Grey Market Goods and Parallel Imports
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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 l.jpg
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 l.jpg
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 l.jpg
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 l.jpg
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


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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?


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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


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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


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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


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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 l.jpg
Thank you for your time Any questions?

Christopher Stothers cstothers@milbank.com+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