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Parallel Imports/Gray Market

What are parallel imports?

Parallel imports (sometimes referred to as gray market goods) refer to branded goods that are imported into a market and sold there without the consent of the owner of the trademark in that market.

The goods are “genuine” goods (as distinct from counterfeit goods), in that they have been manufactured by or for or under license from the brand owner. However, they may have been formulated or packaged for a particular jurisdiction, and then are imported into a different jurisdiction from that intended by the brand owner.

Exhaustion of IP rights refers to the extent to which IP rights holders can control the distribution of their branded goods. According to the concept of exhaustion, once IP right holders sell in a particular jurisdiction a product to which their IP rights are attached, they must allow the resale of that product in that jurisdiction. The IP rights covering the product have been “exhausted” by the first sale.

There are two types of exhaustion regimes: national (or regional) and international. The debate between which is preferable has been highly controversial.

National (or Regional) Exhaustion
These regimes are followed by countries and regions that only allow trademarked goods that have been exhausted to be resold in the national or, in the case of the European Union (EU), regional area that the goods are from. It does not allow for goods to be sold outside of those areas.

International Exhaustion
This regime is followed by countries and regions that allow trademarked goods that have been exhausted to be resold in regions other than the country or region of origin.

Some countries use a hybrid approach that modifies one of the two basic types of exhaustion. For example, a country nominally applies the principle of international exhaustion but does place some limits on the goods that may be imported.

INTA's position

INTA advocates the national (or regional) exhaustion of trademark rights in relation to the parallel importation of goods.

In addition, the Association supports the principle that international exhaustion should not apply to parallel imports in the absence of clear proof that the trademark owner expressly consented to such imports, and that the burden of proof should be on the party seeking to prove such consent.

In those countries that currently follow international exhaustion, and in which political or other conditions make it highly improbable that national exhaustion would be implemented, a “material differences” standard should be adopted in order to exclude parallel imports that are materially different from those products authorized for sale by the trademark owner in the domestic market.

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