Edited by Irene Calboli and Edward Lee
Chapter 6: Economic perspectives on exhaustion and parallel imports
Parallel imports (PI) are legitimately sourced goods brought into a country, without the authorization of the entity owning some form of intellectual property rights (IPRs) to those goods, after they have been placed into circulation in another nation. Whether such trade is legally permitted depends on the geographic scope within which the IPR, whether patent, copyright, trademark or other exclusive right, is exhausted upon first sale. Typically when a commodity is first sold within a country the IPR holder cannot prevent its owner from reselling it within that market. The exhaustion doctrine governs the ability of such goods to be imported legally into another market. Some countries give the IPR owner in the target market the right to exclude such goods sold abroad from importation, a situation referred to as national exhaustion. The United States (U.S.) adopts this policy in most areas.1 Others permit parallel imports, which are called that because by definition they occur within a parallel distribution channel outside the control of the originator. This is the case of international exhaustion, which may be found for certain types of IPR in Brazil, New Zealand, and elsewhere.2 The European Union (EU) and other members of the European Economic Area (EEA) pursue an intermediate policy of regional exhaustion, under which IPR owners may exclude PI from outside the EU geographical area but such trade is fully legal inside the region. Under the terms of Article 6 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) at the World Trade Organization (WTO), member nations are given full latitude to select their own exhaustion regimes. It is not surprising that a global rule could not be reached, given the complexity of the subject. There are marked differences across markets in the permissibility of this trade.3 Moreover, for any country the law may vary across types of IPRs. For example, Japan traditionally followed national exhaustion in patents until recent court decisions opened the market in certain circumstances.4 However, it is open to parallel imports in copyrighted goods except motion pictures. Australia has a mixed regime, being open to PI in trademarks but closed in patented goods (with limitations) and in copyrighted products, except for compact disks and books.
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