Parallel Imports: Good, Bad or Ugly

Parallel Imports are at the epicenter of all controversial IP issues. Despite it being considered that they are well within the four walls of law, the laws of the market are hardly the only ones applicable to them.

DEFINITION:

According to the World Trade Organisation, a parallel import is a non-counterfeit product imported from another country without the permission of the IP owner. Parallel imports are also known as grey goods or grey-market goods. The goods are genuine and have been manufactured for or under license from the brand owner. However, even though they may have been meant to be sold in a particular jurisdiction, they are imported into a different jurisdiction from that intended by the brand owner. (Eg – a drink intended for sale in Australia being sold in Italy). Parallel importers usually purchase goods in one country at a price that is cheaper than the price at which they are sold in another country and then import the products into the second country.

In Kapil Wadhwa & Ors. v. Samsung Electronics Co. Ltd. & Anr., FAO(OS) 93/2012 (Del. A.B. Sept. 7, 2012).) Samsung Electronics Co. Ltd. and its Indian subsidiary (Respondents) sued the Appellant, previously an authorized dealer of the Respondent, for unauthorized sale of Samsung printers imported from foreign markets into India. The printers sold by the Appellant were imported by the Respondent and sold at a cheaper price in India. The Appellants were also accused of Meta-Tagging and Deep Hyperlinking with the Respondents website for the sale of imported printers.

In the Wadhwa case, The Division Bench partially set aside the order of the Single Judge to the extent that Appellants were restrained from importing and selling Respondents products in India. Further, the order directed the Appellant to prominently display in their showrooms that the products sold were imported and that the Respondents do not provide any warranty or after sale services over such products. The injunction on the website, however, still continues.

Before we go any further we need to understand what first sale doctrine is.

FIRST SALE DOCTRINE:

The doctrine enables the legal distribution of copyrighted products like library lending, giving, video rentals and secondary markets for copyrighted works like exchanging gaming consoles or trading game CDs. In trademark law, this same doctrine enables reselling of trademarked products after the trademark holder put the products on the market. The doctrine is also referred to as the “right of first sale,” “first sale rule,” or “exhaustion rule.” Basically it governs on the premise that the manufacturer does hold any right over his product’s distribution or otherwise, once the product has been legally sold.

In John Wiley & Sons, Inc. v. Kirtsaeng, 54 F.3d 210 (2d Cir. 2011); John Wiley & Sons, Inc. filed suit against Thailand native Supap Kirtsaeng over the sale of foreign edition textbooks made outside of the United States marked for sale exclusively abroad which Kirtsaeng imported into the United States. Kirtsaeng asked his relatives from Thailand to buy medical books at home and ship them to him to sell at a profit. He sold the imported books on eBay, “making huge profits in revenue.

Wiley sued Kirtsaeng for copyright infringement and won in two lower courts. The Second Circuit Court of Appeals upheld the ban on importation of copyrighted works without the authority of the U.S. copyright owner; this set up a Circuit split with the Third Circuit and the Ninth Circuit, which had had variant approaches to the same question in other cases.

Kirtsaeng then appealed to the Supreme Court, arguing the first-sale doctrine, accepted in United States and Indian laws as well, was more important than the copyright owner’s rights to control importation of the owner’s works under US Law.

In 2013, the U.S. Supreme Court reversed the Second Circuit and held that Kirtsaeng’s sale of lawfully-made copies purchased overseas was protected by the first-sale doctrine. The Court held that the first sale doctrine applies to goods manufactured outside of the United States, and the protections and exceptions offered by the Copyright Act to works “lawfully made under this title” is not limited by geography.

This judgment concluded that parallel imports were legal, though one wonders what stand of Indian Judiciary on the same is. More so because India has generally stood by the principles of Barrier free trading and encourages lower priced goods.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: