IMPORTERS want to import goods cheaply, no matter where the product is in the world. Sometimes the importer collects the product from the manufacturing person or organisation or their representative. Sometimes they can collect it from a third person or organisation. Manufacturers can claim various types of intellectual property rights, including patents, trademarks, industrial designs, GIs, copyrights, and register them with the appropriate intellectual property authority for the products they invent. The product may be marketed in one country by the person or organisation and may be imported to another country through a third party without the approval of the person or organisation.
In addition, any other person or organisation may obtain the right to manufacture and supply the product from the inventor — individual or organisation through a voluntary license agreement. The agreement will contain how much of the licensing fee the patent owner will receive from the licensee, what purposes the agreement will serve, whether the agreement permits the licensee to transfer the right to produce to a third party on the occasion of production facilities or concentration in a geographical market, how long the agreement will remain valid, and to what designated area the product will be delivered, or whether it can be exported to another country. With such an agreement in place, there is a possibility that the person or organisation obtaining such rights may import the product to another country without the knowledge of patent owner.
Therefore, it turns out that the inventor (person or organization) or the licensee with its consent can simultaneously produce and market the same product. In the absence of an export ban in the license agreement, the importer can then import the product to another country other than the country marketed by the inventing person or organisation. However, the importer may prefer the cheaper exporting country between the two countries — whose products are legally made, which are not counterfeit or pirated. In the case of importing goods from this cheap exporting country, the permission of the original intellectual property owner is not required. Such importation by an importer from a third party is called parallel importation.
Suppose the Oxford-AstraZeneca company is marketing their vaccine in the UK and Europe at Tk 1,500. Then, the Serum Institute of India is making the vaccine in India with the proper license and marketing it there for Tk 300. And, in Bangladesh it is being sold for Tk 2,000 through the Oxford-AstraZeneca’s representative. In this case, if any pharmaceutical company in Bangladesh imports the vaccine from the UK, Europe, India or any other market without the knowledge of the Oxford-AstraZeneca company or the Serum Institute, then this import can be treated as a parallel import.
Now the question is whether this parallel import is valid under domestic and international law? The Paris Convention 1883 is silent on parallel imports. The TRIPS Agreement 1994 was expected to address all aspects of intellectual property including parallel imports. The GATT approved international free trade objectives, but it did not agree to give general permission for parallel imports. To overcome this stand-off, the Article 6 of the Agreement declares that ‘nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.’ This means that no matter what a country does about the exhaustion of intellectual property rights in the case of parallel imports, it does not have to stand in front of the WTO’s dispute resolution body. This flexible provision in the agreement created scope for parallel importation. Some countries to allow it, others do not.
Parallel importation is not illegal in countries such as US, UK, Europe, or Australia. The products available in ‘dollarshops’, ‘poundshops’ or ‘rejectshops’ in these countries are imported from the international market through parallel imports and are quite cheap. The cheap price may be the result of low quality raw materials and cheap labour, different version of products or pricing for different markets or the regulatory support in some countries to the production of cheap products. And consumers are more attracted to these parallelly imported cheap products. This also prevents price inequality in the local market and creates fierce competition.
Now the question is how the legal framework of these countries legitimises parallel imports? Countries follow various rules to legalise parallel imports. One of them is the principle of exhaustion which can be known as local, regional, and international exhaustion. According to this concept, when the product first comes to the market of a particular country, the intellectual property right owner loses the right to control the resale of the protected product. In fact, his/her rights were exhausted, and all residents of the country were granted to do parallel imports. In this case, if any resident of the country imports the product from any legitimate source as an importer and sells it at a lower price, the rightsholder will not be able to challenge them. In this case, some countries also follow the provision of exhaustion of intellectual property rights in regional and international markets.
Although it is conducive to consumer rights, this provision of parallel imports is not enshrined in any law of Bangladesh. This may be because the intellectual property laws of Bangladesh, especially the Patents and Designs Act 1911, do not follow the TRIPS Agreement. However, as far as is known, the draft Patent Act 2021 has spoken of international exhaustion of intellectual property rights. Following this provision, if and when enacted the draft law, a patent product sold cheaply in any market in the world can be imported to Bangladesh without the approval of the right owner. If such a provision is included in other intellectual property laws, intellectual property protected products including Covid-19 vaccines can be made easily available in this country.
Dr Mohammad Towhidul Islam is professor of law in the University of Dhaka.
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