Admissibility under trade mark law of parallel imports of pharmaceuticals

Opinions of the Advocate General before the ECJ: In January 2022, the highly anticipated Opinions of the Advocate General were issued in two different proceedings referred for a preliminary ruling regarding the admissibility under trade mark law of parallel imports of pharmaceuticals:

• Opinion of the Advocate General dated 13 January 2022 on the parallel preliminary ruling proceedings in case numbers C-253/20 and C-254/20, and
• Opinion of the Advocate General dated 21 February 2022 on the parallel preliminary ruling proceedings in case numbers C-147/20, C-204/20 and C-224/20.

We would like to take this opportunity to report on these two proceedings and each Opinion of the Advocate General in this article and a subsequent one. This first article addresses the joint preliminary ruling proceedings in case numbers and C-254/20.

Facts

In the preliminary ruling proceedings in case numbers C-253/20 and C-254/20, two companies of the pharmaceutical group Novartis proceeds against the Belgian parallel importers Impexeco NV and PI Pharma NV.

The pharmaceutical company Novartis sells original pharmaceuticals and, via its group company Sandoz, generic pharmaceuticals that are chemically identical to their reference products. Both, the original products and the generics are manufactured at the same location and under the responsibility of the same company, but under different licenses and marketed via different distribution channels. The preliminary ruling proceedings deal with the generic pharmaceuticals “Letrozol Sandoz” and “Methylphenidat Sandoz”. Parallel importers have been purchasing these generic products and selling them in Belgium under the trade marks of the original products, i.e. “Femara” and “Rilatine”. When selling the product “Letrozol-Sandoz” under the brand name “Femara” in Belgium, they have been able to charge around 30 times the price they paid to purchase the product “Letrozol Sandoz” in the United Kingdom. Novartis opposed this use of its trade marks and brought actions before the Belgian courts against the parallel importers for trade mark infringements.

(Trade mark) law issues

Many previous court cases have dealt with the question of the circumstances under which it is admissible for a third party to sell pharmaceuticals imported from another EU Member State under the original trade mark.

The essence of the problem always lies in the appropriate balance of interests between the rights of the trade mark owner and the principle of unrestricted distribution of pharmaceuticals within the EU:

• According to trade mark law, an owner’s trade mark right is deemed “exhausted” if the trade mark – e.g. of a product – has been placed on the market by the owner or with the owner’s consent. Once a trade mark has been exhausted, the owner can no longer claim its trade mark right. This principle of exhaustion is intended to prevent such occurrences as a restriction of free movement of goods caused by a trade mark owner claiming its trade mark right and interfering in continued marketing under the trade mark and erecting artificial trade barriers or allocating markets.
• However, section 24(2) of the German Trade Mark Act (Markengesetz) and Article 15 of the EU Trade Mark Regulation (EU) 2017/1001 provide for an exception according to which the trade mark is not deemed exhausted if the owner opposes the distribution for legitimate reasons, in particular if the condition of the goods has been changed or impaired after having been placed on the market.

In turn, this exception would, result in a right on the part of the trade mark owner to oppose any repackaging or relabelling of its original product that is required by pharmaceutical law, thus using trade mark law to effectively prevent parallel imports. For this reason, in its landmark decisions dated 23 May 1978 and 11 July 1996, the ECJ established criteria under which repackaging a pharmaceutical is admissible under trade mark law (criteria established in the Bristol Meyer Squibb case: “BMS Criteria”).

These criteria provide that repackaging and/or relabelling is admissible if

1. it is established that reliance on trade mark rights by the owner in order to oppose the marketing of repackaged products under that trade mark would contribute to the artificial partitioning of the markets between Member States;
2. the repackaging cannot affect the original condition of the product inside the packaging,
3. the importer gives notice to the trade mark owner before the repackaged product is put on sale, and
4. the new packaging clearly states who repackaged the product and indicates the name of the manufacturer.

The court ruled that artificial partitioning according to the first criteria is always given

“...where the owner has put an identical pharmaceutical product on the market in several Member States in various forms of packaging, and the repackaging carried out by the importer is necessary in order to market the product in the Member State of importation...“ (ECJ, judgment dated 11 July 1996 – cases C–427/93, C–429/93 and C–436/93, published in NJW 1997, 1627 onwards)

In the preliminary ruling proceedings at issue here, it was disputed whether (1) a trade mark on an original product can be exhausted at all if a generic product has been placed on the market (under another trade mark) and (2) if so, whether the admissibility under trade mark law of the continued marketing of the generic product must then be examined according to the BMS criteria.

Opinion of the Advocate General

(1) Exhaustion of the trade mark of the original product

Because the case at hand does not deal with the use of the trade mark of the generic product that was actually marketed but rather with the trade mark of the original product, which was actually not marketed by the importer, the parties intensively disputed whether the trade mark of the original product could be considered exhausted at all. The Advocate General answered this question by referring to the previous case law of the ECJ stating that exhaustion can occur if identical goods are marketed by the same owner or with its consent in other Member States under the trade mark.

According to the Advocate General, it is not automatically given that such “identical goods” exist if generic products and their reference pharmaceutical products are of equal quality from a therapeutic viewpoint. Under certain circumstances, it is, however, conceivable that pharmaceutical products and generic product could be “the same product” that is merely marketed under different regulatory systems. The Advocate General pointed out that this was possible in particular if they were manufactured by the same company or an affiliate of that company. However, whether the objective identity is actually given must be decided by the national courts on a case-by-case basis.

(2) Applicability of the BMS criteria

According to the Advocate General, if the conclusion has been reached that the owner’s trade mark rights have been exhausted, the question of whether the owner can nevertheless oppose the use of the mark for legitimate reasons must be answered on the basis of the BMS criteria already established by European courts, including whether the use of the trade mark for placing the product on the market was “objectively necessary”. According to the case law of the ECJ, the prerequisite for such necessity is fulfilled if regulations or practices in the import Member State prevent the marketing of the product in question in its original packaging. In contrast, this prerequisite is not fulfilled if the parallel importer’s sole purpose in repackaging the product is to gain an economic advantage. Whether such necessity existed in the cases referred for a preliminary ruling has to be determined by the national courts on a case-by-case basis.

Conclusion

It remains to be seen whether, as is often the case, the ECJ concurs with the Opinion of the Advocate General and in particular his position that the reference product and the generic product can be “identical products” under certain circumstances. However, from a purely practical viewpoint, even if the ECJ agrees with the Advocate General’s line of argument, as the Advocate General himself states, this does not mean that the parallel importer automatically has more freedom to act.

This is because the BMS criteria apply even here, according to the Advocate General. The “objective necessity” of using the original trade mark to ensure actual access to the market of the import Member State will in practice virtually never be given. This is true as a Member State cannot generally refuse to grant a permit for the parallel import of a generic product if a permit for entry onto the market was granted for the reference product in this Member State. The only exception to this is if such refusal is justified on health protection grounds. The resulting conclusion is that a parallel importer usually has the right to market a generic product under its own trade mark. It is not necessary in such a case even from a purely legal standpoint to replace the generic product’s trade mark by the trade mark of the reference product in order to place it on the market, regardless of whether the generic product marketed in parallel is also licenced in the import Member State. It is all the more unnecessary to use the trade mark in order to be able to charge a higher price.

Although the Opinion of the Advocate General and in particular certain statements regarding exhaustion and identity of the products will be contradicted by trade mark owners, it ultimately does follow from the Opinion that, despite the fact that exhaustion may be assumed to be given, the further marketing under the original trade mark is to be evaluated according to the BMS criteria and is thus not automatically possible for parallel importers.