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Published online by Cambridge University Press: 27 October 2017
A lot of attention has been devoted in the past few years to attempts made by intellectual property owners to oppose parallel imports. This refers in particular to imports without their consent of goods placed by themselves, or with their consent, on the export market. The question is crucial as it is inherently linked to the quest for the key to control international trade flows and to restrict intra-brand competition in the country of importation.
1 See, among others, Hays, T. ‘Anti-competitive agreements and extra-market parallel importation’ 26 (2001) ELRev 468 Google Scholar; Jones, J. ‘Does an opportunity still exist for the development of a doctrine of international exhaustion at a Community level under Articles 28 and 30?’ (2000) EIPR 171 Google Scholar; Zarpellon, S. ‘The scope of the exhaustion regime for trade marks rights’ 21 (2001) ECLR 382 Google Scholar; Murphy, G. ‘Who’s wearing the sunglasses now?’ ECLR (2000) 1 Google Scholar; Wong, T. ‘Exceptions to the free movement of parallel imports’ (2000) EIPR 585 Google Scholar; Hays, T. ‘The burden of proof in parallel- importation cases’ (2000) EIPR 353 Google Scholar.
2 Of course the marketing of the products will need to be in compliance with the commercial legislation in force in the country of marketing/importation. In the EC this is subject to the principle of mutual recognition.
3 Counterfeit and pirated goods are goods which infringe intellectual property rights in the country of importation and were put on the market of exportation without the consent of the intellectual property owner. As such, they do not qualify as parallel imports. See also Art. 1(4) of Council Regulation No 3295/94 on counterfeit and piracy, OJ 1994 L 341/8, as modified by Council Regulation 241/99, OJ 1999 L 27/1.
4 Art. 6 TRIPS.
5 Art. 40 TRIPS.
6 On the situation in the USA subsequent to the decision of the US Supreme Court in 1998 in the Quality Kings Distributors v. Lanza Research Internationa, Inc. Case, see Zadra-Symes, L. and Basista, J. ‘Using US Intellectual Property rights to prevent parallel imports’ (1998) EIPR 219. On the situation in Japan susbequent to the decision of the Japanese Supreme Court in 1997 in the BBS Kraftfahrzeugtechnik AG v. Racimex Japan Corp. and Jap Auto Products Co. Case, see Tessensohn, J. and Yamamoto, S. ‘The big Aluminium wheel dust up—international exhaustion of rights in Japan’ (1998) EIPR 228 Google Scholar.
7 Case T– 198/98 Micro Leader [1999] ECR II–3989.
8 The following statement, which is still highly pertinent today, is taken from Machlup, F. and Penrose, E. ‘The Patent Controversy in the Nineteenth Century’ (1950) The Journal of Economic History 1, 1–2 CrossRefGoogle Scholar: ‘The patent controversy, as most seesaw battles, attracted at the time the widest pub lic interest; frequent reports appeared in the daily press and in weekly magazines. That the whole story was later forgotten and now seems to be unknown even to experts in the field is probably due to the absence of any modern historical accounts of the debates that were carried on in the nineteenth century’
9 See the early economic reasoning as developed in Demaret, P. Patents, Territorial Restrictions and EEC Law, IIC Studies, Vol. 2 (1978)Google Scholar.
10 Penrose, E. The Economics of the International Patent System, (New Jersey The John Hopkins Press, 1951)Google Scholar. At 231 she writes that, besides compulsory working: ’(t)he second method of reducing the cost of the patent monopoly is that of compulsory licensing. This is by far the most effective and flexible method and enables the state to prevent most of the more serious restrictions on industry. It could be used very effectively to undermine the monopoly power of several of the more powerful international cartels whose position is largely based on their control of the patent rights to industrial processes in the larger industrial countries; and it could be used to ensure that patented new techniques developed abroad are available to domestic industries wishing to use them.’
11 For more details, see Govaere, I. The Use and Abuse of Intellectual Property Rights in EC Law (London, Sweet & Maxwell, 1996) 169 ffGoogle Scholar.
12 Case C–30/90 Commission v. United Kingdom [1992] ECR I–829 at para 28. Case C–235/89 Commission v. Italy [1992] ECR I–777 at para 24.
13 Case C–191/90 Generics v. Kline ECR [1992] I–5335. The issue raised in this case was the com patibility, with the EC rules on the free movement of goods, of a national provision that required the competent national authority ‘to refuse a licence (of right) to import from another country when the patentee works the patent by manufacture in the United Kingdom but to grant a licence (of right) to import from a third country where the patentee works the patent by importation of products manufactured in other Member States of the EEC’.
14 Einhorn, T. ‘The impact of the WTO Agreement on TRIPS (Trade related aspects of intellec tual property rights) on EC law: a challenge to regionalism’ 35 (1998) CMLRev 1069, 1090–91Google Scholar. Another interpretation might be that ‘the requirement of that provision is met if the compulsory licensing rules do not treat differently imported and locally produced products’, see Correa, C. ‘The GATT Agreement on trade-related aspects of intellectual property rights: new standards for patent protection’ (1994) EIPR 327, 331 Google Scholar. Compulsory licences are, anyhow, subject to strict conditions according to Art. 30 and 31 TRIPS. See Ullrich, H. ‘TRIPS: adequate protection, inadequate trade, adequate competition policy’ (1995) Pacific Rim Law & Policy Journal 153 Google Scholar, esp. 176.
15 Art. 21 TRIPS.
16 Including on markets where prior to TRIPS no patent protection could be obtained. See also below at point B, on the effects of compulsory harmonisation achieved by TRIPS.
17 There are of course many other factors that will influence this outcome, such as subsidies, access to skilled labour, etc.
18 Govaere, I. and Demaret, P. ‘The TRIPS Agreement: a response to global regulatory competition or an exercise in global regulatory coercion?’ in Esty, D. et. al. (eds.) Regulatory competition and economic integration: comparative perspectives (Oxford OUP, 2000) 368 Google Scholar.
19 The objective of trade marks is to guarantee the (commercial) origin of the product or, as Art. 16 TRIPS mentions, to avoid a likelihood of confusion.
20 Case 187/80 Merck I [1981] ECR 2063 at para 10. However, it was argued elsewhere that the Court drew the wrong conclusion in this case by allowing the exhaustion of rights in the absence of parallel protection, see Govaere, above n 11 at 158–68.
21 Developing countries only benefit from a longer transitional period. See the article by Ullrich, above n 14. There are, however, important problems of implementation. See for instance Levy, C. ‘Implementing TRIPS—a test of political willingness’ (2000) Law and Policy in International Business 789.
22 Another unwarranted result might be that the intellectual property owner refrains to bring his product on the market where he enjoys intellectual property protection altogether. However, see above at point A. about possible IPR-related legal constraints to produce and/or market a product in a given market.
23 This is the most controversial result of the previously cited Merck ruling of the Court, as confirmed later on in the Merck II ruling; see Joined Cases C-267/97 and C–268/95 Merck II [1996] ECR I–6285.
24 Yusuf, A. and Moncayo Von Hase, A. ‘Intellectual property protection and international trade: exhaustion of rights revisited’ (1992) World Competition 115, 124 Google Scholar.
25 On the reason for this, see Govaere, I. ‘Convergence, divergence and interaction of regional trade agreements and the agreement on trade related aspects of intellectual property rights (TRIPs)’ in Demaret, P. et. al. (eds.) Regionalism and Multilateralism after the Uruguay Round: Convergence, Divergence and Interaction (Brussels, European Interuniversity Press, 1997), 703 Google Scholar.
26 Art. 6 TRIPS reads as follows: ‘For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights’. Exceptions are, however, made to the principle of most-favoured-nation treatment for agreements prior to TRIPS and duly notified, such as is the case for the EC and the EEA. See Govaere, above n 25.
27 Some cases also deal with the relationship to services, see for instance Case 62/79 Coditel [1980] ECR 881.
28 Case 78/70 DGG [1971] ECR 487.
29 Dir. No 89/104/EEC, OJ 1988 L 40/1.
30 See, for instance, Joined Cases C–427/93, C–429/93 and C–436/93 Bristol Myer Squibb [1998] ECR I–3457; Joined Cases C–71/94 and C–73/94 Eurim-Pharm [1996] ECR I–3630; Case C–232/94 MPA Pharma [1996] ECR I–3671.
31 Case 19/84 Pharmon [1985] ECR 2281, where the Court held that the patent holder is not considered to have consented to putting products on the market under a compulsory licence, regardless of whether or not he also received a reward. This was different in Case 434/85 Allen & Hanburys [1988] ECR 1245 because the licence of right concerned only allowed for a reward to be received.
32 Case 158/86 Warner Brothers [1988] ECR 2605. The Court ruled that consent to sell a video tape leads to exhaustion with respect to further sales, but does not necessarily constitute the consent also to rent out the video tape.
33 See in particular Case 119/75 Terrapin v. Terranova [1976] ECR 1039; Case C–317/91 Deutsche Renault v. Audi [1993] ECR I–6227.
34 On the guarantee of origin function, see Case 102/77 Hoffman-La-Roche v. Centrafarm [1978] ECR 1139. For the clarification that it concerns the commercial origin of a product and not the historical origin of the mark, see Case C–10/89 HAG II [1990] ECR I–3752.
35 Case 3/78 Centrafarm v. American Home Products [1978] ECR 1823
36 Para 10. See also Case 1/81 Pfizer [1981] ECR 2913, where these criteria were applied in respect of a transparent wrapping.
37 Case C–337/95 Parfums Christian Dior [1997] ECR I–6013.
38 Joined Cases C–427/93, C–429/93 and C–436/93, above n 30. See for instance also Case C–349/95 Loendersloot [1997] ECR I–6227.
39 Case C–379/97 Pharmacia & Upjohn [1999] ECR I–6927.
40 Merck I & II, above nn 20 and 23, respectively. The prior reward theory elaborated after the earlier Centrafarm v. Sterling Drug Case (Case 15/74 [1974] ECR 1147) was thereby substituted for the so-called consent theory.
41 Para 39.
42 Drugs were long excluded from patent protection in many countries, including in certain Member States such as Italy, on the basis of public health considerations. Under TRIPS no such option was left, as was illustrated by the case India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, Report of the Panel, 5 September 1997, WT/DS50/R; Appellate Body Report, 19 December 1997, WT/DS50/AB. The tension between patents and public health policies of developing countries, such as South-Africa, have led to accepting the primacy of the latter without, however, relaxing the obligations under Art. 27(1) TRIPS.
43 Exceptions are the Community trade mark and Community design which apply to the whole internal market. However, national trade marks and national designs continue to co-exist so that it remains up to the proprietor to determine for what markets to register for exclusive rights.
44 Inventions are subject to the principle of absolute novelty. In the EC, as in most countries, the first-to-register criterion is adopted. The USA traditionally adopts the first-to-invent criterion to establish novelty. The right of priority as written into the Paris Convention offers the possibility to register in different countries mostly within one year of initial registration without loosing novelty status. The European Patent Convention offers a centralised procedure to register in different European countries at once.
45 Be it through importation, see above at Sect. II.
46 Para 54.
47 Case 19/84, above n 31.
48 For instance, Case 15/74, above n 40. See the criticism by Demaret, above n 9.
49 See Case T–41/96 Bayer, Judgment of the Court of First Instance of 26 October 2000, currently in appeal before the Court of Justice.
50 See Govaere, above n 25.
51 Case 51/75 EMI Records [1976] ECR 811; Case 270/80 Polydor [1982] ECR 329.
52 Case E-2/97 Mag Instruments v. California Trading Company Norway, Advisory Opinion of the EFTA Court of 3 December 1997 at paras 16 and 22.
53 Case C–355/96 Silhouette [1998] ECR I–4799.
54 A lot of criticism of Silhouette is due to the fact that the Court does not usually adopt a textual method of interpretation of EC law and even less considers legislative history as crucial in this respect. The more teleological method of interpretation as usually employed by the Court is known as the ‘purposive’ approach. See Stuart, Lord MacKenzie, The European Communities and the Rule of Law (London, Stevens & Sons, 1977) 77 Google Scholar.
55 Case C–173/98 Sebago [1999] ECR I–4103.
56 Joined Cases C-414/99 and C-416/99 Zino Davidoff [2001] ECR I–8691 at para 60.
57 Para 47.
58 Case E-2/97, above n 52.
59 The objective of homogeneity essentially implies that the same rules are applied, implemented and interpreted in the same manner all through the EEA.
60 Para 19–20.
61 Above n 34.
62 See, for instance, Case 15/74, above n 40. Anyhow another option would still be to use different trade marks for different markets. In that way the trade mark proprietor could avoid undermining the goodwill associated with his trade mark used in the country of importation.
63 The results of the Nera study were not conclusive in this respect.
64 Argument invoked by France, Germany, the UK and the EC Commission.
65 Paras 25–28. Long before Mag and Silhouette it was submitted that the issue of international exhaustion is most likely to be situated under the common commercial policy, see Govaere, I. ‘Intellectual property protection and commercial policy’ in Maresceau, M. (ed.) The European Community’s commercial policy after 1992: the legal dimension (Dordrecht, Martinus Nijhoff, 1993) 197 Google Scholar.
66 See above at point III.B.
67 See above at Section II.
68 Art. 40(1) TRIPS reads as follows: ‘1. Members agree that some licensing practices or condi tions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology.’ Art. 40(2) TRIPS further gives examples of abusive behaviour whereas Art. 40(3) and (4) TRIPS stipulate when and how a WTO Member may request consultations with another WTO member concerned.
69 See Case 24/67 Parke Davis [1968] ECR 55.
70 See Joined Cases C–241–242/91 P RTE and ITP (Magill) [1995] ECR) I–743.
71 Case C–53/92 P Hilti [1994] ECR I–667
72 Case 78/70, above n 28 at para 7.
73 Although the Commission might, for instance, impose a fine or a penalty payment in case a breach of Art. 82 EC.
74 The technology transfer block exemption gives some guidance with respect to know how and patent licensing, see Commission Reg. 240/96, OJ 1996 L 31/2.
75 Case 40/70 Sirena [1971] ECR 69.
76 Case C–9/93 Ideal Standards [1994] ECR I–2789.
77 Case 35/83 BAT v. Commission [1985] ECR 363.
78 Case 51/75, above n 51.
79 Case T–198/98, above n 7. On this case, see Muñoz, R. ‘Propriété intellectuelle: vers une exception à l’épuisement communautaire?’ (2000) JTE 215 Google Scholar.
80 See the Merck case, above n 20.