MR. JUSTICE MANN :
- Shorn of its distractions, this is an application for the continuation of an interim injunction originally ordered by Kitchin J at the end of October. The injunction was originally granted by Kitchin J on 19th October 2007 when he also granted Norwich Pharmacal relief. It has been extended on the way by Blackburn J and Warren J. The action is for trade mark infringement. The Claimants (whom I will call collectively "Eli Lilly") maintain that the defendant (whom I will call "8 PM") has infringed its trade marks by importing relevant goods (pharmaceutical products) under various marks in respect of which one or other of the claimants is registered as proprietor.
- The claimants are part of a group of well-known manufacturers and distributors of pharmaceutical products. They own the marks which are relevant to this case, namely word marks CIALIS, LILLY, EVISTA, HUMALOG and HUMULIN under various signs. CIALIS is a drug for treating erectile dysfunction; EVISTA is a drug for alleviating the effects of the menopause; HUMALOG and HUMULIN are diabetes drugs. All of them, except one particular formulation of HUMULIN, are prescription drugs in the United States. All of them, without exception, are prescription drugs in Europe.
- It is said that the commercial origins of the facts of the present case lie in the fact that drug companies such as Eli Lilly charge a lot more for their drugs in the North American market than they charge in other parts of the world. In order to mitigate the effects of that on North American users, and in particular impoverished North American users, websites exist on which orders can be logged and drugs delivered more cheaply by sourcing them from other parts of the world. This is achieved by the relevant website organisers procuring the delivery of drugs from countries where the drugs can be brought much more cheaply.
- That method of doing business underpins the activities of the defendant and its Turkish supplier. The defendant is an English pharmacy which, as a side operation, conducts the activities which are the subject of this action. In relation to the goods in question in this case, what happens is as follows. Customers can place an order on a website identified as www.Canadadrug.com. Their order is in all cases supported by a prescription apparently written out by a doctor. This prescription or a copy of it finds its way to Turkey where the drugs have been supplied more cheaply and from where they can be supplied at a cheaper price than would be applicable where the customer is buying in the United States at US prices. Thus, in this case the drugs are supplied by a Turkish supplier. The identity of that supplier is said to be confidential. Although it has been disclosed to the lawyers in this case and to me, I do not need to identify it in this judgment. But what is not confidential is that the controlling shareholder is a Mr. Vinesh Aggarwal. Mr. Aggarwal is a director of 8 PM although he says he is not a shareholder in it.
- In Turkey the relevant product is taken from the shelves of the Turkish supplier in its original Lilly packaging (which contains its trade marks) and typically is placed in an anonymous brown cardboard box. In the case of HUMALOG and HUMULIN, additional insulating packing is provided both to protect the bottles in which it is contained and also to contain small ice packs to prevent the product from overheating. HUMALOG and HUMULIN are sensitive to extremes of temperature, and to a lesser extent are sensitive to variations of temperature generally, a point to which I will have to refer below.
- Before being placed in its brown box, each product is given a label identifying the product and dosage, identifying the customer by name and, in some cases, identifying a prescription number allocated by Canadadrug. The affixed label also contains the name "Complete Care Pharmacy" in fairly large type across the top, with an address in the top right-hand corner apparently pertaining to that concern, the address being PO Box 3329, Slough, UK. Below that address is an American toll-free number. No pharmacy operates, and indeed no other concern operates, from the PO Box address referred to. Anything sent to that address is in fact redirected to 8 PM. It is therefore effectively 8 PM's PO Box. Eli Lilly says that name and address are intended to give the impression that the drugs have an English origin. That is something again to which I will return below. The EVISTA product is not accompanied by anything in the nature of a patient safety leaflet or other similar information. The other products are generally accompanied by such a leaflet, but in the case of the products the subject of this litigation are written in Turkish and are therefore likely to be extremely uninformative to the average North American user.
- Each small cardboard box is given an address label bearing the name and address of the ultimate recipient, that is to say the person who originally ordered the product on the website. However, those boxes are not transmitted directly from Turkey to the United States. Instead, they are placed in larger boxes (in the case before me about 100 per larger box) and that larger box is consigned to 8 PM in the UK. 8 PM procures the release of the larger cartons from Customs, splits the consignment by removing the smaller boxes, and then posts the liberated brown boxes to the United States using normal Royal Mail postal services.
- Mr. Aggarwal, who has given evidence about this method, says that this is a more reliable and cheaper method of distribution than distributing directly from Turkey to the United States. He says the Turkish postal services are unreliable and therefore posting direct from Turkey is not sensible, and that on the facts of international transport this is the cheapest and most effective way of getting the goods safely and on time to the ultimate recipients in the United States. In fact, his evidence goes further and says that distribution directly from Turkey to the United States cannot sensibly be done at all if it is to be achieved reliably -- his reference being not merely to the Turkish postal services.
- 8 PM, the Turkish supplier and Canadadrug are able to operate in this way without incurring any English excise duties or VAT because of a Customs regime known as "inward processing relief" or "IPR". A person wishing to bring goods into the UK from a country outside the EC, with a view to sending the goods to another country again outside the EC, may take advantage of various customs schemes or regimes which enable that to be done without incurring any English duties or taxes. One way of doing that is to effect the onward transmission from what is known as a Customs warehouse. Another way is to use inward processing relief. If there is an intention to re-export the goods then under this latter process the goods can be released to the importer (in using that word at this stage in the judgment I am not prejudging the question which arises in this case as to whether or not these activities amounted to importing for the purposes of the Trade Marks Act 1994) who is then at liberty to send them on outside the EC. If that is done, and if the relevant returns are made, then no duties or taxes are payable. It is effectively like distributing from an appropriately designated secure warehouse but without leaving the goods in the warehouse. If the importer decides to distribute the goods in the United Kingdom then duties and taxes become payable. The evidence is that the regime is operated differently for those who indicate that they may wish after all to deploy the goods in the UK than for those who indicate they certainly intend to re-export them.
- The present case arose when the UK Customs authorities became suspicious about a consignment of pharmaceuticals consigned to 8 PM and which included some non-Eli Lilly goods as well Eli Lilly branded goods. It seems that HMRC suspected that the goods, or some of them, might be counterfeit. The relevant companies, including Eli Lilly, were alerted and inspections took place by means of a photographer who went in and took photographs on behalf of all four concerned companies. Eli Lilly were then notified on or about 2nd October. It was given some samples, and told of the identity of the consignee, although it was not at liberty to use the latter information until it had taken formal steps to acquire it through more formal channels, in this case by a Norwich Pharmacal application.
- Based on that information, Eli Lilly made a without notice application to Kitchin J (to which I have referred). He granted Norwich Pharmacal relief thereby formalising the ability of Eli Lilly to use the identity of 8 PM which had previously been disclosed to it and he gave injunctive relief restricting the use which could be made of the particular consignment in the warehouse. By the time of the hearing before Kitchin J it was known that in fact the CIALIS was genuine and not counterfeit but there was uncertainty over the other products. That was the state of knowledge of Eli Lilly at the time it made the application and must be borne in mind when assessing what was or ought to have been known to Eli Lilly at the time of that application and in assessing what ought or ought not to have been in its evidence and in its disclosure before the judge.
- In due course it was established that all the Eli Lilly branded products were in fact genuine. The focus of the attack at that point then changed to one based on import and export contrary to section 10(4)(c) of the 1994 Act. As I have already indicated, the relief which had been granted by Kitchin J was extended by consent pending the completion of evidence and the matter now arrives before me to be heard as an application by order.
- In addition to the claimant's claim for an interim injunction operating until trial, 8 PM has launched its own application for summary judgment on the footing that the claim is hopeless. There is also a claim by 8 PM that the original without notice application was attended by serious non-disclosure to an extent which means that that original order should be discharged, so far as that is a meaningful concept, and perhaps, more significantly, to an extent which means that Eli Lilly should not be entitled to maintain its claim for interim relief.
- Logically the non-disclosure point comes first for the reason that it is said to justify and require a refusal to grant further relief. Were the point a good one then I would not have to go on to apply the traditional analysis applying to interim injunction applications. However, for reasons of proper case management I heard the material on that point together with submissions on the interim injunction point. Since, for reasons that will appear, I consider that the non-disclosure point fails, it will be useful to continue with judgment on the interim injunction application point and to come back to non-disclosure later. That will permit all the material to be used as background to explain some of the points arising on the non-disclosure application. I shall also at an appropriate point deal with the summary judgment application.
- I should record at this point that although some complaint has been made in the evidence about possible sales of branded product in this jurisdiction which are said, if they took place, to be an infringement of the trade mark, those sales are apparently very limited, and whether limited or not they are not relied on for the purposes of this application. This application concerns the vast bulk of the shipment and the relevant business of 8 PM, that is to say this shipment and other shipments effecting the transit of goods between Turkey and the United States using this jurisdiction in the manner in which I have described it as being used.
- I should also observe that I have been informed that three other drug companies or groups are interested in the overall consignment which was originally treated as suspicious by HMRC. Those other three companies, or perhaps there are four, have launched their own proceedings. Those proceedings are stayed pursuant to some form of agreement or pattern of agreements and they await the result of these proceedings.
- The scope of the activity can be gathered from an exhibit originally described as a confidential exhibit to the first witness statement of Mr. Aggarwal but in respect of which any claims for confidentiality were abandoned at the end of submissions. He describes the 8 PM's business (so far as concerns this action) as follows:
"8 PM makes, on average, two shipments of products together containing around 1,500 packs to the US each week. On average, each shipment includes around 30-40 packs of products manufactured by Eli Lilly and Lilly ICOS."
- It is apparent from that that the actual effect on Eli Lilly's trade is relatively small. However, the overall scope of 8 PM's business in this respect and more appropriately perhaps the Turkish supplier's business in this respect, when one considers the aggregate, is clearly considerable. I have not been given financial figures, but 3,000 packages a week obviously represents a significant sum of money. The Turkish supplier is described as owning $1 million worth of stock.
- Logically the first question that I should consider on an interim injunction application is whether or not there is an arguable case. This involves a consideration of whether on the facts Eli Lilly have an arguable case for trade mark infringement. As will be apparent from my recitation of the background facts, that is not a straightforward exercise. It is not the usual exercise of seeing whether a mark is similar to a registered mark or the exercise of ascertaining whether properly branded goods are nevertheless an illegitimate parallel import. The point turns on whether 8 PM are guilty of import and/or export contrary to section 10(4)(c) of the 1994 Act.
- Whether there has been such an infringement, and whether there is a future risk of such an infringement, is the main question on liability in this case. Obviously Eli Lilly says that there is an arguable case; 8 PM says there is not, and in fact says that the position is so clear that I can determine it against Eli Lilly as a matter of summary judgment. That is the point behind the summary judgment application.
- The starting point in considering this matter must be section 10(4) of the Trade Marks Act 1994. The material parts of section 10 read as follows:
"(1) A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.
...
(4) For the purposes of this section a person uses a sign if, in particular, he ... (c) imports or exports goods under the sign ..."
- Mr. Turner, who appeared for 8 PM, said that there was no case for saying that such an activity occurred in this matter. He relied on the Customs regimes which can be legitimately deployed by a person in this jurisdiction and which keep goods effectively outside the jurisdiction for tax and revenue purposes. The goods were bought into the country under the IPR mechanism and were all intended for re-export. None were intended to be released for free circulation in this country or the EC. That, he said, was crucial and determinative of the matter. It meant that there was no import and, therefore, no export in this case, and the claim was bound to fail.
- His case in this respect relies mainly on the authority of Class International BV v Colgate-Palmolive Co and Others [2006] 1 CMLR 14. However, in order to consider what that case really held it is necessary to consider more of the detail of the Customs Code (Council Regulation (EEC) No 2913/92) under which IPR and the other procedures operate because the decision in that case relied on them.
- Article 4 of that Code contains definitions, including the following:
"(7) 'Community goods' means goods:
- wholly obtained or produced in the customs territory of the Community ... and not incorporating goods imported from countries or territories not forming part of the customs territory of the Community,
- imported from countries or territories not forming part of the customs territory of the Community which have been released for free circulation."
The concept of free circulation should be noted.
"(15) 'Customs-approved treatment or use of goods' means:
(a) the placing of goods under a customs procedure;
(b) their entry into a free zone or free warehouse;
(c) their re-exportation from the customs territory of the Community;
(d) their destruction ...
(16) 'Customs procedure' means:
(a) release for free circulation;
(b) transit;
(c) customs warehousing;
(d) inward processing ..."
- Again the concept of free circulation should be noted, and the latter three forms of customs procedure described there should also be noted. The second and third of them, that is to say transit and customs warehousing, are in various forms referred to in the judgment in Class. Articles 98 and following describe customs warehouses and the customs warehousing procedure (to an extent). Putting the matter shortly, customs warehouses are warehouses where the goods are still under the supervision of the customs authorities. Various procedures are laid down for the handling of goods which are subject to that regime. "Transit" by itself is not specifically dealt with, but "external transit" and "internal transit" are. The former is described the transit of non-Community goods within the community.
- Article 91 provides:
"The external transit procedure shall allow the movement from one point to another within the customs territory of the Community of:
(a) non-Community goods, without such goods being subject to import duties and other charges or to commercial policy measures."
Thus it is envisaged that goods subject to this provision shall not attract duty.
- Internal transit describes the transit of Community goods within the Community. I do not need to refer to that further.
- Inward processing is dealt with in Articles 114 and following. Article 114 describes the procedure as allowing goods to be used in one or more of the following operations:
"(a) non-Community goods intended for re-export from the customs territory of the Community in the form of compensating products, without such goods being subject to import duties or commercial policy measures;
(b) goods released for free circulation with repayment or remission of the import duties chargeable on such goods if they are exported from the customs territory of the Community in the form of compensating products."
The expression "compensating products" is defined elsewhere. I do not need to set it out.
- Those are the provisions dealing with concepts which lie at the heart of the ECJ judgment in Class. It would also be useful by way of explanation and background to set out one paragraph from the opinion of the Advocate-General in Class appearing at paragraph AG 12 at this point in this judgment:
"12. Customs warehousing is a procedure enabling importers to store imported goods where it is not known at the time of importation how the goods will finally be disposed of. The goods may subsequently be re-exported, in which case there will have been no need to pay import duties, or released for free circulation, at which point import duties will be payable. The Court has stated that the 'essential purpose of customs warehouses is to provide for the storage of goods' and not to permit the goods to pass from one stage of marketing to another."
That demonstrates the essence of the Customs warehousing procedure and transit procedures. IPR is intended to have a similar effect.
- Thus equipped, and with those provisions in mind, I can now turn to Class. In that case a container of toothpaste bearing trade marks of Colgate-Palmolive entered the EEA from South America and was held in a warehouse in Rotterdam. The owners claimed that it was in transit. Questions arose about the ability of the trade mark owner to prevent its introduction into the jurisdiction under transit procedures. Various questions were referred by the Dutch courts to the ECJ, and in that context some of the above concepts were considered.
- The court considered the questions posed to it in groups. In the course of doing that it summarized some of the questions, and gave answers, as follows. Various of the questions were gathered together and described thus:
"Whether the trade mark proprietor may prevent the introduction into the Community, under the external transit procedure or the customs warehousing procedure, of original goods bearing the mark.
28. By its first question, concerning external transit, and its second question the national court asks, essentially, whether Articles 5(1) and 3(c) of the Directive and Article 9(1) and 2(c) of the Regulation must be interpreted as meaning that the trade mark proprietor is entitled to oppose the introduction into the Community, under the external transit procedure or the customs warehousing procedure, of original goods bearing that mark which had not already been put on the market in the Community previously by that proprietor or with his consent.
...
33. Article 7(1) of the Directive and Article 13(1) of the Regulation limit exhaustion of the rights conferred on the proprietor of a trade mark to cases where goods are put on the market in the Community. They allow the proprietor to market his products outside the Community without thereby exhausting his rights within it. By making it clear that putting goods on the market outside the Community does not exhaust the proprietor's right to oppose the importation of those goods without his consent, the Community legislature has thus allowed the trade mark proprietor to control the initial marketing in the Community of goods bearing the mark ...
34. 'Importing' within the meaning of Article 5(3)(c) of the Directive and Article 9(2)(c) of the Regulation, which the trade mark proprietor may oppose in so far as it entails 'using [the mark] in the course of trade' within the meaning of Article 5(1) of the Directive and Article 9(1) of the Regulation, therefore requires introduction of those goods into the Community for the purposes of putting them on the market therein.
35. The putting on the market in the Community of goods coming from a third country is subject to their release for free circulation within the meaning of Article 24 EC.
36. Entry of non-Community goods for customs procedures such as external transit or customs warehousing is distinguishable from placing them under the customs procedure of release for free circulation, which, pursuant to the first paragraph of Article 79 of the Customs Code, confers on non-Community goods the customs status of Community goods."
- It therefore appears that the court is distinguishing there between customs procedures which do not permit free circulation in the EC, and procedures which do. While that sort of analysis cannot bear directly on the meaning of "import" under the trade mark legislation, the Court apparently considered that importation, with the necessary concept of using the mark, required that the goods be marketed within the Community (paragraph 34). In order to be thus marketed, the Code concept of free circulation was used as a test (paragraph 35) and the transition from non-Community goods to Community goods was a mark of the exercise as well (paragraph 36). The same concepts are similarly deployed in paragraph 38. Thus the customs concepts seem to be used as touchstones of whether an item is imported or not.
- This is taken up again at paragraphs 42 and following:
"42. It is therefore apparent that non-Community goods placed under the external transit procedure or the customs warehousing procedure may at any time be assigned another customs-approved treatment or use. They may, in particular, be placed under another customs procedure, where appropriate that of release for free circulation, or else be re-exported outside the territory of the Community.
43. Release for free circulation, a requirement for putting goods on the market in the Community, is therefore only one of the options open to the trader who brings goods into the Community customs territory.
44. As long as that option is not chosen and the requirements of the customs-approved treatment or use, other than release for free circulation, under which the goods have been placed are satisfied, the mere physical introduction of those goods into the territory of the Community is not 'importing' within the meaning of Article 5(3)(c) of the Directive and Article 9(2)(c) of the Regulation and does not entail 'using [the mark] in the course of trade' within the meaning of Article 5(1) and Article 9(1) respectively."
- What is said in paragraph 44 is arguably somewhat qualified. It does not say that any goods which are held on one of the suspensive regimes are not imported. It says that the "mere" introduction of goods into the EC is not importing for the purposes of the Trade Mark Regulation (and thus the 1994 Act). Mr. Fernando who appeared for Eli Lilly in this case relies on that as part of his attempt to distinguish this case.
- The concept of "mere entry" re-appears in paragraph 50:
"The answer to the first part of the first question and the second and third questions must therefore be that Article 5(1) and 3(c) of the Directive and Article 9(1) and 2(c) of the Regulation must be interpreted as meaning that a trade mark proprietor cannot oppose the mere entry into the Community, under the external transit procedure or the customs warehousing procedure, of original goods bearing that mark which had not already been put on the market in the Community previously by that proprietor or with his consent. The trade mark proprietor cannot make the placing of the goods at issue under the external transit procedure or the customs warehousing procedure conditional on the existence, at the time of the introduction of those goods into the Community, of a final destination already specified in a third country, possibly pursuant to a sale agreement."
Again this seems arguably to be a limited formulation. This time there is reference to two of the three procedures for dealing with goods free of tax. There is no reference to IPR.
- The court then goes on to consider another question. This time the question considers a further activity. Having answered the question about the introduction of goods, this question goes on to consider bars on the possible further activity of selling within two of the three procedures. The question is:
"Whether the trade mark proprietor may prohibit the offering for sale or the sale of original products placed under the external transit procedure or the customs warehousing procedure." (See page 352)
The court then goes on to answer this question:
"55. As is clear from paragraph 44 of this judgment, non-Community goods placed under the external transit procedure or the customs warehousing procedure are not regarded as 'imported' for the purposes of Article 5(3)(c) of the Directive and Article 9(2)(c) of the Regulation.
56. Such goods may be the subject of offering for sale or sales to a third country.
57. In those situations, when the goods are original goods bearing a trade mark, the trade mark proprietor's right to control the initial marketing in the Community is not adversely affected.
58. On the other hand, if the offering or the sale necessarily entails putting goods bearing the mark on the market in the Community, the exclusive rights conferred on the proprietor of that mark by Article 5(1) of the Directive and Article 9(1) of the Regulation have been adversely affected, regardless of the place in which the addressee of the offer or the purchaser is established and irrespective of the provisions of the contract ultimately concluded regarding any restrictions on resale or the customs status of the goods. The offering or the sale is then 'using [the mark] in the course of trade' within the meaning of Article 5(1) of the Directive and Article 9(1) of the Regulation. It follows that the trade mark proprietor may oppose it pursuant to Article 5(3)(b) of the Directive and Article 9(2)(b) of the Regulation."
- This time the contrast is between offers which inevitably ("necessarily") involve putting goods on the market in the Community and offers which do not. The former amounts to "using [the mark] in the course of trade", so that it can be opposed by the trade mark owner. It is opposed, however, not because it amounts to an import but because it amounts to an offer for sale under the sign. These paragraphs therefore do not tell us much about what activities under the umbrella of the three relevant customs procedures would amount to an import. Furthermore, the IPR is again not considered.
- What, then, is determined by this decision for the purposes of the case before me? It is absolutely clear that where goods are held under customs warehousing procedures or external transit procedures that, without more, is not an import. The same is very likely to be true of IPR, which, for these purposes, is indistinguishable, provided that one is just distinguishing the regime without any refinements. It is also apparent that then putting the goods into free circulation within the EC will constitute an import. However, I do not consider the Court was saying that nothing short of putting the goods into free circulation, or making them Community goods, will be capable of amounting to an import. The Court was considering straightforward cases - mere warehousing, warehousing with dealings involving a sale outside the Community and sales into the Community. Those clear cases generate clear answers. That is the extent of what is clear from this case. I consider that it remains open to argument that the court was not intending to deal with the potential subtleties of the facts of the present case. The present case (if Mr. Fernando is right) involves the engrafting of special facts on to the customs-governed release of the goods to 8 PM. They are not released into free circulation in the Community, and they do not become Community goods, but I do not consider that a proper reading and understanding of the decision in Class means inevitably that there can be no import. Situations which are part way in between arguably have to be looked at on their merits. To that extent Eli Lilly's case on the law is an arguable one.
- I should mention one English authority on the point. In Waterford Wedgwood PLC v David Nagli Ltd [1998] FSR 92, Sir Richard Scott V.C. had to consider whether goods were imported within the meaning of the 1994 Act when they were transshipped in Felixstowe en route from Spain to New York. He held that they were. He considered the point fairly shortly. At page 103 he said this:
"In trade mark cases it is the statute, section 10(4)(c), which declares that importation into or exportation from this country of goods bearing the mark constitutes use of the mark for infringement purposes. Importation consists of the bringing of goods into the territorial jurisdiction; exportation consists of their removal from the territorial jurisdiction (see Morritt LJ in LA Gear Ltd v Hi-Tec Sports plc [1992] FSR 121 at 129-130). It seems to me no more practicable in the case of goods and trade marks than in the case of patented articles to distinguish between some types of importation or exportation that would constitute an infringing use and other types of importation or exportation that would not. I would echo Lord Chelmsford when he said 'I do not appreciate the distinction ... between an active and a passive use of a thing'. If it were the defendants who, as principals, were responsible for the counterfeit Waterford crystal goods being brought into Felixstowe from Bilbao and shipped from Felixstowe to New York, it is, in my judgment, no answer to a trade mark infringement case under section 10(4)(c) that the defendants had not known the goods were going to be brought into England en route to New York nor that the goods were only temporarily in England while in transit."
- That case, if applied here, gives victory on the point to Eli Lilly and gives a clear victory to them. However, I do not apply it in that way. The point does not seem to have been given the detailed consideration that was brought to bear in Class. In particular, that case did not involve a consideration of the operation of the customs regimes. While the true interpretation of the Trade Marks Act and of the Trade Marks Regulation cannot be governed by the interpretation of similar concepts in the Customs Code, nevertheless the manner in which matters are actually operated under those codes may have a bearing as to whether the acts in question amount to an import or indeed an export for the purposes of the other Act and Regulation referred to. That is the real question. Had Scott V.C. had the benefit of the sort of discussion that appears in Class he may well have decided the Waterford case differently. At all events I do not rely on that case as handing Eli Lilly a clear victory. Nor, I detect, would Mr. Fernando really rely on it for that purpose. The case did not appear in his or indeed in Mr. Turner's skeleton arguments as placed before me when this case started. The case was only dealt with when I drew it to the attention of counsel.
- I turn, therefore, to consider that law in the context of the facts of this case. The defendants say that what has gone on in this case is no more and no less than the sort of activity that was held in Class to be not importing. Goods have been brought into this jurisdiction in bulk packages. They have been split up into predetermined smaller packages, and the latter have been sent to their predetermined final jurisdictions. There was never any intention that the goods should become Community goods or to be put into free circulation in the EC. They are only in this jurisdiction so that they can more or less immediately leave it again. The activity could have been carried out within a warehouse under one of the customs warehousing procedures, in which case (it is said) the defendant would be home and dry in this case and Eli Lilly would have no case.
- I consider that that analysis arguably oversimplifies the matter. It describes some of the bare facts, but the matter is capable of being more subtle and more detailed than that. The effect of what happens is capable of giving the impression that the goods emanate from England. The goods have an English address applied to them in the form of an apparent English trading concern's name on the label. The name of the apparent trading concern ("Complete Care Pharmacy") does not describe any actual English trading body. Eli Lilly have determined that it is not a name under which 8 PM trades. Furthermore, it is not the name under which anybody else trades in this jurisdiction. It is not a registered trading name of any person in Turkey. It is said by 8 PM that it is the trading name of the Turkish supplier, but that is mere assertion with no substance behind it. It is also said by the defendant that the address is merely some form of return address, and that the reason that the alleged pharmacy is given an English return address is because Royal Mail (by whom the goods are delivered) will not return goods other than to this country. That, too, is pretty unconvincing. The address is not described as a mere return address. It looks like a statement of the source of the drugs -- a pharmacy based in England. If it is a mere return address, why include the word "pharmacy" in the title? Mr. Turner offered to remove the word "pharmacy", but that is not the point. The name and address give a clear impression of source, whether or not it would also be an appropriate return address.
- So far as the point about Royal Mail returning goods only to England is concerned, that may or may not be true, depending on the arrangements, but the real question is why the return should have to be to England in the first place? If Royal Mail is returning goods because they are undelivered, that can be understood, but it is not inevitable that it is only Royal Mail who will return the goods. The customer has the right to return the drugs. Why could they not be returned to, for example, Canada? All those are unanswered questions, and being unanswered they strengthen the impression that the address is not merely a return address.
- The other important aspect of this case is the use of the Royal Mail for delivery. It is said by the claimants that this is deliberately done so that the goods have an apparent UK origin rather than a more accurate apparent Turkish origin (if one imagines one of the alternatives) or an origin from some other so-called non-1st world country. That is said to have two effects. First, it means that the customer's perception of these goods as having an English origin is enhanced. The goods arrive with an English postmark, reinforcing the apparent English origin derived from the label. This achieves conformity with what is said about the origin of the drugs. Second, it gives a similar impression to the US Customs. Although it is something of a movable feast at present, there are some restrictions on the importation of drugs into the United States. The US Food and Drug Administration (FDA) has the function of policing this or supervising it. The strict requirements are probably in the course of being formally relaxed and there are a number of de facto informal concessions made in favour of individual customers who import for their own purpose. The extent of all this is a matter of dispute in this action. However, it appears that the position is as follows. Strictly speaking, the importation of all or most of these drugs would be illegal. However, US Customs announced that from October 2006 they would not confiscate drugs mailed from Canada. Nevertheless, the position about drugs mailed from other countries is more fluid. Mr. Turner's evidence is that the strict legal position is in the course of likely modification as a result of legislation, subject only to presidential veto, which no one has any reason to suppose will be forthcoming.
- A website available to consumers and known as pharmacychecker.com compares online pharmacies. It points out some of these details and tells its readers:
"While the FDA usually does not prevent Americans from importing medication for personal use, consumers should use their best judgment in determining from which countries they feel most comfortable ordering medications.
It is more likely that the FDA will seize prescription drug orders from countries not considered to have the best systems of pharmaceutical regulations".
- Doubtless with that in mind, when it comes to survey the various online pharmacies, the website has a column for each pharmacy labelled "country", and says that "the Operations for each of them have to be evaluated in the country(ies) listed below. If a vendor will provide you with the option to receive medication from a different location, we recommend that you request the licence, address, and contact us." I am not totally sure what all that means, but it seems to relate to the country of origin of the drugs. For canadadrug.com the country is indicated as being "Canada, NZ, India, UK." On a separate page there is a "pharmacychecker.com verification program" entry for canadadrugs.com. The licensing body for the pharmacy is described as the Manitoba Pharmaceutical Association, and "other verified dispensing pharmacies" are specified as being the UK and the United States. All this is information supplied to the customer. Eli Lilly says that it has the effect that customers will expect the goods from canadadrug.com to have come from one of the specified sources, including the UK but not including Turkey. The UK postmark has the effect of reinforcing, or giving the impression to customers that the drugs have a UK origin, which is what customers will expect. So far as Customs is concerned, the UK postmark will be more acceptable to Customs than, say, a Turkish postmark, and the goods are less likely to be confiscated.
- All these are or may be valid points. They do, however, have their counter-arguments. It is the case that the packeted drugs which are the immediate subject of this action (EVISTA and CIALIS) have Turkish packaging. The bottled goods have labels with the Turkish language upon them. Once the customer is through the envelope and past the stuck on pharmacy label, it will be apparent that the origin of the goods is questionable, and it is certainly arguable that the existence of Turkish packaging will immediately undo any impression of English origin (to which the riposte will probably be that the customers will be reassured by the apparent English immediate origin derived from the label). So far as the effect on US Customs and the FDA is concerned, there was evidence that the problems are much less than they used to be, and whether the English postmark is needed to improve the chances of surviving customs penetration was, at the end of the day, in issue on the evidence.
- All this means that there is a case for saying that the use of the English jurisdiction was far more than its use as a "hub", to use an expression relied on by 8 PM. Mr. Fernando accepted that the test was objective - what impression was objectively given by the acts in question - rather than subjective - what was the subjective purpose of the use of the English jurisdiction in this way? Nevertheless, I think that there is sufficient material to make it properly arguable at a trial that the impression given by the method of distribution adopted by Canadadrug, the Turkish distributor and 8 PM, was that the goods have an English origin. Coupled with the actual manner in which the goods arrive here and are dealt with (including a change of consignor from the Turkish distributor to 8 PM) that makes it arguable, in my view, that this case is distinguishable from the more ordinary transshipment cases envisaged by the ECJ in Class, and that the acts amount to "importing" for the purposes of section 10(4)(d).
- Having decided that, the remaining question under section 10(4)(d) is whether the goods are imported "under the sign". Mr. Turner relied on the fact (undisputed) that the goods were placed in anonymous brown packaging in Turkey, and not removed from it until the customer saw it. Thus the sign was never apparent in this jurisdiction. That meant, he said, that the importation was not under the mark.
- I was not taken to any authority on the meaning of that expression. However, it seems to me that Mr. Turner's submission cannot be right or at least (bearing in mind that this is an interim injunction hearing) it cannot be plainly right and that the contrary is at least arguable. It is most unlikely that any foreseeable act of bulk importation would ever be under circumstances in which the mark is visible and relied on in some way for the purposes of the act of importation. If some explicit reference to the mark were to be required for importation, it is hard to see how there would ever be an infringement, and that is unlikely to have been the intention of the framers of the legislation. On closer inspection I think it much more likely that the expression "under the sign" qualifies "goods", not the act of importation. The goods are under the sign if they bear it or are associated with it, as these goods plainly are. This is not a point which plainly gets the defendant off any hook it might otherwise be on. Mr. Fernando's case on this point is at least arguable, if not almost certainly right.
- Accordingly, for all those reasons, there is a good arguable case on infringement for the purposes of the first step in the American Cyanamid analysis.
- Mr. Fernando had an additional basis on which he put his claim. He based his claim on Article 58(2) of the Customs Code. That provision read as follows:
"2. Paragraph 1 shall not preclude the imposition of prohibitions or restrictions justified on grounds of public morality, public policy or public security, the protection of health and life of humans, animals or plants, the protection of national treasures possessing artistic, historic or archaeological value or the protection of industrial and commercial property."
- He said that that provision gave his client a standalone right to restrain dealings in these goods because it was necessary in the circumstances which will be referred to hereafter to protect the public health. I put on one side for present purposes the extent to which the activities of 8 PM and its associates in this case might be thought to endanger the health of members of the public. It is sufficient for me to observe at this point that I do not consider that Mr. Fernando can be right in his claim that this provision gives his client a separate cause of action.
- The broad context of this provision is that it is in a regulation which provides a code under which the customs lays down and operates procedures and members of the public have the benefit of or are otherwise subject to those procedures. It is not designed to give members of the public the sort of rights against third parties to which Mr. Fernando refers. That is even more plain when one looks to see the immediate context of sub-paragraph (2). Its immediate context is sub-paragraph (1) which reads as follows:
"1. Save as otherwise provided, goods may at any time, under the conditions laid down, be assigned any customs-approved treatment or use irrespective of their nature or quantity, or their country of origin, consignment or destination".
Paragraph 2 is then said to be an exception to that because it "shall not preclude" various matters.
- I struggle to see how a bare provision which is clearly a qualification of an earlier provision affords a cause of action, but, be that as it may, with the assistance of references to this provision in the Class case, it can be seen that the purpose of the provision is as follows. Paragraph 1 is intended to allow a member of the public the right to choose one of the relevant Customs regimes appearing in the code. He or she or it is entitled to all the benefit of all the regulations and other provisions relating to that particular regime. Paragraph 2 detracts from that particular provision. It allows the Customs authorities or others to impose various prohibitions on various grounds. That is the effect of article 58(2). It does not and, in my view, cannot conceivably have the effect contended for by Mr. Fernando. Accordingly, Mr. Fernando is thrown back on his claim under the Trade Marks Act. He does not have an alternative claim. However, as I have already observed, he does have at least an arguable claim in relation to his main claim.
- Having decided that Eli Lilly has a good arguable case, it is therefore necessary to turn to the balance of convenience in the shape of the usual consideration of the merits and de-merits of the possible parties' claims under the claims for damages or claims on the cross-undertaking in damages.
- The first question is whether Eli Lilly would be adequately compensated in damages for any loss it might suffer. At one level it seems to me clear that it would. If this were a case just about finance and the loss to Eli Lilly it would adequately be compensated in damages. Its loss arising out of allowing this trade to continue between now and the date of the trial would be mere financial loss and, judging by the level of trade, not very great. There is no real suggestion that 8 PM would not be good for such loss. Whether or not that applies to the other drug companies is not something I propose to consider in this context.
- However, the risk to Eli Lilly does not stop there. It is said that there are other risks to Eli Lilly and those arise out of possible risks to patients. Those are matters which it is said I can and should take into account. Those risks are as follows.
- First, it is said that there is a risk to patients and therefore ultimately a risk to Eli Lilly because its goods are involved, arising out of the fact that pharmacists are not sufficiently involved in the operation of prescribing and dispensing these drugs; second, it is said that there is a risk to patients because these drugs are not shipped with inadequate patient information to enable the patient to assess the risks of taking it to protect him or herself; and, thirdly, it is said that in respect of some of the goods, and in this case the HUMULIN and HUMALOG products, there is a risk of an undesirable and conceivably dangerous degree of degradation of the product in transit.
- I will deal with each of those matters in turn. As to the first, there was, I think, originally in this case a suggestion that there was altogether an insufficient involvement of pharmacists in the operation of dispensing with the goods. To some extent, the sting has been taken out of that point by the evidence of 8 PM which is that the prescription is checked by a pharmacist when the order is first placed, and the accuracy of the packaging in Turkey is also checked by a pharmacist. If that is true then this point boils down to the lack of personal involvement of a pharmacist at the stage of personal dispensing which means that the patient does not receive the opportunity to have such information as the pharmacist may choose to give when physically handing over the drug. To that extent, it is allied to the second of the points which is a failure to provide patient information. I shall consider it with that. I turn, therefore, to that second point.
- A lot of the evidence before me was devoted to the question of whether patient information leaflets in some form or other are required in the United States. It seems to be common ground that a patient information leaflet would have to be provided with these products were they being provided within the European Community and I think, although it does not matter, probably Turkey as well.
- However, the position seems to be different in the United States. With the exception of the EVISTA product, which very arguably has to be accompanied by a document called a Medguide setting out certain patient information in relation to it, it seems that the position is that in the United States these products can be lawfully distributed without necessarily being accompanied by a patient information leaflet. Patient information leaflets are provided but it is up to the pharmacist or the doctor whether on any particular occasion such a leaflet accompanies the goods when dispensed. It may be that in many cases a leaflet is given on a first prescription but not subsequent prescriptions. At any rate, the important point to note is that patient information leaflets may be provided with these drugs in the United States if dispensed through the United States, but equally may not be. Evista is slightly different. US law probably requires that to be accompanied by a Medguide when dispensed. A failure to do that is a breach of the regulations.
- What Eli Lilly says about that is this. Although it is not inevitably the case that were these drugs to take a more conventional route a patient would get a patient information leaflet, nevertheless there is a materially increased risk that a patient will receive these drugs without an accompanying document or other form of accompanying information which a patient might need. One knows from experience that patient leaflets contain information such as the dose. That will appear on the drug itself so the omission of that probably does not matter. They contain information as to side-effects. I suppose that many patients will read them but I am sure that that will be ignored by many and deprivation of that information may or may not be considered to be serious. But perhaps more importantly the information will contain contraindications – for example, that the drugs are not to be taken if pregnant or if the patient is subject to certain allergies or certain other conditions or is taking other drugs.
- It is said by Eli Lilly, and I agree, that the ability of a patient to receive information of that sort -- and I interject at this point that the sort of information that I just referred to as identified by me was not specifically identified by Eli Lilly -- is a significant loss to the patient. It seems to me to be clear that there is a much greater risk of the patient receiving drugs without appropriate information if the drugs arrive through the route which is the subject of these proceedings rather than the more conventional route in the United States. I cannot and do not ignore that risk. I consider that the risk to patients is something that I am entitled, if not obliged, to take into account in this hearing. I do take it into account.
- The third head of risk to patients is a risk from lack of potency of products arising out of their manner of storage during the transit period. There was again considerable evidence about this. At the end of the day I think the evidence can be distilled as follows. Mr. Harris has provided evidence on behalf of Eli Lilly on this point. He has annexed an exhibit originally described as confidential, for reasons which I confess I fail to understand, but whose confidentiality has subsequently been waived, if there was any. It is a document which sets out in a table Eli Lilly's views as to the extent to which potency in its HUMULIN and HUMALOG and other insulin related or diabetes related products will be lost if the product before sale is stored at varying temperatures for varying times. This is not a document which seeks to set out the degree to which potency is reduced so as to make the drug ineffective. It is a document which sets out Eli Lilly's view as to the loss of potency should mean the drug so as to make it, in Eli Lilly's conservative view, unfit for sale. It takes the view that a certain degree of loss of potency when arising will mean the product should no longer be sold. It takes that view not because the product is dangerous or not because it is ineffective at that point but that the degree of potency lost at that point runs the risk that when there is an additional lack of potency because of storage under various conditions in the hands of the customer, the ultimate degree of potency will be such as to render the drug less effective or even ineffective. It is, I am told and I accept, a conservative estimate, but it is one which I respect.
- It does not reflect the FDA's view of the degree to which potency can be lost before the drug should no longer be administered. The FDA's view is that up to 5% of potency can be lost before the drug should be regarded as not safe or not proper. Eli Lilly's views so far as sale is concerned are much more conservative than that. As I say, that is something which I consider I ought to and I do respect.
- Mr. Harris's table shows, for example, that a product stored at 25 degrees Centigrade for 14 days will have lost potency to a degree which makes the product unfit for sale. The table is presented as one with two axes. The X axis is temperature and the Y axis is hours or days storage. One can read off and see what a combination of temperature and length and storage will do to Eli Lilly's views about the loss of potency and the saleability of the product. At the extremes, product which is stored at 55 degrees Centigrade should never be sold, and a product which has been frozen should never be sold. Between that there is, as one might expect, a progression which is, again, as one would expect, exponential and not necessarily a straight line of time against temperature.
- The point is this. The journey of these goods takes place through or over several jurisdictions: through Turkey, which is capable of being hot and indeed very cold; across Europe in an aeroplane; through this country, which is not quite so capable of extremes, and the United States, which is again capable of both extremes. It cannot be guaranteed through what sort of temperature conditions the product will travel and it cannot be guaranteed what sort of temperature conditions will be encountered once it reaches the customer. The product is not plainly kept refrigerated between leaving Turkey and arriving in this jurisdiction and is not kept in refrigerated conditions in the Customs warehouse where it arrives or, as I understand it, in 8 PM's premises either. There is no guarantee that it will be refrigerated or protected from any extremes of temperature on the way from this jurisdiction to the United States.
- The time of the journey is not guaranteed either. Mr. Turner's case is that a typical journey from Turkey to the United States takes about six days. That seems to me to be optimistic. It takes at least a day to get from Turkey to this jurisdiction and 8 PM tries, but, by inference, does not always succeed, to turn the product round within 24 hours. That is a second day at least. The journey to the United States takes in the normal course, according to Royal Mail's website, which may or may not be accurate in this respect, four to five days. That gets one to seven days before one starts adding on any of the other vagaries which may occur in transportation or any other delays which may occur in Customs.
- There is therefore a risk that the product will be kept in variable conditions for an unspecified number of days, between six and a rather larger number. All that is unpredictable. The temperatures in which the product is stored whilst travelling is equally unpredictable. There is, therefore, a significant risk of this product achieving a status by the time it reaches the customer (which, in my view, is the equivalent of the point of sale in Eli Lilly's tables), in a state which Eli Lilly considers is no longer fit for sale. I stress that that does not mean that the product is ineffective or dangerous but it poses a risk of it being or becoming ineffective. I should add at this point there is no case at all for saying that the product will ever become dangerous. The worse that will happen is that it will be ineffective, but ineffectiveness to a diabetes patient is obviously a very serious matter.
- There is, therefore, a significant risk on the facts that Eli Lilly's product will arrive in a condition which Eli Lilly would regard by its own standards as being unsatisfactory and under which it would say that the product should not be sold. That Eli Lilly has a genuine interest in its branded products not being sold if they are in an unfit state is apparent from section 12(2) of the 1994 Act.
- A lot of evidence was devoted to the extent to which the product can safely be used when it has been stored in a variety of temperatures, both before and after purchase and both before and after opening. I do not propose to go into that evidence in detail. It is unnecessary for me to do so. What matters for present purposes is the risk of the product achieving a state in which there is degradation to an undesirable or unacceptable extent. That risk will reflect in patient health and that by itself is something that I take into account and should take into account, but it will also reflect in possible risk to Eli Lilly's reputation, which is a more direct risk to Eli Lilly. Again I take that into account. I take it into account in the balance of convenience because I think it is right and important that I should do so. This is not a case in which all the factors relevant to the balance of inconvenience can be measured in financial terms. I therefore consider that there is a significant risk which cannot be compensated in damages to Eli Lilly, and a fortiori to the patients themselves.
- Those are the balance of convenience factors operating so as to affect Eli Lilly. I next need to consider whether if I stop this trade in this particular manner, pending a trial, and it turns out that I should not have done so which is definitely arguable in this case, then the defendant and the Turkish supplier can be adequately compensated in damages. So far as 8 PM is concerned, I consider that it can. The damage will be quantifiable. Lost trade can be calculated by reference to past trade and I see no great problem about that. The level of trade in terms of 8 PM's business is undetermined because 8 PM has decided not to disclose the profitability to it of this trade. It is not apparent there will be any loss but if there is a loss I am satisfied it can be adequately compensated on the cost undertaking in damages and Eli Lilly are plainly good for that.
- The Turkish supplier is slightly different. I consider it right to take the position of the Turkish supplier into account because it is the Turkish supplier who will be the person mainly affected by this. Whether or not the transit of the goods through this jurisdiction is technically importation for the purposes of the Act, nevertheless the goods are effectively merely sent in transit through this jurisdiction and the business is really that of the supply of these drugs by the Turkish supplier either to Canadadrug or to the US end users. It matters not which view ones takes for these particular purposes.
- Accordingly, since the grant of an injunction will shut off this particular route available to the Turkish supplier, it seems to me to be right and inevitable that I should take the position of the Turkish supplier into account. The Turkish supplier is more financially at risk because it is the person with the commercial risk in the sales. Whether it will lose sales or not depends on whether it can find a substitute route. Various routes were suggested in the evidence. It is not clear to me that no such route is available and it is possible that another route will be found at least temporarily.
- However, even if that is wrong, the loss which the Turkish supplier will sustain in this respect is not apparently the whole of its business and even if it is it will be only a relatively short-term because I propose to make an order for a speedy trial. Since the parties have told me that they think they can be ready for trial in three months, that is an objective for achieving a speedy trial. One is, therefore, only looking at a three month disruption of business.
- I bear in mind that it has been submitted to me that one is not talking about the mere loss of three months of business. It may be that business lost is not entirely business that can be regained if the tap is turned back on. I accept that may be the case but to the extent that is the case again that is something which sounds in damages.
- In all the circumstances, balancing the various factors which I have to take into account upon the balance of convenience head, I have come to the conclusion that the balance is in favour of granting an appropriate injunction until trial. I shall therefore grant an appropriately worded injunction. Exactly what its form will be will have to be the subject of debate between counsel and myself, if it cannot be agreed between counsel.
- That determines the interim injunction application in this matter. It also achieves the disposal of the summary judgment application. Mr. Turner could only have succeeded in his summary judgment application if Eli Lilly's case on importation was unarguable. Since I have held it is arguable then that is end of the summary judgment application.
- The last point which arises today is the non-disclosure application. This is one of what I regard as the distractions to which I referred when I opened this judgment. However, it is a point taken by Mr. Turner on behalf 8 PM and if it is a good point he is entitled to take it. It arises in this way.
- I have indicated that this case started with a without notice application to Kitchin J. The extent to which there is an obligation of full and frank disclosure on such an application is well known and was not the subject of material dispute between Mr. Turner and Mr. Fernando. The only thing which was arguably in dispute was whether or not Eli Lilly should have disclosed relevant authorities to the judge, but it is clear on the authorities that relevant authorities of which they were or to an appropriate degree ought to have been aware should have been disclosed to the judge. That point, in my view, can now be regarded as closed.
- In support of the obligation of disclosure and in emphasis of its importance, I was shown by Mr. Turner Behbehani and Others v Salem and Others [1989] 1 WLR 723 and in particular the extracts from the Brink's Mat case in that case, although I was also taken to other passages. I was also provided with, but not read much of, Memory Corporation v Sidhu [2000] 2 WLR at 1443.
- Those cases emphasize the importance of full and frank disclosure. The importance of that and of the need for the court to impose a discipline in relation to this cannot be over-emphasized. There will be many occasions on which a court will wish to entertain and should entertain an application based on a failure to disclose, notwithstanding the fact that in the events that have happened the point might be said to be spent. If there has been material non-disclosure it will be right that the court should rule on it whether or not it decides to re-impose an injunction, which the authorities indicate can be done notwithstanding non-disclosure. It is partly with that in mind that I embark on a consideration of this point.
- It arose in this case in a somewhat unsatisfactory manner. The normal, and in my view proper way, of taking the point would be formally to apply for a discharge of the injunction on the back of a formal application made in that respect. The formal application will set out the disclosure which it is said the original applicant failed to make and will enable the applicant to meet the case. Of course, it is always important for a respondent to an application to be able to meet the case but there is an additional sensitivity in applications based on non-disclosure. In the hurly-burly of litigation, a failure to disclose a matter, if there was one, may often be laid at the door of the advocates or the solicitors involved in the case as opposed to merely being laid at the door of the client. A client will no doubt be told of the obligation to make disclosure and it will be for the client to come up with the relevant facts in the light of what he is told about the need to disclose all relevant facts. However, there will be occasions in which a complaint about non-disclosure will effectively be a complaint about the lawyers acting. Unless that is flagged up sufficiently clearly in advance, there is a risk that the parties will arrive at court with the same representation as the claimant party had on the ex parte application, with the result that the advocate for the claimant will be required not merely to defend his client's case but also to defend and justify his own personal position. I mention that because that position almost arose in this case when for a time it appeared that Mr. Fernando's conduct of the without notice application was going to be called into question.
- Not surprisingly, for a brief moment, that generated a little more heat than one likes to see in these applications, but fortunately the heat radiated away when Mr. Turner modified his case – entirely properly in the light of his immediate acceptance of a statement from Mr. Fernando as to what Mr. Fernando knew and did not know, and personally did not appreciate on the without notice application. With those points out of the way, the application proceeded on a slightly better-tempered keel, if I am allowed to mix my metaphors.
- However, that slightly unsatisfactory position nevertheless arose in this case because the application to discharge was not the subject of a formal application. It materialized in a particularised form for the first time in Mr. Turner's skeleton argument served on Thursday, 16th November. It therefore arose at a point at which the evidence was largely closed, although not entirely closed because further evidence was served after the exchange of skeleton arguments. It originally contained five grounds. After a certain debate between Mr. Turner and myself yesterday afternoon, that was refined down to three grounds and it is those grounds and matters that I now have to consider. I repeat that I think it would have been better if the matter had been properly formulated in an application because then it would have perhaps received a degree of attention in the evidence which was rather greater than the attention which it did receive, but nevertheless the point was run and I should deal with it on the basis of the material that we had. I do not consider that Mr. Fernando was at the end of the day disadvantaged by the manner in which the matter was advanced.
- I will take the three persisted in heads one by one. Unfortunately they involve going back into the evidence to a degree, which particularly at this time on a Friday evening, will be seen as tiresome, but there is no way out of it.
- The first head reads as follows, and I will take Mr. Turner's formulation because it is that precise formulation which it is appropriate to consider.
"1. The failure of Lilly to explain to the court that it had no evidence that the products were intended to be marketed in the EEA coupled with the failure to draw to the court's attention that all the products of which the Claimant was aware were addressed to patients in the US." (Mr. Turner's emphasis)
This complaint has its origins in a complaint that the judge will have had the impression, or may have had the impression, that at least some of the goods in the warehouse and which were the subject of the without notice application were destined for the market in the EEA. If they had been destined for the market in the EEA there would have been much less dispute about trade mark infringement. In particular, there would have been no debate about importation. There might have been debate about consent to parallel imports, but that would have been different. At any rate, the essence of the complaint was as I have described.
- The material on which that complaint is made is twofold. First, there is effectively an absence: Mr. Fernando's and Eli Lilly's failure to point certain things out to the court. Second, it is positive. It is based on certain things that were actually said in the evidence which was produced in support of the application. First, Mr. Moore in paragraph 6 of his witness statement said this:
"I have now been informed that the Consignment contains over 1000 packages addressed to individual patients some of which appear to be in the US".
Second, paragraph 35 of Mr. Longbottom's first witness statement says:
"I am informed by Mr. Moore and verily believe that Customs indicated to Mr. Moore that the shipment was imported into the United Kingdom, with a view to the individual packages within the Consignment being sent to individual patients many of whom appear to be located in the United States".
- It is probably the case that the matter was at least implicitly, if not explicitly, presented to Kitchin J as being one in which there might well be an infringement by acts in the UK other than importation. In other words, that goods were going to be put on the market in the United Kingdom. However, I do not think that, so far as that is true, the claimants are culpable in forming that view and presenting the case on that basis at the time. It must be remembered in this case that they were entirely dependent for their evidence and what they knew on what they were told by Customs. Customs had told them that they had goods. Customs had told them informally of the consignee of those goods. The consignee of those goods was an English pharmacy. Eli Lilly had not at the time seen the packages and could not themselves have determined that, for practical purposes, not merely some but all of the packages were destined for the US, that is to say a destination outside the United Kingdom. They simply did not know that at the time.
- Accordingly, to criticise them for saying they had no evidence that the products were intended to be marketed in the EEA and for a failure to draw the court's attention to the fact that all the products of which they were aware were addressed to patients in the US is not a fair criticism. They had set out fairly in the evidence what it was they were told by Customs. So far as they might be thought to have been saying that some of the packages might be destined for distribution in the EEA, then that was something which they were entitled to suggest in the evidence that they had. They might be thought to have had at least some evidence that that was the case, bearing in mind that Customs had not yet told them that all the products were destined for the United States.
- In the circumstances, there is nothing unfair or improper about the way in which the matter was presented to Kitchin J and the alleged failure to disclose is not in any sense, in my view, a culpable failure.
- The second failure is said to be this:
"2. The failure to draw the court's attention to the relevant legal authority which would form the basis of the defence".
That relevant legal authority is the Class case, and there is also a case called Montex to which Mr. Turner drew my attention. The case against Eli Lilly in this respect is this. The Class case, if it does not absolutely govern the situation, is nevertheless very relevant to a decision as to whether or not to injunct goods on the basis of importation when those goods are subject to one of the customs regimes. The case was (it is accepted) not drawn to the judge's attention.
- The nature of the case advanced to the judge and the state of knowledge of Eli Lilly are crucial to an understanding of why that did not happen. The case certainly becomes relevant and, in my view, ought to be disclosed, in a case where it is known that a case on importation is going to be made, and made in circumstances in which the goods are known to be subject to one of the customs regime which keep the goods out of the UK tax regime because they are coming into the jurisdiction only to go out of it again pretty shortly thereafter.
- What did Eli Lilly know about that? That has already been set out. It knew that the goods had come into the country and it knew that some of them were destined for the United States. It did not know that they were intended to be re-exported by any particular mechanism and did not know and, cannot be expected to have known at that stage, that the mechanism for passing the goods through the country and its customs regime was one which involved it not technically being put in free circulation and was one which involved it being subject to a regime which made it non-community goods and therefore goods which, applying the test in Class, would mean that they are not being imported for the purposes of the Act.
- Eli Lilly therefore simply knew nothing of the facts which would make an anxious consideration of importation and Class important at that time. The position only became clearer at a later date on an inter partes hearing when Mr. Turner explained the factual position on instructions, and became clearer still when it emerged from the evidence of Mr. Aggarwal filed in the course of an orderly exchange of evidence. Until that time, I repeat, Eli Lilly were operating to some extent in the dark as to what was to happen to these goods. It knew that some goods were going on to the United States, but it had no reason to suppose that the mechanism adopted for importation in a loose sense and exportation in a loose sense would be such as to make it strongly arguable that importation for the purposes of the Act did not take place.
- For that reason, therefore, it does not seem to me that, in those circumstances, when properly and fairly viewed, Eli Lilly are in any way culpable for not having drawn the decision in Class to the attention of the judge. It would have made little sense and would have been absolute overkill based on a number of potentially unjustifiable hypotheses to have required or justified the drawing of the attention of the judge to that authority. I, therefore, consider that that allegation of non-disclosure fails.
- The third allegation of non-disclosure is this:
"3. The allegation (i) that the HUMULIN and HUMALOG was degraded and (ii) the failure to draw to the court's attention that these products are stable up to 30 degrees centigrade for 28 days."
In support of this part of his application, Mr. Turner at least has the support of an admission. It is quite clear from the evidence and from the transcript that Kitchin J was told both by a witness and by Mr. Fernando that the HUMULIN and/or HUMALOG product in the warehouse had by that time degraded, and the clear suggestion was that it had degraded to an extent which made it unusable, if not dangerous.
- Mr. Fernando on behalf of Eli Lilly accepts that that statement was wrong. He has sought to apologise for its making. The explanation for the statement is said to be that the witness who was not a scientist misunderstood the evidence available to the company.
- I accept the explanation but nevertheless the fact is that the statement was made and ought not to have been made. I suppose it amounts to culpable non-disclosure for the purposes of the doctrine requiring disclosure. It is certainly a statement which should not have been made. It was also a statement as to a relevant matter, because an allegation that the drugs in storage have degraded is obviously going to be of significance to a judge who is concerned as to the fate of those drugs and in particular is being asked to give relief which would have the effect of keeping those drugs out of circulation. It may or may not have been the tipping point in relation to the judge's consideration. I tend to doubt it. It was merely one of many factors that will have been operating and it is unlikely it would have been determinative. That does not matter for the purposes of the non-disclosure doctrine. It seems to me that that particular failure was a culpable non-disclosure. The second part of Mr. Turner's formulation adds nothing.
- Mr. Turner has that under his belt. But is it the sort of non-disclosure which should lead to a discharge of the original injunction? In my view, were that concept a material one for these purposes, the answer would be no. It was a non-disclosure. It ought not to have happened. But measuring that particular error, and particularly bearing in mind it was innocent in the sense of not being deliberate, and weighing it against the other factors operating at the time, it is not sufficient by itself -- and that is all Mr. Turner has -- to justify a discharge of the original ex parte injunction. A fortiori it is not sufficient to justify a refusal to grant further relief in the form of the inter partes interim relief which Mr. Fernando seeks today.
- In those circumstances, therefore, while that limb of non-disclosure succeeds on the facts, it fails so far as Mr. Turner's claim to use it to set aside the original relief and to justify a refusal of further relief is concerned.
(Discussion on consequential relief)
MR. JUSTICE MANN: Having heard Mr. Turner, I think the right order in this case is costs reserved. I make that order with a slight degree of reluctance because one knows from experience that, although it is an order which should be made on the basis that the ultimate tribunal is going to be better placed than the tribunal hearing the application to determine the costs, very often that is not the case.
However, in this case I think it is not right to give either party their costs of this application in any event. Costs in the case would have been, in my view, an appropriate order had I been confident that this case would retain its same shape when it gets to trial, because the real and central issue in this case seems to me to be an importation question. If that question were at the end of the day to go against the claimants then it seems to me that it would be right, as I am presently minded, without seeking in any way to fetter the discretion of a trial judge, that the claimant should end up bearing the costs and paying the costs of this application.
However, since it might just be that this case will not have the same shape when it gets to trial, it might be a little difficult to work out which case the costs go and it might even be unfair to make that order, so the appropriate order, in my view, is costs reserved.
(Discussion on permission to appeal)
MR. JUSTICE MANN: The principal question on applications for permission to appeal is whether there is a reasonable prospect of success which one can translate, if one likes, as being whether there is something which is worthy of argument. Mr. Turner has drawn two matters to my attention. I am afraid that I do not regard either of them as having reasonable prospects of success as that test is interpreted in the authorities.
Mr. Turner rightly identifies a question of law as being at the heart of this matter, but it is a question of law which has to be determined against a clear background of fact and in the light of all the facts in the case. Although many of the facts have become clear, it seems to me an almost inevitable conclusion that if the point is not to be determined on the basis of agreed facts, it must be determined on the basis of clearly established facts at the trial. It seems to me to be plain that this is a case in which the point should be determined at a trial and I, therefore, refuse permission to appeal, I suppose, technically on the summary judgment application. That is the convenient vehicle for these purposes.
So far as the other point is concerned, I consider that Mr. Turner's submissions turn, to some extent, on a misconception of what is being said in the relevant paragraph of the skeleton argument. The paragraph of the skeleton argument demonstrates probably that it was not appreciated there was any real issue as to importation at all so they went straight to the stage of exportation. It does not seem to me to be reasonably capable of bearing the construction that Mr. Turner puts on it but, be that as it may, I do not regard that as having a reasonable prospect of success either.
(Further discussion ensued)
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