Unlike the position in Hong Kong, the major laws and
regulations governing the protection of intellectual property
rights in Mainland China do not explicitly set out restrictions
on parallel importation. Although parallel imports affect many
industries like cars, computers and cosmetics in the Mainland,
most intellectual property laws eg Copyright Law and Trademark
Law have not even covered this issue. Instead, the PRC
government appears to prefer to deal with the question of
parallel imports on a case-by-case basis by promulgating
specific regulations with regards to specific industry.
Under the Notice on Strengthening and Improving the
Management of the Import & Export of Audio-visual Products
promulgated in 2004 by the Ministry of Culture, parallel
importation of audio-visual recordings to Mainland China is
prohibited. There is however no general prohibition for all
By virtue of Article 11 of the PRC Patent Law, no entity or
individual can import products made by a patented process
directly without authorisation from the patent owner. That,
however, does not follow that the concept of parallel import
can be applied in Mainland China.
Significant uncertainty has been created by a decision of
the Guangzhou Intermediate People's Court in 1999
regarding the parallel import of a trademarked product
(Shanghai Unilever Co Ltd v Commercial Import and Export
Trading Company of Guangzhou Economic Technology developing
District, Hui Zhong Fa Zhi Chu Zi (1999)).
In that case, the parallel importer imported boxes of Lux
soap from Thailand to Mainland China where the Plaintiff
another Mainland distributor had the exclusive right of sale
and had registered the Lux trademark with the China Trademark
Office. Though the imported products were genuine, the Mainland
distributor argued that the parallel importation infringed the
exclusive right to use his registered trademark.
The parallel importer, in its defence, argued that Chinese
law is silent on parallel import and it was not aware of the
Plaintiff's intellectual property rights. The
People's Court rejected the argument that since the
soaps were not counterfeit, there could be no infringement. It
also ruled that Plaintiff's trademark right had been
widely published and therefore the parallel importer had
breached Article 56 of the Trademark Law in failing to show
that the product originated from the owner of the trademark or
that such importation was approved by the trademark owner. The
Court also seems to suggest that penalties for parallel import
may include administrative and/or civil liabilities.
It is unclear whether the doctrine of "Exhaustion of
Rights" was argued before the People's Court in
the above case, and based on this decision, the doctrine
appears to have been abrogated at least in Mainland China.
Though decisions made in one court have no binding effect on
other courts in Mainland China, this case nevertheless
highlights a possible approach adopted by the Mainland courts
should a similar case arise.
Finally, one would also need to have regard to the other
laws and regulations in force in the Mainland China. For
example, under Article 9 of the Anti-Unfair Competition Law of
the PRC, business operators are prohibited from making
misleadingly or false representations regarding the quality,
manufacturing components, functions, uses, manufacturers,
period of validity, place of origin and other aspects of
merchandise. Consequently, a parallel importer may be in breach
if he makes a misrepresentation (such as the sale of his
parallel imported goods is authorised by the original seller
when they are not).
In view of the above, parties seeking to conduct a parallel
import business in Mainland China should tread carefully. Legal
advice is certainly recommended to negotiate the minefield of
laws and regulations that may affect the conduct of such a
If you wish to know more about intellectual property
registration and enforcement or have any query regarding how to
commence or contest IP legal proceedings in Hong Kong or
Mainland China, experienced lawyers in our Intellectual
Property Department will be happy to assist you.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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This article enunciates the recent, much awaited, and landmark judgment delivered on September 16, 2016 by Hon'ble Delhi High Court throwing light on the important provisions of the Copyright Act, 1962.
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