First published in our Biotech Review of the year – issue 8.
Where businesses who export IP-protected goods from the UK to the EEA are now required to have the right holder’s consent, as putting goods on the market in the UK now no longer also counts as doing so in the EEA, the picture is different for those entering the UK from the EEA. Indeed, it might be said that for the latter it is business as usual.
Put simply, importing such goods into the UK will be permitted because the UK government has mandated that IP rights in goods placed on the EEA market by, or with the consent of, the rights holder, will continue to be considered ‘exhausted’ if they are then imported into the UK. Guidance issued by the UK government says that ‘This means that parallel imports into the UK from the EEA will be unaffected. ’
But what does the law say?
The law relating to parallel imports has been developed continuously over the last 30 years, primarily through judgments of the CJEU. This body of case law will become ‘retained EU law’, and so lower courts will remain bound by it.
More senior courts, including the Court of Appeal of England and Wales, will have the power to depart from it. The fundamental purpose of allowing for EEA exhaustion is to ensure the smooth working of the internal EEA market. Over the years, in the context of parallel imports, expressions like ‘avoiding artificial barriers to trade’ and ‘not partitioning the market’ have been prevalent.
Once a good has been put on the market in the EEA by the brand owner, or with its consent, the brand owner has exhausted its exclusive right to first market the good. The brand owner can not oppose dealings in those exhausted goods unless those goods have not been previously been put on the market in the EEA by the owner, or with their consent, or there are legitimate reasons to oppose the further marketing. The whole premise is to prevent a brand owner carving the EEA market into different areas, effectively continuing to control the after-market by relying on IP rights to prevent parallel imported products.
By way of example, in cases relating to the repackaging of goods (normally pharmaceutical), the courts assess whether it is necessary to do so, and an IP rights owner cannot rely on its rights to oppose repackaging where this would contribute ‘to the artificial partitioning of the market’. Will the UK courts still apply this principle of preventing artificial partitioning of the market, where the UK is no longer part of that market and it is arguably ‘artificial’ to pretend otherwise? If ‘parallel imports into the UK from the EEA will be unaffected’, then the CJEU law that explains why intra-EEA parallel imports are legitimate must apply.
In other cases, the courts have considered whether the trade mark owner has ‘consented’ to their goods being placed on the market within the EEA, and certain facts have been found by the courts to amount to implied consent for such marketing. Once the UK leaves the EU, will this analysis stay the same? Or, will trade mark owners have stronger grounds to argue that they have not consented to any marketing which might lead to their goods being imported into the UK? Again, if ‘parallel imports into the UK from the EEA will be unaffected’ then surely that body of law must continue to be applied with regards to consent.
This is where things become odd.
The underlying rationale of EEA exhaustion and the CJEU decisions only makes sense in the context of the functioning of the single market. For example, if considering whether goods have been put on the market in the EEA and thus can be exported to the UK, one has to consider a morass of case law about the meaning of ‘putting on the market’, all in the context of preventing barriers to trade in the single market. We will be applying law wholly designed to protect the integrity of the single market, despite of course no longer being in the single market. Of course, lots of EU (IP) law is framed with the functioning of the internal market in mind, however, parallel imports is an area where that premise has totally shaped the state of the law.
The above is particularly true in the field of medicinal products. Things become even more complicated when dealing with this type of product because of the highly harmonised EU bio-pharmaceuticals system. There is also the need to have a parallel import licence (for noncentrally authorised medicinal products) issued by the competent authority in the Member State of import, based on the similarity to a reference marketing authorisation of a product commercialised in the Member State of destination, or a parallel distribution notice (for centrally authorised medicinal products).
What will happen, going forward, when the marketing authorisation of reference upon which the parallel import licence has been issued ceases to be valid? In the Ferring case, the CJEU clarified that the automatic cancellation of a parallel import licence due to the withdrawal or expiry of the marketing authorisation of reference is contrary to EU law, as it is contrary to Article 34 of the TFEU. This approach was possible in view of the highly harmonised system for medicinal products in the EU, where pharmacovigilance in the Member State of importation can be guaranteed through cooperation with the national authorities of the Member State of exportation. Can the UK follow the EU’s position now that there is no mechanism for pharmacovigilance cooperation with the national authorities of the EU Member States? More recently, in the Kohlpharma case , the CJEU considered whether a parallel import licence can be amended once the reference marketing authorisation has expired. It concluded that in situations where the marketing authorisation of the reference product in the Member State of importation has expired, a parallel importer should be able to update the documents and particulars relating to the medicinal product to be imported, on the basis of the documentation of another medicinal product with the same therapeutic indication which (i) is covered by an MA in both the Member State of importation and the Member State of exportation; and (ii) contains the same active ingredient but in a different pharmaceutical form.
Again, the decision was based on the fact that pharmacovigilance can ordinarily be guaranteed for medicinal products that are the subject of parallel imports, through cooperation with the national authorities of the other Member States, by means of access to the documents and data produced by the manufacturer in the Member States in which those medicinal products are still marketed on the basis of a marketing authorisation still in force. Will this retained EU law fit in the new framework, where the UK regulatory system will work independent from the EU? The only cooperation, relating to manufacturing, envisaged in the EU-UK Trade and Cooperation Agreement does not take us very far.
The UK will have to fill in some gaps to be able to rely on the retained EU law if it wishes to continue with the import of medicinal products from the EU. So far, the MHRA has only issued guidance on the process to convert parallel distribution notices for centrally-authorised medicinal into parallel import licences, as centrally authorised medicines will no longer be valid in Great Britain and, in turn, the EMA’s parallel distribution notices will no longer be valid in this territory. This is welcomed guidance, but it does not address any of the open questions that relate to the parallel import of medicines from the EU to the UK.
When it comes to IP-protected goods in general, if the courts move away from the retained law and the UK forges its own rules, then this creates uncertainty for when and how parallel trade is legitimate or not.
The government has indicated it will consult on the policy in early 2021. If the government retains the EEA exhaustion policy, which might well be the appropriate policy at an economic level, hopefully it will grapple with the paradox of continuing to apply case law specifically designed to support the functioning of the single market.
In the meantime, it seems we will have to rely on all of the governing principles from the CJEU with respect to parallel imported products, until we are told otherwise.
 Case C-172/00 Ferring Arzneimittel GmbH v Eurim-Pharm Arzneimittel GmbH ECLI:EU:C:2002:474
 Case C-602/19 Kohlpharma GmbH v Bundesrepublik Deutschland ECLI:EU:C:2020:804