Flynn Pharma Ltd v Drugsrus Ltd & Anor

This claim is brought by the Claimant (‘Flynn Pharma’) alleging that the Defendants are proposing to infringe its trade mark ‘Flynn’ by importing into the United Kingdom pharmaceutical products which have been sold in other EU member States under the brand name ‘Epanutin’ and affixing to them the name ‘Phenytoin Sodium Flynn’. The relief sought is an injunction to restrain the Defendants from infringing the trade mark and either delivery up or destruction on oath of all infringing articles. Flynn Pharma also seeks damages or an account of profits and an order for the dissemination and publication of this judgment.

The Defendants contend that such imports would not be an infringement of Flynn Pharma’s mark either because they would not be making trade mark use of the word ‘Flynn’ or because the reliance by Flynn Pharma on its trade mark rights under domestic legislation to stop these imports constitutes a disguised restriction on trade and is contrary to the free movement provisions of the Treaty on the Functioning of the European Union (‘TFEU’).

Flynn Pharma is a speciality pharmaceutical company trading in both generic medicines and speciality brands. It has never operated as a research-based pharmaceutical company but works at the ‘mature end’ of the market, selling branded products once the patent on the product has expired so that generic versions of the drug are usually competing on the market. It acquires the rights to branded products from research-based pharmaceutical companies and promotes and sells them under the Flynn brand. As Mr Walters, a director of Flynn Pharma, describes it:

“Flynn has traditionally looked to ‘rescue’ such product lines. They are the tail end products that the major pharmaceutical companies no longer have in their focus; they are not core to their business. There is still a role for these products though and doctors and patients will still be relying on them. They do not want that product to disappear from the market, so that is really our role. We look for products that we can acquire the rights to, or enter into some kind of commercial deal, to ensure continuity of supply into the market. Obviously as part of that we make a margin.”

Flynn Pharma currently markets about 14 different drugs including phenytoin sodium, the drug at the centre of this dispute. About 90 per cent of Flynn Pharma’s total turnover comes from the UK market and in the last financial year, its UK sales were over £40 million. It remains a small company with about 15 employees and 25 field representatives who are trained to promote the products in Flynn Pharma’s portfolio. It is a full service pharmaceutical company which means that it is responsible for the manufacture of its licensed and unlicensed products (although as described later it does not in fact carry out the manufacture in its own facilities), ongoing technical support and pharmacovigilance (that is the mechanisms by which information about the effects of, and any problems arising from, the use of the drug by patients is gathered and reviewed).

Flynn Pharma is the proprietor of registered trade marks for the word ‘FLYNN’:

All of Flynn Pharma’s products carry the ‘FLYNN’ name and logo and Flynn branding is visible on the packaging of all its products in the UK. Flynn branding is also used on the company’s business cards, promotional and educational material and patient leaflets. It also operates a website with the domain name www.flynnpharma.com.

The Defendants are two companies in the group established in about 1997 by Mr Naresh Shah and his wife to trade in the business of parallel imported pharmaceutical products. The role of the Second Defendant (‘Tenolol’) in the group is that it applies for, holds and maintains product licences for parallel imports (‘PLPI’s). The role of the First Defendant (‘Drugsrus’) is as a wholesaler of pharmaceutical products. It imports and sells parallel imported drugs using licences held by Tenolol. Drugsrus has a wholesale dealer’s licence and has satisfied the stringent criteria applicable in relation to the storage, distribution, tracking and management of pharmaceutical products. The group employs about 80 people including four pharmacists and three regulatory staff responsible for PLPI applications and for maintaining the product licences. The group holds about 900 PLPIs making it one of the bigger parallel import licence holders in the UK market. Parallel imported products comprise about 80 per cent of its turnover.

The principal witness for Flynn Pharma at the trial before me was Dr David Fakes who is a director of Flynn Pharma and manages the day to day operations of the company with his colleague David Walters. He is a registered pharmacist and has been so for 32 years. He has a PhD in material science and a postgraduate qualification in business administration. After completing his PhD in 1985, he worked for another large pharmaceutical company in research and development. He was trained in all aspects of pharmaceutical pre-formulation, formulation and testing of drugs and in the design of the product which would eventually come to market. He also worked on post-approval and post-marketing development when new strengths, formulations presentations or indications were investigated and developed. After leaving that company he became director of R&D at a different pharmaceutical company for 10 years where he was responsible for all aspects of product development, regulatory and medical affairs. He also worked as a consultant in the industry for about 4 years, that work overlapping for two years with his work for Flynn Pharma. He has worked full time at Flynn Pharma since 2006. The other witness for Flynn Pharma was David Walters. He was one of the founders of Flynn Pharma when it was originally set up in 1994 and has been a director of the company ever since.

Evidence for the Defendants was given by Naresh Shah an employee of Jumbogate Ltd, a company within the same group as the Defendants. Mr Shah is a pharmacist who qualified in 1977 and worked in retail pharmacy between 1978 and 2012. From 1988 he was also involved in the wholesale importation and distribution of parallel imports from other EU Member States into the UK. He is the ‘Responsible Person’ in relation to Drugsrus’ wholesale dealer’s licence and is responsible for ensuing compliant distribution practices.

Both sides levelled some criticism at the other side’s witnesses but I consider that all three witnesses were doing their best to assist the court. In any event, there is very little factual dispute to be resolved in this case.

In the UK the authority with responsibility for the review and approval of medicines is the Medicines and Healthcare Products Regulatory Agency (‘MHRA’). The MHRA issues marketing authorisations, also referred to as product licences, when it approves a product application. That marketing authorisation is the regulatory permission to sell that particular product and it specifies how and where the product will be manufactured, for which patients and for which conditions it may be used and how the product is to be presented, including the product name and packaging. Once a product has been authorised it may then be considered by the National Institute for Health and Care Excellence (‘NICE’) which recommends to the Government whether the product represents value for money and so should be included on the list of drugs available in the NHS.

Dr Fakes described the responsibilities of the holder of a marketing authorisation as follows:

“100.

Flynn is the marketing authorisation holder (the "MAH") for Phenytoin Sodium Flynn in the UK. … We own the licences so we are responsible in law for the product. We deal with every aspect of the regulation of that product and we would also be the party to notify customers, the NHS, if there were critical supply shortages (as there have been on two or three occasions for this product) or patient safety issues following receipt of an adverse event report (if sufficiently serious). We have an obligation to ensure the continued availability of the product. We must have in place arrangements for provision of technical support and medical information to healthcare professionals. We have staff whose sole job is to provide information and respond to technical and medical information enquiries, which can be of all types, typically from healthcare professionals, but occasionally from patients.

101.

Flynn's ownership of the licence imposes on us all the regulatory obligations pertaining to that licence for the manufacture of the product in accordance with its licence and in accordance with current standards of good manufacturing practice and current scientific knowledge. We are responsible for the quality, testing and specification of the ingredients, not only the [active pharmaceutical ingredient] but all the ingredients that go into the manufacture of the finished product and we are obliged to keep our labelling up to date. If new information comes to light relating to the possible risks associated with use of the product, we must take steps to amend the product information leaflet and notify the MHRA, doctors, pharmacies and patients.

102.

We are responsible for notifying in advance, and getting prior approval, of any changes to the product which would need to be reflected in the marketing authorisation. You cannot make a change and not tell the MHRA in advance and obtain their approval, even if it is the most trivial of changes to the product testing, for example. This is all part of the MAH's total control of the quality of the product. …”

He went on to say that although, as I describe below, Flynn Pharma contracts out the production of the products, the responsibilities imposed on Flynn Pharma are exactly the same in terms of the range of duties and assurances to which the company commits as the holder of the marketing authorisation: “You are subcontracting part of the activity but not the legal responsibility for the product”.

Mr Shah described in his evidence the process for applying for a PLPI. Every application for a licence must be accompanied by mock-ups of the labels intended to be applied to the imported product before marketing it, mock-ups of the outer packaging and of the proposed patient information leaflet. After the grant of the licence, if the PLPI holders wishes to make a change to the livery or the information leaflet, it must make an application to the MHRA for approval of a variation. Where the PLPI is granted, the original outer packaging of an imported pharmaceutical product is either over-labelled or it is discarded and the product is re-boxed or repackaged. The importer must also include in the box a patient information leaflet in English. The identity of the importer must be stated on the label and on the patient information leaflet together with a statement that the product has been imported from the EU. The labels, repackaging and patient information leaflets are all approved by the MHRA.

The control of the price at which a prescription pharmaceutical product can be sold in the UK depends on whether the product is a branded or generic product. The price at which branded products can be sold by the marketing authorisation holder to pharmacists is regulated by the pharmaceutical price regulation scheme or ‘PPRS’. The PPRS is a non-contractual agreement between the UK Department of Health and The Association of the British Pharmaceutical Industry and applies to all branded licensed medicines available on the NHS. Its effect is to cap the total revenue received by pharmaceutical manufacturers on their portfolio of branded medicines so that if a manufacturer increases the price of one product in its portfolio, it has to reduce the price of another. The price of generic products sold under the drug’s international non-proprietary name (‘INN’) is not subject to the PPRS. The price paid by the NHS for them is determined by what the pharmacies are being charged since the expectation is that this is set by competitive market conditions.

Most prescriptions for pharmaceuticals are written in the course of primary care by a doctor. These prescriptions are filled by retail pharmacists who buy their stock from specialist pharmaceutical wholesalers. Flynn Pharma distributes its products through two of the main national wholesalers, AAH and Phoenix. Pharmacies receive payment for the prescriptions they fulfil from the NHS and the amount they receive is dictated by the price of the product listed in the Drug Tariff set by the NHS Business Services Authority. The Drug Tariff applies equally whether the generically written prescription is filled by a branded product or a generic; the reimbursement price to the pharmacist is the same. To the extent that the pharmacy can source their products for less than the Drug Tariff price, they will make a profit – thus they have an incentive to obtain the product from the cheapest source available.

If a prescription is presented to a pharmacist with the branded name prescribed – in this case ‘Phenytoin Sodium Flynn’ - then the pharmacist must fill that prescription with the product bearing that name. But if it is simply a generic prescription for, for example, ‘phenytoin sodium 100mg capsules’, then the pharmacist can choose which product to supply, either the branded product or a generic product if one exists.

The product in dispute is the pharmaceutical product with the INN phenytoin sodium. It is an anti-epileptic drug (AED) used in the treatment of epilepsy and to prevent other kinds of seizures caused by brain surgery or head injuries. It is also used for trigeminal neuralgia (facial nerve pain). It was originally developed by the Pfizer group but its patent protection expired many years ago. Epilepsy is not a single condition or disease but is a complicated group of conditions varying in severity. It is a serious and chronic condition and the consequences of seizures may be significant and traumatic for the patients and their families. Dr Fakes described the current place of phenytoin sodium in the market as follows:

“Phenytoin was never the drug of choice for all epilepsies but it was a preferred agent for some epilepsies in the past. However, as newer agents have come to the market with improved efficacy, fewer contra-indications (side effects) and/or better safety profiles, the place for Phenytoin Sodium in therapy has declined such that it is no longer the drug of first choice for any seizure type - it is not even the drug of second choice. It is considered as a tertiary or an adjunctive agent in some patients in whom perhaps the initial first approach and backup approach do not provide adequate control. One can look at the sales data by volume over the last five or ten years and generally you will see a decline in the sales of phenytoin sodium of approximately 5% per year.

NICE CG137, published in January 2012 and updated most recently in January 2015, provides authoritative guidance as to the diagnosis and management of epilepsies. Appendix E to that guidance sets out the AED options by seizure type, offering recommendations as to first-line AEDs, adjunctive AEDs, other AEDs that may be considered in tertiary care and finally AEDs that should not be offered. Eight different seizure types or categories are delineated. Phenytoin is first-line in none and adjunctive treatment in only one (convulsive status epilepticus). The guidance reserves its use in one seizure type (focal) for tertiary referrals and advises that it is not recommended at all in three seizure types.”

Phenytoin Sodium comes in a number of formulations and strengths. As well as the capsules which are at the centre of this dispute, there is also an oral tablet, a chewable tablet directed mainly at children (where the API is the phenytoin base rather than the sodium salt), an oral suspension and an injection. The capsules have the largest volume of sales but there is also a small market for the other presentations.

One significant characteristic of phenytoin sodium is that it has a narrow therapeutic index. This means that there is a small difference between the blood level of the drug that is necessary to achieve therapeutic efficacy and the blood level that once exceeded might result in adverse events and/or drug toxicities. It is therefore very important for epilepsy patients to achieve a high degree of stability of the drug level in their blood because the consequence of even a small change in blood level may be a seizure or possible toxicity, both of which can be unpleasant and distressing.

This characteristic of phenytoin sodium caused the MHRA to issue guidance in November 2013 about prescribing AEDs (‘the Guidance’). The Guidance was based on the advice of the Commission on Human Medicines although Dr Fakes’ evidence was that there was nothing particularly new or ground-breaking about it. The Guidance divided AEDs into three categories according to the importance of maintaining a consistent supply and depending on whether there is considered to be a risk or problem with switching between different formulations. Phenytoin Sodium is one of four AEDs specified by the MHRA to be in category 1 of its Guidance. The concern with these category 1 agents is that even if two products have the same active ingredient and are presented in the same form (for example, capsules), different sources of API or different places or methods of manufacture may result in subtle differences in the products such that one product may not be exactly the same or therapeutically or clinically the same as the other. As a result there is a concern amongst patients and healthcare professionals about switching between products from different sources and a desire to maintain continuity of supply from one source. For category 1 AEDs the MHRA advises, but does not compel, doctors to ensure that their patient is maintained on a specific manufacturer’s product. The MHRA additionally advises pharmacists that they should ensure the continuity of supply of a particular product when the prescription specifies it, but that usual dispensing practice can be followed when a specific product is not stated. It is important with such drugs for GPs to know exactly what they are prescribing and, for patients, what they are taking. The Guidance only applies where phenytoin sodium is prescribed as a treatment for epilepsy. Dr Fakes pointed out that the Guidance states that GPs should ensure patients are maintained on a specific manufacturer's product. However, this is clarified later in the same Guidance when they say that by 'manufacturer', they are referring to the 'Marketing Authorisation Holder'.

Before September 2012, all phenytoin sodium capsules supplied in the UK were made by the pharmaceutical company Pfizer Ltd and sold under Pfizer’s brand name EPANUTIN. Pfizer was the originator of phenytoin sodium and has manufactured and marketed the drug for many decades as the holder of the market authorisation granted by the MHRA. As at September 2012, the price at which Pfizer could sell Epanutin was controlled in the UK by the PPRS with the result that Epanutin was sold at very low prices – about £3 per bottle of 84 100mg capsules. This meant that although phenytoin sodium was no longer protected by patent, there was no competing generic alternative on the market and very little by way of parallel imports of Epanutin from other EU member states. Pfizer made the API for Epanutin at its facility in Kalamazoo, USA and the capsules were produced in Pfizer’s secondary manufacturing facility in Freiburg in Germany.

Dr Fakes describes the negotiations with Pfizer over the acquisition by Flynn Pharma of the marketing authorisation for phenytoin sodium:

“Dave Walters and I set out our approach of how Flynn Pharma would manage Phenytoin Sodium if Pfizer were to divest it to us. We presented a 'wall-to-wall' solution covering all aspects of the manufacture, supply and support for the product such that we could take it on from them. We explained that our intent (at the time) was to genericise the product, which would mean removing the Epanutin branding and selling it by reference to the generic name 'phenytoin sodium hard capsules Xmg' thereby removing the product from the constraints of the [PPRS] giving freedom of pricing; market-based pricing. This would have allowed Flynn Pharma to increase the price to make the product sufficiently worthwhile to fund the increased stocks and to guarantee its continued availability. However, before Pfizer could be persuaded to divest the product, they had to be sure that Flynn Pharma had the wherewithal, that we had considered and had viable plans for every aspect of what we proposed to do. They did not want to sell this product to a company in whom they did not have confidence that we would maintain its availability. That would still reflect badly on them.”

There was a suite of agreements between Pfizer and Flynn Pharma in early 2012 under which the marketing authorisations were transferred. I will need to consider the terms of those agreements later. Flynn Pharma only acquired the rights to the capsules not to the other presentations which continue to be made and marketed by Pfizer in the UK under the brand name Epanutin. It also only acquired the rights for phenytoin sodium capsules in the UK not for other countries in the EU. Phenytoin sodium capsules continue to be sold under the Epanutin brand name in other EU member states.

Following the acquisition of the licences, Flynn Pharma applied to the MHRA to change the name of the product from Epanutin to ‘phenytoin sodium’. However, this was rejected by the MHRA who suggested instead that the product be called ‘Phenytoin Sodium Flynn’. Flynn Pharma initially resisted this proposal and did not understand the reason for it. In fact as later emerged, it was because of the Guidance that was at that time being developed within the MHRA but which had not yet been made public. A licence variation was granted for the change of name to Phenytoin Sodium Flynn on 29 August 2012. Flynn Pharma then registered the word ‘FLYNN’ as a trade mark. The word had been used as a company name particularly on a logo with a little bird printed on the packets of Flynn Pharma product. Pharmaceutical companies will often register the name of the company as a trade mark and then devise and register the separate name of each product which they want to market as a branded product within their range. Here, unusually, the mark protected in relation to this particular product was part of the product licensee’s name.

Flynn Pharma started selling the product named Phenytoin Sodium Flynn on 24 September 2012. Pfizer stopped selling Epanutin capsules in the UK shortly afterwards. The capsules are sold under the name Phenytoin Sodium Flynn in four strengths, 25mg, 50mg, 100mg and 300mg with 100mg being by far the most commonly prescribed.

Dr Fakes’ evidence was that when Flynn Pharma acquired the market authorisation for phenytoin sodium from Pfizer, the company ‘went to tremendous lengths’ to establish the supply chain. This was a product which had been out of stock on occasion in the UK and this has unfortunate consequences. Flynn Pharma made a commitment to the MHRA that the product would be continuously available and this involved building up buffer stocks and putting in place alternative sources of manufacture and packaging. The MHRA also required Flynn Pharma to implement a communication plan notifying the patient community, healthcare professionals and prescribers of the name change. Dr Fakes described what this involved:

“88.

We communicated the name change to patients through the epilepsy support groups and charities who are often the first port of call for a patient in distress, or a patient seeking information. In addition to the communications circulated to those groups, we also worked with them to agree the announcements on their websites (see for example our discussions with the Epilepsy Society). We also set up the helpline which was, and continues to be, manned by a clinical nurse specialist employed by Flynn. The free phone number was widely communicated through the advocacy groups and responses to requests for medical information were drafted and pre-agreed. I understand from the clinical nurse, Christine Wakefield, that the helpline has received 408 calls (to 27 March 2015), and peaks in call volumes were noted at the launch of our Phenytoin Sodium Flynn product and around the time of the launch of the NRIM product. Several patients have also sought to communicate with Flynn directly about their concerns and as a registered health care professional, I am able to respond to those concerns and handle confidential patient data … .”

89.

In addition a letter/mailing went to a total of 42,523 GPs (which was also published on the MHRA website) and a different letter went to 19,364 pharmacists. We also placed advertisements in a range of journals to try and get the announcement of this change seen on at least one occasion by all health care professionals who might possibly have an interest in, or be affected by it. There were adverts in popular doctor communications such as Pulse and in the Journal of the Pharmaceutical Society of Great Britain (read by many pharmacists).

90.

Finally we sent emails to prescription software providers (whose software assists primary care providers in writing prescriptions for patients) with a view to them updating the product name in their software and to our wholesalers to notify them of the situation.”

In all these communications the main message that Flynn Pharma wanted to get across to patients and healthcare professionals was that the product Phenytoin Sodium Flynn was exactly the same as the product they were used to using under the brand name Epanutin. For example, text that was drafted for the Epilepsy Society’s website in September 2012 said (emphasis in the original):

“Will the capsules be the same as Epanutin?

Yes. The new capsules will be exactly the same as Epanutin. The only thing that is changing is the name

The capsules will not differ in any way: they will contain the same ingredients and be prepared and packaged in the same way. They will also be made in the same manufacturing warehouse. To reassure you that the capsules are the same as Epanutin, they will look the same – the same size and colour, even down to the word ‘Epanutin’ on the capsule itself.”

Although the MHRA required Flynn Pharma in effect to include a brand name in the approved name for the product, it accepted that the product should be treated as a generic product rather than a branded product for the purpose of being outside the PPRS. Once Phenytoin Sodium Flynn replaced Epanutin capsules on the UK market, there was an increase in price from about £3 for Epanutin capsules to about £66.50 for 84 Phenytoin Sodium Flynn 100mg capsules. Not surprisingly this generated some adverse comment from users of the product and others blogging about pharmaceutical matters. There were discussions between Flynn Pharma and the relevant authorities who accepted that a price increase was justified. The current price for 84 capsules of 100mg strength is about £54.

In addition to Phenytoin Sodium Flynn capsules, the UK market is supplied with 100mg capsules marketed by NRIM and called ‘Phenytoin Sodium NRIM’. Presently the only other sources of phenytoin sodium capsules in the UK are parallel imports of Epanutin from other Member States.

So far as parallel imports of phenytoin sodium are concerned, Mr Shah’s evidence is that the UK pharmaceutical market is considered to be a high price market compared to some other EU Member States such as Spain, Poland and Italy. The Defendants initially started to import phenytoin sodium under the brand name Epanutin from Spain in 2010. However, the very considerable price difference between the Phenytoin Sodium Flynn 100mg capsules and Epanutin capsules on sale in other EU Member States prompted the Defendants to look around for other sources of imports. Mr Shah says that the group found that all four strengths marketed by Flynn Pharma in the UK are available as Epanutin marketed by Pfizer in Ireland. The Defendants applied to vary their existing PLPI to permit the marketing of the imported product under its generic name as well as under the brand name Epanutin. The MHRA contacted them to say that the product could not be marketed under its generic name, in accordance with the policy underlying the Guidance. The MHRA’s direction to parallel importers was that the product name for a parallel imported AED product should be the name under which the UK cross-referred product is marketed or that alternatively the name of the product in the source country may be used providing this will not lead to any confusion or doubt over continuity of supply to the patient. The MHRA said that they would consider any proposals from importers wishing to use an alternative name that will not cause confusion and will ensure continuity of supply to the patient. I should say at this point that in all the information provided by the MHRA, the agency makes it very clear that it does not take any account of trade mark or other IP rights when it is advising or recommending what suppliers should do. It is up to the supplier to work out whether and how it can comply with what the MHRA requires without infringing any other person’s rights.

Mr Shah’s evidence is that the option of marketing the product in the UK under the name Epanutin presented the Defendants with two problems. The first was that pharmacists would not be able to use that product to fulfil prescriptions written for ‘Phenytoin Sodium Flynn’ but only where prescriptions were written for ‘Epanutin’ or for the INN ‘phenytoin sodium’. The second problem was that the Defendants could not, as parallel importers, guarantee the continued supply of Epanutin capsules. If customers were to source Epanutin from them (or Epanutin described by some other brand name of their choosing) there would be a danger that on any given day they would not have any available. Apart from other parallel importers (who may also have no supply on any particular day), there is no source of Epanutin capsules in the UK. That is why they want to be able to label their product Phenytoin Sodium Flynn when they import it into the UK.

Flynn Pharma submits that the Defendants’ proposed use of the Flynn mark is an infringement pursuant to section 10(1) of the Trade Marks Act 1994 (‘the 1994 Act’) because it is the use of the identical sign for identical goods. The Defendants say that they are not using the mark as a trade mark but only as a description of the goods. They therefore rely on section 11(2)(b) of the 1994 Act which provides that a trade mark is not infringed by ‘the use of indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the rime of production of goods or of rendering of services, or other characteristics of goods or services’, provided that the use is in accordance with honest practices in industrial or commercial matters.

The Defendants rely on Case C-48/05 Adam Opel v Autec [2007] ECR I-1034 where the CJEU was considering a preliminary reference in a trade mark infringement case referred by a court in Germany. The claimant was the owner of the trade mark for Opel cars. The mark was well known for cars but had also been registered for toys. Opel brought an action against Autec which is a maker of remote controlled, scale model cars because the miniature version of the Opel Astra V8 coupé made by Autec bore the Opel logo on its radiator grille like the original vehicle. The Court noted that the referring court had explained that, in Germany, the average consumer of the products of the toy industry, normally informed and reasonably attentive and circumspect, is used to scale models being based on real examples and accords great importance to absolute fidelity to the original. The consumer will understand that the Opel logo appearing on Autec's model car indicates that this is a reduced-scale reproduction of an Opel car. The Court noted that the referring court might mean by this that the relevant public does not perceive the tiny Opel logo appearing on the scale models as an indication that those products come from Opel or an undertaking economically linked to it. If that was the case, the national court would have to conclude that the use at issue in the main proceedings does not affect the essential function of the Opel logo as a trade mark registered for toys.

I do not see that that decision assists the Defendants in the present case. The narrow application of the decision in Opel is illustrated by the CJEU’s earlier judgment in Case 206/01 Arsenal Football Club v Matthew Reed [2002] ECR I-10099. In that case Arsenal FC sought to prevent a stall trader from selling scarves and other memorabilia bearing the word ‘Arsenal’ or ‘The Gunners’ which were registered marks owned by the Club. The High Court considered that the marks were not an indication of origin but rather were perceived by the public merely as 'badges of support, loyalty or affiliation'. The CJEU emphasised that the exclusive right to use the trade mark was conferred to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions. The exercise of that right is therefore reserved to cases in which a third party's use of the sign affects or is liable to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods. The CJEU held that Mr Reed’s use of that sign was such as to create the impression that there was a material link in the course of trade between the goods concerned and the trade mark proprietor. This impression was incorrect since the goods sold by Mr Reed had not been manufactured or supplied under the control of a single undertaking responsible for their quality. In those circumstances, the use of a sign was, the CJEU held, liable to jeopardise the guarantee of origin which constitutes the essential function of the mark and was an infringement.

In my judgment the facts of the present case are closer to the Arsenal FC case than to the Opel case. The use of the word ‘FLYNN’ is not a description of the goods. It is not a word associated with medicines or ingredients or otherwise denoting the qualities or characteristics of the medicine. It will be perceived by consumers as a mark of origin because there is no evidence that consumers will interpret the sign in the way the Defendants suggest, namely as an indication of the source of the API or the site of the manufacture of the product. They will interpret it as being an indication of the holder of the marketing authorisation of the product and therefore as indicating that the product originates with Flynn Pharma as being the entity responsible for the quality of the goods. That is clearly a trade mark use of the sign.

The Arsenal FC v Reed case is also relevant because of what the CJEU said about the use of a disclaimer by Mr Reed. On his stalls he displayed a sign stating that the goods he was selling were not official Arsenal FC products. The Court held that even if it is possible for a third party to rely on such a notice as a defence to an action for trade mark infringement, some consumers might see the goods after they have been sold and taken away from the stall and may still interpret the sign as designating Arsenal FC as the undertaking of origin of the goods. The CJEU appears to have left open in that case the question whether in other circumstances a disclaimer might be sufficient to counter the impression conveyed to the consumer that the product to which the mark is attached originates with the mark owner. I am also doubtful whether such a disclaimer could assist the Defendants under domestic law or whether it would rather constitute ‘added matter or circumstance’ to be discounted: see per Jacobs J in British Sugar plc v James Robertson and Sons [1996] RPC 281. In the present case the Defendants propose including a disclaimer or explanation on the packaging of the rebranded Epanutin. In a letter to Flynn Pharma dated 13 March 2014, the Defendants offered to include on the outside of the pack and in the patient information leaflet a statement that the product is not distributed by Flynn Pharma but that ‘it is manufactured at the same site as the Phenytoin Sodium Flynn product marketed in the UK by Flynn Pharma Limited’; that it is ‘therapeutically equivalent and may be dispensed against a prescription for Phenytoin Sodium Flynn’.

Before the trial, the MHRA wrote to Tenolol giving its approval to a variation to Tenolol’s PLPI to include the following statement on the packaging of the product:

“Flynn is a trademark of Flynn Pharma Ltd. However, this product is not manufactured or sold by Flynn Pharma Ltd but has been imported from the EU as Epanutin by Tenolol Limited. It is considered by the Medicines and Healthcare products Regulatory Agency to be equivalent to Phenytoin Flynn”

In closing Mr Burkill QC, appearing for Flynn Pharma, expressed serious concerns about this wording. First, he pointed out, it refers to the product as being equivalent to ‘Phenytoin Flynn’ whereas in fact the correct comparator is to Phenytoin Sodium Flynn – the salt and not the base. Elsewhere in the MHRA’s approval letter there is a reference to including the leaflet for Phenytoin Sodium Flynn Tablets which, as Mr Burkill points out, do not in fact exist. Flynn Pharma sells only capsules not tablets, the tablets that are on the market are made of the base phenytoin not the salt phenytoin sodium. Mr Burkill expresses, with some justification, alarm both at the fact that the Defendants can have proposed such inaccurate wording to the MHRA and also that the MHRA can have given their approval for the use of a leaflet without apparently noticing the fact that a leaflet in those terms would be seriously misleading. The Defendants’ response was simply that these inaccuracies could be ironed out between the parties if Flynn Pharma cooperated with the Defendants in devising the wording of the disclaimer.

Even if the disclaimer were accurate, I do not regard it as sufficient to clarify for the patient what the nature of the relationship between the product and Flynn Pharma is. The use of a word in naming a product where the word is clearly a brand name is not gainsaid by small print explaining that the product has not been made or marketed by the entity which owns the rights to use that name. The proposed wording in the leaflet would be just as apt to describe the situation where Flynn Pharma Ltd was a subsidiary company of Pfizer and where the Epanutin being imported was made by a sister subsidiary in another Member State. I therefore reject the defence based on the submission that there is no trade mark use of the mark here.

Article 34 TFEU provides that:

"Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States."

Article 36 TFEU tempers this absolute provision:

“The provisions of Articles 34 … shall not preclude prohibitions or restrictions on imports … justified on grounds of … the protection of industrial and commercial property…”

The final sentence of Article 36 then limits the carve out from Article 34 for restrictions justified as protecting intellectual property:

"Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States."

The restrictions we are concerned with here take the form of national trade mark legislation entitling a trade mark holder to prevent the import of goods on the grounds that that import constitutes a breach of its trade mark rights. There is extensive jurisprudence on when such legislation is justified for the purposes of Article 36 and when it constitutes a means of arbitrary discrimination or a disguised restriction on trade. The importance of arriving at the correct balance between conflicting interests as regards the parallel import of pharmaceutical products was described by the Court of Justice in the early case, Case 104/75 Officier van Justitie v Adriaan de Peijper [1976] ECR 613. That case concerned the documentation that the regulatory authority in the importing state could require the parallel importer to produce to show that the product in question was safe. The Court noted that the authority in the importing state had an interest in ensuring that the batch of product being imported complied with the particulars already held on file for that product as marketed within its territory. However, the Court urged the regulatory authorities to be proactive in enabling every trader to obtain the necessary evidence and held it was unduly restrictive to require the importer to produce documents to which he did not have access without the assistance of the maker of the product, who was unlikely to cooperate with him:

“25.

This question is all the more important because parallel importers are very often in a position to offer the goods at a price lower than the one applied by the duly appointed importer for the same product, a fact which, where medicinal preparations are concerned, should, where appropriate, encourage the public health authorities not to place parallel imports at a disadvantage, since the effective protection of health and like of humans also demands that medicinal preparations should be sold at reasonable prices.”

The application of these rules to the repackaging of parallel imported pharmaceutical products was considered by the CJEU in Cases C-427-93, C-429/93 and C-436/93 Bristol-Myers Squibb v Paranova [1997] FSR 102 (“BMS”). The Court held that the trade mark owner in that case could not legitimately enforce its trade mark if the national court found that five conditions were met. The first such condition is the key one here, namely that: (emphasis added)

“it is established that reliance on trade mark rights by the owner in order to oppose the marketing of repackaged products under that trade mark would contribute to the artificial partitioning of the markets between Member States; such is the case, in particular, where the owner has put an identical pharmaceutical product on the market in several Member States in various forms of packaging, and the repackaging carried out by the importer is necessary in order to market the product in the Member State of importation, and is carried out in such conditions that the original condition of the product cannot be affected by it; that condition does not, however, imply that it must be established that the trade mark owner deliberately sought to partition the markets between Member States; ”

The other BMS conditions, in brief, are that the repackaging does not affect the original condition of the product; the new packaging clearly states who repackaged the product; the packaging is not defective or poor quality so as to damage the trade mark owner’s reputation and the importer gives notice to the trade mark owner before the repackaged product is put on sale. Those conditions are not in contention here.

The next development in the case law related to when the parallel importer not only re-packaged the goods and affixed the same mark that had been on them before repackaging but repackaged them and applied a different mark, that is the mark under which the product was sold in the importing country where that was different from the mark applied in the exporting country. That situation was considered by the CJEU in Case C-379/97 Pharmacia & Upjohn SA v Paranova A/S [1999] ECR I-6927 (‘Pharmacia’). There, the Upjohn Group marketed in the EU an antibiotic under the trade mark ‘Dalacin’ in Denmark, Germany and Spain, the trade mark ‘Dalacine’ in France and the trade mark ‘Dalacin C’ in the other Member States. Paranova, the parallel importer, purchased ‘Dalacine’ and ‘Dalacin C’ in France and Greece respectively, repackaged them and imported them both into Denmark where it marketed them under the trade mark ‘Dalacin’. Paranova argued that the different marks used in Greece, France and Denmark constituted in reality the same trade mark, with the result that the trade-mark rights of the Upjohn Group had been exhausted. It submitted, in the alternative, that the marketing system operated by the Upjohn Group amounted to an artificial partitioning of the markets contrary to EU law. The CJEU held that there is no objective difference between reaffixing a trade mark after repackaging as in BMS and replacing the original trade mark by another as in Pharmacia. There was therefore no justification for applying the rules differently to the two situations: (emphasis added)

“38.

In the first place, the practice of using different packaging and that of using different trade marks for the same product, in contributing similarly to the partitioning of the single market, adversely affect intracommunity trade in the same way; secondly, the reaffixing of the original trade mark on the repackaged product and its replacement by another trade mark both represent a use by the parallel importer of a trade mark which does not belong to him.

39.

Consequently, where the trade-mark rights in the importing Member State allow the proprietor of the trade mark to prevent it being reaffixed after repackaging of the product or being replaced, and where the repackaging with reaffixing or the replacement of the trade mark is necessary to enable the products to be marketed by the parallel importer in the importing Member State, there are obstacles to intracommunity trade giving rise to artificial partitioning of the markets between Member States within the meaning of the case-law cited, whether or not the proprietor intended such partitioning.

40.

The condition of artificial partitioning of the markets between Member States, as defined by the Court in Bristol-Myers Squibb, thus applies where a parallel importer replaces the original trade mark by that used by the proprietor in the Member State of import.”

The CJEU held that it was not necessary for the parallel importer to show that the manufacturer had used different marks in different member States with the intention of restricting parallel imports. But it did have to show the necessity of using the replacement mark in order to market the product in the importing state.

The Defendants accept that in the cases thus far in the CJEU, the existence of a sufficient connection between the company placing the goods on the market in the exporting state and the company in the importing state seeking to prevent the imports has not been in issue. However, the Defendants also rely on the recent decision of the Court of Appeal in Speciality European Pharma Ltd v Doncaster Pharmaceutical Group Ltd [2015] EWCA Civ 54 (‘SEP’). That case concerned the import in the UK by the Defendant parallel importer of the drug trospium chloride which was marketed in the UK by the claimant, SEP. SEP was the exclusive licensee in this country of the trade mark REGURIN which was owned by the manufacturer of the product Madaus. SEP was also the exclusive distributor of the product in the UK. Madaus sold its trospium chloride in a number of EU countries and marketed it under different names in different territories; CERIS in France and URIVESC in Germany as well as under the name REGURIN in the UK. Doncaster imported CERIS made by Madaus into the UK from France and over-stickered it with the REGURIN mark.

Floyd LJ (with whom Arden and Bean LJJ agreed) considered the judgments of the CJEU in BMS, Pharmacia and Case C-143/00 Boehringer Ingelheim v Swingward [2002] ECR I-3759. He concluded his summary of the existing case law in paragraph 32 of his judgment:

“i)

Subject to compliance by the importer with all the BMS conditions, a trade mark owner may not enforce his mark against parallel imported goods which are re-branded if it is established that it is necessary to re-brand in order to gain effective access to the market.

ii)

Effective access to the market is not achieved by being able to place some goods on the market.

iii)

It may be necessary to re-brand where the parallel importer is not excluded from the whole of the market, but is merely excluded from a substantial part of it or from a significant proportion of consumers (like the alternate local sizes in BMS, and the label-resistant group in Boehringer);

iv)

In determining whether it is necessary to re-brand, the court must consider what alternatives exist for the parallel importer, and whether they are realistic (e.g. trying to eliminate label-resistance amongst pharmacists or consumers).

v)

Whether it is necessary for a parallel importer to re-brand in order to gain effective access to the market in a particular case is a question for the national court to decide, applying these principles.”

The Defendants rely on the fact that Floyd LJ did not include in paragraph (i) of his summary a requirement that the parallel imported product must have been placed on the market by or with the consent of the trade mark owner. He said simply that, subject to compliance with the BMS conditions, the trade mark owner cannot enforce his trade mark where it is necessary for the product to be rebranded to gain effective access to the market.

Flynn Pharma’s argument is straightforward. In order for the trade mark owner’s claim to be defeated, the Defendants must show that the Epanutin that they are seeking to import into the UK was placed on the market in the exporting member State by the same entity as is now trying to prevent its import. Flynn Pharma asserts that the Defendants cannot show that and therefore the fulfilment or otherwise of the five BMS conditions is irrelevant. Flynn Pharma submits that all the previous cases both in Luxembourg and domestically have dealt with situations where there is clearly a sufficient link between the company selling the product in the exporting state and the company seeking to enforce trade mark law in the importing state; either they were parent and subsidiary, or both subsidiaries with a common parent or the latter was the exclusive distributor or licensee of the rights of the other. Mr Burkill described the principle underlying the case law as preventing the entity from having two bites at the cherry. If there has been no first bite on the part of the rights holder in the importing state then its rights to prevent the product being placed on the market are not exhausted.

Mr Howe QC on behalf of the Defendants was keen to stress that their primary case was not that Flynn Pharma’s rights had somehow been exhausted by the placing of the Epanutin on the market in the exporting country. He accepts that in the earlier exhaustion of rights cases it is necessary to show that the trade mark owner (in the importing state) has consented to the original placing of the goods under the mark concerned in order for rights to be exhausted. Where that consent has been given, the CJEU’s reasoning is that the enforcement of national trade mark law is not justified within the meaning of the first sentence of Article 36 TFEU because the specific subject matter of the right is not engaged. However, the Defendants say that the repackaging and rebranding cases represent a significant break from this reasoning because in those cases it was clear that the parallel importer and not anyone connected with the rights holder was affixing the mark to the new pack. The parallel importer affixed either the same mark that had been put on the original pack by the rights holder (in BMS) or a different mark (in Pharmacia). There is no doubt that the specific subject matter of the right was invaded by this conduct but the CJEU still considered that preventing imports was a disguised restriction on trade where the five BMS conditions were met. Thus, the Defendants contend, the application of the principle in the repackaging and rebranding cases is not based on any requirement of consent by the owner to the use of the right involved: it is sufficient if the enforcement of the right results in artificial partitioning. The Defendants submit that the second sentence of Article 36 is therefore engaged in these cases: the prohibition on import is prima facie justified on grounds of the protection of intellectual property because the importer’s conduct impinges on the specific subject matter of the trade mark right. But nonetheless that prohibition is unlawful under the second sentence of Article 36 because it constitutes a disguised restriction on trade between Member States where it is invoked to prevent the import of goods which are identical in every way to the goods marketed by the rights holder in the importing state. If the goods are identical then any partitioning of the market by the application of national trade mark law is an artificial partitioning and therefore contrary to the free movement provisions. It is artificial in this case, they argue, because the only reason why the MHRA insisted on Flynn Pharma including a brand name in the name of the product was to protect public health in the light of the narrow therapeutic index. Yet the inclusion of that name should not, the Defendants contend, allow Flynn Pharma to restrict the sale of parallel imports. The fact that the MHRA have approved the Defendants’ PLPI using the Phenytoin Sodium Flynn name indicates that the Epanutin parallel imports can be marketed under that name consistently with the human health objectives of the MHRA’s measures because a patient stabilised on Phenytoin Sodium Flynn capsules sold in the UK by Flynn Pharma can be dispensed the identical Epanutin capsules without the risks that would arise from being supplied with, for example Phenytoin Sodium NRIM. Flynn Pharma should not be allowed to convert human health measures into a barrier to trade.

It is helpful first to clear out of the way some unusual aspects of this case. First, it does not seem to me relevant that the mark that Flynn Pharma has attached to the product in dispute is part of the company’s name. There may have been commercial reasons for choosing ‘Flynn’ as the brand name for the relaunched phenytoin sodium capsules in order to satisfy the requirements of the Guidance. But Flynn Pharma could equally well have chosen some other invented word which signifies that it is Flynn’s product in the same way that the word REGURIN signifies that a particular packet of trospium chloride is produced by Madaus rather than any other maker of trospium chloride. Further, Flynn Pharma could have chosen to relaunch the product using a mark comprising a single invented word rather than combining that invented word with the INN. They could, for example, have chosen in compliance with the Guidance to market their brand of phenytoin sodium under the single word “Errol” rather than “Phenytoin Sodium Errol” (Footnote: ¹). It is true that the use of the INN in addition to the word ‘Flynn’ better reflected the unusual hybrid position of the product for the purposes of the UK pricing system whereby the MHRA wanted it to be a branded product for safety reasons but recognised that it should be treated as a generic product for the purposes of the PPRS. But for the application of the free movement provisions of the TFEU and the principles of the case law I have discussed, there is no difference between the Defendants re-labelling Epanutin with the mark ‘Phenytoin Sodium Flynn’ and them re-labelling it with the mark “ERROL” if Flynn Pharma had chosen to comply with the Guidance in that way. The question then is whether the BMS, Pharmacia and SEP cases are authority for the proposition that it does not matter whether the goods were placed on the market in the exporting state by the same entity that is now trying to stop them being imported, so long as the goods are identical so that there are no public health issues arising. In my judgment they are not.

In both BMS and Paranova there was no doubt that the trade mark owner in the importing Member State was the same entity as had placed the goods on the market in the exporting state. I did not understand the Defendants to dispute this. The answers formulated by the CJEU referred to the repackaged and relabelled goods as having been put on the market in another Member State by the owner or with his consent and did not discuss whether the goods were identical therapeutically or not. I do not accept that the Court in BMS was enunciating a principle that superseded rather than extended the principle of exhaustion of rights. On the contrary, the wording of the judgment shows that the Court rejected the submission that the principle of exhaustion cannot apply if the importer has repackaged the product and reaffixed because such a rejection would imply a major alteration to the principles flowing from Articles 30 and 36 of the Treaty: see paragraph 37. The CJEU in BMS and Pharmacia was not abandoning the protection conferred by a trade mark in favour of some public health criterion dependent solely on the characteristics of the goods sold. The Court reiterated the legitimate interest that the trade mark owner has in the reputation of the mark; the Court referred to the essential function of the trade mark as a guarantee of origin whereby the consumer or end user is not misled as to the origin of the products and does in fact receive products manufactured under the sole supervision of the trade mark owner. That was the justification for imposing the BMS criteria which focus on safeguarding the reputation of the brand:

“67.

If the repackaging is carried out in conditions which cannot affect the original condition of the product inside the packaging, the essential function of the trade mark as a guarantee of origin is safeguarded. Thus, the consumer or end user is not misled as to the origin of the products, and does in fact receive products manufactured under the sole supervision of the trade mark owner.

68.

Whilst, in these circumstances, the conclusion that the trade mark owner may not rely on his rights as owner in order to oppose the marketing under his trade mark of products repackaged by an importer is essential in order to ensure the free movement of goods, it does nevertheless confer on the importer certain rights which, in normal circumstances, are reserved for the trade mark owner himself.

69.

In the interests of the owner as proprietor of the trade mark, and to protect him against any misuse, those rights must therefore, as the Court held in Hoffmann-La Roche, be recognized only in so far as the importer complies with a number of other requirements.”

The high water mark of the Defendants’ argument is the fact that in summarising the principles derived from the case law, Floyd LJ in SEP did not refer to the need for the parallel imported goods to have been placed on the market in the exporting country by the owner of the trade mark or with his consent. However, I do not read paragraph 32 of his judgment as making a leap of the kind that the Defendants propose since that was not an issue discussed in the preceding paragraphs. The primary issue in that case was the application of the first BMS condition as I discuss later. The question posed by Floyd LJ at the start of his judgment was (emphasis added): “When a pharmaceutical manufacturer markets the identical product in EU member state A under trade mark X and in EU member state B under trade mark Y, in what circumstances can a parallel importer take the goods (marked X) from state A to state B and re-brand them with mark Y?” The case proceeded on the basis that it was the same manufacturer marketing the identical product in both member states. I do not, therefore, regard SEP as authority for the proposition that it is no longer necessary for the Defendants to establish that the product they wish to import into the UK bearing the mark Phenytoin Sodium Flynn has been placed on the market in the exporting Member State by or with the consent of the owner of the UK mark. On the current state of the case law, the Defendants can only rely on Article 36 to defeat the claim of infringement if they can show that Epanutin was placed on the market in the exporting Member State by the same entity as is now seeking to prevent its import into the UK.

I therefore turn to whether that pre-condition for the application of the five BMS conditions is met here. The Defendants submit that if, contrary to their primary submission, they do have to show that the Epanutin was placed on the market in the exporting Member States by the same entity that is now trying to prevent its import into the UK, then they can succeed in doing so on the proper analysis of the arrangements entered into between Pfizer and Flynn Pharma. Those arrangements are contained in the following agreements.

An asset sale agreement dated 27 January 2012 provides for the sale to Flynn Pharma of the marketing authorisations for the four strengths of phenytoin sodium capsules together with the sales and marketing know-how for the products, technical product data and key regulatory and other product related data. It records in the recitals that Pfizer has elected to cease all of its marketing, promotional and distribution activities in the UK in respect of capsule formulations of the Product which has been marketed by Pfizer under the trade mark Epanutin. Accordingly Pfizer has agreed to sell and transfer the Assets to Flynn Pharma. The Assets are defined as:

The asset sale agreement also provides that Pfizer grants Flynn Pharma an exclusive, fully paid up and royalty free licence with rights to sublicense, to use and exploit the Medical Information in connection with the marketing and sale of the product in the UK during the term of and in accordance with the Exclusive Supply Agreement. Flynn Pharma is obliged to take all necessary steps to ensure that the Assets are properly maintained and up to date at all times and shall promptly notify Pfizer of any material changes or modifications to the Assets and any material communications with the regulatory authorities concerning the use of the Assets. The consideration for the transfer is confidential but Flynn Pharma said that it was a small up front sum because the bulk of the payment for the Assets was effectively made through the payment for the supplies of product under the Exclusive Supply Agreement. Flynn Pharma is required to file applications for the marketing authorisation transfers and Pfizer must produce all reasonable information and materials to assist with that transfer of the marketing authorisations. It was also required, by clause 6.4, to maintain all necessary registrations, licences and authorisations in relation to the marketing authorisations to ensure that they remain valid and not let them lapse without the prior written consent of Pfizer. Clause 9.1 of the asset sale agreement provided that if the parties failed to enter into the exclusive supply agreement, or if that agreement expires or is terminated for any reason then the asset sale agreement also terminated and the Assets, including the marketing authorisations, must be returned to Pfizer.

An exclusive supply agreement dated 17 April 2012 sets out the arrangements for Pfizer to manufacture and supply Flynn Pharma with its requirements for phenytoin sodium capsules for three years. The agreement is exclusive in both directions so that Flynn Pharma must acquire all its requirements for the capsules from Pfizer and Pfizer cannot supply the capsules to anyone else in the UK. The agreement provided for monthly minimum quantities to be ordered by Flynn Pharma. It also provided as follows:

This exclusive supply agreement has, according to Flynn Pharma’s evidence, been extended on an interim basis since it expired in April 2015.

A quality agreement or Technical Agreement came into effect on 11 June 2012 and sets out and allocates the responsibilities for the manufacture and testing of the products between the two parties. This includes quality responsibility tables which allocate responsibility for many different aspects of the production process to Flynn Pharma, Pfizer Ltd or Pfizer Manufacturing Deutschland GmbH. The great majority of responsibilities relate to the manufacture of the product and are allocated to Pfizer Deutschland as the actual manufacturer of the product. Some of the key responsibilities such as maintaining in force valid authorisations and assuring that written procedures are in place for change control are placed on all three signatories. The responsibilities allocated solely to Flynn Pharma are those that relate to handling recalls of the product and to making submissions to the MHRA.

A pharmacovigilance agreement dated 20 April 2012 provides for the exchange of drug safety information. Dr Fakes says that if a licence holder is supplying its product in any market it has a legal responsibility and moral duty to collect and respond to information about the safety of that product in use. He expressed this responsibility in the following terms:

“Drug safety is always of paramount importance and particularly important with products such as Phenytoin Sodium. If a licence holder is supplying his product in any market, he has a legal responsibility and a moral duty to collect and respond to information about the safety of that product in use. Pfizer, in selling us the product licences, was taking a step away from what was happening with the use of a number of presentations of this product in the UK. However, they continue to be responsible for certain presentations and its sale on an international basis and therefore they have a legal, clinical and professional obligation and interest in the ongoing monitoring of the safe use of this product.”

Finally there is a trade mark licence treated as coming into effect on 17 April 2012 between Pfizer Ltd, Parke Davis & Co LLC (an affiliated company with Pfizer Ltd) and Flynn Pharma. Under this agreement, Parke Davis, as owner of the UK trade mark EPANUTIN grants Flynn Pharma the right to use the name ‘Epanutin’ in the identicode on the capsule shell. However, Flynn Pharma is not permitted to use the EPANUTIN trade mark in any marketing authorisation documentation or in packaging material or in any form of advertising of the product.

On 27 August 2014, Pfizer and Flynn Pharma entered into an agreement to amend the terms of the asset sale agreement. The relevant amendments were that Clause 6.4 which obliged Flynn Pharma to maintain the marketing authorisations in place and notify Pfizer of any changes to those authorisations was deleted. Clause 9 relating to the exclusive supply agreement was also deleted, including the provision about the possible return of the Assets to Pfizer on the expiration or termination of the exclusive supply agreement.

The submissions of the parties on the nature of this suite of agreements focused on whether their effect was closer to an exclusive distribution agreement whereby Flynn Pharma agreed to distribute Pfizer’s product (as the Defendants contended) or whether it was a true assignment of the marketing authorisation coupled with a contract manufacturing agreement (as Flynn Pharma contended). I do not find that dichotomy particularly helpful. It is important, rather, to consider what precisely one is looking for to distinguish a situation where the trade mark owner is using the national trade mark law to get a second bite of the cherry such that the prevention of imports constitutes a disguised restriction on trade from the situation where it is not. In an early Opinion in Cases 15 & 16/74 Centrafarm bv v Sterling Drug Inc [1974] ECR 1147, Advocate General Trabucchi considered (in paragraph 5 of his Opinion) the situation where the patent in the exporting state was owned by a different company from that which owned the patent in the importing state but where the two companies were subsidiaries of the same parent. He noted that an act carried out on the commercial plane by an undertaking which belongs wholly to a parent company “cannot be considered foreign to the latter”. It is reasonable to suppose that when the product is put on sale in a member State in accordance with the normal commercial practice of the manufacturer, that has occurred with the consent of the parent since a parent normally determines the commercial policy of the subsidiaries that are wholly controlled by it. On ‘the level of economic reality such act of the subsidiary is not without effect for the parent company’. In its judgment in that case, the CJEU contrasted the position where the product is coming from a Member State where it is not patentable or ‘where the original patentees are legally and economically independent of each other’ with the position where the product ‘has been lawfully put by the patentee himself or with his consent on the market of the member State from which it is being imported e.g. in the case of a holder of parallel patents’.

This still does not quite pinpoint to what the rights holder must be consenting when the product is placed on the market in the exporting member State in order for that ‘consent’ to preclude reliance on trade mark laws in the importing State. More light is cast on that question by the judgment of the CJEU in Case C-9/93 IHT Internationale Heiztechnik GmbH v Ideal Standard GmbH [1994] ECR I-2836. In that case a group of companies held, through subsidiaries, a trade mark consisting of the name ‘Ideal Standard’ in several Member States of the EU including Germany but the trade mark had been assigned for France only and for some of the products for which it had been registered (heating equipment) to an undertaking outside the group. The heating equipment was manufactured by the French assignee and marketed in France under the device ‘Ideal Standard’. Some of the equipment found its way into Germany where the owner of the German mark sued for infringement of its mark registered in Germany for both sanitary fittings and heating equipment. The Court proceeded on the assumption that there was a risk of confusion; the question was whether the common origin of the mark assigned to the French company prevented the German company from being able to rely on its national trade mark rights to oppose import. The Court reiterated that the specific subject-matter of a trade mark is the guarantee that the owner of the trade mark has the exclusive right to use that trade mark, for the purpose of putting products protected by the trade mark into circulation for the first time, and is therefore intended to protect him against competitors wishing to take advantage of the status and reputation of the trade mark by selling products illegally bearing that trade mark. National rules which lay down that the mark owner’s rights are not exhausted when the product protected by the market is marketed in another Member State can create an obstacle to the free movement of goods. Such an obstacle is not justified when the product has been put onto the market in a legal manner in the Member State from which it has been imported, by the trade mark owner himself or with his consent, so that there can be no question of abuse or infringement of the trade mark. In an important passage the Court explained why this is: (emphasis added)

“34.

… This principle, known as the exhaustion of rights, applies where the owner of the trade mark in the importing State and the owner of the trade mark in the exporting State are the same or where, even if they are separate persons, they are economically linked. A number of situations are covered: products put into circulation by the same undertaking, by a licensee, by a parent company, by a subsidiary of the same group, or by an exclusive distributor.

35 There are numerous instances in national case-law and Community case-law where the trade mark had been assigned to a subsidiary or to an exclusive distributor in order to enable those undertakings to protect their national markets against parallel imports by taking advantage of restrictive approaches to the exhaustion of rights in the national laws of some States.

36 Articles 30 and 36 defeat such manipulation of trade-mark rights since they preclude national laws which enable the holder of the right to oppose imports.

37 In the situations described above (paragraph 34) the function of the trade mark is in no way called in question by freedom to import. As was held in HAG II: 'For the trade mark to be able to fulfil [its] role, it must offer a guarantee that all goods bearing it have been produced under the control of a single undertaking which is accountable for their quality' (paragraph 13). In all the cases mentioned, control was in the hands of a single body: the group of companies in the case of products put into circulation by a subsidiary; the manufacturer in the case of products marketed by the distributor; the licensor in the case of products marketed by a licensee. In the case of a licence, the licensor can control the quality of the licensee's products by including in the contract clauses requiring the licensee to comply with his instructions and giving him the possibility of verifying such compliance. The origin which the trade mark is intended to guarantee is the same: it is not defined by reference to the manufacturer but by reference to the point of control of manufacture (…).

38 It must further be stressed that the decisive factor is the possibility of control over the quality of goods, not the actual exercise of that control. Accordingly, a national law allowing the licensor to oppose importation of the licensee's products on grounds of poor quality would be precluded as contrary to Articles 30 and 36: if the licensor tolerates the manufacture of poor quality products, despite having contractual means of preventing it, he must bear the responsibility. Similarly if the manufacture of products is decentralized within a group of companies and the subsidiaries in each of the Member States manufacture products whose quality is geared to the particularities of each national market, a national law which enabled one subsidiary of the group to oppose the marketing in the territory of that State of products manufactured by an affiliated company on grounds of those quality differences would also be precluded. Articles 30 and 36 require the group to bear the consequences of its choice.

39 Articles 30 and 36 thus debar the application of national laws which allow recourse to trade-mark rights in order to prevent the free movement of a product bearing a trade mark whose use is under unitary control.”

The Court went on to distinguish the situations where the imported products come from a licensee or a subsidiary from those where the trade mark has been assigned because (paragraph 41):

“a contract of assignment by itself, that is in the absence of any economic link, does not give the assignor any means of controlling the quality of the products which are marketed by the assignee and to which the latter has affixed the trade mark.”

The Court rejected the view that by assigning the mark the owner of the rights in the importing state had consented to the mark being attached to the goods:

“The consent implicit in any assignment is not the consent required for application of the doctrine of exhaustion of rights. For that, the owner of the right in the importing State must, directly or indirectly, be able to determine the products to which the trade mark may be affixed in the exporting State and to control their quality. That power is lost if, by assignment, control over the trade mark is surrendered to a third party having no economic link with the assignor.”

The Court finally sounded a warning note, in answer to a point similar to the point raised by the Defendants in the instant case:

“It should be added that, where undertakings independent of each other make trade-mark assignments following a market-sharing agreement, the prohibition of anti-competitive agreements under Article [101] applies and assignments which give effect to that agreement are consequently void. However, as the United Kingdom rightly pointed out, that rule and the accompanying sanction cannot be applied mechanically to every assignment. Before a trade-mark assignment can be treated as giving effect to an agreement prohibited under Article [101], it is necessary to analyse the context, the commitments underlying the assignment, the intention of the parties and the consideration for the assignment.”

In other words, there may be situations where an agreement purporting to assign a trade mark to an independent entity is in fact a market sharing agreement between the assignor and the assignee. Such cases can be tackled by the competition provisions of the TFEU rather than under the free movement provisions.

Returning to the facts of the instant case, it is not helpful to ask whether the agreements between Pfizer and Flynn Pharma look more like an exclusive distribution agreement or more like an assignment of the rights. The correct question is whether there is anything (a) in the corporate relationship between Flynn Pharma and Pfizer or (b) arising from the agreements between them that indicates that the same entity can exercise control over the quality of the Epanutin sold in other Member States and the product sold as Phenytoin Sodium Flynn in the United Kingdom.

As to the first part of that question, it is not suggested that Flynn Pharma and Pfizer have any corporate link or connection that means that the commercial decisions of the one ‘cannot be considered foreign’ to the other, to adopt AG Trabucchi’s phrase. What about the obligations under the agreement? There is an important difference between the situation here and the situation in Ideal Standard because in Ideal Standard the heating equipment was made by the French mark owner and not by the German mark owner whereas here Pfizer in fact makes the Epanutin that is sold in the exporting Member States and also makes the Phenytoin Sodium Flynn that is sold in the United Kingdom.

Having regard to the responsibilities of Pfizer and Flynn Pharma under the agreements and the way they have been operated, I consider that it is Flynn Pharma which is responsible for the quality of the Phenytoin Sodium Flynn placed on the market in the UK and Pfizer which is responsible for the quality of Epanutin placed on the market in the other Member States. First, the marketing authorisations for the supply of the capsules on the market in the UK belong to Flynn Pharma and not to Pfizer; Flynn Pharma has sole charge, with Pfizer’s assistance, of maintaining them in force and of liaising with the MHRA about any issues that arise. The initial inclusion of clause 6.4 whereby Flynn Pharma undertook to Pfizer to ensure that the marketing authorisations remain valid is explicable on the basis that Pfizer was dependent on the initial years of sales of the product under the exclusive supply agreement to receive effective payment for the transfer of the Assets. After the first few years of supply had taken place, that interest on the part of Pfizer ceased and clause 6.4 was deleted by the amendment agreement in August 2014.

Secondly, the specification of the product is determined by Flynn Pharma, Pfizer is obliged to make the product in compliance with that and cannot change any aspect of the manufacture without the consent of Flynn Pharma.

Thirdly, the trade mark is applied to the goods as an indicator of the origin of control has no connection with Pfizer; Pfizer is not able to use that mark in respect of any goods other than those it makes under these agreements for Flynn Pharma.

The Defendants submitted that the true relationship was an ongoing one in the nature of a lease rather than a sale, at least up until the point where the Amendment Agreement was entered into. They point to the fact that under clause 2.2 of the Asset Sale Agreement, Flynn Pharma is only entitled to use the ‘Medical Information’ as defined in the agreement in connection with its marketing, promotion and sale of the product “during the term of and in accordance with the terms and conditions of the Exclusive Supply Agreement”. Mr Howe submitted that the Asset Sale Agreement remains nothing more than a licence to use the Pfizer Medical Information for, and only for, as long as Pfizer exclusively supplies the product. Without the Medical Information of course, Flynn Pharma can do nothing, since it includes not only the regulatory material, but also all technical information relating to the product which would be required to source that product from elsewhere. Flynn Pharma, he submits, remain firmly locked to Pfizer regarding their source of supplies for the indefinite future.

I do not accept, however, that the fact that Flynn Pharma is obliged to or chooses to acquire its supplies of Phenytoin Sodium Flynn for the UK from the same manufacturer as makes Epanutin for other Member States means that the same entity is responsible for the quality of the two products for the purposes of applying the free movement provisions. What is more important is whether responsibility for the quality of both products lies with the same entity so that it is not misleading for the parallel importer to attach the Flynn name to the Epanutin. When considering responsibility here, I am referring to responsibility to the ultimate consumer for the quality of the product. Of course Pfizer is responsible to Flynn Pharma for the quality of the product it supplies under the agreements and the specification of that product is set by Flynn Pharma and monitored by them. What matters is whether there is anything in the suite of agreements which gives Flynn Pharma power to control the quality of the Epanutin supplied by Pfizer in other Member States or anything that entitles Pfizer to control the specification of the Phenytoin Sodium Flynn supplied in the UK if, for example, Flynn Pharma decided to change it. I do not see any such control granted to either company over the other’s product. Pfizer can sell Epanutin anywhere else it likes - Flynn Pharma has no control over Pfizer’s other products and no control over the trade mark that Pfizer uses elsewhere. Flynn Pharma can put its own trade mark on the products made for it, and Pfizer has no control over that. Only the products Pfizer manufactures for Flynn Pharma at its direction can be packaged as Phenytoin Sodium Flynn. As the holder of the marketing authorisation it is Flynn Pharma that takes the responsibility for those products. Legal responsibility for manufacture at all levels (API, product formulation & packaging) to ensure compliance with authorisation lies with Flynn Pharma for the Phenytoin Sodium Flynn product. It could manufacture in-house if it chose and where, as here the manufacture is contracted out, it must have a supply agreement, technical agreement and quality agreement in place.

Having considered the agreements between Pfizer and Flynn Pharma, it would not be right to say that the owner of the right in the importing State is, directly or indirectly, able to determine the products to which the trade mark may be affixed in the exporting State and to control their quality. I therefore hold that Flynn Pharma’s trade mark rights in the name Phenytoin Sodium Flynn are not exhausted in respect of packages of Epanutin placed on the market in other Member States. Flynn Pharma is therefore entitled to prevent the relabelling of the parallel imported product by the Defendants.

There was a great deal of evidence before me as to whether the Epanutin currently on sale in other Member States was still identical with the Phenytoin Sodium Flynn sold by Flynn Pharma in the UK. The Defendants relied on this, as Mr Shah said in his evidence to show they believed (and continue to believe) that using the name Phenytoin Sodium Flynn would not mislead patients – it is telling them that the product that the Defendants are providing is identical in all material respects to the product that they source in the UK under that name.

Certainly Flynn Pharma was keen to stress when it relaunched the product in September 2012 that there was absolutely no difference between the new and old capsules. Dr Fakes said that he does not know whether changes have been made to Epanutin sold by Pfizer since then since there is nothing in the agreements that prevents Pfizer from changing the formulation of the product it sells under its own brand name outside the United Kingdom; Flynn Pharma has no control over this under the agreements and is not entitled under the agreements to be notified of any such change. Dr Fakes said that even if the products are still identical, Flynn Pharma has no way of knowing whether, let alone ensuring that, this does not change in the future.

The Defendants regard this evidence as disingenuous and suggest that Flynn Pharma has avoided asking Pfizer the question because they expect to get the answer that the products are still identical and are expected to remain so in the future. Moreover they submit that in relation to pharmaceutical products, the MHRA acts in effect as a guarantor that the parallel imported product remains identical to the trade mark owner’s product. Mr Shah’s evidence described the regulatory framework under which this control is exercised. In his second witness statement he responds to Flynn Pharma’s assertions about the possibility of divergence between Epanutin and Phenytoin Sodium Flynn, and of any such divergence going unnoticed. He records an exchange he had with the manager in the MHRA’s Parallel Import Unit, Licencing Division, on 28 May 2015, where he asked whether the MHRA had a procedure for checking on any significant changes which might occur in the imported product as compared to the UK product. The MHRA confirmed that the MHRA refreshes the European Community Marketing Authorisation (‘ECMA’) reports every 3 years, carries out effective “goods-in” checks, and becomes aware of potential issues from a variety of sources. Mr Shah explains that the parallel import licence granted for a given parallel imported product is for a specified ECMA. Mr Shah’s understanding is that where the licence to supply a product is a national licence rather than one issued by the European Medicines Authority, there is an ECMA number which acts as an identifier for that product. Each product will receive an ECMA number from the competent authority in the country where it is put on the market. Different countries will have different rules for controlling the ECMA numbers but generally a change in the ECMA number will indicate a change in the imported product. This would prevent the repackaging of that changed product, since if the ECMA number of the imported product is different from the one specified in the parallel import licence then the parallel importer cannot repackage the imported product. It would have to apply for a variation and only start repackaging or re-labelling the imported product once the MHRA grants a variation. The MHRA would request information from the competent authority in the exporting country and would only grant the variation once it is satisfied that the product is therapeutically equivalent to the product available in the UK.

Accordingly, Mr Shah says, if Pfizer were to alter the Epanutin product or transfer their marketing authorisation in the country concerned to another entity in a way which results in a new EMCA number this would automatically prevent the Defendants parallel importing the product until the MHRA had checked that the product concerned was therapeutically identical. Further, the parallel import licence granted is based on certain information in, amongst other sources, the foreign patient information leaflet. A copy of the leaflet against which the licence is granted is retained by the importer on file. Each time a repacking job is raised within the Defendants’ group, the foreign leaflet from a sample pack from the batch to be repacked is checked against the leaflet on file. If any significant information has changed then they would have to apply for a variation with the MHRA and, again, they would only be able to re-label or repack the imported product for marketing once the variation is granted. Information which is regarded as significant for this purpose includes the identity of the market authorisation holder, the location of the manufacture, the active ingredient, the excipients and the storage conditions. The MHRA will only grant the variation after making appropriate checks. Once the variation is granted the leaflet in the ‘foreign leaflet’ file is replaced with the Parallel Import leaflet and the PLPI leaflet will reflect the changes granted in the variation. Similarly, any change to the product form, for example a change in product colour or shape and any change in the colour or type of any markings on the incoming product from that described in the parallel import leaflet, means that a variation has to be applied for and the product can only be released for sale once the variation is granted by the MHRA and the Product Information leaflet reflects the new description.

So far as future changes to the specification of Phenytoin Sodium Flynn (rather than to Epanutin) is concerned, the UK product leaflet is likely to reflect those changes. The Defendants would pick up the changes introduced between that leaflet and the leaflet for the PI product. But in any case the MHRA would know of any changes because Flynn Pharma would have to apply for a variation.

Finally Mr Shah referred to the power the MHRA has to stop the Defendants using a licence granted or to ensure that the re-labelled or re-packaged product has specified additional criteria before they can use a licence. Thus, if Flynn Pharma were to apply for a change to the product which would mean that the PI cannot be cross referred to the amended UK product then the MHRA could ask the Defendants to stop repacking the product.

For all these reasons, if there were changes made to the Flynn Pharma product in the UK, then the likelihood is that the MHRA would become aware of the difference between that product and the Epanutin PI product. Conversely if it were the Epanutin that changed, the MHRA will be aware of that and can take action to prevent any further parallel imports until it is satisfied that there is no therapeutic difference that would endanger patients.

In the light of that evidence, which was not challenged by Flynn Pharma, I would have been prepared to find that there is no real risk that Epanutin sold by Pfizer in other Member States will diverge from Phenytoin Sodium Flynn sold by Flynn Pharma in the UK without the Defendants and the MHRA becoming aware of this so that they can prevent further relabelling until they have established whether the change makes any therapeutic difference. I have found that the case law establishes that that finding is not enough to entitle the Defendants to relabel as they want to. To hold that the owner of a brand name cannot prevent a third party attaching that brand name to products if the third party can prove incontrovertibly that the product he wishes to supply has rolled off exactly the same production line at the factory which makes the branded goods would be a substantial inroad into trade mark rights. Further, to hold that the oversight by the MHRA as the guarantor of the identical characteristics of the goods makes a difference would lead to trade mark rights for pharmaceutical products having a narrower ambit than rights in relation to biscuits, sunglasses, jeans or any other products where branded and unbranded versions may be manufactured at the same factory but where there is no similar regulatory oversight. I do not see that there is any justification in the case law for making that distinction.

In case I am wrong on my conclusions on the law, it may be helpful for me to set out my findings of fact on whether the first BMS criterion is satisfied in this case, if those criteria apply. This was the main issue considered by the Court of Appeal in the SEP case already discussed. Floyd LJ described the first BMS condition as requiring that it be shown that the use of the mark by the importer is objectively necessary in order to market the product. He considered further (in paragraphs 13 onwards) what is meant by ‘necessary’ here and concluded from his analysis of the CJEU case law that:

‘… the overall message is clear: the condition of necessity is satisfied if, in a specific case, the prohibition imposed on the importer against replacing the trade mark hinders effective access to the market of the importing member state.’

Floyd LJ quoted from the judgment of the CJEU in Case C-143/00 Boehringer Ingelheim v Swingward [2002] ECR I-3759, paragraph 47 where the CJEU held that effective access to the market is impeded even where the impediment is partial, for example where there is strong resistance to relabelled goods on the part of a significant proportion of consumers. Floyd LJ said:

“23.

It is very important to understand what the court is saying here about “substantial part of the market”. It is not saying that it is enough if the importer has access to a part of the market: it is saying that he must not be hindered from access to a substantial part of the market. Thus it was no answer for the brand owner to say that there were sales which could be made to some part of the market – those who did not object to over-stickered products.”

He also noted that the courts have not been receptive to suggestions that hindrances to effective market access could be overcome by efforts of the parallel importer and others to change practices. However, in determining whether it is necessary to re-brand, the court must consider what alternatives exist for the parallel importer, and whether they are realistic (e.g. trying to eliminate label-resistance amongst pharmacists or consumers).

The findings of fact about the relevant market in SEP related to two formulations of the drug, the 20mg tablets and the 60mg tablets. The first instance judge had found that 88.65 per cent of prescriptions written for 20mg trospium chloride in the UK were written generically and only 8.61 per cent were written by reference to the REGURIN branded name. Approximately 2.74 per cent were written by reference to other brands. The only 60mg tablet actually on the market was the branded one but there was evidence before the court that 68 per cent of prescriptions were written by reference to the generic name, trospium chloride 60mg. Applying the case law to those facts, Floyd LJ said:

“58.

I have found it helpful to consider the market for trospium chloride in the UK … as having two potential points of sale for the drug importer: pharmacists and doctors. If the only point of sale were pharmacists, then … the UK rule or practice that a branded prescription can only be filled with the branded product, means that it is necessary to re-brand in order to get access to that part of the market. I do not accept that access to the remaining part of the market is an answer in law to exclusion from a part of it unless that part can be dismissed as insignificant. I think that whether one looks at the 20 mg product or the 60mg product the effect is that Doncaster is hindered from reaching a substantial part of the market.”

He held further that the persistent practice of pharmacists of filling generic prescriptions with the branded product even though there were cheaper options which would be more profitable for the pharmacist suggested that there was strong resistance to brands other than REGURIN. Doncaster would also be hindered to some degree in attacking the part of market for fulfilling generic prescriptions as well as the part of the market for fulfilling prescriptions naming REGURIN. He went on to hold that it was not realistic to expect the parallel importer to introduce its own rival brand.

Applying the Court of Appeal’s analysis in SEP to the facts of this case, the Defendants have, in my judgment, established that it is ‘necessary’ for them to rebrand the Epanutin as Phenytoin Sodium Flynn within the meaning of that term in the first BMS condition. The evidence of prescribing practice was drawn by Dr Fakes from information provided from a number of sources, in particular Prescription Cost Analysis data published by the NHS Business Services Authority showing month by month the number of prescriptions written for each product and data provided by the Prescription Pricing Authority in response to a Freedom of Information Act request made on behalf of Flynn Pharma. The evidence from the witnesses and from that data shows that before Flynn Pharma entered the market, when the only product available was Epanutin supplies by Pfizer, about 55 per cent of prescriptions named the generic product phenytoin sodium and 45 per cent referred to Epanutin. One would have expected that the publication of the Guidance would have reduced the percentage of generic prescribing but this is not in fact what happened. According to the data provided by Dr Fakes more than 90 per cent of prescriptions for phenytoin sodium are now written generically and only about 7 to 9 per cent name Phenytoin Sodium Flynn. The Defendants submit that this shows only that there has been a delay in the Guidance affecting the prescribing practices of doctors. They point to a small but consistent increase from about 7.4 per cent in April 2014 to 9.5 per cent in March 2015 for 100mg capsules. I have heard no explanation as to why it would take doctors over a year to find out about the Guidance or why, if they know about the Guidance, they would not implement it straight away if they were going to implement it at all. This small increase is, in any event, dwarfed by the drop from the 55:45 ratio before the Guidance was published.

However, in the light of the decision in SEP, the exclusion of the Defendants from 7 per cent of the market cannot be regarded as insignificant. On the basis of these figures, I consider that it is necessary for the Epanutin to be rebranded as Phenytoin Sodium Flynn in order to gain access to the market.

Moreover although only 7 to 9 per cent of prescriptions for phenytoin sodium 100mg capsules are written using the Flynn brand name, Flynn Pharma’s share of sales by volume is currently about 40 per cent of the market although this figure has been falling over time. The parties differed in the inferences they invited me to draw from this disparity between percentage share of prescriptions and percentage share of sales. Both sides accepted that part of the difference is due simply to the success of Flynn Pharma in competing on price and quality with the other available products. But Flynn Pharma accepted that some of the difference is due to the pharmacist following MHRA guidance that when a patient presents with a generic prescription, the pharmacist should check what brand the patient is currently taking and fulfil the prescription with that brand and no other. It is not possible to identify precisely which of Flynn Pharma’s additional sales are due to careful pharmacists following MHRA guidance and which are due to market forces. The evidence on pricing of different phenytoin sodium products was inconclusive in this case so it is not clear to me, as it was clear in SEP, that pharmacists were foregoing profits by dispensing Phenytoin Sodium Flynn against a generically written prescription. However Flynn Pharma’s evidence is that the company has devoted time and effort into impressing on GPs and pharmacists the importance of adhering to the Guidance and ensuring that patients stabilised on their product are supplied with that product. For example, Dr Fakes describes the steps the company took when it became apparent that the pharmacy chain Boots had switched a large number of patients from Phenytoin Sodium Flynn to the competing NRIM product in November and December 2013 after the Guidance had been published. Boots responded by showing Flynn Pharma the alert that was sent out to Boots pharmacists in November 2013. Under the heading ‘Action on receipt of a generic unbranded prescription’ for phenytoin sodium, the advice to Boots pharmacists is to identify and dispense the brand that has been supplied previously, to refer to earlier records or ask the patient or prescriber for confirmation of what brand should be dispensed or to return the prescription to the prescriber for amendment.

The evidence before me establishes that a significant if unquantifiable part of the sales for generically prescribed phenytoin sodium are effectively closed to other brands of phenytoin sodium where the patient has been stabilised on Phenytoin Sodium Flynn. This, added to the 7 – 9 per cent of the branded prescriptions, further satisfies me that the Defendants do need to rebrand if they are to gain effective access to the market.

My conclusions can be summarised as follows:

I therefore hold that Flynn Pharma’s claim for infringement succeeds.