Domain Names E-CommercePatentsLitigationIP Rights MaintenanceIP as PropertyNews & BulletinsTrademarksLicensingIP Rights TransfersTreaties
HomeAbout UsContact UsSearchQuick Search:

IP As Property / IP Rights Licensing / Gray Market

V. Practical steps to prevent parallel imports


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.

 

[PREVIOUS] [CONTENT]

 

Contact Us


[Home] [About Ladas & Parry LLP] [Contact Us] [Search]
[Trademarks] [Domain Names & E-Commerce] [Patents & Copyrights]
[Litigation] [IP Rights Maintenance] [IP as Property] [News & Bulletins]

(C) Copyright 2001 Dennis S. Prahl
Please read our disclaimer.