Court of Appeal finds no damage in fact – Proprietors trade mark rights are exhausted
The Court of Appeal has held that the de-branding and co-branding of pharmaceuticals in the aftermarket in the EEA did not damage the reputation of the trade marks originally applied to the goods and therefore could not constitute a "legitimate reason" not to apply the general principle of exhaustion of rights (Boehringer v Swingward ).
- The co-branding in this case did not cause damage and thus could not form the basis of a non-exhaustion argument.
- De-branding cannot be an infringement as there is no use of the trade mark.
- Given that the trade mark owner is not entitled to any exposure of his mark after he has sold the product, some exposure, even if not as prominent as he would wish is more than he has a right to insist on and cannot be damaging as such.
- Although the Court of Appeal supported Laddie J's first instance finding that there was no damage to the trade marks involved, no final decision could be given, however, since the ECJ had a further reference on foot which might add another "minimum interference" criterion to the BMS conditions and require further assessment by the Court.
Business Impact Following the ECJ decision in the Court of Appeal's reference in this case (see our earlier IP newsflash 11 May 2007) brand owners appeared in a stronger position given that full and partial overstickering (de-branding) and co-branding were deemed damaging "in principle" and thus could be a legitimate reason for the originator to oppose further commercialisation of branded goods, including parallel imports within the EEA.
However, as the Court of Appeal reminds us in this judgment, the ECJ also stated that whether there was damage in each case was a matter of fact for the national court to decide and if there is no damage to the trade mark's reputation in fact, the proprietor's rights remain exhausted. Any final decision has however been deferred pending the outcome of an Austrian ECJ reference in the same area
Background - "legitimate reasons" for exhaustion not to occur
Although a trade mark proprietor's rights would usually be exhausted, once his trade marks goods are placed on the market in the EEA with his consent, a proprietor may oppose the use of his mark in relation to further commercialisation of the goods where there are "legitimate reasons" for doing so. Repackaging of those goods is usually one such "legitimate reason" unless the repackager can show that the repackaging has not damaged the reputation of the trade mark or its proprietor. A repackager is required to satisfy a series of conditions, termed the BMS conditions (after the Bristol Myers Squibb case (1996) in which they were formulated), in order to show that there is no danger of damage to the trade mark's reputation.
The ECJ held out the possibility of non-exhaustion in de-branding and co-branding situations
In May last year we reported the ECJ's decision that co-branding and de-branding of pharmaceuticals for different markets within the EU was parallel importation which trade mark owners were entitled to prevent if the BMS conditions were not fulfilled – i.e. these activities should be treated in the same way as repackaging in general. (See our IP newsflash of 11 May 2007 linked above for further explanation of de-branding and co-branding and detailed analysis of the ECJ decision and BMS conditions).
The ECJ concluded that the requirement that repackaging does not damage the reputation of the trade mark or the proprietor is not limited to cases where the repackaging is defective, of poor quality or untidy. Although it is a question of fact for the national court to decide whether in light of the circumstances of each case such damage is liable to occur; in principle any de-branding, co-branding or overstickering that obscures (wholly or partly) the trade mark, failure to state that the trade mark belongs to its proprietor or printing of the name of the parallel importer in capitals, is liable to damage the trade mark's reputation.
The case was referred to the ECJ by the English Court of Appeal which has now given its judgment in light of the ECJ decision on the reference.
The Court of Appeal finds no damage and thus no legitimate reason for further commercialisation by the importer to be prevented.
Whilst the Court of Appeal acknowledged that the ECJ had found that damage is not limited to poor presentation and that co-branding, de-branding and partial de-branding were "in principle" damaging, Jacob LJ held that the ECJ had specifically left it to the national courts to decide as a matter of fact whether damage was liable to occur or had occurred.
The Court of Appeal held:
- On the facts there had been no damage done to the proprietor or the trade mark.
- Therefore there were no legitimate reasons to prevent further commercialisation
- Total de-branding does not fall within Art 5 at all
- No defence is needed.
- There is simply no answer to the proposition "no use, no infringement".
On partial de-branding
- As Jacob LJ put it "a trade mark owner has no right to insist that his trade mark stays on the goods for the aftermarket. Because this is so, it seems to me impossible to say that partial de-branding is damaging in itself."
- Partial de-branding which gave the original trade mark less exposure than it otherwise would have was not damaging either. "[G]iven that the trade mark owner is not entitled to any exposure of his mark after he has sold the product, some exposure, even if not as prominent as he would wish is more than he has a right upon which to insist. It cannot be damaging as such."
Final Court of Appeal decision deferred pending ECJ reference on "minimum intervention"
However a final decision was deferred pending the outcome of another ECJ reference by the Austrian courts which had itself been stayed pending the outcome of the second Boehringer reference referred to above. Aspects of the two references overlapped but one element of the Austrian reference has been maintained and now awaits an ECJ decision – whether the presentation of new packaging is to be measured against the principle of "minimum intervention" or (only) against whether it is such as to damage the reputation of the trade mark and its proprietor?" Jacob LJ was of the opinion that any damage to specific subject matter would mean that the 4th BMS condition was not complied with and that whether there was damage was a question of fact for the national court (as per the second Boehringer reference) and that any principle of minimum intervention would in effect be adding a further BMS condition "one that has never been expressed before".
Nevertheless, having concluded that there was no damage to the reputation of the claimants' trade marks, Jacob LJ found that since there was a possibility that the ECJ could decide that there is some further rule about minimum intervention, the Court should accede to the claimants' request to defer a final decision.
The decision, as far as it goes for now, serves as a reminder to brand owners that co-branding and de-branding will not provide automatic release from the principle of exhaustion of rights within the EEA. Indeed the de-branding situation appears unlikely to provide fruitful claims in future, given Jacob LJ's conclusion that without trade mark use there can be no infringement. It is frustrating that the final decision of the Court of Appeal has had to be deferred pending the outcome of a further ECJ reference.
The saga of repackaging cases continues, with uncertainty remaining for now over the principles to be applied in relation to repackaging of pharmaceuticals imported from another Members State.