PROTECTING YOUR BRANDS FROM PARALLEL IMPORTS

As our economy becomes increasingly globalized, prudent trademark owners will remember that it is their responsibility to maintain control over the distribution channels, as well as the ultimate geographic sale location, of their branded products. Markets around the world are being flooded with “parallel imports” and “gray market” goods – branded goods that are imported into a market and sold there without the consent of the owner of the trademark in the markets. These goods are not counterfeit (i.e., manufactured by someone other than the brand owner). Rather, they are manufactured by, for, or under license by the brand owner, but are imported into a jurisdiction different from that intended by the trademark owner. The question for trademark owners is, what rights do they have to stop the sale of gray market goods?

In the United States, trademark owners have several options including: (i) seeking assistance through the United States Customs and Border Protection Division of the Department of Homeland Security (CBP), (ii) filing a lawsuit in federal court, or (iii) filing a complaint with the United States International Trade Commission. Each avenue has its own distinct set of advantages and disadvantages, but each is a valuable resource to trademark owners.

The CBP has developed an initiative to stop the import of merchandise that infringes on United States intellectual property rights. To utilize the services of the CBP, trademark owners must first record their trademark rights with the CBP. Information requested in the CBP application includes the trademark owner’s name, address and citizenship, the trademark registrations to be recorded, information about the entities licensed to use the trademarks, and a description of the merchandise associated with the trademarks. Once the trademarks or products are registered, the CBP will enforce the trademark owner’s rights against all parallel import products that are materially different from products authorized for sale in the United States, even if the products originated from an affiliate of the U.S. trademark owner. “Material differences” include differences such as:

• Specific compositions of the products
• Product construction or structure
• Performance or operational characteristics
• Differences resulting from legal or regulatory requirements or certificates
• Other distinguishing factors that may cause consumer confusion with products authorized for sale in the United States.

It is important to note that the CBP will allow the importation of parallel import goods if labels are affixed to the goods indicating that the goods are not authorized for importation and sale in the United States by the rightful trademark owner.

If the CBP does not prove to be a viable option for a trademark owner, the trademark owner may file a lawsuit against the importer for trademark infringement, and in connection with that lawsuit seek both monetary damages and a court order enjoining future imports. In order to successfully prosecute such a case, trademark owners must establish that material differences exist between their products and the alleged parallel imports and that those differences are likely to cause consumer confusion or deception concerning the goods. These differences can exist in quality control, packaging, configuration, price, language labeling, warranty coverage and post sales service. Unfortunately, a lawsuit is typically the most expensive option available to trademark owners.

Lastly, trademark owners can seek the aide of the United States International Trade Commission (ITC). The ITC can be advantageous to trademark owners because it does not have all of the procedural prerequisites the other options do, but it does require that complaints filed by trademarks owners be far more detailed. Because of this, trademark owners can expect to incur more time and expense investigating potential claims prior to filing an action, than they might if they pursued claims in the CBP or court.

In light of the current state of imports in our country where, for example, products are routinely recalled for safety hazards, it is more important than ever for trademark owners to ensure that their products in the U.S. are in fact genuine or authentically licensed. Depending on the circumstances, this can be accomplished through one or more of the methods described above. Choosing which method is important, but not as important as choosing to take action. The failure to do so can destroy the good name the trademark owner has invested so much in acquiring.

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