Exhaustion of trade mark rights and repackaging of parallel import products: the Ferring/Orifarm case

By a preliminary ruling under Article 267 TFEU in Ferring/Orifarm (judgment of 10 November 2016, Case C-297/15, Ferring Lægemidler AS v Orifarm AS, ECLI:EU:C:2016:857), the CJEU once again dealt with the issue whether a trade mark owner can oppose to the parallel import of trade-marked pharmaceutical products, whose package has been modified by the importer.

Ferring sold a drug in the Nordic countries under the trade mark of Klyx in different packages. Orifarm bought the drugs in Norway in the packets of 10 to resell in Denmark, after repackaging them,  in new packets of 1, upon which it affixed the Klyx trade mark. Importantly, Ferring marketed in Denmark the drugs both in 1-packets and 10-packets. Ferring commenced a trade mark infringement action against Orifarm before the Maritime and Commercial Court of Denmark. It contended that it had the right to object to the importation of the Klyx drugs from Orifarm. It also argued that the repackaging made by Oriform was unlawful, its only justification being to give the importer a commercial advantage.  Oriform replied that the repackaging was necessary to access for the segment of Danish market for 1-packets of Klyx. At this point the Maritime and Commercial Court of Denmark stayed proceedings and referred a preliminary question to the CJEU.

What the referring court asked to the CJEU was whether Article 7(2) of Directive 2008/95 (TMD) should be read in the sense that a trade mark owner may oppose the parallel importation of a pharmaceutical products when the importer has repackaged the products in a new outer packaging and reaffixed the trade mark of the former.

The CJEU started by recalling its previous case law on the interaction between trade mark rights and the principle of free movement of goods that may be summarized with the following statements:

a.      The trade mark owner cannot oppose the importation of repackaged products, which have previously marketed within the EEA by him or with his consent, if his opposition may contribute to the artificial partitioning of the single market.

b.     An artificial partitioning of the single market may occur when the contested repackaging is necessary to allow the importer to sale the repackaged products in the import Member State.

c.      The repackaging must be necessary to market the repackaged products in the import Member State and must be done in such a way to respect the interest of the trade mark owner.

d.     In particular, the repackaging may be necessary where the products with the packaging used in the export Member State cannot be sold in the import Member State because of some national practices: national rules that allows the commercialization only of packets of drugs of a certain size; sickness insurance rules making the reimbursement of the purchase costs of the drugs on a certain size of packets; well-established medical prescription based on standard sizes.

Then the CJEU applied these principles to the facts of the case. It observed that Ferring marketed Klyx in the same packages in the import and export countries. Therefore, the scenario described above under d), as a result of which the Orifarm access to the Danish market might be hindered, was unlikely to arise in this case. In addition, it is upon the referring court to establish the presence of such obstacles to the importer. If it is not the case, the trade mark owner can oppose the importation of repackaged trade-marked products if such products are sold in the same packages in the export and import countries. Orifarm argued that the repackaging was necessary because, in absence of that, it could have access only to a small fraction of the Danish market, the market for 10-packages of Klyx. However, the CJEU dismissed this argument as no evidence that the market for 10-package of Klyx was a small part of the Danish market was given.

Thereby, the CJEU held that Article 7(2) of TMD should be interpreted in the sense that a trade mark owner may oppose the parallel importation of a pharmaceutical products that the importer has repackaged in a new outer packaging and to which he reaffixed the trade mark of the former when:

·       The drugs can be sold in the importing country in the same packaging as that in which they were sold in the exporting country;

·       The importer failed to show that the repackaged products can be sold only in a limited part of the market of the importing countries.

Finally the CJEU said that whether, under the above conditions, Ferring rightly opposed the commercialization of the repackaged drugs by Orifarm is to a matter to be determined by the Danish referring court.  

Under the case law developed by the EU courts, the principle of exhaustion of trade mark rights can be invoked by the trade mark owner when the business practices of the parallel importers may harm his trade mark rights and are not objectively necessary. This appears to be the case with Ferring/Orifarm. The branded pharmaceutical products were sold in the same packages both in the export and import countries So, did Orifarm really need to repackage the drugs to resell them in Denmark? Would its access to the Danish market have hindered if it had sold the drugs in the original unmodified package? From the facts and evidence submitted before it, the CJEU believed that the reply to these questions was in the negative. These questions should be addressed on the merit by the referring Danish court. That said, Ferring/Orifarm appeared to be a clear-cut case where the trade mark owner has legitimate interest to successfully rely on the principle of exhaustion to oppose to the further marketing of his branded products. And when the repackaging was done by the importer with the view to gain a commercial advantage, as apparently Orifarm did with Klyx, the trade mar owner is entitled to object to the repackaging and further marketing of the products (Case C-379/97, Pharmacia & Upjohn v Paranova [1999] ECR-I-6927).