Court of Appeal upholds ruling that proposed parallel importation would infringe Flynn trade mark

June 2017


The case concerns the interaction of EU law on the free movement of goods with trade mark rights, in the context of the proposed parallel importation of pharmaceuticals. The Court of Appeal held that Flynn Pharma can prevent DrugsRus from importing Pfizer’s Epanutin into the UK from another EU member state and rebranding it as Phenytoin Sodium Flynn1. This was because it was held that Flynn had no control over the Epanutin sold by Pfizer outside the UK and Pfizer had no control over the Flynn trade mark in the UK.

Phenytoin Sodium

The case concerned an anti-epileptic drug whose international non-proprietary name ("INN") is phenytoin sodium. Before 2012, all phenytoin sodium capsules sold in the UK were made by Pfizer under the brand name Epanutin. The UK price was controlled by the pharmaceutical price regulation scheme ("PPRS")2 and the price of a bottle containing 84 capsules was about £3. Phenytoin sodium has a narrow therapeutic index meaning that there is a small difference between the blood level which is therapeutic and that which is toxic. Therefore, the UK regulator, the Medicines and Healthcare Products Regulatory Agency ("MHRA"), advised doctors and pharmacists to ensure that patients were maintained on a specific manufacturer’s prescribed product.

In September 2012, Pfizer transferred the UK marketing authorisation to Flynn Pharma following a suite of agreements, including an asset sale and a supply and quality agreement. The intention was for Flynn to genericise the product in the UK by removing the Epanutin branding and using the INN instead, which would take it outside the PPRS. The MHRA was concerned that if the drug was called phenytoin sodium, this might cause safety concerns and so told Flynn that the drug should be called ‘Phenytoin Sodium Flynn’. Flynn agreed and also applied for a registered trade mark for the word FLYNN. Flynn launched Phenytoin Sodium Flynn in the UK and Pfizer stopped selling Epanutin in the UK shortly after. Pfizer continued as the manufacturer. Flynn educated patients and health professionals that Phenytoin Sodium Flynn was exactly the same product as Epanutin. The price of a bottle of 84 capsules increased by about 18-20 times, up to about £66.50 at one point.

Proposed parallel importation

DrugsRus proposed to import Epanutin from Spain into the UK and to repackage and sell it under the brand Phenytoin Sodium Flynn, pursuant to a parallel import licence. Flynn objected and brought proceedings for trade mark infringement. DrugsRus argued that since both Epanutin and Phenytoin Sodium Flynn were the same drug and were both manufactured by Pfizer, then the repackaging should be allowed, otherwise Flynn’s enforcement of its trade mark would partition the markets of the EU. Flynn argued that this was wrong since it had not consented to Pfizer’s Epanutin product being put on the market outside the UK, and yet it was legally responsible for the quality of Phenytoin Sodium Flynn inside the UK.

The judge (Rose J) held that there had been infringement and the defendants appealed.3

Key issue

The primary issues at stake were whether Flynn could enforce its trade mark rights to prevent the proposed parallel imports or whether the principles of free movement of goods meant that the enforcement of Flynn’s trade mark rights constituted a disguised restriction on trade between member states.

EU law

Article 34 TFEU prohibits restrictions on imports between member states and thus provides for free movement of goods. Article 36 TFEU states that the free movement principle shall not preclude prohibitions on imports which are justified on the grounds of intellectual property rights, provided that such prohibitions do not constitute a disguised restriction of trade between member states.

For trade mark rights, the CJEU has recognised that trade mark owners are generally entitled to protect:

  • the specific subject matter of the right: the guarantee that the trade mark owner has the exclusive right to use the trade mark for putting a product on the market for the first time; and
  • the essential function of the trade mark: to guarantee to consumers the origin of the product by enabling them to distinguish, without any possibility of confusion, that product from the product of others.

This means that the trade mark must guarantee that all products bearing it have been manufactured under the supervision of a single enterprise which is responsible for their quality. In the case of the importation and repackaging of pharmaceutical products, where the goods have been put on the market by the trade mark owner or with its consent and it controls the quality of the goods in the country of export, then importations and repackaging for sale in the country of import will generally be allowed provided that the five BMS conditions have been satisfied. In Flynn’s case, the Court was applying the wording of Article 36 to determine if Flynn’s enforcement of its trade mark was enforceable or a disguised restriction on trade.

The Court of Appeal Decision

The Court of Appeal unanimously held that the test in these circumstances involves a dual inquiry by the Court:

  • Are the goods, which the alleged infringer wishes to import, goods which have been placed on the market in the country of export by the trade mark owner or with its consent?
    • If yes, then the trade mark owner cannot enforce its rights (subject to the importer satisfying the BMS conditions for permissible repackaging).
  • Even if the answer is no, is the party who did place the goods on the market under a trade mark in the country of export also in effective control of the trade mark which is sought to be enforced in the country of import?
    • If no, then it is highly likely that the enforcement of the trade mark is justified.

Applying the facts, the Court asked itself:

  • Whether the goods which Flynn seeks to oppose, by enforcement of its trade mark in the UK, are goods over which Flynn had the ability to exercise control before they were placed on the market in the country of export? If no:
  • Are the links which exist between Flynn and Pfizer such that use of the Flynn trade mark should be regarded as being under the control of Pfizer?

If the answer to these two questions is no, then enforcement of the trade mark by Flynn is necessary to safeguard the origin function of the Flynn mark.

In answer to the first question, following analysis of the suite of agreements between Flynn and Pfizer, the Court upheld the judge’s finding that Flynn had no control over the quality of Pfizer’s Epanutin sold by Pfizer outside the UK. Flynn and Pfizer are entirely separate companies with no corporate links enabling Flynn to control the products put on the market by Pfizer. The fact that the goods which DrugsRus seeks to import are from the same source as Flynn’s own product (namely Pfizer) is not equivalent to Flynn giving consent to their marketing or having control over their quality.

In answer to the second question, the Court upheld the judge’s findings that the specification and branding of Flynn’s product is determined by Flynn and not Pfizer. Flynn is free to obtain its supplies from elsewhere or manufacture them in-house if it chooses (however inconvenient that would be).

In summary, Flynn has a legitimate interest in the enforcement of its trade mark against goods which have never been placed on the market by it under the Flynn mark and over which Flynn has no control. Equally, Pfizer is not able to control the use which Flynn makes of its trade mark rights. Sales of the imported product by DrugsRus would affect the guarantee of origin which the Flynn mark entails. The harm caused by a defective batch of Epanutin sold by DrugsRus under the Phenytoin Sodium Flynn brand would rebound on Flynn. DrugsRus would be taking unfair advantage of the reputation of the Flynn mark. Therefore, Flynn’s enforcement of its trade mark against parallel imported Phenytoin Sodium Flynn does not amount to a disguised restriction on trade between member states.

The Court also rejected the arguments by DrugsRus that (a) its use of the mark Flynn in Phenytoin Sodium Flynn was not trade mark use or (b) was protected by the defence under section 11(2)(b) of the Trade Marks Act 1994 as an indication concerning the characteristics of the goods.

We understand that DrugsRus has submitted a petition for permission to appeal to the Supreme Court.

Competition law proceedings in relation to pricing

Separately, and independently of the trade mark proceedings, the UK’s Competition and Markets Authority ("CMA") investigated the price increases of the drug. On 7 December 2016, the CMA held that Pfizer and Flynn each abused their respective dominant positions by imposing unfair prices for phenytoin sodium capsules in the UK, thereby infringing competition law. The CMA imposed a financial penalty of £84.2 million on Pfizer and £5.2 million on Flynn, and directed both companies to reduce their prices. Pfizer and Flynn are appealing the CMA’s ruling.

1 [2017] EWCA Civ 226

2 New cost controls and information requirements for medicines and medical products

3 2015 EWHC 3759 (Ch)


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Christopher Benson

Chris is senior counsel in the IP/IT group.

Timothy Pinto

Tim is senior counsel in our IP/IT group.

"Flynn has a legitimate interest in the enforcement of its trade mark against goods which have never been placed on the market by it under the Flynn mark and over which Flynn has no control"