In Eli Lilly & Company and Lilly Icos LLC v 8PM Chemists Ltd, [2008] EWCA Civ 24, the Court of Appeal discharged an interim injunction, previously granted by the High Court, on the basis that the Claimants did not have an arguable case of trade mark infringement.

The Claimants (Lilly), a large world-wide pharmaceutical company and owners of the registered trade marks in suit, complained that 8PM had imported relevant goods under these marks, contrary to Section 10(4)(c) of the UK Trade Marks Act 1994.

US consumers could buy genuine Lilly pharmaceutical products at a price cheaper than could be found in the United States by placing their orders on a Canadian company’s website. The goods were sourced in Turkey where each order was individually boxed and labelled in anonymous packaging. Orders were then sent in batches to 8PM in the United Kingdom where they were separated into individual orders and sent on by mail to the United States . The individual boxes were, therefore, never opened in the United Kingdom. 8PM’s activities were carried out under the “inward processing relief” system for customs purposes, which enables products to be processed in the United Kingdom without duty becoming payable.

The heart of Lilly's complaint was that, by using labels from a pretend UK pharmacy and UK postage stamps, 8PM were representing to US consumers that the product had come from a UK pharmacy, rather than a Turkish one.

Jacob LJ, giving the leading judgment, first considered whether 8PM’s activities jeopardised the essential function of Lilly’s European trade marks, namely guaranteeing to consumers the origin of the goods. He concluded that, as no-one in Europe even saw the trade marks in question, it was very unlikely that this would be the case.

He went on to examine whether there was a use of the marks “in the course of trade” and, more specifically, if there was an “import” or “export” that might constitute such use. Citing the ECJ decision in Class International v Colgate Palmolive [2005] C-405/03 ECR I-8735, he found that “using the mark in the course of trade” required introduction of the goods into the European Community for the purposes of putting them on the EC market. Consequently, as long as the requirements of customs were satisfied, the mere physical introduction of those goods into the Community, as opposed to free circulation, was not “importing”.

Lilly argued that Class was distinguishable from the case at issue because it was concerned with goods under actual customs control, while 8PM simply used “inward processing”. However, the use of different customs procedures was not enough to convince the Court. Just as in Class, the goods were not “released for circulation” and had not become “Community goods”.

This case adopts the ECJ’s approach in Class. It confirms that the decisive criterion for establishing trade mark infringement in cases involving importation and/or transshipment is whether or not there is an interference with the right of first marketing within the European Union. Thus, genuine goods, which never become Community goods, do not interfere with the trade mark owner’s right.