On November 17, 2022, the European Court of Justice (ECJ) issued four important decisions (here) relating to parallel imports of branded products within the internal market of the European Union (EU). This is a complex topic at the crossroads of free movement of goods and trademark enforcement in the EU.
Two of the decisions relate to parallel imports of products and the requirements imposed by the Falsified Medicines Directive. The other two decisions concern the parallel imports and rebranding/repackaging of generic medicinal products. The facts in the latter two cases are similar. Novartis marketed branded reference products on both the Dutch and the Belgian market (respectively Femara® and Ritalin®/Rilatine®). At the same time, Novartis’ generics division Sandoz marketed in the Netherlands a generic version of the Novartis reference products containing the same active pharmaceutical ingredient, under the international nonproprietary name nomenclature combined with the Sandoz company name. In both cases, Belgian parallel importers Impexeco NV and PI Pharma NV imported the generic Sandoz products from the Netherlands and repackaged and rebranded them as the Novartis’ reference products in order to market them in Belgium. The parallel importers thought their actions complied with applicable case law, but Novartis disagreed and sought injunctions before the Brussels Commercial Court. Novartis won both cases in first instance. On appeal, the Court of Appeal of Brussels referred several questions to the ECJ.
To answer these questions, the ECJ referred to the settled case law following the BMS case, in which five cumulative conditions (the BMS criteria) for a parallel importer to have a safe harbor from trademark infringement are set out. The ECJ concentrated its reasoning on the first of the BMS criteria: does Novartis’ enforcement of its trademarks contribute to an artificial partitioning of the relevant market between Belgium and the Netherlands? This artificial partitioning criterion looks at whether the repackaging is objectively necessary in order to enable the parallel import of identical products to be marketed in the country of import. There is objective necessity if it can be shown that the circumstances prevailing at the time of marketing in the import market precluded the imported medicinal product from being placed on the market in the same packaging as in the export market. However, there is no objective necessity if the repackaging can only be explained as an attempt by the parallel importer to secure a commercial advantage.
In the Novartis cases, the ECJ decided first that only a medical product which is identical in all respects to another medicinal product can be repackaged in new outer packaging bearing the trademark of the other medicinal product. This is, for example, not possible for equivalent medicinal products with a narrow therapeutic margin. There may be identity when a reference medicinal product and a generic medicinal product are manufactured by the same entity, or by economically linked entities, and they constitute one and the same product marketed under two sets of rules. The ECJ also considered that, if the products are identical, the fact that they are subject to different rules and perceptions by health professionals and patients is not sufficient for the trademark owner to oppose their parallel importation, assuming their repackaging was objectively necessary. In other words, a different product perception (generic v. originator products) and different regulatory regimes do not impact the identity of two products and do not create different markets.
The ECJ then examined whether Novartis’ opposition to the use of its trademarks constituted an obstacle to the effective access of the generic medicinal products in the country of import (Belgium). The ECJ came to the following clear conclusion: if a parallel importer is able to market the imported product under its original trademark (the generic Sandoz product imported from the Netherlands) by adapting where appropriate the packaging in order to meet the market requirements of the country of import, the condition of objective necessity is not satisfied, and the trademark proprietor can oppose the import.
Important to note is that the ECJ considered that a parallel import license for a generic medicinal product cannot be refused if the corresponding reference product has a marketing authorization in the country of import. Where the parallel importer is able to market the generic medicinal product under its trademark of origin by adapting the packaging in order to satisfy the market requirements of the importing Member States, there is no objective necessity to rebrand. Another important element to be taken into consideration is the parallel importer’s justification behind the rebranding. In the Novartis cases the parallel importer bought the generic medicinal products at a low price in the Netherlands and sold the rebranded products at a similar (higher) price as the Novartis reference products in Belgium. The ECJ is of the opinion that the trademark owner can oppose rebranding if this is exclusively motivated by the pursuit of an advantage, as is the case, especially when the parallel importer seeks to take advantage of the reputation of the trademark of a reference product or to place a product in a more profitable category.
To sum up, the ECJ’s final conclusion is that in situations such as in the Novartis cases, the trademark owner can oppose the sale of a generic product repackaged and rebranded as a reference product unless the two products are identical in all respects and the rebranding complies with the BMS criteria, and more specifically if the repackaging/rebranding was objectively necessary. In the Novartis cases, the parallel importers could have marketed in Belgium the generic products originating from the Netherlands as generic products under a parallel import license based on the Novartis reference products. Also, the practices adopted by the parallel importers in the Novartis cases could be seen as exclusively motivated by the pursuit of an economic advantage. These two issues will be for the Court of Appeal of Brussels to decide. But the ECJ did not leave much wiggle room.
This ECJ decision brings further clarification regarding the condition of objective necessity under the BMS case law, but also triggers the question whether there will be shift in case law as regards the need for repackaging when such repackaging is done to meet local habits related to packaging of pharmaceuticals or well-established medical prescription practices. For example, it has been decided in the past that there is an objective necessity to repackage a parallel imported product into a large pack size and adapt the blisters in order to have access to the market of large packages in the country of import. Can this be regarded as placing the parallel imported product in a more profitable category? To be continued.
For further information, please contact:
Kristof Roox, Partner, Crowell & Moring