Due to considerable variations in the prices of medicine within the EU, parallel trade – cross-border resale of trademark-protected pharmaceutical products by a third party without the authorisation of the IP rights holder – is common in the pharmaceuticals market.
Although any restrictions on free movement of goods are generally prohibited, certain activities by parallel traders (such as repackaging, relabelling, co-branding, etc.) may sometimes conflict with the rights of trademark owners and prompt opposition to further commercialisation of the product.
So what activities by parallel traders are considered permissible from the point of view of trademark protection and when can a trademark owner rightfully assert their rights?
BMS conditions and repackaging of pharmaceutical products
Parallel trade is closely connected to the exhaustion principle, according to which the trademark owner is no longer able to oppose or control the further commercialisation of its trademark-protected goods once they have been put on the market in the EEA, unless it has legitimate reasons for doing so.
In the context of parallel trade, the repackaging of pharmaceutical products can be seen as such a legitimate reason. To avoid potential opposition to the further commercialisation of the repackaged product, a parallel importer must be able to prove the existence of the following five conditions (the so-called BMS conditions):
the repackaging is necessary to market the product in the state of importation;
the original condition of the product is not affected by repackaging;
the new packaging clearly identifies the manufacturer and the importer;
the presentation of the repackaged product is not damaging to the reputation of the trademark or its owner; and
the importer gives notice to the trademark owner before the repackaged product is put on sale and supplies a sample of the repackaged product, if requested.
Since the ECJ favours a broad interpretation as to when a presentation of the product could damage the reputation of the trademark, parallel traders must also be cautious when using methods such as "de-branding" or "co-branding", although this is a question of fact and ultimately for the national courts to decide on a case-by-case basis (C‑348/04).
Rebranding of pharmaceutical products and effective access to the market
In practice product manufacturers often use different packaging or different trademarks for a single product in different Member States. As a result, parallel importers often seek to replace the trademark used by the proprietor in the state of export by the trademark which the proprietor uses in the state of import.
However, replacing the original trademark with a different one means that the trademark owner has not placed or consented to the placement of the goods in question on the market under that specific trademark. The ECJ has already established that in such cases the exhaustion principle does not apply (C-379/97). As a result, because the rights of the trademark owner have not been exhausted, the trademark owner is in such cases free to oppose the further commercialisation of the goods in question, as long as such opposition does not lead to the artificial partitioning of the EU Member States' markets (Article 36 TFEU).
In such cases, the national courts must assess whether it was objectively necessary for the parallel importer to replace the original trademark in order to market the product in the state of import (C-379/97). In particular, the ECJ indicated that rebranding could be permissible, if effective access to the market would be impaired otherwise.
Rebranding of generic medicine to originator brand name and joint cases Novartis vs. Impexeco and PI Pharma
In June this year the court of appeal of Brussels referred two requests for a preliminary ruling to the ECJ, both concerning the controversial issue of whether a parallel importer is allowed to market a generic pharmaceutical product after repackaging and rebranding that product with the brand name of the originator.
The facts of the cases revolve around two Belgian undertakings, who imported the generic medicine (Letrozol Sandoz® 2.5 mg and Methylphenidate HCI Sandoz® 10 mg) from the Netherlands into Belgium after repackaging and rebranding the medicine with the trademark of the originator (Femara® 2.5 mg and Rilatine® 10 mg, respectively).
The ECJ's decision will focus on whether the opposition to rebranding the generic medicine to the originator brand name could lead to artificial partitioning of the market. If the answer is yes, the ECJ is also asked to answer whether in such a case BMS conditions should be applied.
The cases are characterised by the fact that (i) the composition of generic medicines at issue is identical to their originator counterpart, and (ii) both – generic and originator medicine – are put on the market by undertakings, part of the same group. Although having the same therapeutic effect, the generic and original medicine are distinct from the point of view of regulatory, pricing, medical and public perception. What is also significant is that the generic medicine Letrozol Sandoz® 2.5mg is marketed in Netherlands as well as in Belgium, so the parallel importer could have accessed the market without rebranding the imported generic product.
It will surely be interesting to see if and how this will impact the ECJ's decision. As indicated, however, finding the balance between the free movement of goods and protection of IP rights is not always straightforward.
By Eva Skufca, Local Partner in cooperation with Schoenherr, and Lea Avsenik, Associate, Schoenherr