Brand protection covers different means and tools to protect right holders. What Pointer can do is ensure that brand owners are given the best possible technology and support to help protect their intellectual property rights online. One of the ways to track and stop illegal activities is to eliminate the ongoing problem of illegal parallel import.
What is parallel import?
Parallel import, also known as the import of grey market goods, exists when genuine goods, containing intellectual property rights, are imported for sale on markets and territories without the brand owner’s explicit consent. A simple example would be an item bearing a trademark, for example a coffee maker, which is sold on and intended for the United States market, but is then imported from the United States to the European Union without the trademark owner’s permission. In that case, even though the goods are genuine, the act of importing to a country, for which the rights owner has not given their explicit consent, would constitute an intellectual property rights infringement – parallel import.
What is important to mention is that parallel import could occur for products protected by copyright, trademarks and patents. The rules in relation to parallel import depend on the territorial application of the rights in question. From European Union law viewpoint this act is prohibited as the ECJ has established in early case law.
Are there any limitations to parallel import?
IPR holders’ rights are limited by the principle of the first sale doctrine. This means that once a good containing intellectual property – be it a DVD with a copyright-protected movie, or a technology product containing a patented component – has been sold, the IPR holder cannot prevent the buyer from further selling the item in the same territory. The first sale of the product ‘exhausts’ the IPR holder’s rights.
There are national differences as to what is considered as the first sale. Some jurisdictions consider as first sale a sale anywhere (international exhaustion, applied for example in the US and Australia). Other jurisdictions only consider the IP rights to be exhausted when the product has been sold in that particular territory (national or regional exhaustion). The latter is the case in the European Union, which applies regional exhaustion. Article 15 of the EU Trademark Directive states: ‘A trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Union under that trade mark by the proprietor or with the proprietor’s consent’.
For example, if one buys a watch in Germany and resells it in Romania, the brand owner cannot prevent the second sale, since both Germany and Romania fall under EU jurisdiction. If, however, the watch has first been sold in China, the right holder’s rights have not been exhausted in the European Union and parallel import rules can be relied upon.
How does parallel import threaten brand owners?
There are several ways in which brand owners can be affected by such an IPR infringement. Parallel imports often limit the brand owners’ capacity to exercise control over their products, and ultimately, their brand.
Pricing: Parallel imports often occur where brand owners have decided to apply diverging pricing strategies in different regions. Allowing parallel importers to import branded goods from a lower price-level jurisdiction into a higher price-level jurisdiction can undermine the legitimate and authorized sales in the second jurisdiction, and the whole pricing strategy.
Distribution: There may be various reasons why a brand owner may decide to provide to a certain market but not another. There could be strategic business, competitive, or legal reasons which lead the brand owner to decide to not sell specific products in specific markets.
Quality and service: Brand owners may also choose or be required to apply different quality and service levels in specific countries. Allowing parallel importers to import the goods where they are not meant to be sold also undermines the brand owners’ ability to provide the level of quality or service desired or needed in that market.
Safety: Some products such as technology products can contain features (for example voltage or compatibility features) which may lead to disfunction of the products or safety risks when used in a region for which the product is not intended.
Reputation: Being able to control the above aspects has a direct effect on the brand value and reputation of the brand. For example, being able to control the price level of the product directly affects the brands’ positioning among the consumers. Similarly, allowing exclusive or luxury goods to be sold on unreliable or shady marketplaces affects the consumers’ perception of the brand’s exclusivity. It can also lead to consumers confusing genuine products with fakes or knock-offs. A recent CJEU judgment has confirmed that luxury brand owners under certain circumstances can prohibit their resellers from selling their products on online marketplaces. (C‑230/16 Coty Germany GmbH v Parfümerie Akzente GmbH).
How can Pointer help?
We are dedicated to help our clients to detect and enforce illegal parallel import. Our advanced brand protection and monitoring software ‘Revlect’ scans hundreds of online market places 24/7. The system filters out cases of illegal parallel import, displays them in a dashboard, and allows the brand owner or our team of experienced brand protection analysts to send out Notice & Takedown emails to shut down the infringing listings with just a few clicks.
 Directive (EU) 2001/29/EC, art. 4.
 Regulation (EU) 2017/1001, art. 9(2)(c) and Directive (EU) 2015/2436, art. 10(3)(c).
 C-15/74, Centrafarm B.V. and Adriaan de Peijper v. Sterling Drug Inc., 6 IIC 102 (1975) Negram III.
 C-10/89, Cnl-Sucal NV SA v HAG GF AG (1990), C-9/93, IHT International Heiztechnik v Ideal Standard (1994), C-55/0 and C-57/80, Musik-Vertrieb Membran and K-tel Int. v GEMA (1981).
 Directive (EU) 2015/2436.