Parallel imports refer to the import of non-counterfeit or genuine goods from one country to another without the permission of the intellectual property owner. Whether parallel importation may constitute a violation of intellectual property rights (“IPR”) depends on the nature of the IPR involved.
Philippine law currently provides for a system of protection of various IPRs, which may be broadly classified as falling under:
- Patents (including utility models and industrial designs);
- Trademarks (including service marks and trade names); and
- Copyright and Related Rights.
As will be discussed in more detail below, only a patent owner has the exclusive right to prevent parallel importation, subject to certain exceptions. Copyright and trademark owners do not enjoy the same right.
Parallel Importation Of Products Which Are
The Subject Matter Of A Philippine Patent
Section 71 of the Intellectual Property Code of the Philippines (“IP Code”) expressly provides that a patent owner has the exclusive right to restrain, prohibit, and prevent the importation of a product which is the subject matter of either an active product or process patent registration in the Philippines. Thus, if a product is the subject matter of an active product or process patent in the Philippines, such product may generally not be imported into the country without the express authorization of the patent owner. It bears emphasis that only the owner of a patent, its assigns, or licensees, may exclusively exercise the rights granted under Section 71 of the IP Code.
Section 71, however, admits of exceptions, as provided under Section 72.1 of the IP Code.
The first exception embodied in Section 72.1, otherwise known as the Doctrine of Domestic Exhaustion, states that once a product has been sold in the domestic market for the first time by or with the consent of the IPR holder, it then ceases to have control over any subsequent sale/re-sale of the same in the said domestic market. The second exception, the Doctrine of International Exhaustion, applies to drugs and medicines so that once a drug or medicine has been sold anywhere else in the world, the IPR holder can no longer prevent the importation of such drugs or medicines. In both such cases, there will be no patent infringement.
Thus, where a product, which is the subject matter of a registered patent in the Philippines, is imported into the country without the consent of the owner, its assigns, or its licensees, and which importation does not fall under the foregoing exceptions under Section 72.1 of the IP Code, such importation shall constitute patent infringement which exposes the violator to civil liability.
It is noteworthy to state that the prohibition against parallel importation in Section 71 of the IP Code likewise extends to imported products which are the subject matter of an active utility model or industrial design registration, pursuant to Sections 108 and 119 of the IP Code.
Utility models primarily cater to the protection of new technical innovations that are not sufficiently inventive to meet the threshold required for regular patents. An industrial design (called design patents in other jurisdictions), on the other hand, is the ornamental or aesthetic aspect of an article.
Parallel Importation Of Products Which
Have As Their Subject Matter A Registered
Unlike the provisions on patents, the IP Code does not grant to a trademark owner the right to exclude others from importing goods which bear the registered mark. In fact, Section 166 of the IP Code impliedly allows the importation of genuine products, as it only prohibits the importation of goods which “copy or simulate” a mark registered in the Philippines.
Moreover, Section 155 of the IP Code defines trademark infringement in such a way that it cannot be committed if the products are original or authentic. Under Section 155, any of the following three (3) acts which constitute infringement have “likelihood of confusion” as their common key element:
(a) Using in commerce a copy of a registered mark (or its dominant features) in connection with the sale, distribution, or advertising of any goods or services, and such use is likely to cause confusion, mistake, or deceit;
(b) Using in commerce the same container (or its dominant features) for the sale, distribution, or advertising of any goods or services, and such use is likely to cause confusion, mistake, or deceit; or
(c) Copying a registered mark (or its dominant features) and applying it to labels or advertisements for commerce, and such use is likely to cause confusion, mistake, or deceit.
There can be no likelihood of confusion, and thus no trademark infringement, when the products are authentic. The sale of the products in their original packaging does not result in a “confusion of goods” since a buyer is not misled into purchasing products that are not actually produced by the original manufacturer. Moreover, the said sale also does not result in a “confusion of business” because there is no representation by the seller that it produced the products. As this key element is absent, there is no trademark infringement.
Parallel Importation Of Copyrighted Works
Nothing in the IP Code provides that a copyright owner has the exclusive right to import the copyrighted work. To begin with, importation is not one of the exclusive rights of the copyright owner which are enumerated under Section 177 of the IP Code.
The foregoing conclusion is further supported by the amendments to the IP Code. Paragraphs (a) and (b), Section 190 of the IP Code previously provided that the importation of a copy of a work by an individual without the authorization of the author was allowed under certain conditions. In effect, these paragraphs implied that importation of copyrighted material was otherwise prohibited. However, paragraphs (a) and (b) were deleted when Republic Act No. 10372 amended the IP Code in 2012. The current Section 190 of the IP Code only limits the importation and exportation of infringing materials, and therefore does not cover non-counterfeit and genuine goods. Furthermore, unlike for patents, the importation of copyrighted material is not explicitly referred to as an infringing activity. Hence, there appears to be no more prohibition on the mere importation of copyrighted works.