Official resellers of branded products are increasingly confronted with parallel trade. In parallel trade, the branded products are imported without permission of the manufacturer or brand owner of the original products. It is not counterfeit, these products are “real”. It usually involves remainder lots or products purchased from a middleman or sometimes even from an official distributor. The products can then be marketed at a lower price. That is good news for the average consumer but of course it is completely against the grain of the official distributors. They will complain to the trademark owner since his official distributors have all kinds of obligations imposed on them, which the parallel trader does not have to deal with. For instance, parallel traders do not have to keep expensive stocks, store premises or qualified personnel, which results in a lower price.
The trademark owner often tries to prevent parallel trade by claiming trademark infringement. This is possible provided that the products of the parallel trade are imported from outside the EU. This is because in Europe the trademark owner has the right to be the first to market the product under a certain trademark. However, if the parallel trader has obtained the products within the EU, then he can claim exhaustion of trademark rights. Exhaustion means that when products have been placed on the European market with the consent of the trademark owner, the trademark rights of the trademark owner have been ‘exhausted’. The trademark owner can then no longer oppose the resale of those products if they are already in the EEA. This is a consequence of the principle of free movement of goods.
To prevent this, the parallel trader often removes the batch codes or the product codes from the packaging, so that it is not immediately possible to find out where the products come from. That in itself is not considered trademark infringement, unless the packaging is changed in such a way that it detracts from the luxurious appearance of the product. However, the parallel trader would be wise to put his own code on the product, but he must be able to link it internally to the original code of the manufacturer in the context of product safety. If the manufacturer recalls batches of products with a production defect for repair or replacement, it must be possible to trace them back to the production batch in question.
In short, parallel trade is possible provided strict conditions are met.
