In the latest judgment given in the protracted UK litigation between several big pharma companies including the Boehringer and Glaxo groups against various parallel importers, the ECJ has given additional guidance which will disappoint parallel importers and be broadly welcomed by trade mark owners (Case C-348/04). This guidance indicates that the requirements which must be met by parallel importers in order to avoid infringement if the goods are to be re-packaged apply both to re-boxed goods and to those left in their original boxes if stickers giving additional "home language" information are affixed to such boxes.
The first English High Court judgment in this litigation was given in February 2000! At that point a first set of questions was referred to the ECJ concerning the requirements which must be met by a parallel importer who wishes to re-package branded goods and avoid trade mark infringement. These focussed on whether consumer resistance to obviously imported products is sufficient to render repackaging "necessary" where there was no legal requirement to do what was in fact done. Two years later the ECJ confirmed, in case C-143/00, that "a strong resistance from a significant proportion of consumers" would suffice to make replacement packaging objectively necessary. However, the parties could not agree the effect of this guidance and so there was a need for further argument and a second judgment. This was given in February 2003 but the parallel importers believed the High Court judge had got the application of the ECJ’s guidance badly wrong and so appealed to the Court of Appeal.
In the appeal court the leading judge Jacob J summarised the conditions set by the ECJ in the Bristol-Myers Squibb case as follows – "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 central areas of dispute about the ECJ’s existing guidance were whether:
- these conditions applied at all to "over stickered" as opposed to re-boxed goods;
- the "necessity" requirement applied only to the need to repackage in itself or to each aspect of the re-packaging undertaken (i.e. the brand owners argued that the re-packaging undertaken must be the minimum necessary to overcome the consumer resistance/ legal requirements relied upon to justify it); and
- if notice is not given by the parallel importer, all the imports made until notice is given by him, must be regarded as infringements whether or not the trade mark owner has obtained details of the re-packaging from other sources.
The appeal court decided these issues were far from "acte clair" and therefore referred an extremely detailed set of questions about them to the ECJ. Before doing so Jacob J made clear his own view that the law in this area "may be losing a sense of reality…we are, after all, only considering the use of the owner's trade mark for his goods in perfect condition". In particular he was critical of the strict application of the BMS "notice" requirement – "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?... Does the parallel importer have to pay damages in one case but not the other?"
It appears that the Advocate General took some of Jacob J’s concerns to heart; advising that as affixing new labels to external packaging could not possibility effect the condition of the goods inside, no harm could be done to the essential function of the mark (i.e. to act as a guarantee of origin). Accordingly the BMS conditions, which were only needed to ensure the essential function of the mark was protected, did not apply to merely over-stickered products.
The ECJ however has chosen to disregard at least this part of the Advocate General’s opinion. It has determined that the BMS conditions must be mechanically applied to over stickered products as well as to re-boxed ones. It has also made it very clear that all products imported for which the parallel importer has not given notice must be regarded as infringements. In respect of the remedy for the same it has indicated that it "must not only be proportionate but also…a sufficient deterrent…"
The parallel importers had one small win in the ECJ’s finding that the necessity requirement applies only to the need to re-package and to "the choice between a new carton and oversticking". It does not apply to the specific style of re-packaging/labelling chosen. However, this will offer parallel importers little practical help because the ECJ has also made it clear that the style of packaging chosen may effect the reputation of the mark and therefore infringe even where it is not "defective, of poor quality or untidy". Whether or not the particular style of re-packaging does have this detrimental effect is left to the national court.
The additional guidance shows that there is no manoeuvre room to avoid the strict and mechanical application of the BMS conditions whatever re-packaging has been chosen. This will be welcomed by many for the certainty it provides.
In the present litigation the focus will now shift to the trade mark owners’ arguments that all the different styles of repackaging used were/would be detrimental to the reputation of their trade marks. If the appeal court determines that no such harm was/would be done in respect of some, it will then be very interesting to see what financial remedy (if any) is awarded in respect of these appropriately re-packaged goods which were only infringements by virtue of the failure to notify. The ECJ have indicated that the remedy for the same must be proportionate but must also act as a "deterrent". However, UK tradition and arguably also the IP Enforcement Directive - 2004/48/EC (which was not referred to by the ECJ), indicates that the damages awarded for infringement must be compensatory not punitive and relate to the harm actually suffered. Accordingly the need for a third ECJ reference cannot be ruled out!