A brand-owner generally wants to use the same brand across several countries, but there are industries where national branding is common. Pharmaceuticals is one. In a free trade bloc like the EU this leads to a tension between the free movement of goods and protection of IP rights. The interplay of the EU rules in this area has come under the spotlight in SEP v Doncaster.
This Court of Appeal decision looks at what happens when a trader with no connection to the brand-owner brings pharmaceuticals sold in France or Germany into the UK, and sticks a label over the French or German branding showing the brand name used in the UK. This practice, known as ‘parallel importing' plus ‘over-stickering', is particularly prevalent in the drugs industry. This is because of the way the markets operate in this highly regulated sector. Prices can differ substantially between EU states, and so it is often worth the effort to bring them from one country to another, even where a bit of repackaging or over-stickering is required. What happened in this case shows that inability to access even a small part of a national market can be enough to warrant rebranding.
The medicine being parallel imported in this case was trospium chloride for overactive bladder symptoms, made by German company Madaus. Branded in France as CERIS and in German as URIVESC the product was brought into the UK by Doncaster and sold for many years simply as trospium chloride. It was when Doncaster started using the UK brand name, REGURIN, that the problems started.
Madaus's own UK sales under its trade mark REGURIN were through an exclusive licensee, SEP. It was SEP that objected to use of the REGURIN brand.
The EU principle of free movement of goods is one of the four key freedoms of the EU. Only limited carve-outs are allowed. One is restrictions justified for the protection of IP, but not if these extend to ‘artificial partitioning of the market'. The court had to decide whether SEP's objections to the parallel import were justifiable, or whether they strayed too far towards artificial partitioning. This requires consideration of five factors, summarised in Boehringer Ingelheim v Swingward as:
- Necessary to repackage to market the product;
- No effect on the original condition and proper instructions;
- Clear identification of manufacturer and importer;
- Non-damaging presentation; and
The focus in this case was on condition 1 – was it necessary to use the UK trade mark in order to market the product? And how much of the market should be accessible? A part, the majority, or all of it?
Delving into the earlier cases, the court concluded that inability to access a part of a national market could be enough. Here, although there was a substantial generic market after expiry of the patent for the drug itself, there remained a group of doctors and pharmacists who would only use the branded product. The number of prescriptions referring specifically to REGURIN was only 8.61%. But this was enough to make rebranding necessary for Doncaster to effectively access the market.
8.61% does not seem like a substantial part of anything, but the court made clear that this was number of prescriptions rather than value. Also, because of the growing generic competition for this drug, Doncaster could only make money from parallel imports by accessing the remaining branded section of the market.
The considerations were rather more straightforward for the long-acting version of the drug. It had no generic competition because of ongoing patent protection. Here the change of brand was required not only because the branded product was the only one on the market, but also because the UK regulator had objected to use of the German brand name because a similarly named product was already sold on the UK market.