Young Practitioners Discuss the Latest Developments in Parallel Imports

Published: April 20, 2022

Agnese Gerharde

Agnese Gerharde COBALT Riga, Latvia Internet Committee

Corrado Masetti AKRAN Intellectual Property Rome, Italy

A Virtual Discussion Forum hosted by INTA’s Young Practitioners Committee and Parallel Imports Committee on March 24 turned its attention to one major topic: parallel imports. Panelists and more than 50 young practitioners from Europe and elsewhere explored the latest developments in parallel imports regarding luxury goods, the volume of parallel trade of pharmaceutical products in the European Union, and the impact of Brexit on the system for parallel imports.

To kick off the discussion, Remco Klöters (Van Kaam IP & Media, the Netherlands), vice chair of the Parallel Imports Committee, offered a crash course on the topic. He explained that parallel imports, also known as gray market goods, are illegal when branded goods are exported from one market to another without the consent of the rights holder. The rights of the brand owner are exhausted once the brand owner sells in a particular market a product to which its IP rights are attached. However, even if the rights are exhausted by the owner, parallel imports can still be considered illegal for various reasons, such as risks to public health or to public order, and if there is a material difference between the imported goods and the authorized ones.

Further, he said, gray market goods pose concerns such as the absence of the manufacturer’s warranty and product liability, different quality standards and languages, and price competition with official distributions. They, therefore, pose a risk to the trademark owner’s investment and reputation, as well as contribute to the potential loss of consumer trust and expectations.

Luxury Goods

Luxury industries face many challenges from parallel imports. Luxury goods often require a more selective and refined distribution network than consumer products. When using a selective distribution network, the supplier undertakes to sell the specific goods, either directly or indirectly, only to distributors that are selected with specific criteria, and distributors are obliged not to sell outside the network. The price cannot be fully controlled and quantitative restrictions, such as maximum or minimum sales, may be applied in the selective distribution. Moreover, objective criteria should be developed and applied in a non-discriminatory manner.

Panelist Laurence Morel-Chevillet (B V L G A R I, Italy) noted that brand owners have several tools to stop gray market goods and legitimate reasons to oppose further marketing of the products once the products have been put in the market with the owners’ consent. Under specific conditions, it is possible to oppose the exhaustion of rights, such as the existence of a selective distribution network, a prestigious product, or a serious prejudice to be proven concretely (e.g., high discounts).

Pharmaceutical Products in the EU

According to Rachel Cockburn Buhl (Ferring International Center SA, Switzerland), the volume of parallel trade of pharmaceutical products has been stable over the past 10 years, but the share is more significant in higher-income member states of the European Economic Area (EEA) because of price levels and governmental policies. Parallel traders exploit price differences among the EEA states.

Further, she noted, due to different languages and regulations, imported products are modified by relabeling, reboxing, and/or rebranding, and in an evolving trend, many parallel traders prefer reboxing and marketing products in their own packaging.

The problems posed by parallel-traded pharmaceutical products are various. The reboxing of the product means that hidden safety measures are removed, the investments of pharmaceutical companies are devalued, and it obstructs the consumer from identifying counterfeits, which increases the possibility of medication errors.

However, the trademark owner cannot legitimately oppose further marketing of a repackaged pharmaceutical product if any of five BMS Conditions apply (explained in Bristol-Myers Squibb v. Paranova (joined Cases C-427/93, C-429/93, and C-436/93).

Brexit and Parallel Imports

Brexit has affected the system for parallel imports. Since January 2021, EEA goods continue to be imported into the United Kingdom without limitations, whereas goods from the UK to the EU need a brand owner’s approval.

Mary Bagnall (Charles Russell Speechlys LLP, United Kingdom) provided an update on the UK government consultation on the options for the exhaustion regime. More than 150 responses were received, including an INTA submission. Four possible options are: (1) maintain the current one-way position; (2) opt for national exhaustion (INTA’s advocated option); (3) opt for international exhaustion; or (4) opt for a mixed regime.

However, as of January 2022, the UK government had found insufficient data to understand the economic impact of alternatives to the status quo. What happens next is yet to be determined.

Although every effort has been made to verify the accuracy of this article, readers are urged to check independently on matters of specific concern or interest. 

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