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Intellectual Property Rights and Parallel Trade: Debate on National Versus International Exhaustion of Rights

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Contemporary Issues in International Law

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Abstract

Most of the countries have implemented common basic standards of intellectual property (IP) protection based on the widely adopted Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) of the World Trade Organization (WTO).

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Notes

  1. 1.

    Jayashree Watal, Intellectual Property Rights in the WTO and developing Countries (Oxford University Press, 2001) at 294.

  2. 2.

    Ibid.

  3. 3.

    Ibid.

  4. 4.

    Margreth Barret, ‘The United States’ Doctrine of Exhaustion: Parallel Imports of Patented Goods’, 27(5) Northern Kentucky Law Review, 2000, at 914.

  5. 5.

    Holyoak and Torremans, Intellectual Property Law (Oxford University Press, London, 4th edn., 2005) at 430.

  6. 6.

    The first-sale doctrine is one of the specific statutory restrictions which have been placed on the exclusive rights of the IP owner. It has been codified in 17 U.S.C. 109 which provide that an individual who knowingly purchase an IP protected work from the IO holders receives the right to sell, display or otherwise dispose of that particular work, notwithstanding the interest of the IP owner. The right to distribute ends, however, once the owner has sold that particular work. Since the first-sale doctrine never protects a defendant who makes unauthorized reproductions of a protected work, the first-sale doctrine cannot be a successful defense in case that alleges infringing reproduction.

  7. 7.

    Enrico Bonadio, ‘Parallel Imports in a Global Market: Should a Generalised International Exhaustion be the Next Step?’, 33(3) European Intellectual Property Review, 153–161, 2011, at 153.

  8. 8.

    Frederick M. Abbott, Parallel Importation: Economic and Social Welfare Dimensions, International Institute for Sustainable Development, 2007, at 4.

  9. 9.

    Ibid.

  10. 10.

    Tommaso M. Valletti and Stefan Szymanski, ‘Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis’, 54(4) The Journal of Industrial Economics, 499–526, 2006, at 500.

  11. 11.

    Ibid.

  12. 12.

    Ibid.

  13. 13.

    ‘International Exhaustion and Parallel Importation’, available at: http://www.wipo.int/sme/en/ip_business/export/international_exhaustion.htm [accessed on September 29, 2013].

  14. 14.

    Margreth, Supra note 4, at 937.

  15. 15.

    Exhaustion of Rights, Chap 05 CY564-UNCTAD-V1 November 27, 2004, at 93, available at: www.wcl.american.edu/pijip/download.cfm?downloadfile [accessed on October 26, 2013].

  16. 16.

    In case of Silhouette v. Hartlauer (Case C-335/96) Silhouette, an Austrian company sold spectacles under its trademark sold an outdated batch to a Bulgarian company for resale in the Former Soviet Union. However, the distributor then tried to put them on the market in Austria, and the court upheld Silhouette’s right to prevent this under its trademark.

  17. 17.

    ‘Parallel Imports’, WTO Glossary, available at: http://www.wto.org/english/thewto_e/glossary_e/parallel_imports_e.htm [accessed on October 24, 2013].

  18. 18.

    ‘What Are Parallel Imports?’, International Trademark Association, Available at: http://www.inta.org/Advocacy/Pages/ParallelImportsGrayMarket.aspx [accessed on October 24, 2013].

  19. 19.

    ‘Obligations and Exceptions under TRIPS, What are Member Governments’ Obligations on Pharmaceutical patents?’, Fact Sheet: Trips And Pharmaceutical Patents, 2006.

  20. 20.

    Valletti and Szymanski, supra note 10, at 499.

  21. 21.

    Ibid.

  22. 22.

    Id., at 500.

  23. 23.

    These price discrepancies are usually a result of various reasons among which the most important are currency fluctuations, distribution costs, differences in tax levels among different countries, sales promotion strategies and consumer preferences. Ioannis Avgoustis, ‘Parallel Imports and Exhaustion of Trade Mark Rights: Should Steps be Taken towards an International Exhaustion Regime?’, 34(2) European Intellectual Property Review, 108–121, 2012, at 109.

  24. 24.

    Christopher Heath, Parallel Imports and International Trade, at 1, available at: http://www.wipo.int/edocs/mdocs/sme/en/atrip_gva_99/atrip_gva_99_6.pdf [accessed on September 27, 2013].

  25. 25.

    WTO, Minutes of TRIPS Council Special Discussionon Intellectual Propertyand Access to Medicines, June 18-22, 2001, WTO Doc No. IP/C/M/31 at 25.

  26. 26.

    Nick Gallus, ‘Parallel Policies on Pharmaceutical Parallel Trade’, 11(3) Int. T.L.R., 77–83, 2005, at 77.

  27. 27.

    Frederick, supra note 8.

  28. 28.

    Ibid.

  29. 29.

    Ibid.

  30. 30.

    The imports may be described as being imported in parallel to the authorized distribution network. Under most current parallel import provisions the legal meaning of parallel imports require that the plaintiff has to prove that the defendant has imported protected goods into the domestic jurisdiction, without licence. The important point is that parallel imports have, by definition, been made lawfully. Therefore, the actual making of the imported articles did not infringe IP rights. In effect, a parallel import channel exists alongside the authorized by manufacturer. Hazbo Skoko and Branka Krivokapic Skoko, ‘Theory and Practice of Parallel Imports: An Essay’, Proceedings of the 6th International Conference of the Faculty of Management Koper Congress Centre Bernardin, Slovenia, 24–26 November 2005, at 463.

  31. 31.

    There is nothing grey about imported goods, as the English Patents Court in the Roussel Uclaf v. Hockley International, [1996] R.P.C. 441observed that grey and mysterious may only be the distribution channels by which these goods find their way to the importing country. In the importing country, such goods may create havoc particularly for entrepreneurs who sell the same goods, obtained via different distribution channels and perhaps more expensively. In order to exclude such unwelcome competition, intellectual property rights have sometimes been of help. There is little doubt that once the owner of an intellectual property right has put such goods either on the market himself or with his consent, there is little he can do about further acts of commercial exploitation on the domestic market.

  32. 32.

    Ibid.

  33. 33.

    Frederick, supra note 8, at 5.

  34. 34.

    Keith E. Maskus, ‘Parallel Imports in Pharmaceuticals: Implications for Competition and Prices in Developing Countries’, Final Report to World Intellectual Property Organization, 2001 at 2.

  35. 35.

    Frank Muller-Langer, ‘Does Parallel Trade Freedom Harm Consumers in Small Markets?’, Croatian Economic Survey, 2008, at 16.

  36. 36.

    Enrico Bonadio, supra note 7, at 155.

  37. 37.

    Margaret K. Kyle, ‘Strategic Responses to Parallel Trade’, NBER WORKING PAPER SERIES, Working Paper 12968, 2007, at 3.

  38. 38.

    Paul Rawlinson, ‘Parallel Imports: A Welcome Decision for Asia’, 14(7) European Intellectual Property Review, 239–243, 1992, at 239.

  39. 39.

    Hazbo Skoko & Branka Krivokapic Skoko, Theory and Practice of Parallel Imports: An Essay, Proceedings of the 6th International Conference of the Faculty of Management Koper Congress Centre Bernardin, Slovenia, 24–26 November 2005, at 463.

  40. 40.

    Jason Potts, ‘The Legality of PPMs under the GATT: Challenges and Opportunities for Sustainable Trade Policy’, International Institute for Sustainable Development , 2008, at 9.

  41. 41.

    Ibid.

  42. 42.

    The TRIPS, 1994, Article 6: Exhaustion—For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.

  43. 43.

    Alan J. Kasper, ‘A View of the Parallel Imports Issue from an International Perspective’, Available at: http://www.sughrue.com/files/Publication/51080ce5-5e07-415e-98eb1ee3b14/par_imports.htm.

  44. 44.

    The Doha Declaration, 2001; Para 5(d) reads as: ‘The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge, subject to provisions of Articles 3 and 4’.

  45. 45.

    The TRIPS, 1994, Recital 1.

  46. 46.

    Alan J. Kasper, supra note 43.

  47. 47.

    Ibid.

  48. 48.

    Whatever regime is chosen, the immunity from legal actions before WTO courts is guaranteed. Article 6 basically amounts to an ‘agreement to disagree’. Para 5(d) Doha Declaration on the TRIPS Agreement and Public Health states that the effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each member free to establish its own regime of exhaustion, without challenge.

  49. 49.

    Ibid.

  50. 50.

    Supra note 42, Article 28 states that ‘importing, like all other rights conferred under this Agreement in respect of the use, sale, importation or other distribution of goods, is subject to the provisions of Article 6 above’.

  51. 51.

    Christopher Heath, supra note 24, at 2.

  52. 52.

    Ibid.

  53. 53.

    Id., at 3.

  54. 54.

    Id., at 10.

  55. 55.

    David Hummels, ‘Transportation Costs and International Trade Over Time’, at 2, available at: http://www.krannert.purdue.edu/faculty/hummelsd/research/hummels%20jep%20rewrite%20final%20with%20tables.pdf [accessed on September 20, 2013].

  56. 56.

    Carlos María Correa, ‘Implications of bilateral free trade agreements on access to medicines’, 84(5) Bull World Health Organ, 2006, pp. 399–404.

  57. 57.

    U.S. delegation held at the Council for TRIPs Special session of June 21, 2001.

  58. 58.

    Ibid.

  59. 59.

    Ibid.

  60. 60.

    Submission by the Africa Group, Barbados, Bolivia, Brazil, Dominican Republic, Ecuador, Honduras, India, Indonesia, Jamaica, Pakistan, Paraguay, Philippines, Peru, Sri Lanka, Thailand and Venezuela.

  61. 61.

    ‘TRIPS: COUNCIL DISCUSSION ON ACCESS TO MEDICINES’, Developing Country Group’s Paper, Paper submitted by a group of developing countries to the TRIPS Council, for the special discussion on intellectual property and access to medicines, June 20, 2001, available at: http://www.wto.org/english/tratop_e/trips_e/paper_develop_w296_e.htm [accessed on September 24, 2013].

  62. 62.

    Amal Nagah Elbeshbishi, ‘TRIPS and Public Health What Should African Countries Do?’, 49 African Trade Policy Centre, 2007, at 24.

  63. 63.

    ‘Implications of the Doha Declaration on the TRIPs Agreement and Public Health’, 12 Health Economics and Drugs Series, 2002, available at: http://apps.who.int/medicinedocs/en/d/Js2301e/9.4.html [accessed on September 24, 2013].

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  1. Law School, Banaras Hindu University, Varanasi, India

    V.K. Pathak

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  1. National University of Study and Research in Law, Ranchi, Jharkhand, India

    B.C. Nirmal

  2. Faculty of Law, Banaras Hindu University, Varanasi, Uttar Pradesh, India

    Rajnish Kumar Singh

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Pathak, V. (2018). Intellectual Property Rights and Parallel Trade: Debate on National Versus International Exhaustion of Rights. In: Nirmal, B., Singh, R. (eds) Contemporary Issues in International Law. Springer, Singapore. https://doi.org/10.1007/978-981-10-6277-3_24

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