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Whats parallel import?

Published : Saturday, 22 June, 2024 at 12:00 AM  Count : 899
MS Siddiqui
Parallel importation is understood as a mechanism of selling a non-counterfeit and branded product imported from another country in the local market without permission of the trademark owner.The doctrine of parallel importation developed on resold theory or the doctrine of international exhaustion of branded products. The common example of this parallel import in our country is importing mobile handsets, cosmetics  and other consumer goods etc in an in appropriate channel and selling them at a predatory lower price without any warranty from the brand owner.

The term "parallel importation" has been explained by Christopher Heath, a German author that the goodsproduced and sold legally, and subsequentlyexported. 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.

It occurs when other importers obtained products directly from an authorized source outside the country by passing any native manufacturer or suppliers. While such products are not counterfeit, pirated or duplicate products but they are offered for sale in a marketplace through trade channels that are not authorized by the trade mark right holder". The imported goods are first purchased in an overseas market with the brand owners permission, to be imported into the domestic market without the brand owners permission to resell.

It is also widely termed as "grey market imports" since unauthorized import from illegal counterfeit products.Parallel importers usually purchase products in one country at a price that is cheaper than the price at which they are sold in a second country. They then import the products into the second country. The products are then sold at a price which is normally somewhere between the usual price found in the country of export and the country of import.

According to Wikipedia "A parallel import is a noncounterfeit product imported from another country without the permission of the intellectual property owner." The World Trade Organization (WTO) defined parallel import " When a product made legally (i.e. not pirated) abroad is imported without the permission of the intellectual property right-holder (e.g. the trademark or patent owner). Some countries allow this, others do not."World Health Organization (WHO) has similar definition of parallel import " Parallel imports are imports of a patented or trademarked product from a country where it is already marketed." Parallel importing is regulated differently in different jurisdictions; there is no consistency in laws dealing with parallel imports between countries. Neither the Berne Convention nor the Paris Convention explicitly prohibits parallel importation.

Parallel importing of trademarked goods may create confusion for consumers. However, some authors argue that because parallel importers sell genuine trademarked goods there is no possibility of confusion about the origin or source of the goods. The goods are authentic or genuine goods (as opposed to counterfeit goods), meaning that they have actually been manufactured by, for or under license from the brand owner. Although modern trademark law does not support this view, involving an unauthorized channel or outlet increases the likelihood of consumer confusion about product sourceand quality.

A parallel import restrictions (PIRs) strengthen IP holders control over distribution channels, thereby permitting market segmentation and leading to price discrimination. The third party (unauthorized) has an incentive to operate parallel imports due to the feasibility of price arbitrage.

Despite the problems caused by parallel imports, there are also opportunities for consumers and for manufacturers as well.The main and possibly the only reason why parallel trade has emerged is price differentials between the same products sold in different markets. For example, manufacturer might sell its products both to A and B countries, but due to several reasons the price in country A would be much lower. Hence, business units would try to make profits by exporting cheaper products from country A and selling them at a higher price in country B. Moreover, there could also arise cases of parallel trade if the manufacturer does not sell its products in country B at all or does it on the terms different from those applied to country A.

If products sold or imported by third parties fall within the scope of patents, trademarks or copyrights valid in this particular country, such sale or importation by third parties is generally deemed infringing. Owners of products covered by intellectual property rights have the exclusive right to put such products on the market. On the other hand, there is little doubt that once the owner of an intellectual property right has put such goods on the market either himself or with
his consent, there is little he can do about further acts of commercial exploitation such as re-sale, etc., on the domestic market. Even if a car is covered by several patents, once the car maker has put that car on the market, there is a consensus that he cannot prevent that car from
being re-sold, leased out, etc."

International price discrimination restricts competition to the disadvantage of consumers in countries having higher prices. Parallel imports foster competition and efficiency, thus benefiting consumers in importing countries.The Act also lays down provisions on parallel importation (the principle of international exhaustion, i.e. an authorised sale of a patented product by the patentee or his authorised licensee anywhere in the world, exhausts the right to control further disposition). It lays down the term for utility models (10 years).

In the open market economy, a company has not/ cannot legally authorize agent of a manufacturer for any market. as sole market distributor and importer of all their products. The marketing channel also subject scrutiny of competition law whether the marketing channel create anti-competitive situation. It has been resolved in a judgement of High Court Division of Supreme Court of Bangladesh. Unilever Bangladesh filed the writ petition on 7 October 2010, seeking the High Courts directives to stop the importing and marketing of their branded and patented by other than authorized companies or business persons in Bangladesh. The High Court in a verdict declared open the import and marketing of Unilever products by anyone apart from Unilever Bangladesh. The High Court Division (HCD) has determined the issue by establishing a precedent in Unilever Bangladesh Limited v The Chairman of NBR and ors (2010). The HC judgment stops the monopoly of Unilever Bangladesh Ltd and allowed parallel imports which will help create a competitive market for these products.This is welcome decision from the competition point of view.

The writer is Non-Government Adviser, Bangladesh Competition Commission, Legal Economist & CEO, Bangla Chemical



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