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This article was updated: 8 October 2018
Directive 2011/62/EU, better known as “The Falsified Medicines Directive” or “FMD”, came into force on 2 January 2013, with the aim of preventing falsified medicines from entering the legitimate supply chain in the European Union.
Delegated Regulation (EU) 2016/161 has since supplemented FMD, setting out detailed rules for new safety features to appear on the packaging of prescription-only and some non-prescription medicines to enable them to be verified and authenticated:
At each stage of the supply chain, products will be inspected to ensure they have not been tampered with, have not previously been dispensed and that the packaging is intact.
The Regulation will apply from 09 February 2019, and Marketing Authorization Holders will by then have to place the above safety features on the packaging of medicines regulated. These obligations are putting additional pressure on all in the pharmaceutical supply chain in the EU, not least parallel traders.
Parallel traders, who import medicines from lower-price into higher price markets, are considered ‘manufacturers’ under FMD, and will have to bolster their packaging and IT infrastructures. To comply, when a parallel distributor receives packs of medicine from another EU country, they must first remove the unique identifiers and ‘decommission’ these packs from the country of origin’s database. They must then re-package those medicines with new unique identifiers and ATDs, and re-commission them.
Although certain repackaging will not amount to registered trade mark infringement as established under EU case law, increased obligations upon parallel traders as a result of FMD could be a positive outcome for trade marks owners and their licensees. That said, packaging designs will need careful managing by parallel traders and originators alike, with additional features taking up space previously available for logos or distinctive get-up. This could reduce the opportunity for trade mark protection.
The UK is due to exit the EU (‘Brexit’) on 29 March 2019, and this adds uncertainty to the law and practice around parallel importing, which benefits from the exhaustion of certain intellectual property rights at least in the EU.
The exhaustion of an intellectual property right (IPR) refers to the IPR owner’s loss of the right to enforce its IPR once a product embodying that IPR has been placed on the market, either by them or with their permission, within a specified territory. Presently, the UK is part of the European Economic Area (EEA) exhaustion system, meaning that IPRs are considered exhausted once the relevant product has been put on the market (by the IPR owner or with their permission) anywhere in the EEA, including the EU. Thereby, parallel-imported products originating in the EEA and imported to another EEA country, in principle, do not infringe any IPR associated with the original products.
The current UK Trade Marks Act (1994) effectively maintains a form of regional exhaustion of intellectual property rights, specifically trade mark rights, applicable to the EEA. However, unless or until a deal is reached with the EU, it is unclear whether the UK will remain in the EEA or in a relevant customs union with the EU.
Article 57 of the 19 March 2018 text of the draft withdrawal agreement between the UK and the (remainder of the) EU relates only to goods that will already be in free circulation within the EEA as at the end of the ‘transition period’; it does not address the situation for goods after this date. Neither does it consider the position in relation to goods arriving from outside the EEA, either before or after this date. The UK Government suggests – in its 23 August 2018 guidance ‘How medicines, medical devices and clinical trials would be regulated if there’s no Brexit deal‘ – that “the UK will unilaterally align to the EU/EEA exhaustion regime from Exit day to provide continuity in the immediate term …”; therefore, only as a ‘temporary fix’.
On 24 September 2018, the UK Government published further guidance on exhaustion of IPR if there were no Brexit deal, which affirmed this position. So, at least in the “immediate term”, parallel imports to the UK of IPR-protected goods placed on the EEA market by, or with consent of, the right holder will continue to be legal. In the longer term, without amendment of the 1994 Act, the UK would revert to its pre-1973 position of international exhaustion, something that those supporting strong trade marks rights wish to avoid.
The situation is even less clear in relation to goods being exported from the UK to the EEA, where the September guidance states that “businesses undertaking such activities may need to check with EU right holders to see if permission [to import into the EEA state concerned] is needed”. Meanwhile, the UK Government is seeking to provide mutual benefits to UK and EU IPR holders, including on exhaustion. Watch this space!
For further information or updates, please contact the authors, Rachel Havard and Julie Barrett-Major, or your usual contact at AA Thornton, or consult our website at: aathornton.wpengine.com.
[1] This is an update of an article, by the authors, which appeared in the Sept 2018 issue of Law, Lore & Practice (published by the Pharmaceutical Trade Marks Group).
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