Turkey: Exhaustion Of Trademark Rights For Gray Market Goods

Gray market goods, commonly referred to as "parallel imports," are genuine and legitimate goods, but imported from outside the trademark owner's selective distributorship system. Importing gray market goods in competition with authorized distributors is illegal in many jurisdictions.

What about Turkey? Does the importation of gray market goods from another country in which the trademark owner consented or even placed the goods on the market itself, or the distribution of goods outside the trademark owner's selective distribution system, constitute trademark infringement in Turkey?

General Rule in Turkey

In Turkey, the exhaustion rule, as set out in Decree No. 556 on the Protection of Trademark Rights (the "Trademark Decree") provides that acts relating to a product bearing a registered trademark do not constitute trademark infringement if the acts occurred after the product was released into the Turkish market by the owner or with the owner's consent, as trademark rights are considered to have already been exhausted. Consequently, as of the first authorized sale of the product bearing a registered trademark in Turkey, the trademark owner cannot challenge further sales, or the export or re-import of these products into Turkey. The Trademark Decree accepts national exhaustion and provides that a trademark holder's consent to the initial placement of a product in Turkey authorizes further imports of the same product without the trademark holder's further consent.

Application of the Rule on Parallel Imports

In practice, however, Turkish courts interpret the principle of exhaustion more broadly than expressed in the Trademark Decree. The Turkish Supreme Court of Appeals has consistently held that once a trademark owner or authorized seller places a product with a trademark registered in Turkey on the Turkish market, a third party's parallel import of that product cannot be restricted, even by the exclusive distributor, unless the third party changes or impairs the product. Consequently, even though the Trademark Decree accepts national exhaustion, in practice, Turkish courts apply an international exhaustion rule.

Effects of the Rule on Local Exclusive Distributors

In Turkey, the national exhaustion of trademark rights is unaffected by the distribution system agreed upon between the distributor and the trademark holder. Turkish courts reject the exclusive distributor arguments because the contract between the trademark holder and the distributor has reciprocal effect. This means neither the distributor nor trademark holder has an absolute right to prevent the parallel import.

Comparison with the EU

Turkish courts' longstanding interpretation of the exhaustion principle differs from that of the EU. In the EU, while trademark rights cannot be invoked to restrain the free movement of goods within the EU, they can be used to prevent the entry of goods into the EU. As a result, in the EU trademark rights can protect owners against parallel traders. The EU adopts a regional exhaustion regime and only applies the rule for parallel trading of products outside the EU.

Exceptions to the Rule

Exhaustion of trademark rights does not apply where the importer or reseller acts in a way that impairs the quality of the goods or reputation of the trademark. In other words, the trademark owner can raise claims on the grounds of trademark infringement or unfair competition against the parallel-imported goods if the importer or seller altered, changed, or impaired the goods in a way that decreases the trademark's reputation or the quality of the goods.

The importer or seller must also comply with the specific regulatory rules applicable to the particular product. For instance, a parallel import of cosmetics must be imported in compliance with the cosmetics regulation, absent which the import would constitute unfair competition.

Conclusion

Although, under the Trademark Decree, the exhaustion principle is generally applicable, Turkish practice interprets exhaustion of trademark rights more broadly and, therefore, parallel imports of genuine products is not considered trademark infringement. Nevertheless, resellers and parallel importers cannot use exhaustion of trademark rights as a defense if they impair or damage the quality or reputation of the products or they do not comply with the regulatory requirements for a particular sector.

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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