Other legal theories, aside from trademark infringement, may provide means to prevent parallel imports.

National customs laws and regulations may also prohibit parallel imports. For example, in the United States §526 of the Tariff Act, and regulations thereunder, absolutely prohibits the unauthorized importation of goods bearing "a trademark owned by a citizen of ... the United States and...registered in the U.S. Patent and Trademark Office." Unlike trademark infringement, likelihood of confusion is irrelevant to the prohibition. The only relevant consideration is to ensure that the foreign and domestic owners of the trademark are not related or controlled entities. Parallel importation into the United States of goods made by an unrelated foreign manufacturer under the authorization of the US trademark owner for use in a specific foreign territory, may also be prohibited. [53]

However, subsequent to the Lever decision discussed above, the US Customs Regulations were amended in 1999, somewhat misguidedly, to permit the parallel importation of physically and materially different goods manufactured abroad by entities related to or controlled by the US trademark owner, provided that the products bear a conspicuous and legible label that states: "This product is not a product authorized by the United States trademark owner for importation and is physically and materially different from the authorized product." US trademark owners must apply for such “Lever-rule protection” by filing with Customs an application describing any physical and material differences between the authorized goods and the imported goods. If such goods do not bear the proper label, the burden is on the parallel importer to demonstrate that the goods are identical and fall outside the Lever Brothers rule. Unfortunately, certain trademark owners may not wish to take advantage of this rule since they would be forced to disclose confidential formulas and specifications.

A number of courts have wrestled with the concept of whether, and to what extent, a parallel importer should be allowed to advertise parallel imports, in view of the conflict with trademark, copyright and advertising laws. In the European Union, the Court of Justice has held that the provisions of the Trademark Harmonization Directive “do not entitle the proprietor of a trademark to prohibit a third party from using the mark for the purpose of informing the public that he carries out the repair and maintenance of goods covered by that trade mark and put on the market under that mark by the proprietor or with his consent, or that he has specialized or is a specialist in the sale or the repair and maintenance of such goods, unless the mark is used in way that may create the impression that there is a commercial connection between the other undertaking and the trademark proprietor, and in particular that the reseller’s business is affiliated to the trademark proprietor’s distribution network or that there is a special relationship between the two undertakings.” [54]

The law of passing off, a type of unfair competition and generally the only relevant type of unfair competition found in British law countries, may also prevent parallel imports. The elements of a case for passing off were generally set forth by Lord Diplock in the Avocaat case, namely a misrepresentation, made by a trader in the course of trade to his prospective customers or end users, that is calculated to injure the business or goodwill of another trader and that actually does or will do damage to the business or goodwill of the plaintiff.

Success in preventing parallel imports under the theory of passing off generally requires that there be some difference in the quality of the genuine domestic goods and the unauthorized imported goods that is noticeable to consumers and about which consumers have not been warned in advance. Thus, a seller of expired imported tinned milk was enjoined on the ground of passing off since he did not distinguish the differences in the legitimate goods and the imported goods to customers, even though the genuine mark was placed on both types of goods. [55] Likewise, the unauthorized importation and sale in England of different quality soap made by an independent licensee in the United States constituted passing off, [56] as did the unauthorized importation and sale of different quality toothpaste made in Brazil for the Nigerian market but diverted to the United Kingdom, [57] and a defendant could not defend a passing off action where there existed a difference in quality between genuine United Kingdom razor blades and US razor blades that were imported without authorization to the United Kingdom. [58]

However, a difference in goods may not always amount to passing off, such as in the REVLON FLEX case discussed above where the court concluded that there was no passing off even though US-formula shampoo was materially different from the United Kingdom formula since the public would not notice the difference. [59]

Passing off may also occur where unauthorized dealers pass themselves off as the genuine article, as in Singapore where a Singapore dealer in genuine exhaust systems was allowed to sell parallel imports but was enjoined from passing itself off as an authorized Singapore dealer since only the authorized dealer provided the manufacturer's warranties to customers. [60]

In Canada, where the validity of the Trademarks Act provision that could prevent parallel imports has been called into question [61], trademark owners have attempted to prevent parallel imports under the common law theory of passing off. However, the Supreme Court has held that the passing off doctrine does not apply to parallel imports, for example, simply because genuine goods are not sold with the point-of-sale service and instruction booklet, warranty and post sale service. Instead, passing off requires a misrepresentation calculated to injure the business or goodwill of a trader and, in the case of genuine goods, there is no such misrepresentation. [62] However, at least one court has decided that the issue of misrepresentation may be construed differently where an exclusive distributor and registered user challenges the parallel imports. [63]

In certain countries, and under certain circumstances, unfair competition laws may also provide redress against parallel imports. In the Philippines, where parallel imports are generally allowed, the parallel importation of genuine Telecopier machines was held to be an intrusion on the rights of the exclusive distributor, constituting an abuse of right and unfair competition under the unfair competition provisions of the Civil Code. [64]

However, parallel importation may not always be considered to be unfair competition. For example, in France, a trademark registrant was unable to prevent the unauthorized marketing of its own genuine perfumery products through a discount seller based on the relevant unfair competition law. [65]

In addition to actions for passing off or unfair competition, certain countries also have other fair trading laws, such as the English-style Trade Descriptions Act, that may in certain jurisdictions provide a cause of action against parallel imports that are considered to affect free and fair trade adversely. For example, in response to a Supreme Court decision allowing, over the objections of the Taiwanese trademark licensee of a Japanese trademark owner, parallel imports of candies made by the trademark owner's Indonesian licensee, the Taiwan Justice Department resolved that parallel imports may violate Taiwan's Fair Trade Law.

Other types of intellectual property rights may be affected by parallel imports and the different legal regimes governing such rights may enable trademark owners to prevent parallel imports.

Some countries have separate legal provisions governing the use of trade names and where a parallel import bears a trade mark that also functions as a trade name, the exhaustion principle may not apply to preclude action for trade name infringement. However, even under the relevant circumstances, a cause of action for trade name infringement may not be available, such as in Germany, where the principle of trademark exhaustion was extended to cover trade names when the owner of the trade name SCHEIDEL was unable to prevent the unauthorized distribution of fire-clay tubes that were marked with the SCHEIDEL trade name but that were received in error by the distributor from a common supplier of the tubes. [66]

Additional remedies may be available to prevent parallel imports that are also the subject of patent or design protection, however, these theories are beyond the scope of this analysis.

Even though certain countries may adopt a rule of international exhaustion of trademark rights, the same rule may not apply in the area of copyright. Thus, to the extent that elements of a product may be the subject of copyright, such as the product itself, its packaging, the design elements of a trademark, product instructions or operation manuals, the unauthorized distribution of such materials may be preventable.

A US case in 1994 held that purchasing genuine copyrighted articles from others who lawfully obtained them from a foreign manufacturer is not a defense to copyright infringement, even though the copyright owner in France, where the parallel imports were made, and the owner in the United States were parent-subsidiary, respectively. This case, and related cases, have held that, although ordinarily the first sale of a copyrighted product, by, or with the consent of, the copyright owner in the United States exhausts the copyright thereafter, the "first sale" must take place within the United States, with the result that products made and imported from abroad, or made in the United States for export and then imported back, do not fall within the first sale doctrine and their "first sale" in the United States by unauthorized parties may be prohibited by the US copyright owners. This line of cases is not universally followed in the United States and the Supreme Court has clarified that the first sale doctrine does apply where the goods are manufactured in the United States for foreign sale and reimported into the United States. [67]

Even in cases of copyright exhaustion, exceptions relating to ownership may also apply. In South Africa, where the owner of the copyright in the artistic work in packaging assigned the copyright to a local distributor, the distributor was able to prevent the sale of parallel imports as infringement of that copyright protection. [68] In addition, a case interpreting EC law concerning the marketing in Germany of English-made records, held that "although copyright goods which have been put on the market in one member state may not be denied access to the market in another member state merely because the local copyright holder opposes such entry, this only applies if the goods reached the market in the country of export. If they were there manufactured and then exported direct to the manufacturer's subsidiary or sister company in the country of import, they first reach the market in the latter country and the copyright owner in that country may control that first marketing, untrammelled by Articles 30 and 36 of the EEC" treaty. [69]

Product marking may also help determine whether parallel imports constitute copyright infringement. In a German case, it was held that, provided video game cassettes could be the subject of copyright under German law, the unauthorized commercial rental of such cassettes did not constitute copyright infringement where the copyright owner failed to mark the cassettes as "not for hire". This failure to limit the distribution rights of the products extinguished the publication rights at the first point of sale and rendered their sale unconditional. [70]

The situation in Australia provided an interesting example of the use of copyright protection to thwart parallel imports. Although parallel imports do not generally constitute trademark infringement in Australia, if copyright existed in elements of a mark or product, the unauthorized importation of such copyrighted products for sale in Australia were held to constitute indirect copyright infringement, [71] if a plaintiff proved that he was the owner of a work protected in Australia; the importer had no express or implied [72] license from the copyright owner to import the copies; the copies were imported for a prohibited purpose; and the importer knew that the making of the article would, had it been made in Australia by the importer, have constituted copyright infringement. This was largely used by exclusive distributors in Australia to prevent the import of genuine goods, although the Copyright Act was amended in 1998, with effect in January, 2000, to remove the ability to prevent imports to the extent that the copyright existed only in “non-infringing accessories”, such as product packaging and labeling. [73] A similar fate befell the loophole in the Copyright Act in New Zealand.

Situations involving copyright end-user licensing, such as in the case of computer software, may also provide a ray of hope. In an English decision, Microsoft was able to prevent a defendant from selling in the United Kingdom computer software that it had obtained from North America. The products originally bore a clear legend that there were intended only for the North American market and they were either sold only to academia at a discount and were not for resale, or they were sold in packs that were not intended to be unbundled or whose contents were not intended for separate sale. The defendant sold the software in the United Kingdom by removing the outer casing of products and selling the products in the inner casings without the legend. On the issue of copyright infringement, the court held that the act of making the software available to licensees in the United Kingdom whom Microsoft did not intend to be licensees constituted copyright infringement. [74]

In some circumstances, engaging in the distribution or sale of parallel imports may violate certain contractual provisions between the parties affected. In the Philippines, an exclusive distributor persuaded the Supreme Court to enjoin the parallel importation of goods that the defendant purchased from the trademark owner under the pretense of selling them in Nigeria. The court reasoned that "the right to perform an exclusive distributorship agreement and to reap the profits resulting from such performance are proprietary rights which a party may protect" and that the parallel importer was therefore inducing a breach of the exclusive distribution contract. [75]

Some countries may also allow trademark owners to restrict their license agreements to specific territories and allow a cause of action against licensees that allow their products to enter the territory of another licensee. However, many countries disapprove of such practices under the theory that such restrictions impair free trade, as evidenced, for example by the Fair Trade Commission Guidelines Concerning Distribution Systems and Business Practices, enacted in Japan in 1991 under the Anti-Monopoly Act, that prevent contractual provisions that serve to inhibit parallel imports. Also, trademark licenses or agreements that contain such territorial restrictions, or similar arrangements, will generally be prohibited in the European Union. [76]

In certain countries parallel imports that do not comply with local regulatory schemes may be prohibited. In Japan, which generally allows parallel imports, the perfume and cosmetics industry must comply with local drug laws that require imported cosmetics to be sold with an attached list of ingredients. However, due to the secrecy involved in cosmetics and perfume formulas, the manufacturers provide these ingredient lists only to their authorized distributors and a raid on parallel importers selling products without the requisite lists was successful. [77]