Repackaging of pharmaceuticals

Intellectual property rights easily come in conflict with the objectives of the EC Treaty since they are exclusive in their nature and can be seen as a legal way to create trade barriers. In Article 222 of the Treaty it is stated that the Treaty shall not prejudice the rules in the Member States governing the system of property ownership, and in Article 36 it is permitted to protect intellectual property rights in spite of the free movement provisions. To be able to apply the rules on free movement and the competition rules to intellectual property rights used to divide the market and distort competition the Court has developed the case law by referring to the objectives of the Treaty. This was done through the development of the doctrine of exhaustion, the distinction between existence and exercise and the notion of specific subject-matter. Regarding trade marks the Court has defined the specific subject-matter to be the guarantee that the owner of the trade mark has the exclusive right to use that trade mark, for the purposes of putting products protected by the mark into circulation for the first time. The rule of exhaustion concerning intellectual property rights such as trade marks makes it possible to import most products in parallel. When it comes to pharmaceuticals this has however created certain problems. The packages of the pharmaceuticals are for some reason often different in different Member States, which has given rise to legal proceedings when the proprietor has prevented the repackaging by the parallel importer. In such cases concerning repackaging the Court has applied the free movement rules and the principles of the specific subject-matter and the difference between existence and exercise. It has also used the notion of essential function and stated this to be to guarantee the identity of the origin of the trademarked product to the consumer, by enabling him without any possibility of confusion to distinguish that product from products which have another origin. This means that the right to prevent repackaging is part of the essential function. The Court has however stated that the exercise of the trade mark nevertheless in such circumstances could amount to a disguised restriction on trade between Member States. This would be the case if the use of the trade mark contributes to the artificial partitioning of the market and if it is shown that the repackaging cannot adversely affect the original condition of the products. A parallel importer would then be permitted to repackage the pharmaceutical if he gives prior notice of the marketing and states on the new packaging by whom the product has been re-packaged. In the latest case, Bristol-Myers Squibb, it was also required that the repackaging was necessary and that the reputation of the trade mark did not risk being wounded. It was also made clear that it does not have to be the intent of the proprietor to partition the market artificially, it is enough that this is the effect, to make the prevention of repackaging in breech of the free movement rules. The question is however if instead Article 86 could have been applied to these repackaging cases. When it comes to intellectual property rights the Court has used the distinction between existence and exercise and stated that even though the exclusive nature of intellectual property rights confer some degree of market power, the mere ownership does not in itself give rise to a dominant position. To define abuse the Court has also used the notions of specific subject-matter and of essential function. In general it can be said that Article 86 could be applied in repackaging cases where the use of different packages and the striving to prevent repackaging is a manifestation of a wish to maintain price differences or to make it hard for a parallel importer to sell the product in the ''wrong'' packaging. If the prevention of repackaging is made because of a wish to detect the person in the selling chain who sold the product to the parallel importer it would most certainly be seen as abusive. The assessment of whether a conduct is abusive under Article 86 or not is objective and involves the same assessments as for if an exercise of an intellectual property right contributes to the artificial partitioning of the market under the free movement provisions. If a conduct has been judged to contribute to the artificial partitioning it would therefore most certainly be judged to constitute an abuse. Whether the abusive conduct actually would be caught by Article 86 or not depends on if the other criteria in the Article are fulfilled, i.e. that the undertaking occupies a dominant position in a substantial part of the Common Market and that the abuse is likely to affect trade between Member States. The essential facilities doctrine might also be applied in accordance with case law under Article 86, if the prevention of repackaging would be likely to eliminate all competition, if it could not be objectively justified and if there are no actual or potential substitute to the repackaging