Big Brands Train Guns on Co-Branding, De-Branding

In our last issue, we predicted a challenge by the pharmaceutical giants to co-branding and de-branding practices in their continuing war against parallel imports (Boehringer Ingelheim KG v Swingward Ltd., C-348/04). The big brands did indeed throw down the gauntlet, and the Court of Appeal has picked it up again in yet a further chapter in the long Swingward saga of seemingly endless litigation.

Co-Branding

In its decision in spring 2007, the ECJ accepted the possibility that co-branding and de-branding could potentially damage the reputation of a mark, such that the mark owner could oppose the further marketing of goods that had first been put on the market in the E.U. by it or with its consent. Whether such damage occurred or was likely, however, was a question of fact for the national court.

As expected, back at the Court of Appeal the pharmaceutical giants argued that co-branding practices by parallel importers were indeed damaging to the reputation of their brands. The co-branding complained of involved the affixing of the importer’s name, trade mark or logo to the packaging so that it appeared in conjunction with the registered mark. The registered mark remained visible and unobscured. However, the pharmaceutical claimants argued that sharing the stage with an importer’s mark was inherently damaging.

This argument failed to impress the Court of Appeal. In their view, the co-branding in question was merely to denote, and promote, the importer of the goods. It did no harm to the reputation of the trade marks, and the claimants had failed to put forward any reasonable basis on which such damage could be said to occur. Whether co-branding caused harm to reputation was a question of fact for the national court, and no facts suggesting such damage had been put forward.

De-Branding

Undeterred, the pharmaceutical giants pressed their argument that the actions of some parallel importers in wholly or partially obscuring or removing the brand owners’ marks from packaging was also damaging to the reputation of the brands.

They referred, in particular, to instances where the PROZAC product had been placed in boxes bearing the generic name of the product and the importer’s name, while the blister packs inside still bore the PROZAC brand.

The Court of Appeal saw this argument as driven by commercial considerations, namely a desire to prevent the generic name of the product from becoming too well-known in anticipation of the eventual expiry of the PROZAC patent. Commercial complaints, however, were not the same as damage to a mark’s reputation, and the Court saw no such damage here. It considered such partial de-branding to differ little from other instances of whole or partial de-branding that the claimants had accepted and facilitated, in the form of sales of genuine products to large pharmacy chains who packaged them in their own get-up and with their own brands, as well as with the claimants’ marks.

In the Court’s view, neither total nor partial de-branding was in itself damaging. “Traders,” it observed, “have broken bulk and applied their own trade marks to goods for centuries. There is no harm in it.” Total de-branding involved no use of a trade mark at all and therefore could not be regarded as an infringement. Partial de-branding, for its part, had inflicted no damage in this case.

The Court noted that a mark owner was not, in principle, entitled to any exposure of his brand name once the product had been sold, so that “some exposure, even if not as prominent as he would wish, is more than he has a right upon which to insist. It cannot be damaging as such.”

Comment

The Court acknowledged that co-branding and partial de-branding could potentially damage reputation, depending on how co-branded advertising or the partial de-branding was carried out.

However, merely affixing an importer’s logo in a manner widespread throughout the trade in goods as disparate as food, wine and pharmaceuticals was not in itself damaging. Likewise, partially obscuring or removing a brand name was not, without evidence, to be regarded as damaging since a brand owner was not entitled to the continued exposure of his mark once he had disposed of the goods.

The Court’s remarks on total de-branding make sense, although they might not necessarily avoid a finding of passing off in cases where one trader presents another trader’s goods as his own. On the facts of this case, the importers did not appear to be doing that, but were merely indicating their status as importers (rather than manufacturers) of the goods.
Despite these clear findings, the Court reluctantly withheld judgment pending the awaited ruling of the ECJ in yet another national reference on parallel imports, Wellcome v Paranova (Case C-276/05), on whether new packaging was to be “measured against the principle of minimum intervention or (only) against whether it is such as to damage the reputation of the trade mark and its proprietor.”

The Court of Appeal noted, “European trade mark law seems to have arrived at such a state of uncertainty that no one really knows what the rules are, outside the obviously core case of straightforward infringement.” After two ECJ references in this case alone and relabelling cases before the ECJ going back 30 years, the Court of Appeal regarded the continuing room for argument as “a sorry state of affairs.” Sadly for those who prefer legal certainty, it looks set to continue.