Parallel Imports: Genuine Products, Unauthorized Sellers

Unauthorized resellers can present significant challenges for businesses operating internationally, particularly when genuine products are imported into foreign markets without the trademark owner’s consent. Parallel imports, also sometimes referred to as “gray market goods”, are genuine products imported and sold outside the trademark owner’s authorized distribution network. While these products are not counterfeit, their unauthorized distribution can disrupt established sales channels, undermine brand integrity, and create consumer confusion. These parallel imports therefore present a tricky question for rights holders and IP offices alike: since the goods themselves are genuine, but nonetheless have the potential for sales and reputation losses for the trademark owner, what recourse should brands have to limit parallel imports? As is often the case, lawmakers in different jurisdictions have come down split on the issue. In the US, for example, trademark owners generally cannot prevent the importation of genuine goods solely because the importer is unauthorized. However, other countries have come down differently, opting to give brand owners strong protections against parallel imports. One such country is Brazil, where brand owners are able to enforce their rights to exclusive importation and sale against third parties through infringement claims against violators.

In one recent case we handled, two Brazilian companies were importing the genuine products of our client, originally intended for the Chinese market, without authorization. While this alone would be sufficient grounds for action under Brazil’s prohibition against parallel imports, the companies took the infringement even further, as they removed our client’s original labels, replaced them with their own branding, and marketed the products as new. Following a thorough investigation, we worked with the local authorities to raid the warehouses where these infringers were storing our client’s products and filed an infringement claim against both parties involved.

The Brazilian Court ultimately ruled in our client’s favor, finding the defendants’ conduct unlawful on three independent grounds: unauthorized importation and sale of our client’s products, fraudulent diversion of customers, and removal of the original trademarks identifying our client as the manufacturer. The Court subsequently imposed a permanent injunction prohibiting further unauthorized importation and commercialization of the products, including products with removed or altered branding, and awarded both moral and monetary damages against the infringers.

For businesses seeking to curb unauthorized distribution, effective trademark enforcement requires a country-by-country approach, taking into account the distinct regulations and mechanisms afforded under each system. Even in regions where importation and sale of gray market goods is permitted, factors such as relabeling, product alterations, and misleading commercial practices may provide independent grounds for enforcement. A tailored international enforcement strategy can help rights holders navigate these complexities to protect their brand integrity and safeguard their authorized distribution channels.