Trade marked goods may arguably be "imported" into the European Community even if they have not been released into "free circulation".
Someone wishing to bring goods into England from a country outside the Community, with a view to sending the goods to another country again outside the Community, may take advantage of various customs regimes which enable that to be done without incurring any duties.
One way of doing that is to effect the onward shipment through use of the inward processing relief regime (IPR). If there is an intention to re-export the goods then under this process the goods can be released by Customs to the business responsible for their transit which is then at liberty to send them on outside the Community. If that is done, and if the relevant returns are made, then no duties are payable. It is effectively like distributing from an appropriately designated secure warehouse but without leaving the goods in the warehouse under Customs control.
Eli Lilly charge more for their pharmaceuticals in the North American market than they charge in other parts of the world. The defendant is an English pharmacy which seeks to make a profit from this discrepancy by operating the http://www.canadadrug.com/ web site. US customers can order pharmaceuticals (including Eli Lilly's CIALIS, LILLY, EVISTA, HUMALOG and HUMULIN products) via this website. Their order is required to be supported by a doctor's prescription. This prescription or a copy of it finds its way to Turkey from where the prescribed drugs can be supplied at a cheaper price than would be applicable if the customer brought them in the US.
In Turkey the relevant product is taken from the shelves in its original Eli Lilly packaging (which contains its trade marks) and is typically placed in an anonymous cardboard box. Before being placed in its box, each product is given a label identifying the product and dosage and identifying the customer by name. The affixed label also contains the name "Complete Care Pharmacy" in large type across the top, with an address in the top right-hand corner apparently pertaining to that concern; being PO Box 3329, Slough, UK. In fact no pharmacy operates from that PO Box. Anything sent to that address is redirected to 8 PM.
The EVISTA product supplied via this web site is not distributed accompanied by a patient safety leaflet or other similar information. The other products in issue are generally accompanied by such a leaflet, but they are written only in Turkish.
Each small cardboard box is given an address label bearing the name and address of the ultimate recipient. However, those boxes are not transmitted directly from Turkey to the US. Instead, they are placed in larger boxes (about 100 per larger box) and that larger box is consigned to 8 PM in the UK. 8 PM procures the release of the larger cartons from Customs under the IPR regime referred to above, splits the consignment by removing the smaller boxes, and then posts the liberated brown boxes to the US individuals using normal Royal Mail postal services.
The key issue here was whether what 8 PM did amounted to "importing" the pharmaceuticals into the UK under the relevant trade marks and hence into the Community without Eli Lilly's consent. Section 10(4) of the UK Trade Marks Act 1994 reads as follows:
"(1) A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.
(4) For the purposes of this section a person uses a sign if, in particular, he ... (c) imports or exports goods under the sign ..."
8 PM relied heavily on the European Court of Justice's (ECJ) decision in Class International BV v Colgate-Palmolive Co and Others to argue that as the pharmaceuticals were not released into "free circulation" they cannot be regarded as having been imported into the UK.
The Class International case concerned Aquafresh toothpaste obtained from South Africa which was brought into the Netherlands under the external transit customs procedure and/or the customs warehousing procedure. In that case the ECJ concluded "a trade mark proprietor cannot oppose the mere entry into the Community, under the external transit procedure or the customs warehousing procedure, of original goods bearing that mark which had not already been put on the market in the Community previously by that proprietor or with his consent."
The ECJ noted that "Release for free circulation, a requirement for putting goods on the market in the Community, is therefore only one of the options open to the trader who brings goods into the Community customs territory.
As long as that option is not chosen and the requirements of the customs-approved treatment or use, other than release for free circulation, under which the goods have been placed are satisfied, the mere physical introduction of those goods into the territory of the Community is not "importing" within the meaning of Article 5(3)(c) of the Directive and Article 9(2)(c) of the Regulation and does not entail "using [the mark] in the course of trade" within the meaning of Article 5(1) and Article 9(1) respectively."
The English judge was not convinced however that the Class International case was determinative. This was because what 8 PM had done went beyond mere physical introduction of the goods. Furthermore the Class International judgment did not expressly deal with the IPR customs regime. He noted;
"I do not consider the Court was saying that nothing short of putting the goods into free circulation, or making them Community goods, will be capable of amounting to an import. The Court was considering straightforward cases - mere warehousing, warehousing with dealings involving a sale outside the Community and sales into the Community. Those clear cases generate clear answers… I consider that it remains open to argument that the court was not intending to deal with the potential subtleties of the facts of the present case. The present case…involves the engrafting of special facts onto the customs-governed release of the goods to 8 PM. They are not released into free circulation in the Community, and they do not become Community goods, but I do not consider that a proper reading and understanding of the decision in Class means inevitably that there can be no import".
In particular the judge was concerned that "the effect of what happens [to them here] is capable of giving the impression [to consumers and US Customs] that the goods emanate from England. The goods have an English address applied to them in the form of an apparent English trading concern's name on the label… It looks like a statement of the source of the drugs". Furthermore the use of the Royal Mail and the UK postcode "has the effect of reinforcing, or giving the impression to customers that the drugs have a UK origin."
"All this means that there is a case for saying that the use of the English jurisdiction was far more than…as a "hub"…[and] makes it arguable, in my view, that this case is distinguishable from the more ordinary transhipment cases envisaged by the ECJ in Class, and that the acts [of 8 PM] amount to "importing" for the purposes of section 10(4)(d)."
The judge went on to consider whether the interim injunction currently granted in Eli Lilly's favours should be continued until trial and decided it should. In doing so he was particularly mindful of the potentially unquantifiable harm which may be done to Eli Lilly's reputation resulting from the 8 PM's failure to supply readily understandable patient information leaflets with the pharmaceuticals in issue.
Brand owners who greeted the Class International decision with dismay may cautiously welcome this decision. It suggests at least that parallel importers stopping their goods off in Europe while on their way to lucrative markets elsewhere will only be able to rely confidently on Class International as a shield to infringement actions if their European stepping stone is merely a "hub". If they seek to "enhance" such goods in any way by virtue of their European sojourn they may find themselves to be importers into the Community after all.