A&P-Parallel_Trade_1102.pdf

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Parallel TradeUpdate-Pharmaceuticals

November 2002

INTRODUCTION

In January of this year we published in PLC magazine

an article which gave an overview of the then currentlaw as it related to parallel trade in the EU. In particular,

we explored the overlap of intellectual property and

competition law. In the intervening period there havebeen a number of decisions of the European Court of

Justice (ECJ) of particular relevance to thepharmaceutical sector. This update is designed to be

a companion to our original article, as well as an aid for

use by our pharmaceutical clients.

The four cases we cover in this update are: the keycase of Boehringer,which gave guidelines on when

repackaging may be opposed and when repackaging

is necessary; Aventis,which gave some guidanceon the subject of sufficiency, e.g., whilst a parallel

traders repackaging may be found to be necessaryto allow it effective access to the relevant Member State,

what happens if the repackaging is not sufficient, inthe sense that it does not conform with the brandowners existing marketing authorisation?; Ferring,

which discussed the effect of withdrawing a marketingauthorisation; and an opinion of the Advocate-General

in Stussy, a case which concerned clothing rather than

pharmaceuticals, but which gave some guidance onthe question of burden of proof.

Arnold &Porter

How to Protect Your Brandthe ECJ did not answer the question: Was the

repackaging necessary to allow the product access tothe market? It merely referred to earlier authorities

(Boehringer) and as in earlier cases left the nationalcourts to decide.

BOEHRINGER WHAT CAN BE OPPOSED?

Facts. In April 2002, the ECJ gave its decision in a

case referred to it by the English High Court. BoehringerIngelheim and others had sued two parallel importers

into the UK, Swingward and Dowelhurst. Packagingand instruction leaflets had been altered, to varying

degrees, by the parallel importers. The manufacturersobjected, stating that the changes were not necessary

in order for the products to be marketed in the UK.

Boehringeris the most significant of the latest cases

which have sought to reconcile the tension between,on one hand, protecting a companys trade mark rights

whilst, on the other, ensuring the free movement ofgoods throughout the EU. (The cases seek to reach abalance on the appropriate interpretation of Articles 7(1)

and 7(2) of the Trade Marks Directive.) See alsoHoffmann-La Roche v.Centrafarm(Case 102/77 [1978]

ECR 1139), Bristol-Myers Squibb and Others v.

Paranova(Joined Cases C-427/93, C-429/93 and C-436/93 [1996] ECR I-3457), and Upjohnv. Paranova

(Case C-379/97 [1999] ECR I-6927).

As for the future, we can expect more case law. It is

remarkable that an essentially simple question (i.e.,

When can one oppose the importation of parallelgoods?) has taken so many years to resolve. But we

have not yet reached finality. For example, inAventis

Decision.The ECJ commented on the following three

questions: (1) Can a proprietor of a trade mark opposerepackaging even if that repackaging does not

constitute a real threat to its proprietary interests?;


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(2) What does necessary mean?; and (3) What notice

must be given by the parallel importer?

(1) Opposing repackaging

The repackaging of trade-marked pharmaceuticalproducts is, in itself, prejudicial to the specific subjectmatter of the trade mark as it creates the risk of

interference with the original condition of the product.

From that perspective, it is unnecessary to assess theactual effects of the repackaging in a particular case

(Hoffmann-La Roche). The proprietor of a trade markis, therefore, entitled to use his trade mark rights to

oppose repackaging to the extent necessary to enable

[him] to safeguard rights which form part of the specificsubject-matter of the mark, as understood in the light

of its essential function. However:

It is unacceptable if a proprietors exercise of his

rights amounts to a disguised restriction on trade(Article 30, EC Treaty). If a product is repackaged

in a way that respects the legitimate interests ofthe proprietor (i.e., it does not adversely affect the

original condition of the product, or harm the

reputation of the mark), it will amount to a disguisedrestriction if the trade mark proprietors opposition

to repackaging contributes to artificial partitioningof the markets between Member States.

If repackaging is necessary to enable the marketingof parallel imports, opposition to that repackaging

will be deemed to contribute to artificial partitioningof the markets between Member States.

The test is objective; there is no need todemonstrate that the proprietor of the trade mark

has deliberately sought to partition the markets.

Protection of the trade mark proprietors rights

effectively takes priority. The parallel importer bearsthe burden of demonstrating that repackaging is

necessary in a particular case in order to avoidartificial partitioning of the market.

(2) What does necessary mean?

In answering this question, the ECJ said that one mustassess whether the circumstances prevailing at the

time of marketing in the importing Member State made

repackaging objectively necessary (see Upjohn).

A trade mark proprietor would not be justified inobjecting to such repackaging if it hindered

effective access of the imported product to the

market of the Member State.

By way of example, the ECJ accepted that there

could be cases where there was such a strongresistance to relabelled products that repackaging

would be required in order to achieve effective

access to the market (i.e., it would be objectively

necessary in practical terms, if not in legal terms).In such cases, it would be incorrect to characterisethe repackaging solely as an attempt to secure a

commercial advantage.

Replacement packaging was objectively

necessary if, without such repackaging, effectiveaccess to the market concerned, or to a substantial

part of that market, must be considered to be

hindered as a result of strong resistance from asignificant proportion of consumers to relabelled

pharmaceutical products.

In each case, it would be for the national court to

decide whether the particular repackaging was infact necessary.

(3) What notice must be given by the parallel

importer?

A parallel importer who repackages a trade marked

pharmaceutical product must give prior notice to thetrade mark proprietor that the repackaged product is

being put on sale, and, if requested, supply a sample ofthe repackaged product before it goes on sale(Hoffmann-La Roche). From this starting point, the ECJ

provided the following clarification:

Failure to satisfy the advance notice requirements

established in Hoffmann-La Rochewill give the trademark proprietor the right to oppose the marketing

of the repackaged pharmaceutical product.

The parallel importer must itself give notice to the

trade mark proprietor. It is not sufficient that thetrade mark proprietor is notified by other sources.

The trade mark proprietor should be allowed a

reasonable time to react to the intended repackaging.

However, that must be balanced against the parallelimporters interest of marketing the product as soon

as possible after obtaining the necessary licence.

The ECJ suggested that when the parallel importer

provided a sample of the repackaged

pharmaceutical product at the same time as it gavenotice, 15 working days notice might be reasonable.However, it stressed that this was purely indicative;

cases should be assessed on their individual merits

by the national courts.


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Comment. Boehringer applies the principles

established in previous ECJ cases, with someclarification. Unfortunately, the analysis, in each case,

whether repackaging is necessary for effective

access, or solely to secure a commercial advantage,

remains a tricky one. By reserving to national courtsthe power to determine a number of key issues, theECJ has acknowledged the continuing diversity of the

markets in individual Member States. However, the

potential for very different approaches in the variousMember States will undoubtedly result in further

references on these issues.

Case C-143/00 Boehringer Ingelheim KG (23 April 2002)

AVENTIS - WHERE FIVE PLUS FIVE DOES

NOT EQUAL TEN

Facts. In September 2002, the ECJ gave its decision

in a case referred to it by the German Court and brought

by Aventis (the manufacturer of Insuman Comb 25, 100Ul/ml, suspension injectable, a product for the treatment

of diabetes) against two parallel importers, Kolpharmaand MTK Pharma Vertriebs.

The case highlighted the importance of the very specificpackaging and labeling details required under the central

marketing authorisation procedure provided for inRegulation 2309/93. These include:

the requirement, under Article 6(1) of Regulation No.2309/93, for an application for authorisation to be

accompanied by [a] summary, in accordance withArticle 4a [of Directive 65/65/EEC], of the product

characteristics, one or more specimens or mock-

ups of the sales presentation of the medicinalproduct, together with a package leaflet where one

is to be enclosed. (point 9 of the second paragraphof Article 4 of Council Directive 65/65/EEC of 26

January 1965 as amended);

Directive 92/27/EEC of 31 March 1992 on the

labeling of medicinal products for human use andon package leaflets.

Aventis he ld two separate cent ral market ing

authorisations for the Insuman Comb product: one forpacks containing ten cartridges and another for packscontaining five cartridges. The product was marketed

differently in different Member States; for example, in

Germany Aventis marketed it in packs of ten whilst inFrance it was marketed in packs of five. The parallel

importers purchased the product in other MemberStates, including France, for import into Germany. To

market the product in Germany, they had been

repackaging two five-cartridge packs of the product intoone pack of ten.

Aventis appeared to accept that the parallel importers

needed to be able to market packs of ten cartridges in

Germany; the issue turned on how the packs of tenwere created. Aventis argued that the importers should

produce retail packs comprising of two five-packsbundled together with any necessary over-stickering;

accordingly repackaging would not be necessary and

the parallel importers would be infringing Aventis trademark rights. The European Agency for the Evaluation

of Medicinal Products (EMEA) did not agree withAventis analysis, having written to one of the parallel

importers stating its opinion that a multiple package oftwo sets of five cartridges would not be covered by thecentral marketing authorisation.

Decision. The opinion of the EMEA was not legally

binding, but perhaps not surprisingly in these

circumstances, the ECJ held that every marketingauthorisation issued in accordance with Regulation No.

2309/93 relates to thespecific presentation concerned,that is to say, to the size and form of the packaging

prescribed for the medicinal product in the application

for authorisation. (Emphasis added.)

The authorisations granted were in respect of specifiedpackage sizes. Multiple packages were not provided

for and thus were not authorised. In reaching this

decision, the ECJ placed some importance on the factthat the detailed packaging requirements in respect of

central marketing authorisations are intended toprevent consumers from being misled and thereby to

protect public health.

Comment. Although this decision strongly suggeststhat the parallel importers will be given the go-ahead tocontinue repackaging five cartridge packs into packs

of ten for marketing in Germany, this is not quite the

end of the story.

the requirement for the draft text of the proposed

labeling and package leaflet to be annexed to anyopinion in favour of granting an authorisation/draft

decision by the Commission (Article 9(3)(c) and

10(1) of Regulation 2309/93);

the fact that the second paragraph of Article 11 ofRegulation 2309/93 provides that a central

marketing authorisation will be refused if theparticulars and documents provided by the applicant

in accordance with Article 6 are incorrect or if the

labeling and package leaflets proposed by theapplicant are not in accordance with Council


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As inBoehringer, the ECJ reserved to the national court

the task of assessing whether the circumstancesprevailing at the time of marketing in the Member State

of importation made the creation of new packagingobjectively necessary to allow access to the market.

This step will require the national court to consider anumber of factors, notably whether the parallel importerswould face real obstacles to access the German

market, either in law or fact, if they were only able tomarket five cartridge packs, for example, customer

resistance to over-stickered boxes that might affect

prescription or dispensing practice. As Aventis waswilling to accept bundled packs of ten cartridges, it

will be difficult for it to argue that the importers do notneed to be able to market packs of ten cartridges in

order to have effective access to the market in Germany.

Note, however, that even if the national court finds that

repackaging is necessary, the parallel importers willonly be entitled to repackage the product if they comply

with the requirements established in previous cases,

for example, the requirement that the repackaging doesnot adversely affect the original condition of the product.

(See Boehringerabove for a summary of the points tobe considered by the national court.)

Case C-433/00 Aventis Pharma Deutschland GmbH v.

Kohlpharma GmbH, MTK Pharma Vertr iebs-GmbH (19

September 2002)

FERRING THE PERILS OF WAVERING

Facts. In September 2002, the ECJ gave its decision

in another case referred by the German courts. Ferringmarketed a product, known as Minirin Spray - an anti-

diuretic, on the basis of an implied authorisationgranted pursuant to paragraph 105 of the Arzneimittel

(Law on Medicinal Products) of 1976. From June 1996,

Eurim-Pharm, a parallel importer, purchased Minirin in

another Member State and marketed it in Germany.

Subsequently, Ferring decided to market a new version

of the spray, Minirin Nasenspray 5ml. This contained

different excipients from the original spray, that improvedthe thermostability of the product so that, unlike the

original version, it did not need to be kept in a cool place.Ferring obtained a marketing authorisation for the new

product, and by letter dated 14 July 1999, informed the

relevant national authority that it was waiving the impliedauthorisation that had been granted in respect of the

original Minirin Spray.

import licence automatically ceased to be valid. Ferring

brought proceedings in Germany seeking an orderpreventing Eurim-Pharm from marketing the old

version of Minirin Spray, arguing that, since it had waivedits implied authorisation for the original product, Eurim-

Pharm was marketing the product withoutauthorisation.

Decision.Articles 28 and 30 of the EC Treaty providedthe answer. Article 28 prohibits quantitative restrictions

on imports and all measures having equivalent effect

between Member States. However, Article 30 providesan exception; measures justified on the basis of,

amongst other things, the protection of the health ofhumans are authorised provided that they are not a

means of arbitrary discrimination or a disguised

restriction on trade between Member States.

The ECJ held that the cessation of the validity of aparallel import licence following the withdrawal of a

marketing authorisation of reference would be contrary

to Article 28 unless justified by the need to protect publichealth (or any of the other exceptions allowed by Article

30).

Whilst stating that it would be for the national court to

ensure compliance with Directive 65/65, the ECJemphasised the requirement for proportionality as laid

down in Article 30. The derogation in Article 30 will notapply if, in fact, the health and life of humans can be

protected equally by measures less restrictive of intra-

community trade.

The ECJs view was that in cases where, at the requestof its holder, a marketing authorisation was withdrawn

for reasons other than the protection of public health,

there was no justification for the automatic cessationof the validity of the parallel import licence.

Comment. The ECJ accepted that the position mightwell be different if there were public health concerns,

either (i) giving rise to the waiving of the authorisationin the first place; or (ii) that would arise if the parallel

import licences continued in place, for example, therisk of confusion to consumers if more than one version

of the same product was marketed in a Member State.

The ECJ made it plain that it would be for the competentauthorities of the Member State to assess whether there

were real public health concerns, based on a carefulreview of the evidence. It was not enough simply to

rely on the arguments put forward by the party waivingits original authorisation.

Case C-172/00 Ferring Arzneimittel GmbH v. Eurim-Pharm

Arzneimit tel GmbH (10 September 2002)

The question in issue was whether the fact that Ferring

had waived its implied authorisation in respect of the

original Minirin meant that Eurim-Pharms parallel


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STUSSY BURDEN OF PROOF

Facts. In June 2002, Advocate-General Stix-Hackl

delivered her opinion in another case referred by

Germany, this time involving a clothes wholesaler and

retailer. The wholesaler had exclusive distribution rightsin respect of Stussy Inc.s products in Germany, andhad been authorised by Stussy to bring proceedings in

its own name for trade mark infringement against a rival

wholesaler.

Article 7(1) of the Trade Marks Directive (89/104/EEC)provides for the EEA-wide exhaustion of rights conferred

by a trade mark. This prevents the trade mark owner

from opposing the further marketing of trade-markedgoods when they have been put on the market by him,

or with his consent. Germany sought guidanceregarding the burden of proof, i.e., which party needed

to show that goods had been put on the market in the

EEA, either by the trade mark owner or with his consent.In particular, it asked whether Articles 28 and 30 of the

EC Treaty would be contravened by placing the burdenof proof on the defendant.

Decision. Whilst accepting that Article 7(1) itself doesnot impose any particular approach regarding the burden

of proof, referring to the decision in Davidoff, theAdvocate-General noted the unmistakable close

connection between national courts principles regardingthe burden of proof and the substantive law of theMember States. The Advocate-General concluded that

principles of procedural law must be examined byreference to primary law, in this case Articles 28 and

30 of the EC Treaty.

The Advocate-Generals opinion was that, in principle,

Articles 28 and 30 of the EC Treaty, and Article 7(1) ofthe Trade Marks Directive do not preclude the application

of national rules on the burden of proving exhaustion

under the Trade Marks Directive.

However, due in large part to concerns about thepractical implications, including the fact that the dealer

will usually have no means of making his suppliers

reveal the previous supplier/other links in the distributionchain, she added the following caveat. Where a

defendant to a trade mark infringement claim seeks toargue that the trade mark right has been exhausted,

and has to prove that the goods marketed by him have

been put on the market for the first time by the trade

mark owner himself, or with his consent, it is necessaryto ensure that the national rules:

do not enable the trade-mark owner to partition

separate markets and thus promote the retention

of price differences between Member States; and

do not make it impossible for the defendant trader

to prove exhaustion, or so difficult that he can onlyprove exhaustion in unreasonable circumstances,

for example, by having to reveal his own supplysources with the risk of having them cut off.

Comment. Whilst the case was concerned with theprocedural rules in Germany, it does illustrate the

circumstances in which inroads can be made into the

principle of procedural autonomy. The ECJ is due togive its judgment in late 2002/early 2003.

Case C-244/00 van Doren & Q.GmbHv. Lifestyle & Sportswear

Handelgesellschaft GmbH, Opinion of Advocate-General Stix-

Hackl (18 June 2002)

ADDENDUM PHARMACEUTICAL PRICE

REGULATION SCHEME

You may have noticed that Dowelhurst (one of the twoparallel importers in theBoehringercase) has taken an

active part in recent parallel import litigation.

Having failed in the English High Court and Court of

Appeal, the BAEPD and Dowelhurst petitioned for leaveto appeal to the House of Lords. We acted for the

Association of the British Pharmaceutical Industry (ABPI),a party directly affected in the proceedings, and lodged

objections to the grant of leave, as did the Department

of Health. On 22 April 2002, having considered theobjections, the Appeal Committee of the House of Lords

decided that leave to appeal should be refused. Thechallenge to the validity of the 1999 PPRS modulation

provisions therefore failed and they remain in full force.

Regina v.Secretary of State for Health (Respondent) ex parte (1)

British Association of European Pharmaceutical Distributors(formerly Association of Pharmaceutical Importers) (2) Dowelhurst

Limited, and Others (22 April 2002)

Together with the British Association of European

Pharmaceutical Distributors (BAEPD), it institutedjudicial review proceedings against the UK Department

of Health in respect of the 1999 Pharmaceutical PriceRegulation Scheme (PPRS). The PPRS is a voluntary

scheme regulating the price of branded prescription

medicines supplied to the National Health Service.BAEPD and Dowelhurst challenged the legality of the

modulation provisions in the scheme. They soughtto argue that the modulation provisions had the object/

effect of restricting parallel imports from other EU states

into the UK and were, therefore, contrary to Article 28EC and/or Article 81 EC.


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CAN YOU OPPOSE REPACKAGING?

The manufacturer is entitled to oppose

the marketing of the repackaged

pharmaceutical product.

Has the parallel importer itself given the trade mark proprietor

reasonable prior notice* that the repackaged pharmaceutical

product is being put on sale and, if requested, supplied a sample?(Hoffmann-La Roche)

Is the product repackaged in a way that respects the legitimate

interests of the trade mark proprietor?

Is the repackaging such that it does not adversely affect

the original condition of the product?

Is the repackaging such that it does not harm the reputation

of the mark (e.g., the packaging must not be defective, of

poor quality or untidy)?

Does the new packaging clearly state who repackaged the

product and the name of the manufacturer (i.e., in such a way

as to be understood by a person with normal eyesight, exercising

a normal degree of attentiveness)?

Would the trade markproprietors exercise of his

rights amount to a

disguised restriction on

trade (i.e., would it

contribute to the artificial

partitioning of the markets

between Member States)?

Would repackaging beobjectively necessary in

order for the parallel

importer to obtain effective

access to the market of

the importing state, or to

a significant part of it?**

The manufacturer is not entitled to oppose the marketing of therepackaged pharmaceutical product (subject to the above criteria

being met).

* It is for the national court to assess whether thenotice has been reasonable. As a guide, the ECJ

has suggested 15 days (in cases where a sample

is provided at the time notice is given) ( Boehringer).

** Boehringerrecognised that there may be cases

where there is such strong resistance to re-labelled

products that repackaging is objectively necessaryin order for the parallel importer to have effective

access to the market concerned (i.e., the obstacles

to effective access will not always be obstacles inlaw but sometimes obstacles in fact).

YES

YES

YES YES

YES YES

NO

NO

NO

NO

For further information please contact these people at our London Office:







The manufacturer is entitled to opposethe marketing of the repackaged


The information in this newsletter is for informational purposes only and is not for the purpose of providing legal

advice. Your use of this newsletter does not create an attorney-client relationship between Arnold & Porter and you.

Ian Kirby

(+44) (0)20 7786 [email protected]

Tim Frazer

(+44) (0)20 7786 [email protected]

Beverley Barton

(+44) (0)20 7786 6211

[email protected]

Arnold & Porter

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Alison Brown

(+44) (0)20 7786 6207

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