Parallel Imports and Non-authorised Sales

Parallel Imports and
Non-authorised Sales


5  1. Inadmissibility of parallel imports
5		      1.1 Inadmissibility because the product was put
               into circulation outside the European Union
6		      1.2 Changes to the product or its packaging
6		      1.3 S  ale of an original trade mark product outside
               the selective distribution network
               (“non-authorised” or “grey market sales”)
7		      1.4 Import of pharmaceutical products from the
                accession countries of the EU-Eastern Enlargement
8  2. Claims and litigation available to the manufacturer
8		      2.1 The right to a cease-and-desist order, and
               border confiscation
9		      2.2 Claims for damages


    Parallel imports concern the sale of a manu-
    facturer’s original product outside his
    distribution network. German and European
    trademark and patent law provide ways of
    preventing this. Under certain conditions the
    manufacturer can prohibit a parallel importer
    or other reseller from selling the original
    product. This is of great practical significance
    in the case of goods the prices of which may
    vary considerably from country to country,
    in particular pharmaceutical products and
    medicines, or branded prestige products that
    are sold through selective distribution networks
    via authorised dealers and whose sale by
    retailers outside these networks needs to be

1. Inadmissibility of parallel imports              1.1 Inadmissibility because the product
                                                    was put into circulation outside the Euro-
The inadmissibility of the sale of an original      pean Union                                             Inadmissibility of parallel
product can essentially result from one or more                                                            imports

of the following:                                   In contrast to the law in numerous other countries     Inadmissibility because of
                                                    outside the European Union, in particular the          circulation outside the EU

                                                    USA and also Switzerland, German and European
  – the fact that the product was not intended     law on intellectual property rights does not rec-
     for sale on the European market                ognise exhaustion world-wide but solely Europe-
  – the changes which the distributor has          wide. If the maker of a product which is protected
     made to the product or to the original         by trademark in Europe puts it into circulation
     packaging                                      outside the European Union, the product may
  – the sale of the product, particularly in the   not be sold in the European Union without his
     case of prestige-branded products, via         consent. The manufacturer can prohibit the sale
     supply chains outside the manufacturer‘s       of his product in the European Union on the basis
     own distribution network (so-called “non-      of his trademark if he has put it into circulation­
     authorised” or “grey market sales”)            outside the European Union and it was not in-
  – in the case of patented pharmaceutical         tended for sale in European Union countries. In
     products, or those protected by a so-called    countries outside the European Union in which
     supplementary protection certificate, or       the principle of world-wide exhaustion applies,
     the fact that the product was imported         as for example the USA or Switzerland, this is not
     from the accession countries of the Euro-      possible. The manufacturer cannot prohibit the
     pean Union’s Eastern Enlargement.              sale of his product within these countries solely on
                                                    the basis that it was intended for other countries.

                                                    Resulting from the territorial limitation, the
                                                    owner of a German trademark or a Community
                                                    trademark can always defend parallel imports
                                                    from third countries based on this trademark

Distribution of original goods outside the distribution system of the manufacturer
                                    – possible reasons for inadmissibility:

                                    1.2 Changes to the product or its                  The manufacturer is only obliged to tolerate
                                    ­packaging                                         repackaging and any other changes to packaging
                                                                                       if the changes do not damage his legitimate in-
Changes to the product or its       Furthermore, the owner of a trademark can pro-     terests. One of the conditions for this is that the
­packaging                          hibit parallel imports from EU member states,      reseller must indicate on the packaging that it
                                    if there are “legitimate reasons”, which accord-   has in fact been repackaged. The reseller is also
                                    ing to § 24 II German Trademark Act/Art. 13 II     obliged to ensure that the changed packaging is
                                    CTMR is expressively the case if the product’s     not defective or incorrect (e.g. the translation
                                    original packaging has been changed and he was     on a package insert) and that it has a proper,
                                    not notified of this in advance.                   business-like appearance. If these conditions
                                                                                       are not fulfilled the trademark proprietor can
                                    Even where advance notification of the change      prohibit the sale of the product. In Germany,
                                    to the packaging has been given, as a rule the     there is an established and differentiated judi-
                                    manufacturer can prohibit the resale of his        cial practice which, as a rule, allows for a reli-
                                    product by third parties in the Federal Repub-     able legal assessment.
                                    lic of Germany if the control number has been
                                    removed from the product or its packaging.
                                    This applies in particular if the control number
                                    details the place and time of production, or if
                                    it is apparent to the consumer that a control
                                    number has been removed.

1.3 Sale of an original trademark product            ised distributor or retailer who has obtained the
outside the selective distribution net-              products from an authorised dealer within the
work (“non-authorised” or “grey market               distribution network from reselling them solely
sales”)                                              on the basis of his trademark, if as a result of
                                                     the sale by this third party, e.g. a discounter, the
In order to safeguard marketing quality, Ger-        prestige value of a branded product is impaired.       Sale of an original outside the
man and European law permits the manufac-            Exhaustion of the manufacturer’s trademark             distribution network

turer’s marketing partners to be bound by            rights does not apply in this case either, so that
marketing requirements under certain condi-          he is able to obtain a sales prohibition directly
tions of competition and anti-trust law. If a        against such third party.
product which is sold via an authorised selective
distribution network to a third-party, non-
authorised distributors or retailers in breach of    1.4 Import of pharmaceutical products
the terms of the selective distribution network,     from the accession countries of the EU-
trademark law permits the manufacturer under         Eastern Enlargement
certain conditions to take action directly against
the non-authorised distributor and to prohibit       The European Union has a special mechanism             Import of pharmaceutical pro-
him from selling the product.                        for prohibiting the parallel import of pharma-         ducts from Eastern Europe

                                                     ceutical products which even allows for the
On the one hand, the manufacturer may take           prohibition of the parallel import of pharma-
direct action against the non-authorised dis-        ceuticals within the European Union itself. The
tributor if, for example, the latter has removed     mechanism allows the owner of a patent or sup-
control numbers or made them unidentifiable,         plementary protection certificate to prohibit the
even if the number only contained details of the     sale of the pharmaceutical product in European
distribution channels, or its removal or oblitera-   Union countries, even if it was marketed with
tion is not discernible to the consumer. The se-     his consent within the European Union, namely
curity of an authorised distribution network can     in the new Member States in Eastern Europe.
therefore be effectively maintained by means of
a control number system which gives informa-         The countries in question are those which
tion about the product’s distribution channels       became member states of the EU in 2004, i.e.
within the selective distribution network.           the Czech Republic, Estonia, Latvia, Lithuania,
                                                     Hungary, Poland, Slovenia and Slovakia and
Following a recent decision of the European          those which became member states of the EU in
Court of Justice (decision dated 23.04.2009 –        2007, i.e. Bulgaria and Romania. The back-
C-59/08 – Copad v. Dior), the manufacturer           ground to this ruling is that in these countries,
may, as an alternative, prohibit a non-author-       in general, there is no equivalent to the Western      7
European standard of patent protection. Parallel      If a pharmaceutical product has been marketed
                                      imports from these Member States into other           in the latter countries with the manufacturer’s
                                      EU states where the pharmaceutical product is         consent, his intellectual property rights are
                                      protected by patent or supplementary protec-          basically exhausted and he can only oppose the
                                      tion certificate can be prevented under this          product’s import into other EU Member States
                                      ruling.                                               on the grounds of general principles (see in
                                                                                            particular 2.1. above).
                                      If the patent protection or a supplementary
                                      protection certificate for the pharmaceutical
                                      product was applied for in a Member State at          2. Claims and litigation available to the
                                      a time when no equivalent protection could            manufacturer
                                      be obtained in one of the new Member States
Claims and litigation available       cited above, the patent proprietor can prohibit       In the instances cited above of an infringement
to the manufacturer                   the import of the product from such states into       of the manufacturer’s rights by the parallel
                                      another Member State of the European Union,           importer or non-authorised distributor, the
                                      provided that his intellectual property rights        proprietor of the rights may assert all the claims
                                      are still in force there. By way of exception, the    to which he would otherwise be entitled in the
                                      rule on exhaustion of intangible property rights,     event of an infringement of his industrial prop-
                                      which as a rule is applicable in other cases of the   erty rights, in particular claims to a cease-and-
                                      marketing of goods in the European Union, does        desist order, information about the distribution
                                      not apply under this special mechanism if the         channels and the scope of the illegal sales,
                                      pharmaceutical product had been marketed in           destruction and compensation.
                                      the countries named above.

                                      This special arrangement applies only to the ten
                                      named sates. No equivalent arrangement exists
                                      for the accession countries Malta and Cyprus.

2.1 The right to a cease-and-desist order,            are able to confiscate parallel import products at
and border confiscation                               the border.

The manufacturer can enforce the right to a                                                                 The right to a cease-and-desist
cease-and-desist order by recourse to the inter-      2.2 Claims for damages                                order, and border confiscation

locutory legal process, which enables a prohibi-
tion order to be issued within a few days. One        In cases of trademark infringements too, a            Claims for damages
condition for issue of a preliminary injunction       claim for damages often enables the intellectual
however, is that the manufacturer acts quickly;       property rights holder to demand the surrender
as a rule, no more than a month may elapse            of the entire profit that the parallel importer has
from the date that the illegal sale of a prod-        made from parallel sales and for which he must
uct by a parallel importer or non-authorised          render accounts.
distributor has been discovered and the filing
of the application for the issue of a preliminary     The German Federal Supreme Court has recent-
injunction.                                           ly held that this applies to the parallel sale of
                                                      pharmaceutical products which cannot be sold
The manufacturer can call on the customs              under a different trademark for pharmaceutical
author­ities in the Federal Republic of Germany       law reasons. This decision however presup-
to monitor inadmissible parallel imports. He          poses that the rights holder can also demand the
can request that the customs authorities con-         surrender of the parallel importer’s entire profit
fiscate suspicious goods temporarily and notify       from the illegal sale of other medical products,
an agency named by him. He can then prevent           provided it can be assumed that the product
them being resold by recourse to the courts. In       would not be accepted on the market if it had
order to do this he must first ensure that the        been sold under a different trademark.
customs authorities have a description as pre-
cise as possible of the identifying features of the
suspected products, and once the manufacturer
has received notification of the confiscation, he
must act very quickly – within two weeks – to
file a court order prohibiting sales.

The confiscation of illegally sold original prod-
ucts at a country’s borders is not possible at the
European level. EU border confiscation regula-
tions do not permit the seizure of original prod-
ucts. The German customs authorities, however,                                                              9
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