Monday, 8 March 2021

Parallel imports and trade marks after B****t

 As everyone knows (well, perhaps not quite everyone), the doctrine of exhaustion tells us that once the owner of intellectual property rights of any type has put goods on a market, those rights are exhausted and cannot be used to control subsequent dealings with those actual goods. In the USA, the first sale doctrine does the same job, and it's an important job where a number of separate jurisdictions form a single market. It has always been an important component of EU law, too, needed to ensure that national intellectual property rights could not be used to partition the single market.

In EU trade mark law, it has therefore been a defence to an infringement action, enshrined in the Directive and the Regulation, subject to some exceptions, to say that the accused goods were placed on the market in the EEA by the trade mark owner or with its consent. Where that is the case, it will usually be impossible for the trade mark owner to use (say) a French trade mark to stop parallel imports entering France from (say) Germany. You could say that trade mark law gives the trade mark owner one bite of the cherry: the subtext (always important to understand) says that the same price should be charged in all the countries of the EU, so there is no incentive for parallel importers. Given that purchasing power in Germany and (say, again) Bulgaria is far from equal, the trade mark owner is highly unlikely to obey the subtext, and it will hurt to obey the letter of the law; but I put that down to politics rather than economics (like so much of the EU).

Up to the end of last year (rounded up to the nearest whole day), the UK was part of this arrangement. Section 12 of the Trade Marks Act 1994 embodied the principle of exhaustion, providing a defence to an infringement action where goods were borought into the UK from another EU Member State. Now of course goods coming into the UK would be leaving the EU, but (in an example of definitely not taking back control) the Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2019 (SI 2019/265) preserves this EEA-wide exhaustion principle. Goods imported into the UK from the EEA will still not infringe - unless there is a legitimate reason for the trade mark owner to oppose the goods entering free circulation in the UK, such as repackaging. There has been some changing of the words of s.12 (recognising that when you talk about the EEA the UK is no longer included) but no change of substance.

I'm probably missing something, because I can't see who benefits from this. Not the manufacturer whose goods are in circulation in the EEA, who must be charging more in the UK otherwise parallel traders wouldn't be interested. Not the UK distributor, who faces cut-price competition from the parallel traders. Not the government, which is losing a bit of VAT. Not even, really, UK consumers, who are unlikely to save very much as the parallel traders are going to undercut the legitimate channels by the smallest amount possible. Only the parallel traders are going to benefit - perhaps the government justifies this by calling them "arbitrageurs" to make it sound as if they are doing something socially useful, rather than just being parasites. Them, and maybe the NHS who are the main customer for parallel imports of pharmaceuticals.

I wonder, though, whether there are any parallel imports entering the UK now? Apart from the delays which the government minimises or denies, there's import duty and VAT to think about and it could be that parallel importing into the UK isn't worth it any longer.

I also wonder how long it will be before the government revisits this part of trade mark law, and decides that there are more votes to be had from moving to an international exhaustion doctrine. It already floated the idea, some 20 years ago, and attracted little or no support from its EU partners - whose support it no longer needs. Cheap jeans for the masses might be seen as a good platform for re-election, and a way to deliver a B****t dividend that is unlikely to arise in any other way.

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