all, only considering the use of the owner’s trade mark for his goods in
perfect condition. The pickle the law has got into would, I think, astonish
the average consumer.
My views
- Were the matter free from doubt, I would hold that Mr Green was right,
subject to rejecting his initial submission about condition 4. That condition,
I think, is not limited to damaging the reputation of the mark by poor packaging
– any damage to the reputation of the mark means non-compliance with the
condition. So any act which would infringe (particularly re-affixing) is
not permitted by Art. 28 of the Treaty or Art. 7(1) if it would damage the
reputation of the mark, whether by affecting or potentially affecting the
goods themselves, by poor packaging or otherwise.
- So far as co-branding is concerned, in some circumstances this might indeed
cause damage to the reputation of the mark. This would be the case, for instance,
if it were shown that the co-brand created a perception that it was a brand
of the actual manufacturer, or that the importer and manufacturer were in
some sort of joint venture. But that is not so on the facts of this case.
It is true that one or two pharmacists indicated that there might be some
confusion caused by the co-brand, but overall it is simply not proved that
there is any such conception. Whether clear BMS condition 3 notices
prevented any but the careless or the indifferent patients from taking the "co-brand" as
emanating from the original manufacturer or whether they are just not confused
anyway does not matter. If there had been significant confusion caused by
the co-branding complained of here (essentially the Swingward "get-up" and
the fancy "C" on Dowelhurst’s boxes) it would have been proved.
Nor is this the sort of case where damage to reputation is self-evident –
given the condition 3 notices. It is worth noting that the Taylor Nelson
report shows no concern about damage to reputation caused by co-branding.
Laddie J in his first judgment at paragraph 164 specifically found on the
facts that there was no damage to the claimants’ reputation and exclusivity.
- As regards de-branding again I can see no damage to the reputations of
the claimants or their trade marks. Both Mr Thorley and Mr Silverleaf contended
that there was damage. They submitted that by reason of the reduced prominence
of their clients’ trade marks the reputation of these would be less than
if the trade mark clearly appeared on the box. Deprivation of incremental
exposure of the trade marks was, they submitted, damage. I would not accept
that. I do not think that a trade mark owner has any right that requires
subsequent dealers in his product to keep his trade mark on the product.
We were told that French trade mark legislation expressly confers such a
right. That does not help. There is nothing in the Trade Marks Directive
about any such right.
- Looking at
it another way, the only act which would be an infringement, unless saved
by Art.30
last sentence and Art.7(2), is the act of affixing.
The only such acts in the case of a "de-brands" are in relation
to the leaflets (as to which no objection can be taken) and of the use of
the manufacturer’s name in the BMS condition 3 notice (which again
is unarguably legitimate).
- Indeed the
Judge, as I have said, in his 1st judgment, rejected claims to damage to
the claimants’
trade marks or their reputation either by co-branding
or de-branding. He started in his 2nd judgment from a quite different position,
with his notion of an "irrebuttable presumption" of damage and
went on to hold that the "necessary" requirement ran through everything.
As I have said I do not agree with that analysis which pervades the whole
judgment. It was because of that analysis that he appeared to change his
mind about whether the defendants’ activities were damaging in the second
judgment. To the extent he held that they were (and it is clear that he did
not really think that) it was because of the "irrebuttable presumption."
Conflicting Opinions – the need for a second reference
- It follows from what I have said that if it were left to me I would allow
the appeals (which relate to reboxed products) and dismiss the cross-appeals
concerning restickered boxes. But this I would only do if the law were free
from doubt – acte clair. But I have no doubt there is doubt. Despite
years of repackaging cases in the ECJ, I am afraid it is necessary to refer
the matter yet again. Both sides initially submitted that the position was
clear (in their respective favours) but said if it was not, with great reluctance,
that there should be a reference. That is the position.
- I say that
because there is a substantial disparity of views across the EU. On the
claimants’ side
it is pointed out that a number of national courts
of Member States at the highest level have adopted the "necessity" test
espoused by them and accepted by Laddie J. The cases are: Orifarm v AstraZeneca Danish
Supreme Court, 4th January 2002; Eurim-Pharm v Boehringer Ingelheim Federal
Supreme Court of Germany 11th July 2002 and Schuber Verpacking
II, Austrian Supreme Court, 30th January 2001. In addition
the Swedish Court of Appeal has taken a similar view in a brief interlocutory
decision, Beecham v Netpharma, 16th April 2000.
- In Orifarm the Danish Supreme Court was concerned with reboxed products
imported by Orifarm, which bore Orifarm’s logo. This was held to infringe,
the Court saying:
"Orifarm
has introduced its own line for the imported and repackaged product when
it designed the package and used the triangle
logo and has this performed an actual co-branding with the commercial advantages
involved. The repacked product appears – also without the defendant’s name
on the front – just as much as an Orifarm product as an Astra product. No
matter if the defendant’s design of the package will ease the pharmacies’
identification of the parallel importer’s product line the affixation of
the defendant’s triangle is not necessary to give the defendant effective
access to market the product. Accordingly, and since a possible commercial
reason for Orifarm’s repacking procedure cannot cause a different result,
the court finds Orifarm’s repacking unwarranted."
- In Eurim-Pharm the German Supreme Court prevented a parallel importer
from re-packaging into a package size called N3 (the size sold by the trade
mark owner in German) a number of smaller packages. It was held to be unnecessary.
The court said:
"The
parallel importer is obligated to interfere as little as possible in the
trade mark holder’s right to identify the product."
And:
"A
newly produced package might be more attractive in a certain respect. The
substantial economic interest of the Defendant
in the possibility to present itself better as a distribution company with
such a package does not take priority over the interest of the trademark
holder; the free movement of goods to warranted to the defendant is not affected
as such."
- In Schuber Verpackung II the Austrian Supreme Court was concerned
with a special stickered label used by a parallel importer. It held that
it went beyond what was necessary:
"The
first requirement [BMS 1] reveals that
the modifications of the product imported in parallel must be objectively
necessary to market the product in the Member State of importation."
And
"Whoever
uses new self-stick labels must procure, in using means enabling parallel
trade, the least possible impairment of the
specific subject-matter of the trademark right."
- In Beecham new
outer packages used by a parallel importer had "such
a colour scheme that they thereby must be considered to serve as a distinctive
mark of [the parallel importer]." The packages were restrained.
- This shows four courts reading the BMS conditions one way – in the
case of two of them admittedly before the first ECJ ruling in this case.
On the other hand the EFTA Court of Appeal, concerned with exactly the same
problem, has come to the opposite conclusion in a judgment of 8th July
2003, Paranova v Merck. The defendants, having previously actually
used their trade mark on the goods, removed it following an adverse court
ruling, but continued to use a coloured striping system in accordance with
a house style. It said:
"The protection of the trade mark as a guarantee of
origin also requires that the repackaging must not be done in such a way
that it is liable to damage the reputation of the trade mark and thus of
its owner …. Impairment of the reputation of the trade mark and thus of its
owner may therefore in principle constitute "legitimate reasons" within
the meaning of Art. 7(2)"
- This is precisely Mr Green’s fallback position in relation BMS condition
4. The court went to say:
"50.
Moreover, the protection of the trade mark as a guarantee of origin also
requires that the repackaging must not be done
in such a way that it is liable to damage the reputation of the trade mark,
and thus of its owner, (see, for comparison, BMS, at paragraph 75;
and Dior, at paragraph 43). Impairment of the reputation of the trade
mark, and thus of its owner, may therefore, in principle, constitute "legitimate
reasons" within the meaning of Article 7(2)."
"52.
In order to establish whether there is a risk of damage to the reputation
of the trade mark, the national court will have
to take account of whether there is an inappropriate presentation of the
repackaged product. In such a case, the trade mark proprietor has a legitimate
interest, related to the specific subject-matter of the trade mark right,
in being able to oppose the marketing of the product. Apart from instances
of defective, poor quality or untidy packaging the national court may also
take account of circumstances outside the actual package design such as advertisements
published by the Appellant. The Court is not aware of anything that would
indicate that affixing coloured stripes along the edges of the product packaging
could damage the reputation of the trade mark, and thus that of the Respondents."
"54, With regard to the suggestion that the Applicant
is pursuing the goal of generating a "Paranova product range",
the EFTA Surveillance Authority has rightly observed that the mere fact that
a parallel importer gains additional advantage from a particular type of
graphic design is, in itself, immaterial."
"55. The Respondents have observed that products under
the same trade mark owned by them may be marketed by various parallel importers
with various package designs. They have argued that this would evoke the
risk of degeneration of the trade mark. The Court holds that such a risk
may, in principle, constitute "legitimate reasons" within the meaning
of Article 7(2) of the Directive. It is for the national court to make the
necessary factual assessments. In its examination, the national court will
have to take into account that the products in question are prescription
drugs, and that decisions to use them are made by members of the medical
profession on the basis of specialist knowledge and professional responsibility.
Only if the coloured stripes constitute the main factor in creating the risk
of degeneration, may that risk form a "legitimate reason" to oppose
the use of those coloured stripes. This must be distinguished from other
causes of degeneration, such as the trade mark owner’s own conduct, or developments
in the market. Furthermore, the common use of one trade mark by more than
one undertaking is an inevitable consequence of the privilege conferred on
parallel importers in recognition of their contribution to free trade."
"56. If coloured stripes affixed along the edges of
the product repackaging could create a risk of confusion as to the identity
of the manufacturer, that might in theory cause damage to the reputation
of the trade mark. However, the repackager’s duty to clearly state the name
of the manufacturer as well as its own name is intended to counteract any
blurring of the distinction between the manufacturer and the parallel importer.
Therefore, the use of coloured stripes could not alone constitute a "legitimate
reason" within the meaning of Article 7(2) of the Directive, as long
as the names of the manufacturer and the parallel importer are adequately
stated, i.e. whether the names in question are printed in such a way
as to be understood by a person with normal eyesight, exercising a normal
degree of attentiveness (see, for comparison, BMS, at paragraph 71)."
- Messrs Thorley
and Silverleaf suggested that the case was not really one of co-branding
at all – that
one could not regard the striping system of
the defendants there as co-branding. But that simply is not so. The EFTA
Court plainly did not consider the get-up as merely decorative – it had a
trade mark function, of "generating a Paranova product range," just
as do the get-ups complained of in this case generate a Dowelhurst or Swingward
product range.
- Moreover it is important to observe what the position of the Commission
was in this case. The EFTA court sets it out at para. 28:
"The Commission of the European Communities submits
that the necessity test applies to the act of repackaging, not to the presentation
of the repackaged product. Under the trade mark’s function of origin, however,
the proprietor may oppose the presentation of the products if the presentation
is liable to damage the distinctive character of the trade mark or if the
presentation of the repackaged goods is liable to damage the reputation of
the trade mark and its owner. In circumstances where it is established that
the marketing of the repackaged goods is customary in the reseller’s sector
of trade, the recognition of "legitimate reasons" depends upon
whether the use of the trade mark seriously damages its reputation."
- The Commission’s view accords with that of the EFTA court. It is diametrically
opposed to that of the views of the national courts I have mentioned. A reference
is necessary.
- This is all
the more a pity in view of the fact that the claimants proposed some questions
specifically
directed at co-branding and de-branding following
Laddie J’s first judgment. Evidently they did not appeal to the Judge for
they were not included in the questions ultimately determined by him. He
perhaps thought that his question 3 covered these points, ending as it did
with the general question "what does necessary mean." The Court
did not answer that question specifically – hence the current dispute.
- Further, I think the questions to be posed should include a question about
the form of stickering as well as that of reboxing. The defendants dispute
this, saying the law is already clear as laid down by the ECJ – namely that
if stickering is necessary that is all – there is no further requirement
going to the form of restickering. I am not so sure – the logic of the necessity
argument on reboxing must, I think, at least arguably also apply to the form
of stickering. In particular it may be that a form of stickering which unnecessarily
obscures the trade mark is not permitted. I would not so hold, but I cannot
be sure whether the ECJ would do so: it has never specifically addressed
the question of the necessity of a form of restickering.
- It was pointed out that Boehringer were not consistent in their objections
– complaining about some forms of stickering but not objecting to others
which appear much the same. I agree that appears to be so on the facts, but
the legal point does not depend on whether the trade mark owner objects or
not. The disparities do, however, further demonstrate the uncertainty of
the law and the need for clear rules.
- It was also
said that there should be no reference as regards the form of stickering
because
the claim had been abandoned. It was not suggested
there was any express abandonment of the point, merely that there was an
implied abandonment. It is said that the Judge mistakenly thought the point
was still live and ruled on the matter. I do not accept that there was any
implied abandonment: the fact that attention focused on the most important
matter, reboxing, does not connote abandonment. Nor can I see any prejudice
even if the point is being "revived". The plain fact is that clear
rules for stickering and reboxing are needed for the purpose of this case
and generally and guidance is accordingly necessary.
The Period of Notice
- BMS condition 5 requires that the parallel importer must give notice
to the trade mark owner of his intention to sell parallel imported goods
whose original packaging has been altered or discarded. This requirement
goes back to at least Hoffmann-La Roche in 1978. I freely confess
that I do not understand the basis in the Treaty for this. Why should exactly
the same acts amount to an infringement if no notice is given but not if
it is? Why should a parallel importer have to disclose his commercial plans
to his competitor? (The point does not matter in this case, but one can well
imagine cases where the trade mark owner could respond to the notice by flooding
the market to frustrate the parallel imports). Does the parallel importer
have to pay damages in one case but not the other? My doubts on the basic
rule do not matter: I, like any other national judge, must accept and apply
the requirement as though it were a piece of legislation. And if we are unsure
of its details we must ask the ECJ. Perhaps one day there will be a Directive
or Regulation dealing with the point.
- In some instances in the present cases, no notice was given by the parallel
importers and in others only very short notices. At least in some cases,
despite the absence of notice direct from the parallel importer, the trade
mark owners had knowledge of the proposed packaging from other sources. The
ECJ has now held that only direct notice from the parallel importer will
comply with condition 5. This again I do not really understand, but must
accept. What I am not sure about is whether, if notice is not given, the
parallel imports made until it is given, must be regarded as infringements
with the particular consequence that the importer must pay damages or render
an account of the profits he has made. The question of financial remedies
has not been fully resolved in the present cases: it makes sense to ask a
specific question on the point, as indeed the parties agreed.
- The one thing that can be said about the condition is that it is clear
and can be applied more or less mechanically. It may be that this is an indication
that the other BMS conditions are also intended to be of that character.
Certainly it would be helpful to national courts and traders if the rules
were clear and precise.
- Turning back to this case, in his first judgment Laddie J said this:
"148. In the absence of guidance from the ECJ, it appears
to me that the approach to notice, if it is a pre-condition, should be as
follows. The purpose is to give the proprietor sufficient time to come to
a fair decision as to whether to object or not. If no objection is to be
made, that is a matter which should be conveyed to the importer as soon as
possible so that any dislocation of inter-State trade is kept to a minimum.
How long is needed for that exercise is something which is primarily within
the knowledge of the proprietor. Therefore, if anything other than a very
short time is needed, it is for the proprietor to demonstrate how long is
necessary. In this case no attempt was made by Mr Silverleaf’s clients to
show that they needed anything more than a few minutes to make up their minds.
Where, as here, the importers are well known to the claimants and readily
accessible by phone, only a day or two at most would be reasonable. Of course
if that sort of notice is all that is given and the response from the proprietor
is a legitimate "no", this may cause dislocation and loss to the
importer. However that is a problem he will have to shoulder if he decides
to give such short notice. It has no impact on how long the notice should
be for the purpose of allowing the proprietor to come to a fair decision."
- The ECJ held
that it was "for the national court to assess, in the
light of all the relevant circumstances whether the proprietor had a reasonable
time to react to the intended packaging." But in its reasoning it added:
"On
the basis of the evidence before the Court, a period of 15 working days
seems likely to constitute such a reasonable time where
the parallel importer has chosen to give notice to the trade mark proprietor
by supplying it simultaneously with a sample of the repackaged pharmaceutical
product. That period being purely indicative, it remains open to the parallel
importer to allow a shorter time and to the proprietor to ask for a longer
time to react than that allowed by the parallel importer."
- Mr Silverleaf contends that that observation applies equally to both stickered
and reboxed products. So the period should be 15 working days in all cases.
Laddie J held that there was a difference holding that the case of a stickered
product 7 working days is enough because all the proprietor has to do is
to compare his own unstickered product with the stickered version.
- Although this sort of evaluation is one with which a Court of Appeal will
be slow to interfere, I think Laddie J was in error here. I cannot see any
difference in the time needed to consider a stickered product from that needed
for a reboxed product. In relation to both there is not just the question
of appearance involved but a possible, preliminary at least, factual assessment
of whether there is likely to be involved any damage to reputation. And in
any event the difference between 15 working days and 7 working days is slight.
- Given the guidance of the ECJ, I would hold that the appropriate period
in all instances with which this appeal is concerned is 15 working days.
An injunction about notice in respect of other trade marks?
- Boehringer sought an injunction against Dowelhurst to prevent a future
failure to give notice in respect of other products it may wish to parallel
import in the future. Laddie J refused it, saying that there was no reason
to believe that Dowelhurst or Swingward would fail to give notice in the
future, their obligation to do so directly to the trade mark owner now having
been confirmed by the ECJ – that there is no extant threat to fail to give
notice.
- Before the Judge some evidence was provided late which was supposed to
show that there was indeed an extant threat in that Dowelhurst had failed
to give notice on one occasion. No application was then made to have the
evidence admitted and the judge declined to read it.
- It is now submitted that we should admit the evidence. I do not see why.
If evidence is available for consideration by the judge, then be should invited
to read it by a proper application. If he declines then, in appropriate (likely
to be unusual) circumstances his decision so to do so may be appealable.
But that is not what is sought here – we are asked to admit fresh evidence
without any application for its admittance having been made to the Judge.
There is no explanation for this. It would seem that the evidence was available
for some time before it was sent to the Judge so it is not really even fresh
evidence.
- I can see no reason for interfering with the Judge’s decision on this point.
Documents for this appeal
- Finally, I do not wish to part with this case without entering a strong
protest about the bundles. We were originally sent nearly fifty bundles of
documents. Most of these were fat ring binders. After the court made inquiries
as to what they were all for, many of them were taken away before the case
started. We were nonetheless left with about half. Of these, by my calculation,
ten were never opened. In the case of others only a page or two were looked
at. No attempt was made to comply with the Practice Direction to Part 52
15.11(A) which requires a core bundle of essential documents. On the contrary,
no document was considered too unimportant to be included in the mass of
files that confronted us. Nor were the files particularly logical. For instance
the two judgments of Laddie J and the judgment of the ECJ were buried at
the back of files with transcripts of evidence and argument, procedural orders
of no consequence and other matter. Further, no file contained an inside
label as has become good practice in all substantial litigation for a number
of years. Consequently when a file was opened you could not see what its
number was. Indexing was of a particularly uninformative kind – for example
exhibit numbers were simply given rather than what the exhibit actually was.
Whether or not the parties’ lawyers ever co-operated in the documentation
or if they did they ever considered what was really needed and how best it
should be organised I do not know. It seems unlikely. The consequence of
all this undoubtedly made the hearing more cumbersome and the writing of
the judgment more difficult.
- I hate to think how much the over-documentation has cost the parties but
I would like to know when the question of costs comes to be debated. I would
wish to hear Counsel on all aspects of the matters I have mentioned and as
to whether or not there should be a special order for costs, including perhaps
an order protecting the parties from their own lawyers’ bills.
Conclusion
- In the result I would dismiss the cross-appeals about passing off and an
injunction requiring notice. I would reject the cross-appeal on the factual
necessity to rebox. I would defer judgment on the form of the reboxing and
on the form of the re-labelled products complained of until after the ECJ
has ruled on the questions referred. As to the form of these, I would hope
that the parties could agree them. They need to be as short and precise as
possible. If they are agreed then I expect they will be referred as agreed,
although it would be necessary for the court to approve them. If there is
disagreement then a short hearing may be necessary. It can doubtless be combined
with the question of costs.