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Tuesday, 10 February 2015

"Fool's errand": no need to create your own brand if you can use someone else's

This Kat has been reflecting on a recent trade mark infringement ruling that has left him feeling rather uncomfortable.  The case in question is Speciality European Pharma Ltd v Doncaster Pharmaceuticals Group Ltd & Madaus GmbH [2015] EWCA Civ 54, a decision of the Court of Appeal, England and Wales, last Friday. The trial decision was recorded on this weblog under the title "Taking the p*** -- or merely retaining it? When trospium chloride can't be overstuck" but, to save readers the trouble, the facts and the outcome of the trial decision are related here too.

The claimant ('SEP') specialised in the distribution and sale of pharmaceutical products, particularly in the fields of urology and urogynaecology; since 2009 SEP was the exclusive licensee of the REGURIN trade mark for trospium chloride made by Madaus, who owned the mark. This product was sold and distributed as " Céris" in France, "uriVesc" in Germany and as REGURIN in the United Kingdom.


Doncaster Pharmaceuticals (the first defendant) had previously imported trospium chloride sold in France as “Céris” into the United Kingdom by overstickering the box with the name of the generic active ingredient, trospium chloride. However, in late 2009 it started to import “Céris” by affixing the trade mark REGURIN instead; it later did the same thing with “uriVesc” from Germany. Trospium chloride was sold in the United Kingdom in two formats: a 20mg product and a 60mg XL product.

SEP sued Doncaster Pharmaceuticals for trade mark infringement, joining Madaus to the proceedings but making no claim against it. At trial the court was required to determine (i) whether Doncaster Pharmaceuticals was entitled under Articles 34 and 36 of the Treaty on the Functioning of the European Union (TFEU) to affix the REGURIN trade mark to the pharmaceutical products made by Madaus and which they imported from other Member States; (ii) whether it was necessary for Doncaster Pharmaceuticals to re-brand the products as REGURIN in order to gain effective market access in the United Kingdom.

Judgment was entered for SEP on the following grounds. According to the trial judge, Mrs Justice Asplin:

* To decide whether there was effective market access for an imported product, it was necessary to define that market. The market here could not be defined by reference to the market for products sold under REGURIN alone: such a definition was entirely self-fulfilling and failed to satisfy the underlying principles of free trade between Member States.

* It was not necessary for the court to decide whether, for the purposes of re-branding, the test of necessity was to be applied to the market as a whole or to a substantial part of the market. The question was whether, in all the circumstances prevailing at the time of marketing, it was objectively necessary to replace the original trade mark with REGURIN in order to gain effective access to the trospium chloride market in the UK. The evidence did not lead to the conclusion that it was objectively necessarily to replace the other marks with the REGURIN mark, whether one took into account the market for trospium chloride as a whole or whether one examined the markets for the 20mg and 60mg XL products separately.

* If the products were taken together, Doncaster Pharmaceuticals had immediate and effective access to 90 per cent of prescriptions written for the 20mg version of the product and to 68 per cent of the 60mg XL version. Given the high percentage of the market open to Doncaster Pharmaceuticals even where it could not use the REGURIN trade mark, SEP's exclusive use of the REGURIN mark in the UK did not contribute to the artificial partitioning of the markets between Member States for trospium chloride. Even if one took into account the number of prescriptions written generically for trospium chloride which were currently satisfied by REGURIN, the percentage of the market to which Doncaster Pharmaceuticals had effective access was 60 per cent.

* There was no evidence before the court that Doncaster Pharmaceuticals could not compete effectively against the generic producers. Nor was there evidence of the existence of any rules or structures in the UK market which hampered Doncaster Pharmaceuticals in gaining effective access to the market if it would not be allowed to use the REGURIN mark. In fact, the policy of the National Health Service in the United Kingdom pointed to the opposite conclusion, being in favour of generically written prescriptions.

* There was no significant resistance on the part of consumers or pharmacists to an over-stickered product.

* Given the percentage of prescriptions written generically, Doncaster Pharmaceuticals was merely seeking a commercial advantage in the sense of seeking a greater margin on its imports than it would otherwise be able to achieve. It was seeking to avoid the need to brand and market the 60mg product for itself but, rather, sought to "piggy back" on SEP's marketing efforts.

The defendants, submitting that the trial judge failed to give reasons why she rejected the evidence of Doncaster Pharmaceuticals and decided that it was open to that company to adopt a brand of its own and compete directly with REGURIN. It was also argued that enforcement of the REGURIN trade mark had the effect of applying quantitative restrictions on imports in breach of Article 36 of the TFEU.

On Friday the Court of Appeal (Lady Justice Arden and Lords Justices Floyd and Bean) allowed the appeal, Floyd LJ delivering a single judgment with which the others concurred. In essence, said the Court of Appeal:

* The crucial question was whether the trial judge had been entitled to hold that, by having to develop its own brand, Doncaster Pharmaceuticals could realistically compete for the whole of the market by seeking to persuade doctors to prescribe it. The evidence established that, despite generic competition, there remained a proportion of the prescription market which was resistant and which demanded REGURIN. The judge had failed to give reasons why she had rejected the evidence of Doncaster Pharmaceuticals' CEO Derek Wilson that the regular interruptions of supply suffered by a parallel importer made it unrealistic for it to adopt its own brand, this course of action being described by Wilson as a "fool's errand".

* Rebranding the manufacturer’s product as REGURIN went no further than was necessary to overcome artificial barriers to effective market access so that the enforcement of the trade mark created an artificial partition in the market which was unlawful under Article 36 of the TFEU.

When commenting on the decision of Asplin J, this Kat said:
This Kat thinks this decision is quite an important one, but not so much in legal terms. There was no startling exposition of a new legal doctrine or miserable failure to apply an old one. Rather, its significance lies in the application of the law to the facts. Had Asplin J reached the opposite conclusion, and allowed the use of restickered REGURIN labels on these facts, importers of pharma products would be falling over themselves to emulate Doncaster's actions and the prospects of manufacturers of pharma producers such as Madaus deriving any benefits from their trade marks following the expiry of their patents (as was the case with the patent for trospium chloride, which expired in 2009) would be grim.
While this Kat agrees that it would have been appropriate for Asplin J to give reasons for dismissing the evidence of Doncaster Pharmaceuticals' witness, he remains unhappy about the Court of Appeal's decision for two reasons.  First, he stands by the comment he made above.  Secondly, he has a residual queasiness about appellate courts setting aside a trial judge's assessment of the facts.  Quite correctly Floyd LJ states:
"I have to remind myself that the circumstances in which we could set to one side the judge's conclusion on an essentially factual issue are very limited".
Yet the trial judge's findings, following four days of hearings and with a good deal of reflection as to the commercial reality of the market for trospium chloride, do not seem to this Kat to be so untenable as to warrant being set aside.

Doubtless readers will have opinions to express on both the IP and competition law dimensions of this decision.  The Supreme Court may not have the chance to express theirs, though, unless a ground of appeal can be articulated with sufficient care as to show that a significant point of law is at stake.

Fool's errand here
Gooseberry fool here
April fool here

12 comments:

Anonymous said...

The legal point at issue appears to be whether access to the market includes access to substantially all of the market, include the 8% that is always satisfied by prescription of the branded product. As access to this market is restricted, the rebranding is necessary.

Whilst I am no fan of the availability of parallel imports in the light of government-instigated price fixing, I see this result as inevitable and a correct application of the law of free movement of goods, whilst protecting the essential function of a trademark.

These will always be fact-specific cases, but I can't quickly think of a set of facts where such rebranding will not be considered essential, though there must surely be some.

Anonymous said...

Instinctively this decision seems wrong. A parallel importer should be able to sell the product as a generic substitute but not apply someone else's TM that hasn't previously been on the product, unless it is strictly necessary to apply the TM to sell the product. This instinctive view is reinforced when over 80% of the market for the product is generic anyway.

Surely the only reason for an importer to do this is to get a "commercial advantage"?

Anonymous said...

I agree with Anonymous @16:46 on this. It looks like coach-and-horses time for trade mark owners now, since that's what will be driving through their rights.

This decision will certainly benefit the likes of Doncaster against any honest traders who parallel import but don't rebrand.

Anonymous said...

"unless it is strictly necessary"

That is the point. It is considered in this case to be necessary to access the whole market. Don't forget that the product is that of the originator, just relabelled.

If the originator sold the product in identical packaging throughout Europe,the parallel importer would be able to access the whole market.

There are 2 discussion to be had: Is it allowable under the law and , if it is, should it be. The court can only judge the first question.

Anonymous said...

I came across this interesting govt review into parallel imports with a govt minister recommending plenty of illegal means for preventing the trade.

http://www.parliament.the-stationery-office.co.uk/pa/cm199899/cmselect/cmtrdind/380/9042701.htm


Back on the case, did anyone discuss the legality of completely rebranding the originator's product to one of Doncaster's own? Reverse passing off maybe?

Anonymous said...

Another interesting story:

http://blogs.wsj.com/pharmalot/2015/02/10/pharma-files-complaint-against-italy-for-allowing-off-label-prescribing/

Anonymous said...

'Meeting of minds, or meeting of minders? The European Patent Office's Board 28 meets tomorrow. The IPKat suspects that, after it has done so, we may be hearing about the consequences -- but this is a matter which he leaves to Merpel, whose post on Board 28 last week has already been much read and commented-upon.'

Actually, the agenda mentions already a working dinner last night as part of the meeting. That said, the meeting is longer than usual so maybe the decision isnt as much of a fait accompli as it might seem??

Anonymous said...

I prefer filet de boeuf to fait accompli as my main course.

Anonymous said...

I believe that the comment of Anonymous 05:56 more properly belongs to the thread of the-future-of-boards-of-appeal-of-the-European-Patent-Office:-Board-28-to-meet. And where can we find the agenda, please?

Kind regards,


George Brock-Nannestad

Anonymous said...

GB-N,
Correct partially.
Strangely, the agenda is available to all internally but not externally. Guess there may be confidentiality reasons although why any staff would need to know about the B28 rather than just the participants... Indeed you would imagine that the topic is sensitive so even the staff concerned wouldn't be told. The same applies to the AC documents where there may be personal matters to be discussed but those could be hidden as some of the observers et al do have to leave some sessions of the AC. Who knows. In both cases there isn't a real need to know for staff which couldn't also apply to external interested. If all and sundry internally know the general subject of this B28, then why not let cabinets et al know? I don't think the agenda was even marked confidential, as information-less as it is.
Meanwhile, I wait for Merpel to in-fur-m me about the outcome. A move to the Isle of Man might make for a Manx cat?

Anonymous said...

Can we keep the EPO-whining stuff out of this? I know it's only a TM case, but it is one of the few interesting ones. If the EPO-whining blogs have no room at the Inn, just be patient and wait your turn.

Merpel McKitten said...

Quite right, anon of 21:57:00.

All you EPO guys, post your comments here instead please! http://ipkitten.blogspot.co.uk/2015/02/european-patent-office-announcement.html

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