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Intellectual Property and Competitiveness of MSMEs 11 December 2009

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Grey Market Goods and Parallel Imports Christopher Stothers Milbank, Tweed, Hadley & McCloy LLP, London. Intellectual Property and Competitiveness of MSMEs 11 December 2009. Overview. What is parallel trade and why does it matter? IP - sales within Europe IP - sales outside Europe

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Grey Market Goods and Parallel Imports

Christopher Stothers

Milbank, Tweed, Hadley & McCloy LLP, London

Intellectual Property and Competitiveness of MSMEs

11 December 2009

overview
Overview
  • What is parallel trade and why does it matter?
  • IP - sales within Europe
  • IP - sales outside Europe
  • Competition restrictions
  • Practical strategies for MSMEs
what is parallel trade
What is parallel trade?
  • Goods are manufactured and then put onto the market in country A.
  • Parallel trade occurs when the goods are subsequently transferred to country B by another party (the parallel trader, who may also be the end consumer).
  • The distinguishing feature of parallel trade is that the manufacturer did not intend those particular goods to end up in country B.
  • The goods are typically described in country B as “parallel imports” or “grey market goods”.
why does it matter manufacturers
Why does it matter? Manufacturers
  • Every manufacturer hates disruption to distribution
  • …distributors and retailers complain
  • …brand gets damaged
  • …and profits are reduced
why does it matter consumers
Why does it matter? Consumers
  • Every consumer loves a bargain
  • …but not everyone will fly to New York for one
  • …so intermediaries (parallel traders, retailers, online distribution systems) will try to “help”
  • …and search costs are reduced as price transparency increases online
why does it matter goals for msmes
Why does it matter? Goals for MSMEs
  • As a consequence, MSMEs must try to:
  • …minimise disruption to their distribution
  • …without alienating consumers (or their “representatives”)
  • …without getting tripped up by the law
  • …and maximise opportunities of the EEA?
ip sales within europe the problem of exhaustion
IP - sales within Europe The problem of exhaustion
  • Cannot use IP rights to prevent parallel imports within the 30 Contracting States of the EEA (Articles 28-30)

“would be repugnant to the essential purpose of the [EC] Treaty”

  • Courts are unwilling to allow structural circumvention

Case 1: Bolton v Swinghope/Doncaster

  • Only hope is trade mark where product is altered

Case 2: Sportswear v Stonestyle

ip sales outside europe more exhaustion problems
IP - sales outside Europe More exhaustion problems
  • Can use IP rights to prevent parallel imports from outside EEA unless unequivocal consent to sell them in the EEA
  • Need to be able to show where goods were put on market

Case 3: Van Doren (and Sun v Amtec)

  • Need to ensure goods put on market outside the EEA

Case 4: Peak Holdings

  • Dangers of implied consent: Mastercigars, Honda
competition restrictions yet more problems
Competition restrictions Yet more problems
  • Must comply with Articles 81 & 82 (Vertical Guidelines)

Apply where there is an agreement or dominant position

No resale price maintenance, restricting parallel trade or restricting internet distribution

  • Must ensure compliance in practice, not just on paper
  • Refusals to supply can be dangerous

May be treated as part of an agreement

May make selective distribution system void

practical strategies for msmes
Practical strategies for MSMEs
  • Consider potential distribution issues whenever selling in different markets on different terms – is it worth it?
  • Be creative when deciding how to tackle the issues
  • Protect the brand reputation
  • Look for opportunities to reduce costs
thank you for your time any questions
Thank you for your time Any questions?

Christopher Stothers [email protected]+44 (20) 7615 3016

Parallel Trade in Europe:

Intellectual Property, Competition and Regulatory Law

Hart Publishing, 2007

Milbank, Tweed, Hadley & McCloy LLP

10 Gresham Street, London EC2V 7JD

University College London

Bentham House, Endsleigh Gardens, London WC1H 0EG

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