Parallel Importation

Parallel Importation

Trademark rights grant extensive authority to the trademark owner. However, there are limits on this right as there are with other rights. If the trade of branded goods is left to the monopoly of the trademark owner, it would contradict the principle of protection of free trade.

The legislator must balance the interests of the trademark owner and the traders circulating the branded goods. The most basic principle of providing this balance is the principle of exhaustion that determines when the trademark right will end.

Pursuant to the Trademark Decree No. 556, acts related with a product containing the registered trademark shall not constitute a breach of the rights of a registered trademark, where such acts have occurred after the product has been put on the market in Turkey by the proprietor or with his consent. In other words, after original products have been put on the market, it is legal to put original products on market in Turkey or other countries (original products should have been put on the market before) by third parties without any authorisation from the trademark owner.

The crucial situation of the principle of exhaustion is parallel importation. Parallel importation allows third parties to obtain goods subject to intellectual property rights directly from licensed or authorised overseas sources, rather than dealing with local suppliers, licensees or agents. Thus, parallel importation allows for competition between sources of the same or similar goods. The reason of permission of parallel importation is to provide free movement of goods and monitor the competition. In relation to parallel importations, the original product should be previously put on the market by the trademark owner. Otherwise, the trademark owner’s right will not foreclosure.

Because parallel importation is directly associated with exhaustion of the rights, regulation in parallel importation can vary from country to country. The principle of exhaustion of the rights can be territorial, regional and international. The concept of national exhaustion does not allow the trademark owner to control the commercial exploitation of goods put on the domestic market by the trademark owner or with his consent. However, the trademark owner or his authorised licensee could still oppose the importation of original goods market abroad based on the right of importation. In regional exhaustion, territories of several countries are accepted as a single territory and if the trademark owner puts the product on that market, the trademark owner’s right on the trademark shall be deemed exhausted. Lastly, where a country applies the concept of international exhaustion, the rights are exhausted once the product has been sold by the trademark owner or with his consent in any part of the world.

The main reason of the parallel importation is the difference between the current price of the country of origin of the goods and countries that the goods are offered on the market. Owners of -branded goods may maintain a different price policy for having various economic advantages or increasing the market share in a country. The price margin is extremely important in terms of parallel importers. In such a case, the market traders may take an advantage with freedom of parallel import so they could import the product which can be obtained from a country where the product may be procured to a country where the product may be sold at a higher price. In order to prevent this situation, brand owners sell the products in different brand names and change the packaging on the market in the offering country and the producing country. Thus, they try to make parallel importation impossible. However, these actions of the trademark rights holders are limited by The

Treaty of the European Communities. Article 28 of the Treaty states that the free movement of goods may not be prevented and quantitative restrictions on imports and equivalent effects between member countries may not be prohibited. Hence, the European Court of Justice accepts its decisions that after original products have been put on the market by trademark owner, the trademark right is deemed to be exhausted.

There is an uncertainty regarding which system is adopted in Turkey on the principle of exhaustion. However, according to Article 13 of the Law No. 556, after launching a registered brand to the market in Turkey by its trademark owner or third person with his consent, acts relating to the goods are beyond the rights which come with brand registration. For this reason, it is accepted by doctrine that Turkey adopted the principle of national exhaustion. Indeed, in the Supreme Court’s case-law the principle of national exhaustion has been accepted and importation of original goods can be prevented if the goods have not been put on the market in Turkey. For instance, according to Supreme Court of the 13th Circuit, if original products are put on market by trademark owner or with his consent, the brand rights will be exhausted and the owner cannot prevent to sell his products by third parties anymore. Furthermore, the dominant view is that parallel importation cannot be prohibited. As a result, in particular, European Union countries aim to make parallel imports more common and determine the limits of the use of trademark rights. There are various regulations for parallel imports and the principle of exhaustion that is directly linked with parallel imports but there is no common worldwide adoption for principle exhaustion, so uncertainties about limiting the rights of the trademark owner continue.