Parallel Importing in New Zealand
[ Last Updated 18 December 2007 ]
Contents
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What Is Parallel Importing?
"Parallel importing" allows retailers, wholesalers and other parties to obtain goods subject to intellectual property rights directly from licensed or authorised overseas sources, rather than dealing with local suppliers, licensees or agents. In doing so, parallel importing allows for competition between sources of the same or similar goods.
Parallel-imported goods are sometimes confused with pirated and counterfeit goods. The association is not correct. Parallel imports are goods that are manufactured and put into circulation in another country either by, or with the consent of, the owner of the applicable intellectual property rights. In contrast, pirated and counterfeit goods are infringing goods produced without the consent of the owner of the intellectual property right.
Parallel Importing and Copyright
Copyright, as provided under the Copyright Act 1994 ("the Act"), has generally been the intellectual property right most relevant to the issue of parallel importing in New Zealand. Parallel importing generally focuses on the competitive supply of high demand consumer goods, which tend to be copyright products. Such products are often also goods subject to trade mark protection. The Act allows for the parallel importation of non-infringing copies of a work into New Zealand, with an exception in relation to films.
Parallel Importing and the Copyright Act 1994
One of the core rights granted to copyright owners under section 16(1)(b) of the Copyright Act 1994 is the exclusive right to issue copies of a work to the public (sometimes referred to as "the right of distribution"). That right is, however, subject to certain exceptions. Section 9 of the Copyright Act 1994 defines "issuing copies to the public" as the putting into circulation of copies not previously put into circulation. Section 9(1)(d) was inserted into the Copyright Act 1994 by the Copyright (Removal of the Prohibition on Parallel Importing) Amendment Act 1998. This allows for the parallel importing of non-infringing copies of a work into New Zealand.
(a) Partial Ban on Parallel Importation of Films
The Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003 reintroduced a partial ban on parallel importation of films. It amended section 35 of the Act, relating to infringement by importation, in the following ways:
- Introduced a ban on the parallel importation of films (which includes VHS videos, VCDs and DVDs) into New Zealand, other than for the importer's own private and domestic use, within nine months of the film first being made available to the public, whether in New Zealand or elsewhere. In order to be infringement, the importer must know or have reason to believe that the the film is being imported into New Zealand within this nine month period. The provision includes a sunset period of five years which will provide an opportunity to assess whether the ban should be continued in light of technological developments;
- Shifted the evidentiary onus of proof to the defendant in civil proceedings concerning whether the imported goods in question are infringing copies. These changes to the onus of proof only apply to sound recordings, films and computer programs;
- Amended the existing requirement in the Act that the defendant in civil proceedings concerning the act of importation "knows or has reason to believe" to a requirement that the defendant "knows or ought reasonably to know" that the imported object is an infringing copy. Again, these changes only apply to sound recordings, films and computer programs; and
- Provided that the Court must not require the defendant to disclose information on sources of supply where it appears to the Court that it would be unreasonable to do so.
(b) Rental of Parallel Imported Computer Programs, Sound Recordings and Films
As amended by the Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003, section 9(2) and 9(3) of the Act provide that, in relation to computer programs, sound recordings and films, copyright owners have a right to authorise the rental of their copyright works, including rental subsequent to the works having been put into circulation (sometimes referred to as the "rental right"). This amendment clarifies that the rental right applies to parallel imported works and codifies the decision of the High Court in Video Ezy (New Zealand) Ltd v Roadshow Entertainment (New Zealand) Ltd [2002] 1 NZLR 855, (2002) 7 NZBLC 103, 524.
International Law on Parallel Importing
New Zealand is a party to a number of international agreements in the copyright area. The Berne Convention for the Protection of Literary and Artistic Works does not address the issue of parallel imports (New Zealand is a party to the 1928 Rome Revision of the Convention).
As a Member of the World Trade Organisation (WTO), New Zealand is a party to the Agreement on the Trade-Related Aspects of Intellectual Property Rights 1994 (the TRIPS Agreement ). Article 6 of TRIPS states 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".
Article 6 means that the only obligations under the TRIPS Agreement that can be used by one country to challenge another country's position on parallel importing are those relating to national treatment (Article 3) and most-favoured-nation treatment (Article 4). There are, therefore, no grounds under the TRIPS Agreement for one country to challenge the absence of parallel-importing restrictions in another country.
Other Areas of Law Relevant to Parallel Imports
Many imported products are subject to multiple intellectual property rights, each of which exists under a different statute. For example, a compact disc player may be subject to:
- copyright protection (in terms of the packaging, the accompanying explanatory material, and any aspects of the artwork);
- trade mark protection (in terms of any trade marks affixed to the product or the packaging);
- patent protection (in terms of the way the device operates); and
- registered design protection (in relation to visual design features added to the device).
The changes made by the Copyright (Removal of the Prohibition on Parallel Importing) Amendment Act 1998 did not change the potential applicability of other intellectual property statutes to parallel importing activities. For example, some restrictions on parallel importing and related activities may still apply under the Patents Act 1953 or the Designs Act 1953. The Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003 amended the Trade Marks Act 2002 to state that a registered trade mark is not infringed by the use of the trade mark (including use for the purpose of advertising) in relation to goods that have been put on the market anywhere in the world under that trade mark by the owner or with his or her express or implied consent.
There are also a number of other areas of law that can affect commercial dealing in parallel-imported goods (and may also prevent the goods from being brought into the country). These include:
Law Reform
Why the Parallel-Importing Ban Was Removed in 1998
In 1998, the Copyright Act 1994 was amended by the Copyright (Removal of the Prohibition on Parallel Importing) Amendment Act 1998 so that copyright goods lawfully made overseas may be imported into New Zealand without the consent of the New Zealand copyright owner or licensee.
The rationale of the previous government for removing the prohibition on parallel importing was to ensure that New Zealand consumers could access imported goods at world-best prices by promoting a more open and competitive environment. The suggestion that some copyright products were more expensive in New Zealand than in other countries was based on analysis contained in Parallel Importing: A Theoretical and Empirical Investigation. This was a report prepared for the Ministry of Commerce (now the Ministry of Economic Development) by the New Zealand Institute of Economic Research (NZIER). The general conclusion of the report was that lifting the blanket parallel-importing ban on all copyright goods was likely to provide net gains to the New Zealand economy as a whole.
The Government's Arts and Culture Programme and Parallel Importing
The 1999 Speech from the Throne included a statement that parallel importing of compact discs, videos, films, books and software was to be prohibited for up to two years after first release. In February 2000, the government initiated a review of the impact removing the ban on parallel importing had had on the creative industries in New Zealand. The government indicated that the following categories of "creative-industries" goods would be the subject of its review:
- musical works, not limited to compact discs, but phonographic works fixed in any media (for example, Mini Compact Discs (MCDs), cassette tapes, vinyl records and any new media that may emerge over time);
- "videos", i.e. copies of films and television programmes stored on cassette or disk formats and intended for rental or retail sale (for example, Very High Speed (VHS), Digital Versatile Discs (DVD) or Video Compact Discs (VCD);
- "films", being films produced in formats suitable for cinema release;
- "books", i.e. printed editions and pictorial publications for retail sale, and would include magazines and journals; and
- "software", covering only "consumable" software products, such as operating systems and applications for home and business, games, electronic books and journals, and informational computer products (such as electronic encyclopaedias), for retail "off the shelf" sale, and therefore would exclude industrial software and software in electrical appliances and devices.
These creative industries were singled out as one of a wide range of initiatives under the government's arts and culture programme. This programme was aimed at ensuring support for local artists (by expanding innovation, job opportunities and arts-based wealth creation) as well as promoting New Zealand's culture and identity to the world.
In March 2000, the Ministry released a discussion paper entitled Parallel Importing of Copyright Goods for Creative Industries to gather information from creative industries stakeholders to assist in advising the Government on the need for, and possible specification of, a ban on parallel importing of specified creative industries products. There was insufficient evidence to suggest that parallel importing bans on creative industries products would achieve the government's policy objective of encouraging more international investment in, and overseas promotion of, New Zealand creative talent. There was, however, some suggestion that the availability of parallel imported copies of major new release film titles for rental in advance of New Zealand theatrical release was contributing to declining cinema box office takings.
In December 2000, the Ministry released another discussion paper entitled Parallel Importing and the Creative Industries. This presented the results of the Ministry's consultation and summarised the advice the government had received from officials in relation to the potential for parallel-importing restrictions to contribute to the government's objectives.
On 13 December 2001, the former Minister of Commerce, Hon Paul Swain, and Associate Minister of Arts, Culture and Heritage, Hon Judith Tizard, issued a media statement announcing the legislation the government intended to introduce to make changes to the parallel importing regime.
Now also Associate Minister of Commerce, Hon Judith Tizard issued a media statement on 17 December 2002 announcing that, in order to give effect to the government's undertakings as announced in December 2001, she had introduced amending legislation into Parliament. This was subsequently passed as the Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003.
The impact of these amendments will be kept under review over a five year period.
→ Parallel Importing of Copyright Goods for Creative Industries
Reasons for the Legislation
(a) Parallel Importing and the Viability of Cinemas
The review of the impact of parallel importing on the creative industries raised concerns that the availability of parallel imported copies of major new release film titles for rental or sale in advance of New Zealand theatrical release was contributing to declining cinema box office takings. Left unchecked, it was considered that this could lead to declining theatre audiences, which, over time could mean that:
- distributors would theatrically release fewer films in New Zealand. Distributors would, if possible, have to release films earlier, in conjunction with, or closely following, the international release date and would therefore no longer have access to second-hand prints. This would increase costs, could result in increased ticket prices, and would create disincentives to make films available for theatrical release in New Zealand; and
- rural and smaller communities could face a loss of facilities (picture theatres) as a result of fewer films being available for exhibition in smaller theatres and audiences having to wait longer for a smaller number of prints to become available after exhibition in major centres.
(b) Changes to Onus of Proof
The review also indicated that creative industries stakeholders face a number of problems in taking legal action in respect of suspected pirated or counterfeit material, including:
- proving that the goods in question are pirated; and
- proving that importers of such goods knew or had reason to believe that the goods were pirated (infringing) copies.
The government's objective is to constrain copyright piracy and, in particular, to ensure that effective action can be taken against copyright infringement in relation to sound recordings, films and software products - copyright works that are particularly susceptible to piracy.
The Ministry has also prepared a list of Frequently Asked Questions about Parallel Importing.
Parallel Importing and Piracy and Counterfeiting
What Are Piracy and Counterfeiting?
Pirated and counterfeit goods are infringing goods produced without the consent of the owner of the intellectual property right and, therefore, constitute infringing copies.
- Piracy is the unauthorised copying of goods subject to copyright protection outside the exceptions or "permitted uses" provided in the Copyright Act 1994.
- Counterfeiting is the manufacture of goods that bear a sign that is identical with, or similar to, a registered trade mark.
Piracy and counterfeiting are most likely to occur in respect of easily replicable goods such as clothing (where the making and affixing of counterfeit labels is relatively easy to achieve) and recordings such as music, software and motion pictures (where replication is fast and low cost).
Piracy and counterfeiting can have serious effects on the revenue streams of the copyright and trade mark holders. Free-riding on the investment of intellectual property holders allows pirate and counterfeit copies of goods to be sold at lower prices than legitimate goods. The right holders' resulting loss of revenue can affect their ability to invest in new products and innovations. This can ultimately restrict the availability of goods to consumers. Some consumers might knowingly purchase pirate or counterfeit goods on the basis of lower cost and others are misled into buying such goods. Pirated and counterfeit goods can adversely affect the reputation and goodwill associated with the legitimate goods. The brand itself can also be adversely affected.
Measures to Address Piracy and Counterfeiting
Parallel imported goods are sometimes confused with pirated and counterfeit goods. As noted above, this association is not correct. Parallel imported goods are legitimately manufactured goods that are sourced from an authorised or licensed overseas supplier rather than the owner of the intellectual property right in the importing country. Pirate or counterfeit goods, on the other hand are infringing manufactured goods that are produced without the authorisation of the owner of the intellectual property right.
As stated above, in March 2000 the Ministry released a discussion paper Parallel Importing of Copyright Goods for Creative Industries to gather information from creative industries stakeholders. This consultation revealed that the main concern of music and software distributors, and a secondary concern of motion picture video and DVD distributors, is the presence of pirated product in New Zealand.
During the Ministry's consultations with creative industries stakeholders, a number of problems were raised about the ability of right holders to take action in respect of suspected infringing material, including:
- Perceived difficulties in taking civil enforcement action;
- The fact that trade in pirated or counterfeit goods is commonly perceived to be a "harmless" crime;
- Limited utilisation and a lack of awareness about the requirement to lodge protection notices with New Zealand Customs Service; and
- Difficulties in detecting and preventing infringing activity because of the ease of reproduction of products (made possible by new technologies).
The government has chosen to address the issue of piracy and counterfeiting by direct legislative action rather than through an indirect approach, such as banning parallel importing. A new Trade Marks Act was passed by Parliament on 22 November 2002 and came into force in August 2003. It includes stringent new provisions to deter piracy and counterfeiting. These changes include the following:
- An increase in the maximum period of imprisonment for copyright piracy from three months to five years;
- Criminal provisions, penalties and remedies in trade mark law that correspond to penalties under the Copyright Act 1994, with maximum penalties of five years imprisonment or a fine of NZ$150,000.00. Under the Trade Marks Act 1953 it is an offence to:
- counterfeit a registered trade mark;
- falsely apply a registered trade mark to goods and services;
- make copies of a registered trade mark;
- import or sell goods with a falsely applied registered trade mark.
The Trade Marks Act 2002 substantially updates the Trade Marks Act 1953.
For further information relating to the relationship between piracy and counterfeiting and parallel importing, you may find it helpful to read our information sheet entitled Enforcing Your Intellectual Property Rights or look at Part 5 of the Ministry's discussion document Parallel Importing and the Creative Industries.
Further Information
Contact Details
Legal Advice
The Ministry of Economic Development is not able to provide legal advice. If you have concerns about your legal position, please contact a legal professional familiar with the law relating to intellectual property. You can search for an intellectual property lawyer in the following places:
- in the Yellow Pages;
- on the website of the New Zealand Law Society where you can find the district law society nearest you. The district law society may be able to assist you in finding a legal professional; or
- you can view the list of New Zealand registered patent attorneys on the IPONZ website (Go IPONZ → Information Library → Patent Attorney Information → Registered New Zealand Patent Attorneys).
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