1. Intellectual Property and Competitiveness of MSMEs 11 December 2009 Grey Market Goods and Parallel Imports Christopher Stothers Milbank, Tweed, Hadley & McCloy LLP, London

2. Overview What is parallel trade and why does it matter? IP - sales within Europe IP - sales outside Europe Competition restrictions Practical strategies for MSMEs

3. What is parallel trade? Goods are manufactured and then put onto the market in country A. Parallel trade occurs when the goods are subsequently transferred to country B by another party (the parallel trader, who may also be the end consumer). The distinguishing feature of parallel trade is that the manufacturer did not intend those particular goods to end up in country B. The goods are typically described in country B as parallel imports or grey market goods.

4. Why does it matter? Manufacturers Every manufacturer hates disruption to distribution …distributors and retailers complain …brand gets damaged …and profits are reduced

5. Why does it matter? Consumers Every consumer loves a bargain …but not everyone will fly to New York for one …so intermediaries (parallel traders, retailers, online distribution systems) will try to help …and search costs are reduced as price transparency increases online

6. Why does it matter? Goals for MSMEs As a consequence, MSMEs must try to: …minimise disruption to their distribution …without alienating consumers (or their representatives) …without getting tripped up by the law …and maximise opportunities of the EEA?

7. IP - sales within Europe The problem of exhaustion Cannot use IP rights to prevent parallel imports within the 30 Contracting States of the EEA (Articles 28-30) would be repugnant to the essential purpose of the [EC] Treaty Courts are unwilling to allow structural circumvention Case 1: Bolton v Swinghope/Doncaster Only hope is trade mark where product is altered Case 2: Sportswear v Stonestyle

8. IP - sales outside Europe More exhaustion problems Can use IP rights to prevent parallel imports from outside EEA unless unequivocal consent to sell them in the EEA Need to be able to show where goods were put on market Case 3: Van Doren (and Sun v Amtec) Need to ensure goods put on market outside the EEA Case 4: Peak Holdings Dangers of implied consent: Mastercigars, Honda

9. Competition restrictions Yet more problems Must comply with Articles 81 & 82 (Vertical Guidelines) Apply where there is an agreement or dominant position No resale price maintenance, restricting parallel trade or restricting internet distribution Must ensure compliance in practice, not just on paper Refusals to supply can be dangerous May be treated as part of an agreement May make selective distribution system void

10. Practical strategies for MSMEs 1. Consider potential distribution issues whenever selling in different markets on different terms – is it worth it? 2. Be creative when deciding how to tackle the issues 3. Protect the brand reputation 4. Look for opportunities to reduce costs

11. Thank you for your time Any questions? Christopher Stothers cstothers@milbank.com +44 (20) 7615 3016 Parallel Trade in Europe: Intellectual Property, Competition and Regulatory Law Hart Publishing, 2007 Milbank, Tweed, Hadley & McCloy LLP 10 Gresham Street, London EC2V 7JD University College London Bentham House, Endsleigh Gardens, London WC1H 0EG