Parallel Trade: Rebranding of Generic Medicine to Originator Brand Name Constitutes Trade Mark Infringement

On 12 April 2018, the Dutch-language Commercial Court of Brussels (the “Court”) gave judgment in a dispute between Novartis AG (“Novartis”), a pharmaceutical company developing, manufacturing and distributing innovative medicines, and Impexeco NV (“Impexeco”), a wholesaler of medicines active in the parallel trade of medicines within the European Union.

Novartis produces and distributes a prescription-only medicine indicated for the treatment of breast cancer with the active substance “letrozol”. In Belgium and in the Netherlands, Novartis first brought this medicinal product onto the market under the name “Femara”. Novartis had obtained trade mark protection for Femara and Femara’s active substance was protected by a patent. After the expiry of Femara’s patent, the Novartis group brought a generic version of the medicine on the market under the name of the active substance letrozol as “Letrozol Sandoz”. Letrozol Sandoz was produced in Germany by a subcontractor and then bought by Sandoz BV in the Netherlands and by Sandoz NV in Belgium. Novartis and Sandoz belong to the same group of companies.

The dispute at hand arose after Impexeco bought the generic medicine Letrozol Sandoz from Sandoz in the Netherlands and then introduced and sold it on the Belgian market under Novartis’ trade mark Femara. Novartis claimed that such a practice constituted a trade mark infringement. Novartis added that the European rules on free movement of goods did not allow Impexeco to sell generic medicines as brand name medicines, especially since Impexeco made a profit margin of 3,000% on the sale of these products.

The Court first upheld Novartis’ argument that the principle of exhaustion of trade mark rights, as provided for by Article 13.1 of Regulation 207/2009 on the Community trade mark (the “Regulation”), did not apply to this case. The Court found that it was not disputed that the Femara trade mark had not been used by Novartis with respect to the generic medicines bought by Impexeco in the Netherlands. Therefore, the trade mark rights of Novartis in that trade mark were not exhausted with respect to these products. As a consequence, the Court held that Impexeco had infringed Novartis’ trade mark rights.

The Court then went on to examine whether Impexeco could rely on an exception, i.e., the principle of free movement of goods, to sell these generic medicines. Referring to the case-law of the Court of Justice of the European Union, the Court recalled that the principle of free movement of goods would allow Impexeco’s practice only if the exercise of its trade mark rights by Novartis resulted in an artificial partitioning of the markets. In this respect, the Court also recalled that an artificial partitioning of the markets necessarily implied that the markets in question be identical or, at the very least, that the products be perfectly substitutable.

In this respect, the Court found that generic medicines and brand name medicines belong to different markets since they are not substitutable.

In reaching this conclusion, the Court referred to the Belgian regulatory framework which embraces the principle of “therapeutic freedom” which, as a rule, prohibits substitution in the deliverance of medicines. Subject to some strict exceptions, the pharmacist must not deliver a generic medicine if a physician prescribed the original, branded product. Furthermore, substitution of a brand name medicine by a generic medicine is strictly advised against, especially in oncology. Finally, generic medicines and brand name medicines are regulated differently. The finding of the Court that there are two distinct markets was not altered by the fact that the products were identical and bioequivalent.

The Court was of the opinion that Impexeco was fully capable of accessing the generic medicines market by using: (i) the original name of the products, i.e. letrozol, in combination with the Sandoz trade mark; or (ii) a trade mark of its own. Hence, Impexeco’s access to the market for generic medicines was not unlawfully hindered by the exercise of Novartis’ trade mark rights.

In view of the above, the Court held that:

  • Novartis’ trade mark rights in Femara were not exhausted since the products at hand had not been brought onto the market under that trade mark in the European Union;
  • by rebranding the generic medicine Letrozol Sandoz as Femara, Impexeco had infringed Novartis’ trade mark rights; and
  • the exercise by Novartis of its trade mark rights in Femara did not artificially partition the market for letrozol products.

As a consequence, the Court sided with Novartis and ordered Impexeco to cease the importation and rebranding of Letrozol Sandoz under forfeiture of a penalty payment of € 1,000 for each violation.

By Thibaut D’hulst and Lily Kengen