Page 1Parallel Importing of Copyright Goods 22 May 2008 Parallel Importing of Copyright Goods for...

22 May 2008page 1 Parallel Importing of Copyright Goods

Parallel Importing of Copyright Goods for Creative Industries

Speaker: Aileen Prill, LL.M. (London)


Scene Setting

• Parallel Imports– lawful copies of work or other protected material that have been

legitimately placed on the market in one country and which are sought to be imported into another

– not to be confused with pirated copies

• Reasons for Parallel Imports– earlier release dates abroad

– improved choice

– lower prices


Scene Setting

• Territoriality Principle– copyright and related rights are granted with respect to a particular

territory only

– different rightowners in different countries hold the same protected subject matter

– with parallel imports a rightowner may be deprived of exclusivity

• Can the rightowner in one country prevent the import into this country of copies from another country?


Legal Background


Copyright and Related Rights

• Distribution Right– right of the author to control the dissemination of physical copies

of the work/protected material

– art. 6(1) WCT, arts. 8(1) and 12(1) WPPT

• Secondary Infringement (UK, AU, NZ, US)– infringement committed in the stages of commercial exploitation

– inter alia prohibition of the import of infringing copies without the licence of the copyright owner otherwise than for private and domestic use (see e.g. s. 22 (UK)CDPA 1988)

“An article is an infringing copy if its making in the UK would have constituted ... a breach of an exclusive licence agreement relating to that work.” (s. 27 III (b) CDPA 1988)


The Doctrine of Exhaustion

• Exhaustion of Rights– once the owner of the copyright/related right has permitted the sale

of a copy, the right of distribution as regards that particular copy no longer exists

– Is the distribution right exhausted in one country when the author has permitted the sale in another country?

• Different Approaches– national exhaustion, e.g. USA

– regional exhaustion, e.g. EEA

– international exhaustion, e.g. New Zealand and Australia


Approaches to Exhaustion


National Exhaustion - USA

• First Sale Doctrine, 17 U.S.C. § 109(a)''[T]he owner of a particular copy or phonorecord lawfully made under this title ... is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy ...'‘

• Does the doctrine apply to imported copies?– applicable to copies lawfully made in the US, sold to foreign purchaser and brought back to US (reimported copies) (see Quality King Distributors v L‘Anze Research International 118 S.Ct. 1125 (1998)

– unclear how this precedent applies to copies both lawfully made and sold abroad


Regional Exhaustion - EEA

• National boundaries shall no longer present an obstacle to the free movement of goods and services within the Community (arts. 2, 3 (1)(a), 28, 30 EC Treaty).

(cf. Musik-Vertrieb membran GmbH v GEMA [1981] ECR 147)

• Art. 4 (2) InfoSoc Directive“The distribution right shall not be exhausted within the Community in respect of the original or copies of the work, except where the first sale or other transfer of ownership in the Community of that object is made by the rightholder or with his consent.”

• Ban on Foreign Parallel Imports; EEA Parallel Imports Allowed


Regional Exhaustion - EEA

• MS not allowed to keep concept of international exhaustion (see Laserdisken v Kulturministeriet [2006] ECDR 30)

• Importance of the element of consent– consent can be implied

– implied consent cannot be inferred from•mere silence

•the proprietor’s failure to communicate opposition

•the absence of a notice on the goods or the absence of contractual reservations

(see Zino Davidoff v A & G Imports [2002] ECR I-8691)


International Exhaustion - NZ

• removal of parallel importing ban in NZ in 1998– s. 9(1)(d) (NZ)CA 1994 defines „issue to the public“as excluding

the distribution of imported copies

– copyright goods lawfully made overseas may thus be imported into NZ without the NZ copyright owner’s consent

• but partial ban on parallel importation of films within 9 months of the film first being made available to the public, s. 35 (NZ)CA 1994

• provisions still under review (cf. NECG 2004 and LECG 2007)


Exemplary Cases


The CD-WOW! Case* - An Attempt to Circumvent the Legal Ban on Foreign Parallel Imports -

• Facts– CD-WOW! sold CDs and DVDs to the UK market

– delivery made from Hong Kong; supplies from outside the EEA and intended for non-EEA market

– unwanted CDs could be returned to an address in the UK

– Terms and Conditions specified that the consumer “will become the owner of [his] purchases once we have received your full payment for such purchases”

– i.e. CD-WOW! tried to get around ss. 18 and 22 (UK)CDPA 1988

* Independiente Ltd v Music Trading On-Line (HK) Ltd [2007] E.M.L.R. 25


The CD-WOW! Case* - An Attempt to Circumvent a Legal Ban on Foreign Parallel Imports -

• Does CD-WOW! infringe the distribution right (s. 18 CDPA 1988) despite the contractual arrangements?

• Held that yes for “putting into circulation” in the UK– s. 32(4) Sales of Goods Act 1979: if the buyer deals as consumer,

delivery of goods to a carrier is not delivery of goods to the buyer

– the website was directed at UK customers(referring to KK Sony v Pacific Game Technology)

• 41 million GBP in damages

* Independiente Ltd v Music Trading On-Line (HK) Ltd [2007] E.M.L.R. 25


Universal Music Australia v ACCC (2003) 201 ALR 636- An Attempt to Create a Factual Ban on Parallel Importation -

• Facts– two distributors ceased to supply certain retailers who imported

CDs from overseas creating a factual ban on parallel imports

• Contravention of Australian Competition Law?

• Held that yes for exclusive dealing– s. 46 Trade Practices Act 1974 (misuse of market power) not

contravened due to lack of substantial degree of power in the relevant market

– s. 47 Trade Practices Act 1974 (exclusive dealing) contravened for substantially lessening competition


Pros & Cons


Pros & Cons of Allowing Parallel Importing

• Pros– free (international) market

– legal certainty

– earlier release dates and improved choice

– quality and timeliness, lower prices

• Cons– partitioning of market via territorial licences destroyed; smaller margins

uncertainty to long-term or risky investments

situation more serious in light of digital piracy

– rationalization of the distribution infrastructure

negative impact on employment and availability of distribution channels

– loss of mechanicals


Conclusion and Discussion


Conclusion and Discussion

• countries take different approaches to parallel importation

• balancing of opposing interests: consumers/traders vs rightowners

• doctrine of exhaustion acts as the tool to reconcile interests

• prohibition of parallel importation restricts international trade

• Ban/Limited Ban/No Ban on Parallel Importing?

• If the rightowner in country A and B belongs to the same company, should he be allowed to prevent parallel importing by relying on his copyright? Shouldn't this issue rather be solved contractually?


Aileen Prill, LL.M. (London)

University of Goettingene-mail: [email protected]

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