Introduction

Have you been prescribed or purchased Tylenol or Anadin tablets in Hong Kong before?  They contain the identical active ingredient as Panadol, paracetamol, but why do your doctors usually prescribe Panadol or generic paracetamol?  Could one import Tylenol or Anadin from overseas and sell it in Hong Kong as “Panadol” or “Panadol Plus”?  The English Court of Appeal has given some insight to these questions in Specialty European Pharma Ltd v Doncaster Pharmaceuticals Group Ltd [2015] EWCA Civ 54 (“SEP v Doncaster”).

SEP v Doncaster

Facts

Madaus GmbH manufactures trospium chloride and markets it in France under the trade mark CÉRIS and in Germany under the mark URIVESC.  It has appointed the claimant, Specialty European Pharma Limited (“SEP”) as its exclusive licensee of trospium chloride marketed under the REGURIN mark in the UK and SEP distributes the product there.  The first defendant, Doncaster Pharmaceuticals Group Limited (“Doncaster”) imported CÉRIS by placing stickers over the box bearing the name “trospium chloride” but without using the REGURIN mark (“over-stickering”).  Subsequently it started over-stickering the boxes with the mark REGURIN (“re-branding”).  It has also started to import URIVESC and to re-brand that with REGURIN as well.  SEP claimed trademark infringement against Doncaster for the re-branding practice.

Legal Analysis

Under EU law, restrictions on basic free movement of goods and services within the EU may be justified on grounds of protection of industrial and commercial property (including trade marks).  Notwithstanding that, such restrictions shall not constitute a means of arbitrary discrimination or a disguised restriction on trade between EU states, i.e. artificial partitioning of the market.  In SEP v Doncaster, the Court summarised the principles on the rights of a trade mark owner vis-à-vis parallel importers in this regard:

1.        subject to compliance by the importer with all the conditions in Bristol-Myers Squibb v Paranova [1997] FSR 102 (“BMS”), namely, (i) necessary to repackage to market the product, (ii) no effect on original condition and proper instructions, (iii) clear identification of manufacturer and importer, (iv) non-damaging presentation, and (v) notice, a trade mark owner may not enforce his mark against parallel imported goods which are re-branded if it is established that it is necessary to re-brand in order to gain effective access to the market;

2.        effective access to the market is not achieved by being able to place some goods on the market;

3.        it may be necessary to re-brand where the parallel importer is not excluded from the whole of the market, but is merely excluded from a substantial part of it or from a significant proportion of consumers;

4.        in determining whether it is necessary to re-brand, the court must consider what alternatives exist for the parallel importer, and whether they are realistic (e.g. trying to eliminate label-resistance amongst pharmacists or consumers).

The Court held that because in the UK the pharmacist is not allowed to substitute another product, even if identical, once the prescription is written for a brand, it is necessary to re-brand in order to get access to that part of the market which is not insignificant.  There is also a persistent practice of filling generic prescriptions with REGURIN, and thereby foregoing very significantly increased profits, which the Court considers to suggest a strong resistance to brands other than REGURIN.

The Court also noted that it was unrealistic for Doncaster to adopt its own brand for its parallel imports and market them directly to doctors: to do so would have asked the doctor to place reliance on an inherently unreliable source of supply (i.e. parallel imports), something the doctor does not do if he prescribes REGURIN, FLOTROS (another brand of the same generic drug) or by reference to the generic name.  The Court considered that Doncaster’s parallel imported product will not be able to compete on price with generic product, so there is no benefit in that regard.

In the circumstances, the Court concluded that a significant portion of the market at both prescribing doctor and pharmacist levels remain inaccessible for Doncaster: the adoption of an own brand is not a real world alternative.  As such the enforcement of the trade mark would create an artificial partition in the market in a way which makes it unlawful to enforce the trade mark under EU law. Hence, SEP’s claim failed.

How about in Hong Kong?

Under section 20(1) of the Trade Marks Ordinance (Cap. 559), a registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market anywhere in the world under that trade mark by the owner or with his consent.  Nevertheless, it does not cover a case similar to SEP v Doncaster, where the product is marketed under different marks in different countries.

Freedom of movement of goods is nonetheless enshrined in Article 115 of the Basic Law of Hong Kong.  Enforcement of trade mark rights by a proprietor in a way similar to SEP may amount to abuse of market power, and thus breach of the Second Conduct Rule under the Competition Ordinance (Cap. 619) upon its full implementation.  The concerted practice, between an overseas manufacturer or global distributor granting an exclusive trade mark licence to a local distributor, may also be regarded as anti-competitive and amount to breach of the First Conduct Rule thereunder, since effective access to market would not be achieved.

Unless the prevailing local prescription practice is markedly different from that in the UK, SEP v Doncaster may arguably be in favour of re-branding of pharmaceutical products by parallel importers in Hong Kong pursuant to the full implementation of the Competition Ordinance.  But in order to benefit from the “protection” against trade mark owners, it is at least necessary for parallel importers to comply with the BMS conditions.

Other regulatory provisions

Despite the foregoing, parallel importers are required to observe other regulatory laws in Hong Kong.   For instance, under the Trade Descriptions Ordinance (Cap. 362), it is a criminal offence if a person falsely applies to any goods any trade mark or any mark so nearly resembling a trade mark as to be calculated to deceive, unless he proves that he acted without intent to defraud.  In order not to fall within the ambit of this offence, parallel importers should follow strictly the BMS conditions.  In particular, there should be clear identification of the manufacturer and importer on the packaging of pharmaceutical products.

Further, before starting to deal with parallel import pharmaceutical products, parallel importers shall comply with the provisions under the Pharmacy and Poisons Ordinance (Cap. 138) and the Pharmacy and Poisons Regulations (Cap. 138A), including the following:

1.        parallel importers shall apply for a wholesale dealer licence and could only sell to other wholesale dealers, licensed manufacturers and listed seller of poisons;

2.        the pharmaceutical products shall be registered with the Pharmacy and Poisons Board;

3.        the products shall be properly labelled, stored and transported, and the sales thereof shall be strictly limited.

Conclusion

It is at least arguable that subject to local regulatory requirements, parallel importers may re-brand pharmaceutical products and offer them for sale in Hong Kong, particularly with the full implementation of the Competition Ordinance.  On the other hand, trade mark owners could still claim against parallel importers in infringement if the conditions in SEP v Doncaster are not satisfied, for example where there is evidence to prove effective access of parallel import pharmaceutical products to the market even without re-branding.