UK court prevents drugs brand owner from enforcing trade mark rights to enable market competition

The Court said the trade mark owner could not enforce its trade mark rights to prevent the re-branding because to do so would unfairly shut out the drugs distributor from competing for sales in the UK market.

Lord Justice Floyd, Lord Justice Bean and Lady Justice Arden accepted an appeal by Doncaster Pharmaceuticals Group Limited (DPG) against a 2013 High Court ruling which found that DPG had infringed trade mark rights belonging to rival distributor Speciality European Pharma Limited (SEP) when it imported drugs from France and Germany and marketed them in the UK using the 'Regurin' brand.

The drugs were marketed under different names in France and Germany; however, SEP was the exclusive licensee of the Regurin mark in the UK. The mark was owned by drugs manufacturer Madeus GmbH.

The High Court had ruled that the re-branding was trade mark infringement because it was done for DPG's commercial benefit, but the Court of Appeal said the re-branding was justified because it was necessary to enable DPG to gain "effective access" to the UK market.

"This was not a solely commercial decision taken by Doncaster as a matter of their own commercial choice: it was an aspect of the interstate trade which the free movement rules are there to protect," Lord Justice Floyd said in the Court of Appeal judgment.

The judges agreed that it was not realistic for Doncaster to adopt its own brand for the imported drugs and gain traction in the UK market in competition against SEP's sale of the established Regurin brand.

"Re-branding goes no further than is necessary to overcome artificial barriers to effective market access by Doncaster," Lord Justice Floyd said. He said DPG's ability to sell its imported drugs to doctors and pharmacists is unfairly impeded and that "the adoption of an own brand is not a real world alternative".

"It follows, overall, that the enforcement of the trade mark against the background of the national practices in this case does create an artificial partition in the market in a way which makes it unlawful … to enforce the trade mark," the judge said.

In its judgment, the Court of Appeal considered DPG's rights to trade without restriction under the Treaty of the Functioning of the European Union (TFEU) and how they balanced against those of SEP as a trade mark owner with rights to control the use of their brand.

The TFEU places a general ban on "quantitative restrictions on imports" and equivalent measures between EU member states in an effort to promote trade across the single market.

However, the treaty does permit restrictions to exist in certain circumstances, including where it clashes with intellectual property rights, providing that the restrictions do not "constitute a means of arbitrary discrimination or a disguised restriction on trade between member states".

“A parallel importer can only re-brand using a third party’s trade mark if it is deemed objectively necessary to do so in order to gain effective access to the market concerned," intellectual property law expert Emily Swithenbank of Pinsent Masons, the law firm behind Out-Law.com, said. "The Court of Appeal has said that being able to 'place some goods on the market' does not constitute 'effective access' to the market."

"Re-branding may be deemed objectively necessary if parallel importers are 'merely excluded from a substantial part of it or from a significant proportion of consumers' as opposed to the whole of the market but the Court of Appeal has confirmed that the necessity of re-branding will be considered in the context of what realistic alternatives there are for the parallel importer," she said.