Last week the Court of Appeal in Flynn Pharma v DrugsRus1 has confirmed that a trade mark owner can enforce its trade mark rights against a parallel importer, even when both companies are supplying the same drug which is manufactured by the same third party. The case is an interesting development in the already heavily considered area of trade mark exhaustion because the imported goods were made by the same entity; they were identical to the goods marketed by the trade mark owner.

The key consideration is control. Does the trade mark owner have control over the goods in question? Has the trade mark owner, or an entity that controls the trade mark, put the goods on the market?

The Court of Appeal upheld the High Court’s finding that Flynn Pharma was able to enforce its trade mark against DrugsRus in order to prevent DrugsRus importing Epanutin into the UK to be marketed as ‘Phenytoin Sodium Flynn’.

That was so despite the fact that the imported Epanutin that DrugsRus proposed supplying in the UK was manufactured and put on the market in Spain by Pfizer, the same entity that manufactured Phenytoin Sodium Flynn which was put on the market in the UK by Flynn Pharma. The goods were exactly the same and were made by the same entity.

The Court found for the trade mark owner because the Epanutin which was imported by DrugsRus had not been put on the market by Flynn Pharma. Instead, it had been put on the market by Pfizer, which was an entirely separate entity to Flynn Pharma.

By seeking to enforce its trade mark rights against DrugsRus, Flynn Pharma was not seeking to place an unlawful restriction on trade between EU member states, but instead protecting its legitimate interests.

Trade mark owners can take comfort that when it comes to exhaustion of rights, the key question is whether the goods have been put on the market by the owner or someone who controls the trade mark.

The Detail

Phenytoin sodium is the international non-proprietary name for an anti-epileptic drug. Until September 2012, all phenytoin sodium capsules supplied in the UK were made by Pfizer and sold under Pfizer’s brand name, Epanutin.

In 2012, pursuant to a series of agreements between Pfizer and Flynn, the UK marketing authorisations for phenytoin sodium were transferred to Flynn.

The intention was to “genericise” the product in the UK, which would have meant removing the Epanutin branding on the packaging and selling the drug by reference to its non-proprietary name phenytoin sodium. This took the drug outside of the restrictions of the pharmaceutical price regulation scheme. Once Epanutin had been replaced on the market by Flynn Pharma’s product the price rose to about £66 a bottle, a 20-fold increase.

The MHRA did not permit Flynn Pharma to market its new product under its generic name ‘Phenytoin Sodium’. This is because phenytoin sodium has a narrow therapeutic index and so even if two products have the same active ingredient and are presented in the same form, different sources of the active ingredient or different places or methods of manufacture might result in subtle differences in the product such that one product might not be therapeutically or clinically the same as another. It is therefore important that doctors, pharmacists and patients can distinguish between products from different sources and that patients continue using the exact source of Phenytoin Sodium which is currently working for them.

Flynn Pharma therefore accepted the MHRA’s suggestion that the drug be marketed in the UK as ‘Phenytoin Sodium Flynn’. Flynn Pharma subsequently registered the word “Flynn” as a trade mark.

For the reasons explained above, it was important to Flynn Pharma (and the patients receiving and the doctors prescribing the drug) that the Phenytoin Sodium Flynn which was supplied in the UK was exactly the same as the previously marketed Epanutin. Flynn Pharma therefore entered into a series of agreements with Pfizer for Pfizer to manufacture the phenytoin sodium which was sold as Phenytoin Sodium Flynn. These agreements included an exclusive supply agreement, a quality agreement and a pharmacovigilance agreement.

Parallel import of Epanutin by DrugsRus

Pfizer continued to put phenytoin sodium on the market in Spain, where it was branded Epanutin.

DrugsRus therefore sought to import Epanutin from Spain and market it in the UK. DrugsRus initially requested permission from the MHRA to market that drug in the UK as Phenytoin Sodium but the MHRA again refused permission to market the drug using its generic name in light of the concerns that patients be maintained on a specific manufacturer’s product.

The MHRA therefore proposed that DrugsRus market the imported drug either as Epanutin or as Phenytoin Sodium Flynn. The MHRA takes no account of third party intellectual property rights when it makes recommendations such as this.

Flynn Pharma’s position was that the use of ‘Flynn’ in relation to the Epanutin imported by DrugsRus constituted trade mark infringement. DrugsRus, on the other hand, contended that the exercise of Flynn’s trade mark rights was contrary to EU law, which prohibits the enforcement of an IP right if it amounts to a disguised restriction on trade between Member States.

DrugsRus’s argument was that patients were not being misled about the origin of the drug they were taking; DrugsRus was importing Epanutin, which was put on the market by Pfizer, and Flynn Pharma was going to great lengths to educate its patients and the medical world that Flynn Pharma’s Phenytoin Sodium Flynn was exactly the same as Epanutin.

Decision

The Court of Appeal agreed that Flynn Pharma was entitled to enforce its trade mark against DrugsRus, and that doing so was not a disguised restriction on trade between EU member states.

It reached this finding because:

  1. The Epanutin which was imported by DrugsRus had not been put on the market by Flynn Pharma. Instead, it had been put on the market by Pfizer, which was an entirely separate entity to Flynn Pharma; and
  2. Despite the many agreements in place between Flynn Pharma and Pfizer for the manufacture of Phenytoin Sodium, Pfizer (who put Epanutin on the market in Spain) did not have effective control over the trade mark FLYNN which was being enforced and Flynn Pharma had no control over the quality of the drugs which Pfizer placed on the market in Spain or any other EU member state. Flynn Pharma was free to obtain its supplies of phenytoin sodium from other suppliers or to manufacture the drug in-house (although the evidence suggested that this would have been prohibitively expensive and time-consuming).

In short, the mere fact that the goods which DrugsRus imported were from the same source as Flynn Pharma’s product was not equivalent to Flynn Pharma giving its consent to those goods being placed on the market.

Flynn Pharma therefore had a legitimate interest in enforcing its trade mark rights. The judge was persuaded that a defective batch of Epanutin which was sold by DrugsRus as Phenytoin Sodium Flynn would reflect on Flynn Pharma’s reputation, and there was nothing which Flynn Pharma could do to control the quality of Epanutin to prevent this from happening.

The facts of this case are different to the typical parallel import case. They are certainly different to the repackaging and rebranding cases such as Pharmacia & Upjohn SA v Paranova2, in which the goods concerned have always been put on the market by the trade mark owner itself.

It is also perhaps unusual that Flynn Pharma was able to charge significantly more than Pfizer had been able to do so for the same product, by moving from the price-regulated branded market, to the price-unregulated generic market. It is this discrepancy which presumably made it potentially profitable for DrugsRus to consider importing branded Epanutin from Spain to market as generic goods in the UK.

Nevertheless, the decision is useful confirmation that the rights of parallel importers to use a registered trade mark in relation to parallel imported goods are limited. In order use a trade mark on goods, the goods must first be:

  1. put on the market by the trade mark owner; or
  2. put on the market by a party who is in effective control of the trade mark which is sought to be enforced.

If that is not the case, then the Court of Appeal has said it will be difficult to see how the enforcement of the trade mark would be anything other than legitimate.