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If you are a distributor, one of the greatest challenges you may face is dealing with ‘parallel’ or ‘grey’ imports. Parallel imports are branded products that are imported from overseas and sold without the permission of the manufacturer. As parallel importers are not subject to the same distribution agreements as you, they are able to set lower prices for the same product. In the long-term, parallel importers can undermine both your business and your ongoing relationship with the manufacturer. This article will explain the different options available to you if parallel importers are affecting your business.
How Can I Prevent Parallel Importers From Importing Goods?
Trade Mark Infringement
As a distributor, your distribution agreement should outline your rights to the exclusive use of the brand you distribute. You should carefully review these rights. Many distribution agreements require you to notify the manufacturer as soon as you realise that somebody else is using their trade mark. If this is the case, you should make sure that your distribution agreement requires the trade mark owner to legally enforce the trade mark against any unauthorised users.
To bring an action for trade mark infringement, the trade mark owner must show that the parallel importer is using the mark as a trade mark. This is generally easy to prove in court. The parallel importer will then need to show that they applied trade mark to the goods after receiving consent from:
- the registered owner or authorised user of the trade mark;
- a person permitted to use the trade mark by the registered owner or authorised user; or
- a person with significant influence over the use of the trade mark by the registered owner or an authorised user.
If the parallel importer is unable to do so, you may be able to successfully sue them for trade mark infringement.
Misleading and Deceptive Conduct
Australian law prevents misleading and deceptive conduct. Misleading and deceptive conduct is conduct that could trick customers into buying products they otherwise would not. If an importer of parallel goods markets their goods in a way that implies a relationship with you, the Australian distributor, they may be breaking the law. However, this will not always be the case. You will be unable to claim misleading and deceptive conduct if the importer of the parallel goods:
- indicates that the goods are manufactured overseas; and
- does not imply that they have any relationship with you.
Breach of Contract
As the authorised trade mark user and distributor of the goods, you may be able to take legal action against the trade mark owner for breaching your distribution agreement. This will be the case if the trade mark owner that you have an agreement with supplied the goods to the parallel importer, breaching of the terms of their agreement with you. Unfortunately, however, parallel importers often buy their goods from other legitimate trade mark owners overseas and then import them into Australia. In this case, you will be unable to take legal action for breach of contract.
You may wish to discuss a commercial strategy with your manufacturer, such as:
- offering your official product at a discounted rate for a temporary period; or
- working with the brand owner or manufacturer to buy all parallel imports available in the market.
Taking a commercial approach may help you to resolve the issue by pushing the competition out of the market. This can avoid long and expensive court proceedings.
If you are an Australian distributor, you may struggle with competition from parallel importers. If this is the case, you should speak to your manufacturer or brand owner to prevent other businesses from importing these goods. The longer you allow parallel importers to operate, the more they may damage your goodwill and reputation in the market. If you have any questions about parallel importers, contact LegalVision’s IP lawyers on 1300 544 755 or fill out the form on this page.
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