Rulings should embolden pharma trade mark holders over importer re-boxing

The Court of Justice of the EU (CJEU) confirmed that requirements parallel importers face under the Falsified Medicines Directive do not alter the conditions that otherwise govern whether re-boxing is justified.

Tensions between trade mark holders and parallel importers

Parallel importers are businesses that buy goods that have been placed on the market in one country and then sell them in another, typically to take advantage of the different market conditions, including in relation to the pricing of the goods. In the EU, parallel importers are beneficiaries of the so-called ‘first sale’ doctrine which curbs trade mark holders’ monopoly rights to control how their branded goods are traded after they are first placed on the EU market.

One of the industries in which parallel importers often seek a commercial advantage is pharmaceuticals. Their activities still have to be balanced against the rights of trade mark holders in respect of their brands under EU law, even after the first sale rights have been exhausted.

One way the tension between parallel importers’ activities and trade mark holders’ rights manifests is when parallel importers seek to repackage products placed on the market by trade mark holders. The importers often cite local requirements in the import market as a reason why the repackaging is necessary – regulators will, for example, require product information to be in the local language of the market, requiring original packaging to be opened and leaflets replaced.

However, trade mark owners often object to the need for complete re-boxing of their products by parallel importers. A common argument trade mark holders raise is that parallel importers can meet local regulatory requirements by opening their original packaging, replacing necessary product literature, installing a new anti-tamper seal on the original packaging and re-labelling that packaging to disclose the fact that they are the licensed re-packager of the products.

Parallel importers have sought to resist those arguments. In three related cases ruled on by the CJEU in late 2022, they looked to persuade judges that their objections were on more than presentational grounds, arguing that provisions of the EU Falsified Medicines Directive require them to go beyond mere re-labelling.

The Falsified Medicines Directive does not justify re-boxing

Courts around Europe, including the CJEU, have previously examined how the balance between the rights of trade mark holders and parallel importers should be struck. It is in this context that arguments pertinent to the Falsified Medicines Directive were considered in the latest cases, which involved pharmaceutical companies such as Merck Sharp & Dohme, Novartis and Bayer.

CJEU case law specifies five conditions that must be met for parallel importers’ rights to repackage to be considered to trump the rights trade mark holders have to oppose that activity. These are known as the ‘BMS’ conditions, reflecting case law arising from a 1996 case involving Bristol-Myers Squibb. Subsequent cases have developed the conditions further, but broadly the five BMS conditions require that:

• the repackaging of original branded products is necessary to avoid artificial market partitioning within the EU;
• the repackaging does not do any damage to the condition of the underlying product in any way;
• the new packaging discloses who the repackaging has been done by;
• the form of repackaging does not damage the brand in some other way, such as where the repackaging is of such poor quality that it negatively impacts the impression given of the trade mark holder; and
• the repackager gives notice of its repackaging to the trade mark owner so that the rights holder has an opportunity to review the repackaged product and raise any concerns.

In the three recent cases, the CJEU effectively had to consider whether provisions under the Falsified Medicines Directive alter the BMS conditions.

The Falsified Medicines Directive requires safety features to be applied to the outer packaging of medicinal products that conveys basic information about the product inside and enables those in the supply chain to verify that the product is genuine, has originated from the manufacturer and is not a falsified medicine. In addition, an anti-tamper seal must be applied to the product as a visual sign that the products inside have not been tampered with.

Parallel importers argued that to meet those requirements they needed to re-box. However, the CJEU was unequivocal in its view that that is not the case.

The CJEU considered that the Falsified Medicines Directive effectively anticipates being able to replace safety features on original packaging with new, equivalent, safety features, and that this generally enables re-labelling to be carried out instead of a re-boxing exercise.

The court also said that mere fact that re-labelling might leave visible traces of the original anti-tamper seal having been removed, and impact how the product is perceived by end users, does not generally prevent trade mark holders from opposing re-boxing. Parallel importers will, on a case-by-case basis, have to evidence strong resistance from consumers to repackaging in this way to shift the balance in their favour. The court’s judgments should also give trade mark holders confidence to pushback against broad-brush evidence presented in this regard.

In the Merck Sharp & Dohme case, the CJEU further considered regulatory policy in place in Denmark in relation to repackaging that effectively required parallel importers to re-box, and not merely re-label, to meet the requirements of the Falsified Medicines Directive. The CJEU said that such national policy is precluded by EU law.

In light of other questions answered by the CJEU, trade mark holders should also have confidence in opposing repackaging where there has been a change of product names on outer packaging and/or the removal of other trade marks on that packaging that do not refer specifically to the product.