Co-branding of Pharmaceuticals Prohibited. Parallel imports case from the Finnish Supreme Court

(IPRinfo 2/2011)

Sami Sunila
Senior Associate, Roschier, Attorneys Ltd.

The Supreme Court concluded that the repackaged product created an erroneous impression among consumers. It ruled also on the question of passivity.

The Finnish Supreme Court gave its ruling on 26 January 2011 in a trademark case concerning parallel imports and repackaging of pharmaceutical products (KKO:2011:7). In general, trademark proprietor’s possibility to oppose to parallel imports within the European Union relate to the meaning of ”legitimate reasons” in Article 7(2) of the Trade Marks Directive. This concept was also at the heart of the Supreme Court’s said ruling.

It is fair to say that the ruling follows the well-settled case law of the Court of Justice of the European Union (”CJEU”), but it also raises an important question on the consequences of failure by the trademark proprietor to respond in a timely manner to parallel importer’s prior notice.

Typical case of co-branding
Paranova Oy (”Paranova”) had imported two pharmaceutical products into Finland, which had first been placed on the market in the territory of the European Union by the Dutch company N.V. Organon (”Organon”). The products were marketed using trademarks Mercilon and Marvelon, which were registered in Finland to Organon.

In order to sell the products in Finland Paranova had repackaged them and affixed its own trademark on the exterior of the new packages together with the trademark of Organon. Thus, the case was a typical case of co-branding. The front of the new package showed high up the Mercilon or Marvelon trademark respectively and, below that, Paranova’s pentangular shaped figure mark and the word Paranova in stylistic font. Just above Paranova’s trademark it was indicated that Paranova was a ”parallel importer” and ”repackager.”

The practice of parallel imports is attractive because the importers can take advantage of the principle on the free movement of goods and profit from varying retail prices for the same branded products in different parts of the European Union.

European case law on repackaging is well-settled
The question of whether pharmaceutical products can be repackaged by parallel importers has been a recurrent topic before the CJEU. The case law is clear, namely that repackaging without authorisation from the trademark proprietor is in principle allowed – provided that certain conditions are satisfied. A list and analysis of those conditions can be found, for example, in the CJEU case C-348/04, Boehringer Ingelheim and others.

As part of its assessment of the issue the CJEU has made it clear that altering a trademarked product, including any repackaging of it, creates by its very nature a real risk to the guarantee of origin of the product, a function encompassed by a trademark.

It is not necessary in that context to assess the actual effects of the repackaging by the parallel importer. Therefore, repackaging may be prohibited by the trademark proprietor unless it can be proven by the parallel importer that the repackaging is objectively necessary in order to enable the marketing of the products imported in parallel.

Parallel importer must notify the trademark owner in advance
According to the CJEU case law, a parallel importer must, in any event, give a prior notice to the trademark proprietor before the repackaged product is placed on the market. If the parallel importer does not satisfy that requirement, the trademark proprietor may always oppose the marketing of the repackaged pharmaceutical product.

Subsequent to receiving the prior notification, the proprietor of the trademark may ensure that the exterior of the package does not damage the reputation of the trademark after it has been repackaged and, if necessary, inform the parallel importer that the package is not acceptable.

The CJEU has considered 15 working days to be a standard time within which the proprietor of the trademark could have had a reasonable time to react to the parallel importer’s plan to repackage the goods (see case C-143/00, Boehringer Ingelheim and others).

Packages created an erroneous impression among consumers
The question before the Supreme Court was primarily whether Organon had the right to prohibit the use of its trademarks on Paranova’s sales packages and prohibit the subsequent sales of the product.

Two different aspects were considered in this context. The first one was about whether the appearance of the repackaged product was such as to be liable to damage the reputation of the trademark of Organon. The other aspect was about whether Organon had lost its right to invoke the trademark, since it had not, according to Paranova, reacted to Paranova’s prior notices regarding the parallel import within reasonable time.

The Supreme Court concluded that the repackaged product created an erroneous impression among consumers. The Court considered that the parallel importer may, as a starting point, use its own trade symbol on the new packages, but the decisive factor was the general impression created.

In Paranova’s case, the terms ”parallel importer” and ”repackager” had been printed on the packages. According to the Court, that alone had not been sufficient to indicate the actual role of Paranova. Instead, the use of Paranova’s visible and distinctive symbol on the front side of the packages, together with the original trademark of Organon, was deemed to have given an erroneous impression to those considering purchasing the pharmaceutical, as well as to those who had already purchased the pharmaceutical, that there was commercial link between Paranova and Organon.

Repackaging had thus been carried out in such a way which caused damage to the reputation of the trademark, and Organon could in principle prohibit the sales of the repackaged and co-branded products. The Supreme Court’s ruling is in this regard well in line with the settled case law of the CJEU.

Passivity gone too far?
The second aspect considered in the Supreme Court’s ruling was about whether Organon had lost the right to invoke its Marvelon trademark against Paranova. This was because the Court considered that Organon had been slow in notifying its opposition to Paranova since it had not reacted until 77 working days after receiving Paranova’s notification on parallel import.

The Court finally concluded this to be in excess of what could have been reasonably expected, especially when considering Paranova’s expectations to commence the marketing of the repackaged products. According to the Court, Organon could no longer oppose the marketing of the product.

It was taken into account that the CJEU had considered 15 working days to constitute a standard reasonable time for the trademark proprietor to react (in C-143/00 Boehringer Ingelheim and others, paragraph 67). With regard to the other product (i.e. Mercilon), Organon had reacted within eight working days of the prior notice, which was considered sufficiently quick.

The Supreme Court’s conclusion raises a question. Due to passivity, should the trademark proprietor really be deemed to have entirely lost his right to prohibit the importation? The purpose of the requirement of prior notice being given by the importer is to safeguard the legitimate interests of trademark proprietors (see C-143/00 Boehringer Ingelheim and others, paragraph 62).

In the Supreme Court’s ruling it seems that the requirement has had an effect to the contrary. In this regard, one would have expected a more thorough reasoning by the court in the text of the ruling than what has now been given in paragraph 21 of the ruling, especially when this issue was raised at a lower court by a dissenting member of the Court of Appeal. According to his view, the failure to response in time could have been taken into account simply as a factor affecting the right to claim damages.

This is also what the Danish Supreme Court found in a case between Sanofi-aventis Denmark A/S and Orifarm A/S, where the trademark proprietor Sanofi-aventis Denmark had reacted so late that it was deemed to have forfeited its right to claim payment (see the judgment of 21 September 2009 by the Danish Supreme Court, Højesteret). In view of the different outcomes at the highest court level, the issue could well benefit from further guidance by the CJEU.

Finally, it should be borne in mind that the Supreme Court’s ruling is very much confined to the specific field of parallel imports of pharmaceutical products. The requirement of prior notice does not exist with regard to other types of products.

KKO:2011:7, N.V. Organon (Organon) and Paranova Oy (Paranova) 26.1.2011
President of the Finnish Supreme Court

Case C-143/00 Boehringer Ingelheim and others 23.4.2002
Case C-348/04, Boehringer Ingelheim and others, 28.4.2007
Both cases available via CURIA-database: http://curia.europa.eu/jcms/jcms/j_6/

Case no. 40/2008, Sanofi-aventis Denmark A/S and Orifarm A/S, 21.9.2009
Summary of the decision of the Danish Supreme Court available in English:
http://www.domstol.dk > Højesterets > English > EU Law Decisions