By Ms. Yaqi Zhang, Chofn IP
- Brief Introduction of Parallel Import:
Parallel Import is not a legal term, but was used as a defense by the defendant in the "LUX Soap" case (Case No.: (1999) Sui Zhong Fa Zhi Chu Zi No. 82) as early as 1999. Afterwards in 2014 in the official document "Opinions on Strengthening Imports" issued by the General Office of the State Council, the term "parallel import" was first introduced and has been widely used since then.
The connotation of parallel import: It generally refers to the act of an operator who imports goods bearing an authorized trademark(s) through legal channels from outside the country without permission of the IP rights holders to the importing country and resells the goods.
The main features of parallel import:
- The goods are purchased and imported through legal channels from outside the country;
- The goods are genuine products made and sold or legally authorized by the IP holders;
- The IP rights used on the goods are the same as that enjoyed by the IP holders in the importing country; and
- The importer is not licensed to resell the goods in the importing country.
- General legal opinion on parallel import:
The Chinese Trademark Law and other laws do not explicitly prohibit parallel import relating to trademark so long as the products are genuinely the IP holders’.
In the legal document “Several Legal Issues to Note in Current Intellectual Property Trials” issued by the Beijing High People’s Court in 2016, it held that parallel import shall not be deemed to constitute trademark infringement, since if the infringing goods indeed originate from the trademark holder or its authorized entity, the trademark holder has obtained the commercial value of the trademark from the 'first' sale, and cannot prevent others from making 'second' sales or reasonable commercial marketing.
- Potential trademark infringement during parallel import
Despite the general legal opinion that it shall not be deemed to constitute trademark infringement, if the following scenarios arise during parallel import, it might constitute trademark infringement.
1) Annex other trademarks, especially Chinese trademarks, to the imported goods without the legitimate permission and/or without reasonable grounds.
In this regard, I would briefly introduce two precedents—1) Absolut Vodka case #(2013) Su Zhong Zhi Min Chu Zi 0175 and 2) Ballantine Whisky case #(2016) Xiang 01 Min Chu 1463 as follows:
In the Absolut Vodka case, the defendant (i.e., the seller of the imported goods Absolut Vodka) added and used a Chinese trademark “绝对 (meaning ‘absolute’)” in the Chinese label on the imported goods without the right holder’s permission. However, the sole trademark originally indicated on the imported goods is an English mark “Absolut”. The plaintiff (i.e., the right holder) owns several trademarks such as “绝对” and “Absolut” for the goods Vodka. The Court held that the behavior of the defendant’s adding and using Chinese trademark “绝对” on imported goods without permission constituted trademark infringement.
In the Ballantine Whisky case, the defendant (i.e., the seller of the imported goods Ballantine Whisky) added and used a Chinese trademark “百龄坛 (Chinese version of BALLANTINE)” in the Chinese label on the imported goods without the right holder’s permission. However, the sole trademark originally indicated on the imported goods is an English mark “Ballantine”. The plaintiff (i.e., the right holder) owns several trademarks such as “百龄坛” and “Ballantine” for the goods Whisky. The Court held that the behavior of the defendant’s adding and using Chinese trademark “百龄坛” on imported goods without permission constituted trademark infringement. The Court also stated that the trademark holder can subdivide the goods or market based on its demands. The plaintiff has the right to decide which trademark to use on specific goods and how to use the trademark. The use of the trademark is the plaintiff's business strategy, and others cannot make trademark use without authorization.
2) Re-package the imported goods (e.g., change the packaging, sub-package the goods)
If the act of re-packaging affects the identification or quality of the goods, leads to relevant consumer’s reasonable doubt about the source of the imported goods or leads to the reduction for the trademark’s recognition or trustworthiness, it normally constitutes trademark infringement.
In the “Fujiya Candy” case #(2015) Hang Yu Zhi Chu Zi 416, the involved candy products the defendant sub-packaged and sold indeed came from the plaintiff, and the outer packaging it used also carried the trademarks which are identical with or similar to the involved trademarks. Although from the perspective of the relevant public, sub-packaging did not cause direct confusion for the source of the goods, the defendant sub-packaged the plaintiff's candy goods into different boxes without the plaintiff's permission, and the boxes had obvious differences from the plaintiff's requirements for the boxes.
The court held that in addition to playing basic function of protecting and carrying goods for the outer packaging of the goods, it also play other important functions such as beautifying goods, promoting goods and enhancing the value of goods. Therefore, the defendant’ sub-packaging did not only fail to beautify goods and enhance the value of goods, but also damaged the reputation of the involved trademarks.
3) Remove or destroy product’s identification code
Trademark holders sometimes set bar code or security code on the products or packaging, normally to distinguish manufacturer information or distributor information, or to check partial or detailed information of the goods, or to verify the authenticity of the goods. Bar code or security code is a composing part of the goods, which can be used to check about the source or information of goods.
If an importer destroys or removes the code and destroys the integrity of the goods or packaging, the trademark holders or consumers will have difficulty judging on the source, channels and authenticity of the goods. It also affects the trademark holder’s quality control. Thus, this situation normally constitutes trademark infringement.
In the “Absolut Vodka” case, the defendant destroyed the identification code of the imported goods on purpose, the Court held that such behavior constituted trademark infringement, as 1) such behavior affected the identification function of the trademark, and 2) it impeded the tracking management of product quality by the trademark holder.
To sum up, parallel import generally will not be deemed to constitute trademark infringement, but if the importer has some behaviors which might affect such trademark functions as identifying the source, bearing the goods reputation or might affect trademark holder’s business strategy, it normally constitutes trademark infringement.
Reference cases:
- (1999) Sui Zhong Fa Zhi Chu Zi No. 82;
- (2013) Su Zhong Zhi Min Chu Zi No. 0175;
- (2016) Xiang 01 Min Chu No. 1463;
- (2015) Hang Yu Zhi Chu Zi No. 416.
