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Article Date: 30/04/2007
Article Title: parallel importing
The High Court ruled on 18 October 2006 that parallel importing aimed at a territory of the European Economic Area ("EEA"), via a website operating in a non-EEA country, will amount to an infringement of intellectual property rights, where that website is aimed at EEA customers. The term "parallel importing" describes a situation where branded goods intended for a particular market are bought by customers in a different market. Customers in this different market benefit from lower prices and increased choice.
The defendant, Lik-Sang.com, a company registered and operating in Hong Kong, sold PSP Consoles via its website. The Consoles were obtained from the claimant, Sony, and were intended by Sony for sale in Japan only.
However, they were bought on many occasions by customers in EEA markets.
The intended destination of Sony's products was evidenced by signs printed on the packages ("FOR SALE AND USE IN JAPAN ONLY") and user manuals published in Japanese.
There were two important issues in this case. First, whether Sony gave consent for the import of its equipment to the EEA and second, whether the activity in question targeted the EEA.
The Court held that in relation to the first issue, no consent (express or
implied) for such importing had been given and therefore the trademarks, copyright and registered design rights in the Sony equipment had been infringed by selling in the EEA. The Court agreed with Sony’s argument that since the goods in question were intended for sale in Japan only, the "Community exhaustion" rule did not apply. Community exhaustion excludes from infringement any goods offered to an EEA market by a supplier (in this case, Lik-Sang.com) who has consent to do so from the owner of intellectual property in the goods (in this case, Sony).
The fact that the owner of intellectual property rights in branded goods does not communicate to all subsequent non-EEA purchasers his opposition to marketing within the EEA is also of no importance. The Court further stated that goods do not have to carry a warning prohibiting their placement in an EEA market, nor are contractual restrictions needed. Contractual provisions transferring ownership of the branded goods, including an unlimited right of resale, also did not change the position. Consent must be clear and unambiguous.
As to the second issue, the Court confirmed that the website was undoubtedly aimed at EEA customers. In making such a conclusion, it did not matter that the defendant’s business took place in Hong Kong, and that he had no physical connections with an EEA territory. Lik-Sang’s website was easily accessible by EEA customers, particularly from the UK because English was installed as a default language. The prices were also quoted in pounds sterling, which appeared to be the default currency when the site was accessed from the UK. User manuals were available on the website in various European languages, including English. Furthermore, there were a number of reviews on the website from UK purchasers. As the Court noted, it would make no sense if intellectual property rights in the EEA could be avoided merely by setting up a website outside the EEA.
This judgment is clearly of interest to companies whose products are sold through online retailers. It clearly protects the intellectual property rights of non-EEA companies who target their branded goods at certain markets. In future, distribution policies must be respected by online
retailers who otherwise face legal action for infringement.
Pawel Lipski
Eversheds
pawellipski@eversheds.com
www.eversheds.com
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