Parallel Import is an important topic related to Exhaustion of Rights principle whereby the right holders’ IP rights in respect of a product are considered exhausted (i.e. he no longer can exercise any rights) when that product has been put on the market by the IP holder, or by an authorized party. After a patented product has been sold by the patentee or by others with the consent of the patentee, the IP right is said to be exhausted. It can no longer be exercised by the owner of the patent or patentee.
For example, if an inventor obtains a patent on a new oximeter, the inventor can exercise his rights and legally prohibit other companies from making, using, selling, offering for same and even importing such oximeter in the territory where he has patent protection, but cannot prohibit customers who have bought this oximeter from the patent owner from reselling it to third parties.
U/S 107A, [Certain acts not to be considered as infringement], importation of patented products by any person from a person, who is duly authorized under the law to produce and sell or distribute the product, shall not be considered as an infringement of patent rights. Therefore, it is possible to import the patented products from the licensee of the patentee in any country without the permission of the Patentee.
The purpose of Parallel import is to check the abuse of patent rights and to control the price of patented product by taking away the monopolistic power of the patent holder. Parallel import (also called grey market imports) is not unauthorized, unofficial or illegal sale, nor it the sale of pirated and counterfeited products, rather parallel imports are genuine, often branded, products that do not violate an IP right and legal in most of the nations.
Illustration
Suppose a company called Blue Pharma has a patent for a drug in India. This company has licensed its patent to red Pharma in Russia. Here Blue Pharma is Patentee while Red Pharma is Licensee and is authorized by patentee to see the drug. Now Green pharma in India, buys the drug from Red Pharma and imports to India. Even though Blue pharma has patent rights in India and it can prevent Green pharma from importing the drug in India, as principle of exhaustion of patent rights comes into picture. Since Green Pharma is buying and getting drug imported from Red Pharma where red pharma is duly authorized under the law to produce and sell or distribute the product, importation of drug by green pharma in India shall not be considered as an infringement of patent rights.
Parallel import is helpful in controlling prices of the goods and prevents patentee from abusing his/her patent rights.
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