Apple Inc. Warns Unauthorized Vietnamese Retailers: Parallel Importation Or Trademark Infringement

ARTICLES

Apple Inc. Warns Unauthorized Vietnamese Retailers: Parallel Importation Or Trademark Infringement

On 24 March 2017, VOTRA company – the industrial properties agency of Apple Inc. in Vietnam had a written notification sent to Vietnamese retailers who are selling product lines of Apple Inc without the consent of the Apple Inc. Generally, the notification required the unauthorized retailers to stop (i) selling product lines bearing Apple’s trademarks and (ii) using the trademarks on their store’s business signs.

Regarding the requirement (ii), VOTRA is right to make it because using the trademarks of any organization for business purposes without its permission is considered as the trademark infringement. However, in terms of requirement (i), VOTRA may not be able to force retailers to stop selling the Apple’s products if such products are authentic from parallel importation.

1| WHAT IS “PARALLEL IMPORTATION”?

Company A is the industrial property rights owner of trademark “XXX” used for laptops produced aboard by the company. Then, Company A grants Company B, its subsidiary in Vietnam, the rights to exclusively distribute laptops covered with trademark “XXX” in Vietnam market. At the same time, Company C, a Vietnamese company, without the consent of either Company A or B, imports from Japan such laptops which are lawfully manufactured here by Company A. The above commercial activity of Company C is referred to “Parallel Importation” in which “a product made legally (i.e. not pirated) abroad is imported without the permission of the intellectual property right-holder (e.g. the trademark or patent owner)”[1]

Although this phenomenon is broadly known and occurs daily, it is not officially and consistently governed in any international treaties and left open to be regulated by each nation or territory. For example, in Japan, “In 2003, the Japanese Supreme Court ruled for the first time that the parallel importation of products that satisfy a three-part test—identity of trademark, identity of origin and identity of quality — “lack substantial illegality.” This was the famous ruling of the Fred Perry case[2].”[3]

The rationale for parallel import is the “exhaustion doctrine”[4] or “first-sale doctrine”, which is a limit on IP rights. Accordingly, “After a product covered by an IP right, such as by a patent right, has been sold by the IP right owner or by others with the consent of the owner, the IP right is said to be exhausted. It can no longer be exercised by the owner”[5] In other words, once the owner of a patent product or others who are authorized by the owner have distributed the products for the first time to a certain market, then any purchasers can use, re-sell or rent that original products without any restrains. 

2| HOW IS IT GOVERNED UNDER VIETNAMESE LAW?

In Vietnam, “Parallel importation” is defined at Article 18 (1) of Circular No. 11/2015/TT-BKHCN, specifically, it is interpreted as follows: “Parallel importation prescribed in Clause 2, Article 26 of Decree 99/2013/ND-CP means the importation by an organization or individual of a product which has been lawfully launched on the domestic or overseas market by its owner or the organization or individual with licensed use right, including the case of compulsory licensing, or a person with the right to prior use of industrial property subject matter, without permission of the industrial property rights holder.”[6] Also, under Article 18 (2), such importation shall not be regarded as an infringement upon industrial property rights and the parallel importers shall not be sanctioned.

So, under Vietnamese IP law, any individuals or organizations, without the consent of the owner(s) of the IP rights, are permitted to import and re-sell products of this owner(s) provided that they fulfill two conditions:

(1) The products are originally made by the owner(s) or other authorized entities; and
(2) Then, they are “lawfully launched on the domestic or overseas market by its owner” or other cases provided under Article 18 of Circular No. 11/2015/TT-BKHCN.

3| ADVANTAGES OF PARALLEL IMPORTATION

Although parallel importation does have some drawbacks, its advantages are undeniable, particularly:

  • Firstly, despite being concerned as the cause of the increasingly high amount of counterfeit goods, it brings a huge economic benefit to domestic market. The existence of parallel importers in the market restrains the possibility of being monopoly of the original producer, which means there will be no overcharge, no consumer exploitation and, equally important, no poor service.
  • Secondly, parallel importation may provide many individuals and households an opportunity to run a small business. As it can be seen, in Vietnam, there is a plenty of conventional and online stores selling electronic devices, accessories, cosmetics, clothes or nutritious supplements of which the brands are globally famous. In the long term where automatic machine will possibly replace a majority of tasks done by human, it may help people keep having a source of income.

4| CONCLUSION

Regarding the notification of VOTRAN, on the one hand, VOTRAN’s opinion is right to some degree. In fact, rather than using the trademark for promotional activities, point b Section 2 Article 125 Vietnamese IP Law only grants parallel importers the rights of: “Circulating, importing, exploiting the utilities of products which were lawfully put on the market including overseas markets, except for products put on the overseas markets not by the mark owners or their licensee;”. In other words, venders must stop displaying their business signs which are labelled Apple Inc.’s trademarks. The reason is that this may mislead costumers that such shops are authorized distributors of Apple Inc. and, as a consequence, there is a possibility that the prestige of Apple Inc. is ruined if the unauthorized shops sell counterfeit goods or break standards of customer services of Apple Inc.

On the other hand, Apple Inc. and VOTRAN cannot force venders whose products are original to stop conducting their business due to Vietnamese IP law provided that their business signs, brochures and other promotional materials are not designed in the way that may mislead costumers.

For retailers, basically, to protect themselves from crossing the legal line, retailers only need to be aware that the origin of the imported products must be assured (C/O is the most valuable tool to prove this matter) and do not promote their goods/services under the name or related signs and symbols of the trademark of parallel imported products.

If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.

 

[1] https://www.wto.org/english/thewto_e/glossary_e/parallel_imports_e.htm
[2]See more at: https://www.jpaa.or.jp/old/english/court_decisions/69FREDPERRYCase.pdf
[3] https://www.aacd.gr.jp/en/importing
[4]There are three different levels of exhaustion doctrine, including: nation; region and international. See more at: http://www.wipo.int/sme/en/ip_business/export/international_exhaustion.htm
[5] https://en.wikipedia.org/wiki/Exhaustion_of_intellectual_property_rights
[6] Translated by: https://thuvienphapluat.vn/