Parallel imports refers to the reselling of goods under a certain trademark by a non-authorized seller of those goods in a certain jurisdictions. On many e-commerce and other purchasing channels, brand owners find their goods which appear to be genuine but are sold by entities not authorized by the brand owners. Does the sale of such goods constitute infringement? There is no definitive answer, as neither the Paris Convention nor the Bern Convention explicitly outline the legal status of such acts. Thus, each jurisdiction is left to decide on its own how it chooses to deal with parallel imports. Some jurisdictions follow the so-called  “international exhaustion” regulations for parallel imports, meaning that if a trademark owner sells goods somewhere in the world, it has exhausted its rights everywhere else in the world, ie the reselling of the goods by entities other than the brand owner does not constitute trademark infringement. This is the principle which China and a few other countries follow. Other jurisdictions follow the “national/regional exhaustion” principle, where sale of trademarked goods is not considered infringement if the brand owner has previously sold such goods in a particular jurisdiction.

    Each approach, as the whole concept of parallel imports, is debated by legal systems and professionals. Brand owners would tend to view parallel import practice as a whole to be detrimental to their brand – unauthorized distributors of goods are not bound by the brand owners’ pricing and other policies, such as adhering to distributing goods of certain quality or characteristics in certain regions. One such example is with technology products, where voltages and other technical specifications play a significant role in the quality of the product. If a distributor not authorized by the brand owner sells a Braun hair dryer manufactured for the US market in China, where voltages are different, the product may not function as well or even pose safety risks, leading to a loss of confidence in the brand in that market. Banning parallel imports would mean that the brand owners and their official distributors in each market would be free to set prices for their goods at their own discretion. It would also mean less potential for counterfeiters to pose as official branded goods. From the consumer perspective, as well as the general free market economics standpoint, such a ban would mean a drive towards monopoly for that product. When parallel imports exist, distributors of these gray goods are free to set their own price points, which are often lower than those of the original brand owners’. Thus, consumer rights protection groups tend to be in favor of parallel imports as it means more choice for consumers in a market.

    In China, especially when buying a luxury good, the consumers are sometimes more willing to buy from parallel importers such as daigou shoppers (a practice where Chinese travelers abroad purchase goods to then resell within China) simply because there is more trust that goods coming from overseas are genuine, as counterfeiting within China is particularly rampant.

    Since parallel imports are technically allowed in China, is a brand owner concerned with an unauthorized flow of goods without legal reprieve? The answer is that it depends. Certain cases in China with foreign brands where safety is a concern (ie French-made Michelin tires) were ruled in favor of the original brand owner, citing consumer interests. However, with products that pose no such serious health and safety risks, it may be difficult to protect against parallel importers, as they originally purchased goods through legal means. Should a distributor claim to be the official distributor of a brand without that actually being the case, however, that may be a cause to build a legal case against them. Some small brand owners that are seeking to expand awareness among consumers without investing in a large-scale distribution first may welcome the opportunity parallel imports present through the previously mentioned daigou system. While it may be an easier solution to building awareness and increasing sales in a large market, it is still a good idea to first protect your IP rights in China. Entrepreneurial trademark squatters may register any brand name gaining popularity, thus blocking the true brand owner from protecting their IP rights in the future.