No trade mark exhaustion in parallel imports if separate trade mark owners are involved

In summary, the Court established – following CJEU case law – that there is no exhaustion of trade mark rights where there are separate trade mark owners who are not linked legally (for example through a licence agreement) or economically (for example thorough a corporate structure).

Background

Pursuant to a request by the European Commission to divest certain assets in relation to a multinational merger operation, Pfizer transferred the Italian trade mark "Trosyd" to the Italian pharmaceutical company, Giuliani.

The Italian distributor, Medifarm, purchased products marked "Trosyd" in Portugal, where Pfizer was still the owner of the corresponding Portuguese trade mark, in order to sell such drugs in Italy. Medifarm notified Giuliani of its intention to launch the parallel imported Portuguese products on the Italian market and provided Giuliani with a sample of the products as repackaged for sale in Italy¹.

Giuliani stated in its response to Medifarm that the parallel importation of the drugs in question would amount to infringement of its trade mark in Italy. However, since Medifarm did not agree and was ready to launch the imported product, Giuliani filed preliminary injunction ("PI") proceedings against the Italian distributor. 

In the first instance proceedings, the Court of Milan dismissed Giuliani's claims for lack of jurisdiction. However, on appeal the Italian Judges reversed the previous finding on jurisdiction and granted the PI against Medifarm.

The appeal decision of the Court of Milan

Under EU trade mark law, a trade mark proprietor cannot enforce its rights against parallel imports which have been put on the market in the EEA under that trade mark by the proprietor or with its consent. Indeed, the first sale determines the exhaustion of the rights of the trade mark proprietor².

In the case at issue, the Court of Milan considered whether the first sale in Portugal of the "Trosyd" product by Pfizer (the owner of that trade mark in Portugal) resulted in the exhaustion of Giuliani's (the owner of the "Trosyd" trade mark in Italy) rights in Italy.

Following CJEU case law, the Italian Judges established that the exhaustion occurs only when the owner of the trade mark in the importing country and the owner of the same trade mark in the exporting country are either the same entity or different entities that are economically linked (for example when the product is distributed by a parent company, a subsidiary of the same group or an exclusive retailer).

The reason given by the Court of Milan – recalling in particular the CJEU judgment of 17 October 1990 (Hag II) – was that "if distinct trade mark owners for two Community Member States are not economically linked to each other, the opposition to the free movement of products is legitimate, since the movement of goods would undermine the essential function of the trade mark: consumers would no longer be able to identify for certain the origin of the marked goods and the proprietor of the trade mark could be held responsible for the poor quality of goods for which he was in no way accountable".

In light of the above, the Italian Judges held that Giuliani’s trade mark right was not exhausted by the first sale of the "Trosyd" product by Pfizer that took place in Portugal. As a consequence, the Court held that the parallel import of "Trosyd" by Medifarm in Italy amounted to infringement of Giuliani's trade mark and thereby granted the PI against the Italian distributor.

^{1 CJEU case law sets out a series of conditions the importer must comply with to avoid the trade mark owner legitimately opposing the further marketing of a pharmaceutical product where the importer has repackaged the product:}

• ^{the repackaging carried out by the importer is necessary in order to market the product in the country of importation;}
• ^{the repackaging cannot affect the original condition of the product inside the packaging;}
• ^{the new packaging clearly states who repackaged the product and the name of the manufacturer;}
• ^{the presentation of the repackaged product does not damage the reputation of the trade mark and its owner (the packaging must not be defective, of poor quality, or untidy);}
• ^{the importer gives notice to the trade mark owner before the repackaged product is put on sale and, on demand, supplies him with a specimen of the repackaged product.}

^{2 Unless the conditions listed in the above footnote are not satisfied.}

This article is part of the International Life Sciences and Healthcare update for January 2017