Parallel Import Basics
The term “parallel imports” (also known as “gray imports”) refers to genuine branded goods obtained from one market (i.e., a country or economic area) that are subsequently imported into another market and sold there without the consent of the trademark owner.
The parallel imported goods are genuine (as distinct from counterfeit goods) in that they have been manufactured by or for or under license from the brand owner. However, they may have been formulated or packaged for a particular market, but then imported into a market not intended by the brand owner.
Exhaustion of IP rights refers to how IP right holders may control the distribution of their branded goods. According to the concept of exhaustion, once an IP rights holder sells in a particular market a product to which its IP rights are attached, it must allow the resale of that product in that market. It is deemed that the IP rights covering the product have been “exhausted” by the first sale.
There are two types of exhaustion regimes: national (or regional) and international. The debate as to which is preferable has been highly controversial.
National (or Regional) exhaustion is the regime that, once a brand owner has sold goods in relation to which the trademark is used in a particular country, it has only “exhausted” its trademark rights with regards to those goods in that particular country. If the same goods are subsequently sold in another country, the brand owner may rely on its trademark rights in that other country to prevent the further sale of the goods (absent consent to such subsequent sale). In some areas of the world, particularly in the EU, this concept applies regionally, that is, across a group of countries which form part of a single trading area.
International (Global) exhaustion is the regime that, once a brand owner has sold goods concerning which the trademark is used somewhere in the world, it has exhausted its trademark rights in relation to those goods everywhere in the world.
Some countries use a hybrid approach that modifies one of the two basic types of exhaustion.
For example, they may nominally apply the principle of international exhaustion with some certain restrictions (material differences approach).
The debate over parallel importation focuses on the extent to which a trademark owner should be able to maintain control over its own brands by using its trademark rights in a country (or a region) to restrict the importation of goods into that country (or region) after the goods have been put on the market somewhere else by the trademark owner, or with its consent, or by another person (whether or not related to the owner) who owns the rights in the jurisdiction where the goods originated. In other words, a discussion is held over which exhaustion regime to apply in a specific country. Ukraine has been an active participant of the debate over recent years.
Effective Ukrainian legislation does not explicitly determine a certain IP exhaustion regime. However, the current jurisprudence tends to apply the international one with regard to trademarks. Thus, as a general rule, currently parallel imports of genuine products into Ukraine shall not be deemed a trademark infringement.
At the same time, according to the Trademark Law, a trademark holder may prohibit the use of its trademark on parallel imported products if upon the first sale the condition of the product has changed or worsened. In addition, parallel importation of the pharma and crop protection products to Ukraine is prohibited unless the parallel imported products have valid market authorization in Ukraine.