Exhaustion of Rights and Parallel Imports with Special Reference to Intellectual Property Laws in India
| DOI | 10.1177/2277401720140102 |
| Published date | 01 August 2014 |
| Date | 01 August 2014 |
| Subject Matter | Article |
EXHAUSTION OF RIGHTS AND PARALLEL
IMPORTS WITH SPECIAL REFERENCE TO
INTELLECTUAL PROPERTY LAWS IN INDIA
Garima Budhiraja Arya* & Tania Sebastian**
Exhaustion of Rights is a phenomenon which leads to explicit
conflict between the provisions of intellectual property rights and
principles of free trade. The doctrine of exhaustion addresses a
situation at which the Intellectual Property Rights (hereinafter
IPR) holder's control over the good or service ceases. This article
explains the types of exhaustion, laying special emphasis on
international exhaustion and consequent parallel imports. It
argues that while consumers gain due to parallel exports, the
rights of the IPR holder must be kept in mind as unregulated
parallel imports may have serious economic repurcussions.
I. INTRODUCTION ........................................................................................... 27
II. EXHAUSTION OF RIGHTS: ITS DEFINITION AND SCOPE ............................. 28
A. Basic Legal and Economic Concepts and the Exhaustion Doctrine ....... 29
B. Kinds of Exhaustion and Dynamics of Parallel Trade ............................ 31
III. HISTORY OF TRIPS PROVISION - WHY DID IT START AND
WHERE DO WE STAND NOW? ...................................................................... 34
IV. EXHAUSTION OF RIGHTS IN OTHER JURISDICTIONS .................................. 37
A. European Union ................................................................................... 37
B. United States ........................................................................................ 40
C. India ..................................................................................................... 45
V. INTERNATIONAL EXHAUSTION – IS IT ALWAYS BENEFICIAL? .................. 48
A. Myth of Lower Prices ........................................................................... 49
B. Free Riding ........................................................................................... 49
C. Research and Development ................................................................. 49
D. Disruption of Marketing Strategies and Profits .................................... 50
VI. SUGGESTIONS TOWARDS A MORE REGULATED INTERNATIONAL
* Legal Team, Ibibo Group. LL.M., Indian Law Institute.
** Assistant Professor of Law, Gujarat National Law University.
EXHAUSTION REGIME ................................................................................ 50
A. Strategies to combat unrestricted parallel imports ................................. 50
B. Role of the State – Selective International Exhaustion ...........................51
C. Role of the Companies ...........................................................................51
VII. CONCLUSION .............................................................................................. 52
I. INTRODUCTION
The exhaustion of rights is a most enigmatic phenomenon which stands
at the crossroads of intellectual property rights and international trade. It is
an interface between the free trade spirit of the nations and rights of the
intellectual property holder. Although governed by the territorial laws of
the country, it remains a very contentious and debatable concept in various
international forums.
The article commences with an analysis of the meaning and scope of
exhaustion of rights. It further deals with various kinds of exhaustion with
special emphasis on international exhaustion, as it eventually leads to
parallel imports, which left unregulated can create havoc in the economy of
the state. The article, in the next part, examines the provision of Trade
Related Intellectual Property Rights (TRIPS) Agreement pertaining to
exhaustion of rights. This part gives a backdrop of the various debates in the
international community against which the provision was drafted. The
article subsequently attempts to examine the provisions in the European
Union and the United States jurisdictions related to exhaustion of rights for
a comparative analysis before examining the Indian regime in detail.
Important case laws related to parallel imports of trademarked or patented
products are also discussed in depth through studying their legislative
provisions on exhaustion of rights. As India practices international
exhaustion, the disadvantages of the same are clearly outlined in the
following part. The concluding part of the article enlists some legal and
non-legal suggestions towards a better regulated international exhaustion
regime that emphasises on the proper role of states as well as companies.
The same would enable the international regime to combat the ill-effects of
unregulated international exhaustion.
27
2014] Exhaustion of Rights and Parallel Imports
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