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IP As Property / IP Rights Licensing / Gray Market V. Practical steps to prevent parallel imports A. Adopting a uniform pricing
policy
B. Labeling C. Tinkering with the trademark D. Individualizing products for the local market E. Policing inventory F. Mastering business relations In addition to legal measures, practical steps may
be available to prevent, or at least to deter parallel imports.
A. Adopting a uniform pricing policy Since the primary incentive for parallel importers
is profit, the easiest way to eradicate parallel imports is to reduce
or eliminate the incentive. Accordingly, where practical or possible,
trademark owners should adopt uniform pricing structures. However, for
various reasons discussed above, and for other reasons such as currency
fluctuation and devaluation, uniform pricing policies are not always
feasible and other methods are necessary.
B. Labeling The most effective way to stop parallel imports is
to cut them off at the source. This becomes increasingly difficult for
trademark owners who have multiple licensees or manufacturers. In order
to facilitate locating the initial source of parallel imports, trademark
owners should ensure that their products bear some marking, such as
a bar coding, that will enable them to identify the source of production,
and also, where possible, the authorized distributors. This saves valuable
time in ascertaining the source of parallel imports.
It may also be possible to prevent parallel imports
under the theory that they entered the marketplace without the consent
of the trademark proprietor by requiring that legends, such as "authorized
for sale only in the United States", appear on the product labeling.
Such legends also aid in identifying the source of the parallel imports.
Since some countries may prohibit parallel imports
under the theory of copyright infringement, product labeling should
also include relevant copyright notices, where possible, for design
marks, packaging, usage manuals, instructions and all other copyrightable
matter used in connection with the sale of the product. Also, instruction
or usage manuals should be copyrighted and should be produced, where
possible, in a single language for the relevant market since the unauthorized
translation of such materials may be considered to constitute copyright
infringement.
Expiration date notices on perishable products may
reduce the time within which parallel importers can divert genuine goods,
and sell them to consumers who believe that they are purchasing genuine
products. This may also bolster legal arguments aimed at protecting
consumers under local consumer protection laws. Warranties extended
only to authorized dealer purchases should also be employed and advertised,
if possible.
As a practical matter, all product marking should be
made an integral part of the packaging or immediate container to that
an efforts to delete or modify such markings would arguable endanger
the contents and bolster the claims of the trademark owner.
C. Tinkering with the trademark Although some trademark owners may seek to prevent
parallel imports by using different trademarks in different countries
for the same product, this strategy may not always succeed and may be
considered anticompetitive. Moreover, this mechanism may no longer be
as economically feasible as the global marketplace shrinks and production
costs increase. Sometimes placing ownership of a trademark in the names
of different parties, such as the local exclusive distributor, may assist
in preventing parallel imports, provided the true trademark owner and
the local owner are not related companies. While this may be possible
and advantageous in certain jurisdictions, as discussed above, there
may be many disadvantages to such a system from the perspective of the
true trademark owner and such arrangements may still be found to violate
local antitrust or competition laws. Trademark owners may also utilize
a local certification mark on products, in order to exclude parallel
importers from applying the same marks and to cause doubt in consumers
who expect, or who are told to expect, a certification mark on the genuine
product.
D. Individualizing products for the local market Although fraught with many practical problems, trademark
owners may also consider attempting to adapt their products, which are
sold under the same mark, to local markets, for example, by the use
of different formulations for varying local consumer preferences. However,
this strategy can cause difficulties where goods become inferior in
one jurisdiction and find their way into another where consumers expect
a superior product. Local warranties, service guarantees or rebates
for goods from authorized distributors may also deter parallel importers.
Even local product contests may be sufficient to distinguish “genuine
goods,” since consumers who purchase a product in a country with
the expectation that they are entering a contest would be deceived by
purchasing parallel imports that do not enable them to do so.
E. Policing inventory In order to alert trademark owners to the potential
for parallel import activity, trademark owners should closely match
outgoing inventory against incoming sales figures and local market expectations
so that a surfeit of products is not made available in a particular
market for unwanted purposes.
F. Mastering business relations Wherever possible, and without running afoul of local
licensing or antitrust laws, prohibitions on resale should be included
in licensing and distribution agreements, in order to provide an action
for breach of contract against the suppliers of the parallel imports.
As a practical matter, however, it is always advisable to maintain good
business relations with suppliers, licensees and distributors since
very often parallel import problems are resolved on the business level
by attempting to stop the source of the products.
Parallel imports are an increasingly thorny problem
for trademark owners on the road through the global marketplace, particularly
because the products they are fighting are their own. Moreover, as parallel
imports increase, and the world continues pushing toward free and fair
trade, the difficulties in restraining parallel imports will increase
and trademark owners must be ever more creative in attempting to prevent
them before problems arise.
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