parallel imports

Parallel imports take place when a rival business imports goods or services into a country or region with a view to direct competition in respect to the particular goods or services. There is no rule of law preventing free competition and unless some legal right exists, a business is perfectly entitled to purchase goods (say tyres) in a cheap country and import them into a expensive country, and undercut the price of the original manufacturer or supplier on resale.

Tied to the practice of parallel importation is the exhaustion of rights. Exhaustion of rights is the principle whereby the rights in a product are "exhausted" upon the first sale by the owner with their consent within the territory protected by a trade mark. Once a product is lawfully sold within the European Community, it may be resold freely within the European Community (EC). It is a different scenario where goods are sold in (say) South-East Asia and imported into the EC, under an identical or confusingly similar Community Trade Mark. The importation is unlawful.

Prevention of parallel importation allows some measure of retail price maintenance, management of exclusive licensing contracts (a local distributor may be reluctant to accept a distribution arrangement where the exclusive distribution rights cannot be guaranteed or secured by intellectual property rights) and monitoring performance of licensees.

Protection against parallel importation is usually managed by contract, however trade mark rights and design rights often provide a far superior mode of protection. Passing off also may be used to prevent parallel importations.

Usage: Protection against parallel imports is enhanced by registered trade mark rights.

Related Words: distribution agreement; agency agreement; contract; trade mark; design; copyright; patent.