4. Approaches of Other Countries
Not all countries have parallel importing restrictions and not all are as pervasive as that in New Zealand. The New Zealand Copyright Act 1994 retains the extensive parallel importing restrictions of its predecessor, which includes a complete ban on non-authorised imports. The New Zealand Courts have interpreted the ban as applying to both new and used goods, so that no goods escape the net.
4.1 European Community
Within the EC, parallel importing between member states is considered central to promoting a common market. The use of exclusive territories that overlap with national boundaries is explicitly precluded (Malueg and Schwartz, 1994, p.169). However, the principle does not apply to products from outside the EC. So imports from outside the EC are restricted by the intellectual property laws of the individual member states. For the United Kingdom, for example, this means that parallel importing from outside the EC is not permitted (Chard et al, 1988).
In one of the few empirical studies of parallel importing, Chard et al (1988) conducted a survey of manufacturing firms in the United Kingdom. The survey focused on the impacts or the perceived effects of parallel importing on those firms. They were asked questions about the intellectual property content of their products, their awareness of parallel importing in their products and their responses to perceived parallel importing threats. A summary of the survey is provided in Appendix B. Results from the survey will be used where relevant throughout the report.
The Chard et al (1988) study estimates that the total value of parallel imported goods in the UK is approximately 0.1 per cent of GNP. In the European Community as a whole, parallel imports are estimated to account for around 0.5 per cent of total sales.
4.2 Australia
Until recently, Australia had a similar set of parallel importing restrictions to those found in New Zealand. Government sources began to take an interest in the issue several years ago and this has led to a number of changes in the restrictions. These changes have occurred on a market by market basis or for goods with a particular set of characteristics.
In 1991 , for example, the book market received a shake-up with the introduction of the 30-day rule, whereby parallel importing was permitted unless the local distributor began selling the book within 30 days of the book being released anywhere else in the world (Prices Surveillance Authority, 1993). The speed at which books were available in Australia increased dramatically but it had little impact on the price at which they were sold.
More recently, the Australian government has introduced two Bills6 which if passed will result in a more fundamental change in the copyright parallel importing laws. The first seeks to remove the parallel importing restriction on goods in which copyright subsists only in "accessory" items which are peripheral to substantive goods. The definition of accessory will include labels, packaging, written instructions and other information provided with the article (Australia Senate, 1997, p. 51). This proposed change follows the Copyright Law Review Committee (CLRC) recommendation to the Attorney General in 1988. The Committee stated:
"If the simple expedient of affixing or attaching a label in which copyright subsists to any goods at all entitles the owner of the goods to exclude others from marketing similar goods, the sooner the practice is stopped the better it will be. However imaginatively labelled or packaged a bottle of liquor may be, the product is liquor. The same may be said of cigarettes, perfume and cosmetics." (CLRC reported in Australia Senate, 1997, p.50-51).
The Senate Legal and Constitutional Legislation Committee in reaching its decision to recommend the changes to the parallel importing laws for goods with copyright subsisting only in labels and packaging, weighed many of the same general arguments that we have discussed above. Their conclusion was that copyright is an inappropriate vehicle for restricting the parallel importation of products. The Committee accepted that there were other remedies available to individuals or organisations that were affected by such imports.
The second amendment bill proposes to allow parallel importation of sound recordings. The market for sound recordings has been singled out as a result of an analysis undertaken by the Prices Surveillance Authority which showed that Australian consumers were paying comparatively more for sound recordings than consumers in other countries (Parliament of the Commonwealth of Australia, 1997).
4.3 United States
Estimates of the size of the "gray market" in the US vary. In Chard et al (1988) it was reported that a 1984 estimate put the total value of parallel importing at $US7b or approximately 0.2 per cent of GNP. A 1986 estimate put the figure at closer to $US10b.
The extent of the restriction in the United States is the matter for some debate. Two relevant sections of the US copyright laws apparently contradict each other. The "first sale" doctrine (s109(a) of the US Copyright laws (Title 17 of the United States Code)) says that a copyright holder cannot control the future sale or distribution of a lawfully made copy once ownership is passed on. However, in a separate section the laws state that the importation of a copyright good without the authorisation of the copyright owner is an infringement of the exclusive distribution right provided by the laws.
The courts during the late 1980s generally came out in favour of parallel imports until in 1991 a federal appellate court ruled that the import right of copyright holders was not affected by the first sale doctrine i.e. the importation of genuine copies infringes the import right (Winkler, et al, 1993, p.4). A degree of uncertainty remains.
Enforcement of the restriction is possible through the registration with the Customs Service. Unauthorised imports of goods can then be stopped at the border. However, trademark protection is only available to domestic firms if they purchased the trademark rights and remained independent of the international manufacturer. Foreign firms with subsidiaries in the US do not receive such protection (Chang, 1993, p.32). With copyright goods all US distributors receive the same protection even if they are affiliated with foreign manufacturers (Sommers, 1994, p.273).
4.4 Taiwan
Most of the countries we have discussed so far in this section, US, EU and Japan, are all net exporters of copyright goods. The protection of those right holders provides a benefit to the country as a whole as the profits are kept in the community. For net importing countries such as New Zealand and Taiwan, this is not the case. A recent discussion of the Taiwan experience of parallel importing provides an interesting comparison to that of the larger countries.
The legal status of parallel imports in Taiwan is, as elsewhere, uncertain. Past rulings by the courts and interpretations by government officials have favoured both authorised distributors and parallel importers (Chang, 1993, p.34; Winkler, et al, 1993, p.5). With respect to copyright goods, the matter was resolved by confirming the importation right extended to genuine goods after extended pressure from the US government. The Copyright Law was subsequently revised to clearly state that the importation of originals or copies of works without the authorisation of the rights owner will be deemed as an infringement (Winkler, et al, 1993, p.6). There are a number of exceptions to this article which include:
- a limited number of copies for personal use;
- some imports of equipment or machines that incorporate a work (e.g. a computer chip in an automobile); and
- imports of instructions and handbooks that may be copyrighted but which are imported in conjunction with goods that are not protected by copyright.
Of note is that copyright labels and packaging of non-copyright goods were not on the list of exclusions.
The policy on copyright is thus at odds to the policy on both trademark goods and the 1993 draft amendments to the Patent Law, which tend to favour parallel imports.
Although there is some inconsistency in application, most court rulings have favoured parallel importers of trademark goods. Consistent with these findings is the decision by Taiwan's Fair Trade Commission only to make parallel importation illegal when there is the "likelihood of confusion". Thus it has adopted a labelling policy which requires distributors of parallel goods to label the origins of the goods or label them as "unauthorised". The outcome of these decisions is that parallel importing continues and consumers have a high level of awareness about the differences between the authorised and the unauthorised products.
4.5 Singapore
Parallel import restrictions have recently been eased in Singapore, after some confusion over the legality of parallel imports. An amendment to the Copyright Act introduced in 1994 clarified that imports will only continue to be prohibited if (IPASIA, 1994):
- articles are made in a country where copyright protection does not exist;
- articles are made in a country where the law has ceased to confer protection on the copyrighted article; or
- articles are made under a compulsory licensing scheme.
This amendment overturned a judicial decision that parallel imports were unlawful if the imported article is manufactured without the consent of the local copyright owner in Singapore. Thus if the copyright owner in Singapore was different to the copyright owner of the same good in another country, the Singaporean copyright holder could stop parallel imports from the other country because they did not consent to their manufacture (Wei, 1992, p.141). It was considered that this ruling was inconsistent with the intent of the legislation to allow parallel imports.
4.6 Malaysia
Another country that has recently weakened its parallel importing restrictions is Malaysia. Prior to the introduction of the 1990 Amendment Act, the parallel importing provisions were similar to New Zealand's in that the importation was an infringement if the making of the article in Malaysia would have constituted an infringement. The change specifies that a parallel import is an infringement if the importer knows or ought reasonably to have known that the making of the article was carried out with the consent or licence of the owner of the copyright (Tee, 1991, p. 136).
Thus the 1990 Amendment Act permits parallel importing in Malaysia. Further the Act places the onus on the plaintiff and not on the importer to prove the lack of knowledge or reasonable grounds (Tee, 1991, p.136).
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