Cost of Brand Investment Not Reasonable, Rules Court

An intellectual property decision which surprised some when it was made in 2014 has been reversed by the Court of Appeal.



It involved the importer and distributor of a branded pharmaceutical product which had an exclusive licence to use the product’s brand name in the UK. The manufacturer of the product sells it in several different EU countries under different brands.



The product was also imported by a grey importer, which imported the product from other EU countries and resold it in the UK. It decided to ‘oversticker’ the brand names on the original packaging with the UK brand name in order to give it access to the whole of the UK market.



The licensee took exception to this and took legal action alleging that its trade mark rights had been infringed. This argument was accepted by the High Court and the grey importer appealed.



European law promotes the free movement of goods across the whole of the EU. However, where the goods are trade marked, the law allows the trade mark owner to enforce its rights ‘so as to stop the importation of goods bearing the mark if it is justified for the protection of that trade mark’. There is, therefore, a balance that must be struck between ‘the ability of a trade mark owner to enforce his right, and the free movement rules’.



In this case, the Court of Appeal accepted the argument that the change of brand name was necessary in order to gain effective access to the whole of the UK market and that it would not be reasonable for the importer to invest the money necessary to build its own brand to achieve the desired market penetration.