Research Handbooks in Intellectual Property series
Edited by Irene Calboli and Edward Lee
Chapter 25: From importation to digital exhaustion: a Canadian copyright perspective
The issue of parallel importation questions the reach of intellectual property rights in a free trade context and is consubstantial to the broader theme of distribution.1 Parallel importation refers to the importation for sale by a non-authorized distributor of genuine products outside the channels of distribution contractually organized by the owner of one or several intellectual property rights existing in said products.2 A truism, most manufactured products are complex and contain one or more subject matters of intellectual property (shape, software, logo, etc.). The article or physical object becomes the confluence of various competing rights:3 the rights pertaining to the ownership in the physical good and granted to its purchasers (customers, retailers, wholesalers, etc.) and the intellectual property rights. The rights over the article can affect the ways in which the embedded works are commercialized. This exposure to distinct, yet convergent, proprietary regimes translates into conflicts between different laws, the laws of common or civil law property and intellectual property laws. Hence, parallel importation cases are essentially conflict of law cases and not infringement cases stricto sensu. The object of contention is not the production of a counterfeited good by imitation or reproduction; it is, more precisely, a dispute over the authentic product, its circulation, and its market. Regional price discrimination and international demand and control over brand reputation are the principal drivers of strategic restrictions over parallel importation.4 The advantages of leveraging control over the distribution of a product by relying on intellectual property are obvious. First, as intellectual property rights are territorially based, they allow for international and territorial divisions of ownership. Such divisions support the distribution network as organized contractually by the manufacturer. Second, as intellectual property rights apply erga omnes, they can restrain non-authorized dealers notwithstanding the absence of contractual ties. Not surprisingly, the inherent mapping power of intellectual property rights and their national or even protectionist overtones have posed a veritable threat towards the creation of a single European market. In response, the Court of Justice of the European Union (CJEU) developed a sophisticated jurisprudence to curb the exercise of intellectual property rights to fit the greater objective of the free circulation of goods within the European market. This is particularly true in copyright law. The CJEU relentlessly guards the principle of free circulation against the exercise of exclusive prerogatives granted by national copyright laws. When and where a national law prescribes a distribution right, the latter is limited to the putting into circulation (i.e., to the “first sale”) of the copy.5 Domestic restrictions affecting the circulation of goods are legitimate only: • if they are . . . inseparably linked to the very existence of the exclusive rights. No such justification would exist if the restrictions on trade imposed or accepted by the national legislation were of such a nature as to constitute a means of arbitrary discrimination or a disguised measure to restrict trade.6 In effect, the construction of the single European market subjugated all intellectual property rights affecting the distribution to new paramount legal principles aimed at the collective enterprise. Servant to this very purpose, the exhaustion doctrine, first developed in Germany and the United States (U.S.),7 became the strong arm of European integration policy. Once a commercial article is put into circulation by the right holder, or with his consent, within the European market, the use of intellectual property rights to limit the subsequent distribution of said article is neutralized.8 The first sale doctrine is effectively the same.9 The core idea behind exhaustion and the first sale doctrine is derived from liberal philosophy. Property was invented to support commerce and it must be unencumbered to circulate. All restrictions are, henceforth, suspicious and to be resisted.10
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