Parallel Imports are Non-Counterfeit in the 2022 IP Law in Vietnam?

Founding Partner Le Quang Vinh - Bross & Partners

Email: vinh@bross.vn

Exhaustion of intellectual property rights and parallel import

Immediately after the goods bearing IP rights (eg. inventions, industrial designs, trademarks, copyrights) are sold on the market by the IP right holders, or others authorized by them, such goods are free to circulate, exploit their usage without the IP right holders’ consent. This phenomenon is called the exhaustion of IP rights immediately after the first sale. Widely recognized in the United States and around the world including Vietnam, exhaustion of IP rights originates from the first-sale doctrine, also known as the exhaustion doctrine.

Without recognizing that IP rights are exhausted shortly after the goods bearing them have been legitimately sold on the market, people those who purchased a particular product, such as a Porsche car, a series of Harry Potter, will have to ask permission by the manufacturer Porsche and author J. K. Rowling wherever they want to sell the same to others.

Exhaustion of IP rights is always associated with parallel trade practices (parallel imports). According to INTA, the parallel imports (or gray market goods) refer to branded goods that are imported into a market and sold there without the trademark owner’s consent in that market. The goods have been manufactured by or under license of the brand owner and therefore are not counterfeit, but they may have been formulated or packaged for a particular jurisdiction and are imported into a different jurisdiction in contradiction to the brand owner’s intention.[1]

Parallel imports are non-counterfeit and non-infringement

In general, all parallel imports into Vietnam can be considered exceptions to IP infringement, including pharmaceuticals. In particular, parallel importation of preventive and curative drugs for humans is the importing medicine having the same proprietary name as the medicine that has been granted a registration number for circulation when foreign pharmaceutical companies set the drug price in this country lower than other country. For instance: manufacturer X produces product S which has been granted a registration number and is being sold in the Vietnamese market at G1 price. Also product S, manufacturer X sells it to country A at price G2. If price G2 is lower than price G1, a Vietnamese importer can import product S from country A to sell in Vietnam at price G3 provided that G3 is always lower than G1 (G3 < G1).[2]

In the legal sense, parallel imports carrying IP rights are generally not considered as counterfeit goods, or infringing goods under the 2022 IP Law. More specifically, products in parallel trade channels containing the exclusive rights over patented inventions, patented designs, trademarks, geographical indications, or layout designs are not the IP infringing goods because Article 125(2)(b) of the 2022 IP Law stipulates that a rights holder does not have the right to prevent others from circulating, importing or exploiting the usage of products bearing those industrial property rights if that product itself has been put into the domestic or international markets by him/her, or his/her licensee.

Exhaustion of IP rights also applies to a portion of the economic rights pertaining to copyright or related rights (neighboring rights). Thereby, the rights holders are not entitled to prevent others from subsequent distribution or import for distribution of the originals or copies of a copyrighted work; originals, copies of the fixation of the performance; originals, copies of sound recordings, video recordings; or the fixation of broadcasting programs, on the condition that these originals, copies or fixations are made by the right holder or by others authorized by him/her.

Proprietary rights to a plant variety are also deemed exhausted in respect of protected propagation material if it has been placed on the market by the plant breeder or another person authorized by him/her, except where this propagation material is used to subsequently propagate the very plant variety, or except in the case of exporting materials of that plant variety to countries that do not protect those plant genera or species.

Bross & Partners, an intellectual property company ranked Tier 1 in 3 consecutive years (2020-2022) by Legal 500 Asia Pacific, has rich experience in resolving complicated IP disputes including trademarks, copyrights, patents, plant varieties in Vietnam and abroad.

Please contact: Vinh@bross.vn; mobile: 0903287057; Zalo: +84903287057; Skype: vinh.bross; Wechat: Vinhbross2603; linkedin: (4) Le Quang Vinh | LinkedIn.