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Intellectual Property and Competitiveness of MSMEs 11 December 2009

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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Intellectual Property and Competitiveness of MSMEs 11 December 2009

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  1. Grey Market Goods and Parallel Imports Christopher Stothers Milbank, Tweed, Hadley & McCloy LLP, London Intellectual Property and Competitiveness of MSMEs 11 December 2009

  2. Overview • What is parallel trade and why does it matter? • IP - sales within Europe • IP - sales outside Europe • Competition restrictions • Practical strategies for MSMEs

  3. 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”.

  4. Why does it matter? Manufacturers • Every manufacturer hates disruption to distribution • …distributors and retailers complain • …brand gets damaged • …and profits are reduced

  5. 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

  6. 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?

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

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