Flynn Pharma Ltd v Drugsrus Ltd & Anor

Under Article 36 TFEU, enforcement of a national trade mark against parallel imports is not a disguised restriction merely because it impedes competition or because the goods share a manufacturing source with the proprietor’s product. The court must examine the circumstances rather than apply a rigid same-entity rule. It should ask whether the imported goods were placed on the market by or with the proprietor’s consent, including whether the proprietor could control their quality. If not, it should ask whether the party that marketed the goods under its mark retained effective, unitary control of the mark enforced in the importing State. Where both enquiries are answered negatively, enforcement will ordinarily protect the mark’s origin function.

Flynn held UK and EU trade marks for FLYNN. DrugsRus and Tenolol proposed importing Epanutin phenytoin sodium capsules from other EU Member States and marketing them as Phenytoin Sodium Flynn. Rose J found infringement and rejected the Article 36 defence and the domestic defences in [2015] EWHC 2759 (Ch). She also held, alternatively, that rebranding was necessary for effective market access. The appeal concerned whether enforcing FLYNN constituted a disguised restriction under Article 36 TFEU, whether the proposed sign was trade mark use or fell within section 11(2)(b) of the Trade Marks Act 1994, and whether rebranding was necessary.

Appeal dismissed. Floyd LJ gave the judgment. The Chancellor of the High Court and Kitchin LJ agreed.

1. The word FLYNN was used as an indication of commercial origin. Educating patients, doctors and pharmacists about the characteristics of goods sold under the mark did not convert the mark into an indication of those characteristics. The defences based on absence of trade mark use and section 11(2)(b) of the Trade Marks Act 1994 therefore failed.
2. Article 36 TFEU must be applied to the facts. The court should not substitute a bright-line same-entity rule for the Treaty language, nor adopt an unconfined balancing test. The authorities on rebranding and repackaging show that free movement may prevail where trade mark rights are under unitary control and enforcement would create an artificial partition of the market.
3. The appropriate analysis involved a dual enquiry: first, whether the imported goods were placed on the market by the proprietor or with its consent, including whether it could control their quality; and secondly, if not, whether the party placing the goods on the market under a trade mark also had effective, unitary control of the mark enforced in the importing State. Flynn had neither marketed nor controlled Pfizer’s Epanutin products in other Member States. The common manufacturing source did not amount to consent or control. Conversely, Pfizer could not control Flynn’s mark or the specification of Phenytoin Sodium Flynn. The agreements were real, arm’s-length arrangements between independent companies.
4. The medical need to establish a connection with Epanutin could become relevant only at a later stage, after a prima facie right to import had been established. It could not create that right. The practical difficulty and cost of obtaining another source did not alter the analysis. Concerns about pricing were not a principled basis for displacing trade mark rights under Articles 34 and 36 TFEU.
5. Flynn’s enforcement of its mark protected its origin function and was not a disguised restriction on trade between Member States.

1. Court of Appeal (Civil Division) — The appeal by DrugsRus Limited and Tenolol Limited was dismissed. Floyd LJ reached the same conclusion as the judge, by a slightly different route; the Chancellor and Kitchin LJ agreed.
2. High Court of Justice, Chancery Division, Intellectual Property — Rose J held that use of Phenytoin Sodium Flynn would infringe Flynn’s trade marks, rejected the Article 36 and domestic defences, and held alternatively that rebranding was necessary for effective market access: [2015] EWHC 2759 (Ch).