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With regards to trademarked parallel imports, besides considering the two theories above, it is also important to differentiate “the exclusive right to use a registered trademark” from “the exclusive right to use a licensed trademark”. The subtle differences reflect on their respective legal status. “The exclusive right to use a registered trademark” is a statutory right conferred in accordance with relevant law; While “the exclusive right to use a licensed trademark” is a contractual right arising from the agreement of relevant parties. The former could be directly asserted as a defense against third parties because it is supported by law. The latter, on the other hand, its validity and scope to use the trademark is wholly determined in accordance with the specific “trademark licensing contract”. In other words, contractual rights cannot be directly deemed as a defense against a third party. Once any dispute arises in connection with such an exclusive right to use, the court or arbitration board must decide the validity and scope of the right pursuant to the relevant contractual provisions and governing law. [FN15] Therefore, if any infringement of a trademark right by a third party arises in the territory of the exclusively licensed right to use, pertaining to the judicial interpretation of China, the exclusive licensed user of the trademark may bring an action independently. However, the substantive right it claims shall be the “exclusive right to use a registered trademark”, not the “exclusive right to use a licensed trademark”. To some extent, such burden of proof increases the licensee’s difficulty of showing the document evidence.
Trademarked Parallel Imports Under International Treaties
With regard to whether parallel imports should be permitted, although the issue has been raised in the international arena, there is no reconciliation on the matter. The general view is that developed countries oppose parallel imports, whereas developing countries favor parallel imports. Neither Paris Convention nor TRIPS addresses the issue of parallel importation clearly. The final text of the TRIPS Agreement left that issue unresolved, permitting the debate to continue. But it did not ignore the issue of exhaustion altogether, implicitly left it for each Member State to decide for themselves whether or not to recognize international exhaustion of IPRs. Article 6 of TRIPS states that “for the purposes of dispute settlement under TRIPS, subject to the provisions of Articles 3 and 4 above, nothing in TRIPS shall be used to address the issue of the exhaustion of intellectual property rights.” This article clearly suggests that the issue of IPR exhaustion was considered, but that neither consensus nor compromise could be reached. Equally clear is the suggestion that each member state is left to define its own laws regarding IPRs exhaustion, by the legislature and/or the courts. [FN16]
However, in 1995, shortly after the TRIPS Agreement was concluded, the International Trade Law Committee (ITLC) of the International Law Association (ILA) met to discuss issues relating to the implementation of the TRIPS Agreement, and a study of the role of parallel imports in the international trading system was commissioned. In its deliberations, the ITLC appeared to reach a conclusion that an affirmative policy favoring parallel imports should be adopted as a matter of international trade policy. This conclusion was reflected the First Report (Final) to the Committee on International Trade Law of the International Law Association on the Subject of Parallel Importation, authored by an ITLC Rapporteur Professor Frederick M. Abbot, was released in April 1997 for comment (the “Report”). The Report expressly suggested the adoption of a basic rule that: “A Member shall not restrict the importation of a good or service on the basis of an intellectual property right if such good or service was first sold, or ownership of it was otherwise transferred, on the market of any Member with the consent of the intellectual property rights holder.” [FN17]
Though TRIPS doesn’t directly address to allow parallel importation, article 6 of TRIPS on “Exhaustion” stipulates that “For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.” Furthermore, article 30 addresses “exclusive right of importation”, subject to article 6 and parallel import exception. Article 51 on “broader measures”, its obligation does not apply to parallel imports. From these provisions, TRIPS seems to be in favor of parallel imports. It is obviously reflected in the article 6, which indicates that even a parallel import dispute arises, there is no dispute settlement procedure to apply, with an implication that accusation of infringement is impossible.
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