The free flow of goods around the EU is one of the core principles of the single market, and this is underlined by the rules on exhaustion of IP rights. The trade marks legislation, for example, includes a prohibition on using trade mark rights to prevent the flow of goods around the EU, where those goods have been put on the market by or with the consent of the trade mark owner.
But there are limits on how the exhaustion principle can operate. Trade mark law recognises that there may be legitimate reasons to prevent parallel imports, such as where the condition of the goods is changed or impaired after first sale.
In the medicines field, there is a series of cases on how far a parallel importer can go in repackaging products so that they are suitable for the destination market. The court looks at the extent of any repackaging and relabelling to determine whether there is a risk to the guarantee of origin that the trade mark provides. It also considers whether the trade mark owner is in fact attempting to restrict trade between member states. Case law on medicines indicates that an attempt by a trade mark owner to oppose changes to packaging and labelling will fail if the parallel importer can show that:
- the trade mark enforcement activity would contribute to the artificial partitioning of the markets between EU Member States
- the repackaging cannot affect the original condition of the product inside the packaging
- the new packaging states clearly who repackaged the product and the name of the manufacturer
- the presentation of the repackaged product is not such as to be liable to damage the reputation of the trade mark and of its owner; thus, the packaging must not be defective, of poor quality, or untidy; and
- the importer gives notice to the trade mark proprietor before the repackaged product is put on sale, and, on demand, supplies him with a specimen of the repackaged product.
But these are the rules for medicines. Do they also apply to medical devices? This was the question raised by a German court in a dispute between Lohmann & Rauscher International and Junek Europ-Vertrieb. Junek was reimporting to Germany wound dressing products marked with Lohmann & Rauscher’s DEBRISOFT trade mark. The products bore a small label with Junek’s name and details.
The CJEU ruled that the addition of the label did not even amount to repackaging at all. The label was small and did not affect the original packaging. There had been no opening of boxes to include new patient information, as there had been in many of the medicines cases. So there was no need to go through the five step analysis. Lohmann & Rauscher could not oppose the parallel importation.
Although the European court found here that the brand owner had not even reached first base in its efforts to stop the parallel trade, there is nothing in this decision to suggest that the analysis developed for medicines would not apply in a medical device case involving more serious interference with the packaging. The CJEU explained that the reasoning could apply to other types of product, like alcoholic beverages. So although a very minor modification like adding a small label did not open up the option of trade mark enforcement to stop parallel imports, activity involving a more extensive alteration to packaging might be stopped in this way.
Interesting to note that the question of exhaustion of IP rights has yet to be settled post-Brexit. Depending on the overall trade position, the UK could end up anywhere on a spectrum between full international exhaustion (products sold anywhere in the world can move into the UK market) and a much more restricted national position.