In Orifarm A/S and Paranova Danmark A/S v Merck Sharp & Dohme Corp joined cases C-400/09 and C-207/10 28 July 2011 (unreported), the Supreme Court in Denmark sought clarification as to the applicability of the exhaustion of rights principle in relation to parallel imports.
Merck Sharp & Dohme Corp brought proceedings against Orifarm A/S for registered trade mark infringement on the grounds that Orifarm, which imported Merck’s pharmaceutical products in parallel on to the Danish market, had wrongly identified itself as the company that had repackaged the products, thereby misleading the consumer and damaging Merck’s marks. In a similar factual scenario, Merck brought separate proceedings against Paranova Danmark A/S.
Under the so-called doctrine of “exhaustion of rights”, Article 7(1) of Directive 89/104 prohibits trade mark proprietors from asserting their rights in respect of products that they have already placed on the market in the European Economic Area. Article 7(2), however, provides an exception to this rule where there is a legitimate reason to oppose such further commercialisation.
At first instance, the Danish court found, in both sets of proceedings, that the Defendants had infringed Merck’s trade mark rights by failing to disclose the identity of the actual repackager (in this case, related group companies), which Merck argued constituted a “legitimate reason”. Both Orifarm and Paranova appealed the decisions to the Supreme Court in Denmark.
The Danish Supreme Court made a referral to the Court of Justice of the European Union (CJEU) in both cases, essentially asking whether a trade mark proprietor’s rights are infringed when a pharmaceutical product is the subject of parallel importation by a company with appropriate authorisations to market and sell, but which subsequently instructs a separate company to repackage the product, while listing itself as the repackager.
Disagreeing with the Danish court, the CJEU held that Merck’s trade marks had not been infringed by the Defendants’ failure to disclose the name of the repackager.
The CJEU referred to a number of cases that have specified the conditions under which a parallel importer should repackage pharmaceutical products, one of those conditions being that the new packaging should clearly indicate the repackager of the product and the name of the manufacturer. In the circumstances at hand, however, the CJEU rejected Merck’s argument that the consumer has an interest in knowing the name of the undertaking that actually repackaged the product. The CJEU said that it is clear from the wording of Article 7(2) of the Directive that the exception to the principle of the exhaustion of rights concept is limited to the protection of the legitimate interests of the trade mark proprietor, consumers can instead rely upon other legal instruments to protect their legitimate interests.
In respect of the trade mark proprietors’ rights, they are protected by recourse against the repackager of the product, or indeed against the company on whose authorisation the repackaging was carried out, if the original condition of the product has been affected by the repackaging or the repackaging is likely to damage the reputation of the mark.
In these circumstances, the CJEU held, a trade mark proprietor cannot object to the parallel import of repackaged pharmaceutical products based only on the fact that the company responsible for the repackaging, rather than the actual repackager, is named on the packaging itself.
Despite the clearly stated requirement, developed pursuant to Bristol-Myers Squibb and Others  ECR I-3457 and other case law, that the new packaging must indicate the name of the manufacturer and the party that repackaged the product, the CJEU did not interpret it literally. It is enough that the company responsible for the repackaging is identified. This decision highlights once again the restricted basis on which a trade mark proprietor can prevent parallel imports by relying on trade mark rights. In this case, both the importer and the party that actually carried out the repackaging were in the same group of companies. Arguably the CJEU’s decision reflects the commercial realities of repackaging, which can often involve a number of entities within a group company.