AJPark

What is parallel importing?

Parallel importation is where a person gets a branded product that is legitimately on sale in one country and imports it into another country. The product is imported in parallel to the brand owners own importation and distribution chains.

An example, from the 1980s is Colgate-Palmolive finding out that legitimate COLGATE branded toothpaste from Brazil was being imported into the United Kingdom.

The policy reason for allowing parallel importation is that it encourages competition between sources for the same product. It also avoids the need for people to deal only with local suppliers or agents.

Parallel importation is a controversial subject. Some brand owners and local agents take the view it allows parallel importers to free ride on the advertising, marketing and support services the official agents provide.

How does the current law work?

Current trade mark law in New Zealand allows parallel importers to bring in products that have been put on the market any where in the world with the brand owners consent.

Take a fictitious brand ENERGEX for energy drink as an example. The brand owner Energex Ltd sells the energy drinks into New Zealand and Asia. A parallel importer may be able to source ENERGEX from Thailand at a competitive rate and import it into New Zealand. Because Energex Ltd has consented to the ENERGEX product going into the Thai market the parallel importation cannot be stopped by Energex Ltd.

On the other hand, if the product was not the genuine ENERGEX product it would be an infringement. Parallel importation law does not make it legal to import counterfeit product.

Parallel importation is not relevant where two independent companies are using the same brand in different countries. For example, in New Zealand the confectionery trade mark registration MINTIES is owned by Cadbury. In Australia the same MINTIES mark is owned by Nestle.

In our ENERGEX example, say another company owns and uses the brand ENERGEX for energy drink Australia. An importer could not bring the Australian ENERGEX product into New Zealand, even though it is legitimate in Australia. This Australian product would infringe Energex Ltd’s New Zealand trade mark registration.

Determining who owns a trade mark and who has consented to use of it is not always a straight forward matter.

In the late 1970s, Revlon Inc in the US disposed of a large quantity of a discontinued REVLON FLEX anti-dandruff shampoo cheaply to wholesalers. The shampoo was then imported into the United Kingdom. An injunction was sought to stop the importation and sale of the US product in the UK.

But the United Kingdom REVLON FLEX trade mark was in the name of Revlon Suisse, a Swiss company. Questions arose as to whether the owner of the trade mark was connected to the US shampoo and had consented to the REVLON FLEX mark being used on the shampoo.

In the end the court decided that the shampoo being imported did not infringe the REVLON FLEX registration. This was because of the relationship between the Revlon Inc and Revlon Suisse and the actual packaging labels.

How is trade mark ownership being used to stall parallel importing?

Some people have realised that the way the ownership of trade mark registrations is organised can give different results. What may be parallel importation when one company owns a trade mark may be a trade mark infringement when another company owns the mark.

In my example, the importation of ENERGEX drinks from Thailand into New Zealand would not be a problem. This is classic parallel importation.

But what if Energex Ltd were to transfer the ownership of the New Zealand trade mark to another company, for example a subsidiary or sister company? Let’s call that company Local Ltd. Is the importation of the same ENERGEX drink still a parallel importation?

Local Ltd could say that the drink from Thailand was put on the Thai market without Local Ltd’s consent. Arguably the imported ENERGEX drink is now a trade mark infringement.

If Energex Ltd and Local Ltd are related companies it is likely a court would find, like in the Revlon case, that there is sufficient connection between the companies for consent to be implied. The court would say Local Ltd cannot stop the parallel importation of the product.

But the connection between Energex Ltd and Local Ltd may not be one that can be found from the company and trade mark registers. Unrelated companies may have a contractual or private arrangement. It is this type of association and indirect associations and understandings that the latest amendments to the Trade marks Act is intending to capture. We will have to wait and see.

An edited version of this article was published in Supermarket News, June 2009.

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  Nigel Robb

  Senior Associate