12 March 2015
Lord Justice Floyd has had occasion recently to remind us of the re-packaging/re-labelling rules in a recent Court of Appeal judgment in European Pharma Ltd and Doncaster Pharmaceuticals Group Ltd and Madaus GmbH. The Court of Appeal, overturning the first instance judgment, held that it was legal for a parallel importer (Doncaster) to export pharma products containing the active ingredient Trospium Chloride from France and Germany where they were marketed under the trade mark Céris and UriVesc respectively and import them into the UK by affixing the products with the UK trade mark ‘REGURIN’. Article 7(1) Trade Mark Directive provides for EU-wide exhaustion where the parallel importer uses a trade mark from the country of export and re-affixes it onto a product to be imported to another Member State. However, this case was different. Here the parallel importer was re-labelling a product with the trademark of the country of import. In this instance, re-affirming previous case law in Pharmacia & Upjohn v Paranova, the court determined that trade mark owners may take steps to prevent such over-stickering unless doing so creates an impediment to free movement of goods between Member States. That would be the case where over-stickering is necessary to obtain effective access to the market and is not simply for the importer’s commercial advantage.
Trade mark holders will be concerned that in this case the very points evidencing the success of the REGURIN brand were those relied upon as showing that it was necessary for the parallel trader to over-sticker. The strength of the UK brand therefore prevented the trademark owner from exercising its UK trademark rights to stop what is, on its face, an infringement. The facts relied on as evidence of “necessity” were the fact that doctors and pharmacists were resistant to switching away from prescribing by reference to 'REGURIN' rather than the generic INN and the impracticability for Doncaster to set up a new brand and persuade doctors to prescribe to it. This is because parallel importers are dependent on purchases from third parties and therefore cannot guarantee supply. As a result of this resistance to using non-branded products, the court found that it was indeed necessary to over-sticker the products entering the UK with the UK TM REGURIN in order for Doncaster to be able to compete effectively. An attempt to prevent this would be an impediment to the free movement rules. Furthermore, Doncaster did not obtain a commercial advantage from over-stickering as it would never be able to sell more cheaply than a generic.
This case will STICK in the minds of trade mark holders who, as a result of this judgment may find their ability to benefit from their trade marks curtailed after expiry of the patent. However trade mark holders may find some solace in the fact that before using their trademarks, parallel importers will still have to prove that over-stickering is necessary to gain effective access to the market and will have to comply with the five conditions protecting the guarantee of origin of the trade mark owner’s mark as set out in Bristol Myers Squibb v Paranova.
2 March 2015
Following Avantika's excellent post on “most favoured nation” or “MFN” clauses, we’ve decided to make an article on the same subject our “CLIP of the month” (look to the top right…). In this, Dr Volker Soyez takes a step back and looks at the December 2013 prohibition decision by the German Federal Cartel Office issued against Hotel Reservation Service (“HRS”) an online hotel booking platform. I’m not quite sure that the FCO’s decision is quite ‘the beginning of the end of MFN clauses’, but he’s quite right to note that competition authorities are no longer turning a blind eye to such provisions.
Here are a few points to whet your appetite for the article itself.
- MFNs should not be classified as hard-core restrictions
The article questions the suggestion that MFNs could in some circumstances be regarded as akin to RPM (an idea mooted by the FCO in its December 2013 decision).
- It will be an uphill struggle to satisfy Article 101(3) TFEU... but context is key.
Dr Soyez notes that avoiding free-riding could be a legitimate criterion for individual exemption but only in exceptional circumstances - he highlights the damning words of the FCO: the comprehensive elimination of competition created by the MFN would never be necessary and proportionate to protect HRS’s investments especially where HRS had other less restrictive methods at its disposal for recouping such fees.
- An MFN imposed by a dominant undertakings is likely to be a “no no”
The article comments that it may be tough for a dominant company to justify MFNs and highlights that the FCO found HRS to have abused its dominant position.
This (and other comment) sets in stark relief that context is key for the assessment of MFNs: the greater the impact on the market (whether because of industry - wide practice or because of significant market power), the greater the likelihood of an MFN being regarded as anti-competitive.
The avoidance of free - riding is a key stated reason for MFNS in online trading. However, Article 101(3) is a demanding standard and it remains to be seen whether free riding can provide a defence satisfying that standard. As ever, the most difficult aspect of the high standard for exemption seems likely to be the “indispensability” criterion and particularly showing that the MFN was an indispensable means of recouping sunk costs.