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Re-branding of imported medicines under EU court spotlight

Parallel importers risk trade mark infringement if they seek to sell packets of generic medicines imported from one EU country to another under brand names for reference products developed by the same manufacturer, a senior legal adviser to the EU’s highest court has said.

In a non-binding opinion, advocate general Maciej Szpunar said it would only be justified in “exceptional cases” for importers to fix the trade marks for branded reference medicines to packets of imported generic medicines made by the same manufacturer

Brand protection and parallel trade expert in the pharmaceuticals market Emily Swithenbank of Pinsent Masons said, though, that the advocate general has proposed to leave it to national courts to determine the specific circumstances in which exceptions would apply and that this leaves open practical questions the industry would prefer certainty on.

The opinion concerns two joined cases that have been referred to the Court of Justice of the EU (CJEU) for formal judgment. Rulings in the cases are not anticipated until later this year. The cases concern the appropriate balancing of rights enjoyed by trade mark owners and those of parallel importers of medicines.

The CJEU proceedings stem from court proceedings raised in Belgium where pharmaceuticals manufacturer Novartis has challenged the rebranding of generic medicines imported from the Netherlands for sale in Belgium by two different parallel traders. In both cases the generic medicines were marketed by Sandoz, a company within the Novartis group. The parallel traders imported the medicines from the Netherlands, repackaged and relabelled them, and then distributed them in Belgium using the brand names Novartis had given to the reference products that Sandoz’s products were based on.

The Court of Appeal in Brussels has asked the CJEU to help it interpret EU law and the way it balances the rights of trade mark holders, such as Novartis, and parallel importers.

Trade mark holders in the EU have the exclusive right to control when and where their goods are first placed on the EU market. However, rights holders cannot control subsequent distribution of the goods once the goods have been placed on the EU market.

Some businesses, particularly in the pharmaceuticals sector, buy goods placed on the market in one EU country and sell them in another, seeking to take advantage of the different market conditions, including often in relation to the pricing of the goods. Those businesses are known as parallel importers. EU law provides those businesses with qualified rights to engage in the free movement of goods.

Advocate general Maciej Szpunar considered the provisions of EU treaties and legislation, as well as case law that has been developed in relation to parallel importing, in forming his opinion. He confirmed that while trade marks are important for distinguishing the origins of goods, rights holders cannot use trade mark rights as a means of artificially partitioning the EU market.

According to Szpunar, rebranding imported generic medicines to incorporate the brand name of reference products in the local market may be possible if three conditions are met.

First, the product being rebranded must be identical to the reference product. The advocate general said that generic medicines, even biosimilars, will generally differ from the original reference product and that there are further medical reasons why the two should not typically be considered identical. However, he said that there are nevertheless circumstances in which the two products could be considered identical. This, he said, would include “where the generic medicinal product and the reference medicinal product are manufactured by the same undertaking or by affiliated undertakings” but “marketed under different rules”. Whether or not the products are identical or not is a matter for national authorities and courts, Szpunar said.

The second condition that must be met is that the trade marks in question must be under the control of the same owner, according to the legal adviser.

Finally, it must be necessary for the parallel importer to rebrand. Again, Szpunar said that this was a matter for national courts to decide. The CJEU has, however, previously determined that the condition of necessity is satisfied “where rules or practices in the member state of import prevent the goods in question from being marketed in their original packaging” but not “if the sole reason for the repackaging of the goods is that the parallel importer wishes to obtain an economic advantage”. Szpunar said that if actual access of the goods to the market of importation required the original trade mark to be replaced by the trade mark under which identical goods are marketed in that market then that would meet the necessity threshold.

Swithenbank said that the question on necessity is whether the parallel importer is prevented from access to a substantial part of the market if they are unable to rebrand.   

Swithenbank said: “Of concern to manufacturers is whether imported generics could be given an advantage over the other generics on the market by gaining access to the branded section of the market. That would elevate the imported products to a status that they would not otherwise have enjoyed and confer a commercial advantage to the parallel importers that the CJEU has in previous judgments expressly said would not satisfy the condition of necessity for a rebrand.  However, as this question is for the national courts to answer based on the circumstances in their particular country, there remains uncertainty for manufacturers even if the CJEU follows the advocate general’s opinion.”

Swithenbank said the fact that the manufacturers of the reference products and generic products at the heart of the CJEU cases are economically affiliated entities is a crucial factor in those cases and limits how far reaching the CJEU’s judgment could be once it is handed down.

“Trade marks serve to indicate to consumers the origin of the goods; the ultimate source and controlling entity,” she said. “It is not uncommon for a manufacturer to produce identical goods for different brand owners. That is not unique to the pharmaceutical industry; manufacturers of electrical goods will commonly produce identical goods on a white label basis. The difference here is the fact that the Sandoz brand and the Novartis brands are all owned by the same parent company. That parent might be said to have control over both the generic and reference products and their quality, and if that is the case it opens up the possibility for importers to rebrand, if the other conditions that the advocate general has set out are met.”

Munich-based life sciences expert Marc Holtorf of Pinsent Masons said, though, that in some cases trade marks owned by different legal entities of the same group might not be under the control of the same owner.

Swithenbank said that businesses should not be quick to infer implications for imports into the UK from the advocate general’s opinion, or from the CJEU’s judgment once it is handed down.

Swithenbank said: “CJEU decisions are no longer binding in the UK and these cases at the heart of this opinion concern the need to maintain the free movement of goods between member states, not the exhaustion of rights. Following Brexit, there is the possibility that the same approach would not be adopted by the UK courts if they were asked the same questions posed to the CJEU.”

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