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Interplay between Intellectual Property Rights under Parallel Importation

September 30, 2022

One of the "iridescent and puzzling phenomena" of global trade is parallel import. Production of items that are first lawfully sold and later exported is referred to as "parallel importation." This activity is also referred to as "grey marketing" or "grey commodities,” which imply some doubt regarding their legality. There is nothing dubious about the goods because they are authentic and were first released onto the market by the maker or with their permission. Nevertheless, they are subsequently exported.

There is an element of rising competitive practice existing under parallel importation, which results in motivating the traders to compete in the market and provide more varieties and alternatives to the consumers.

However, manufacturers might face difficulties in situations where the prices differ in different regions, but this could be executed with mutual consideration as being done by the European Union. Parallel importation also assists the manufacturers in some manner or other. The importer, generally speaking, customarily works as a distributor to the manufacturing company, and indirectly promotes the quality of the product and Intellectual Property of the manufacturing Company. 

It is also quite interesting to observe the relation, which takes place between IP laws and parallel importation. Parallel Imports make it difficult for the trademark holder to prove trademark infringement since, once the product is put on the market, the holder loses all control over it. Interestingly, this practice does not cover copyright under certain circumstances, as it was observed by the American Ninth Circuit Court that “Parallel Imports does not apply to copyright works manufactured and first sold overseas”.  

It didn't take long for manufacturers to realise there was a void in the market. They were able to understand that different areas of the intellectual property system's & parallel importation system can function in different ways. In many instances, this scenario of using copyright infringement rather than seeking damages for Trademark infringement is fairly explicit.

The illegal usage of copyright in parallel importation by manufacturers occurs more frequently than anticipated. This practise needs to be curbed and must be given due consideration by the authorities as there are instances where the courts are unable to distinguish between the purpose of Copyright and Trademark law which in turn results in exploitation of Intellectual Property Rights. 

In conclusion, I would further like to recommend that Countries can take the example of European Union which is on the verge of framing a system under which the prices of all pharmaceutical products will be same. By following this, states could make sure that parallel importation does not hamper anybody's right. Other international organizations must also consider such an approach. It would further result not only in providing benefit to the consumer and the manufacturer, but will also help in the development of trade between nations.

Author: Arpit Vihan, Assistant Professor - Unitedworld School of Law (UWSL)

Disclaimer: The opinions / views expressed in this article are solely of the author in his / her individual capacity. They do not purport to reflect the opinions and/or views of the College and/or University or its members.

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