Resisting parallel imports of trade marked goods – pre- and post-Brexit

On 17 May 2018, the CJEU confirmed that trade mark owners cannot oppose a parallel importer's further commercialisation of a medical device in its original packaging if additional labelling added by the importer does not threaten the medical device's guarantee of origin.

By way of background, Lohmann & Rauscher International argued that by re-selling its Debrisoft product in its original box merely with an additional label, Junek Europ-Vertrieb had infringed its EU trade mark ('Debrisoft'). Junek had affixed a small sticker on the original packaging with its name and contact details, but the original mark was still clearly visible on the product. However, the court found that this did not constitute repackaging of the product within the meaning of previous CJEU judgments.

This is the latest in a series of decisions setting out the circumstances in which a European trade mark owner can oppose onward sale of its protected goods in the EEA. Previous cases have focussed on alterations to the condition of the goods (such as addition of a component), and repackaging, in particular when the trade mark has been reaffixed to the product after it has been repackaged.

Most of the impact of this case law has been felt in the pharmaceutical industry, where 'overstickering' and re-branding practices are common, but can pose a threat to the reputation of a trade mark affixed on the product. Earlier CJEU judgments have confirmed that a parallel importer can avoid trade mark infringement by meeting specific conditions, including clearly stating their own details on the product packaging, and giving the trade mark owner notice before selling the repackaged product. As with previous decisions, this decision will disappoint pharmaceutical trade mark owners who were hoping to obtain further protection against exploitative parallel importers, and suggests that the courts will only be willing to intervene where the repackaging causes confusion around the product's origin.

From a UK perspective, it is not clear whether and how such jurisprudence will factor into the debate about exhaustion of rights post-Brexit. Various options are open to the UK, including a 'national' exhaustion system, whereby trade mark owners could oppose any onward sale of a protected product outside the UK, or an 'international' one, which would encourage free movement of UK-manufactured goods on a global scale. With a soft Brexit (and with it, the ability to remain within the EEA exhaustion system) looking increasingly unlikely, it is worth looking closely at the alternatives and what these will mean for the pharmaceutical industry at large.

Clear advantages are presented by a national exhaustion system. In particular, this would address the above issues regarding repackaging and relabeling, and offers the strongest protection for trade mark owners who wish to enforce their rights globally against parallel importers. However, this is also the most protectionist system and could be a barrier to free trade with other countries, by driving up prices in the UK. The NHS, in particular, would suffer under a national exhaustion regime as it relies heavily on parallel imports of cheap drugs to ensure certainty of supply.

However, international exhaustion creates its own issues, both from an intellectual property and quality perspective. With less ability to enforce trade marks against parallel importers, brand protection could be eroded and the pharmaceutical sector could see potential quality control issues as UK drugs are freely repackaged and sold on into different markets. It remains to be seen whether and how the UK could legislate for trade mark holders to be able to oppose parallel imports in such a system - and whether this would follow the above CJEU case law or (potentially) provide stronger rights for trade mark owners.

Trade mark holders should also be aware of the practical difficulties of transitioning to a new exhaustion regime. While the EU and UK seem to have agreed in principle that rights exhausted in the UK and EU before the end of the transitional period should remain exhausted (see here and here), any shift to a national or international exhaustion system would require the identification of exactly which goods were exhausted before and after the relevant date. As such, care should be taken by all parties to document - as accurately as possible - where goods have been placed on the market for such purposes.