Should It Be Permissible？

Analysis on Parallel Importation of Trademarked Goods in China

　　【摘要】The propriety of parallel trade is a matter of intense controversial issue in a number of countries and in the world trade organization （WTO）。 Since intellectual property right is recognized on a territorial basis， each nation has established its own policy covering parallel imports. Countries have a policy of national exhaustion amounting to a government-enforced territorial restriction on international distribution. Original manufacturers retain complete authority to distribute goods and services； In contrast， countries permitting parallel imports are not territorially segmented. This paper aims to analyze whether China， as a developing country， should permit parallel imports in the context of trademarked goods， and seeks to answer this question by paying attention to the diverse approaches taken by other countries in this area. The article concludes in the last section with the suggestion that parallel importation of trademarked goods should be permitted in China with certain exceptions.

　　【关键词】parallel importation， exhaustion of rights， territoriality principle， free trade

　　【正文】

　　Introduction

　　Parallel importation reflects the contradiction between international trade and intellectual property right （IPR）。 On the one hand， with the rapid development of current economic globalization， free circulation of goods with a free trade policy has become a dominant trend in worldwide trading world. On the other hand， by virtue of IPR's territoriality， to some extent it hinders such a free trade in order to protect intellectual property （IP） holders' interests. How to deal with the parallel importation issue appropriately has been of great practical significance to each country. In the field of international trade related to trademarked goods， there have been growing relevant disputes and lawsuits taking place around the world. In essence， parallel importation can be perceived as a trade policy dilemma which derives from each nation's complicated policy considerations. Balancing the conflict of interests among various parties involved is the essential point in this regard.

　　In China， parallel importation was not a practically notable phenomenon due to lack of the economic conditions in the past. China was widely known for its low labor and production costs， and prices in China were much lower than the international market prices. Because of this， together with high customs duties and a strict quota system， parallel imports had not been rampant in China. [FN1] However， with China's accession to the WTO， and the growing economics， constant social improvement， parallel importation cases are springing up in recent years， e.g. the “Lux” case and the“AN'GE” case， [FN2] which will be discussed below. Nonetheless， China's current legislations on parallel importation of trademarked goods， including the new Trademark Law （2001） and the Anti-Unfair Competition Law（1993） [FN3] ， are still vague and insufficient for the present. While attention has been drawn in this subject academically， it is urgent to make efforts at the substantial level of legislation on parallel imports.

　　This article consists of seven sections， the first section is brief introduction， then followed by literature review on parallel importation of trademarked goods in the second section； The third section focuses on studies of parallel imports' classic cases in China， and the fourth section examines international treaties on parallel imports； A view of other countries' current situation on this issue is given in the fifth section. The last two sections of this article are general introduction of China's legal environment in parallel importation of trademarked goods， and a conclusion of China's future direction on trademarked parallel imports to be made on the basis of the analysis above.

　　Overview of “Trademarked Parallel Imports”

　　A. What are Parallel Imports？

　　Parallel imports， also called grey-market imports， are goods produced genuinely under a protection of a trademark， patent or copyright， placed into circulation in one market， and then imported into a second market without the authorization of the local owner of the intellectual property right. This owner is typically a licensed local dealer. [FN4] Regarding to parallel imports of trademarked goods， it refers to a genuine （ie. non-counterfeit） product placed on the market in one country， which is subsequently imported into a second country without the permission of the owner of the intellectual property rights which attach to the product in the second country. Parallel importers ordinarily purchase products in one country at a price （P1） which is cheaper than the price at which they are sold in a second country （P2）， import the products into the second country， and sell the products in that country at a price which is usually between P1 and P2. [FN5] Frequently this form of parallel import occurs when the price of an item is significantly higher in one country than another. Parallel trade represents a form of arbitrage. Like other forms of arbitrage， parallel imports respond to international price differences that result from retailer price discrimination， vertical pricing restraints， or national differences in government price controls. [FN6]

　　In summary， parallel imports' salient characteristic is that they are genuine products rather than counterfeits， produced by the trademark owners or distributors. That means they have the same quality as good as products imported through normal distribution channels and supervised exactly by the trademark owners or distributors. In addition， what should be noticed is that the parallel importers buy parallel imports in a legal manner. In other words， there doesn't exist smuggling or other illegal trade transaction. However， the arguable issue that whether parallel importation is a legal or illegal behavior， results from the fact that before the parallel imports imported into the target country's market， the trademark has been protected under the relevant laws of that country. And the parallel imports are sold by companies which may have no relationship with the producer of the goods， simultaneously without the authorization or consent from the trademark owners or users either.

　　B. Why does parallel importation happen？

　　Multiple complicated factors may explain the emergence and existence of parallel imports. Most importantly， parallel trade takes place due to significant price differential for the same product between two markets. Commercial profit is the catalyst to promote parallel trade. This is the fundamental reason for the grey-market to exist and the parallel imports to emerge continually. Put it in more detail， the relevant factors including consumers' income， consumptive level， the demands of the market， fluctuation of exchange rate and so on， are essentially influencing a product's price； Moreover， each country's different development level in science and technology， labor cost etc， also results in the price differentiation.

　　There is a potential factor that provides an advantaged chance for parallel importation. That is the rise of transnational enterprises' global marketing strategy. Because of this world-wide expanding strategy， multilateral enterprises make multifaceted decisions regarding the means by which they can serve foreign markets. It is not possible to register and maintain trademark registrations in all international classes in all jurisdictions. Thus it is a preferred choice for the multilateral enterprises to license or assign their trademark. In this sense， it unconsciously offers an available chance for the third party to conduct parallel importation.

　　C. Pros and Cons of Trademarked Goods' Parallel Importation

　　The subject of parallel importation is a highly controversial issue in current academic debates both internationally and domestically. One of closely-related factors for the hot debate is in consideration of its influence which is brought to the country or region allowing parallel importation. As a general rule， parallel importation has two sides. It has positive effects， at the same time coupled with inevitable negative results. The positive side has been illustrated that it benefits consumers by lowering prices and widening the selection of products available in the market， provided that consumers retain equivalent legal protection to locally sourced products. It also prospers transnational trade and transaction. However， from a negative point of view， trademark owners， licensees and their authorized distributors may disagree these standpoints. The trademark owners argue that products produced in one country or region are made to comply with consumers' taste of that particular country or region， these products may not be welcome by other places' customers， even though the products are of the same quality， because the products may have tiny differences according to people's special demands in that particular place. The local licensees maintain that they put a considerable of money and efforts to develop local product marketing， promotion， advertising， regulatory compliance， product liability and research， but the parallel importers “free ride” these good conditions and undermine the local licensees' own interests. Parallel imports undermine normal distribution channels and frustrate the local distributors in terms of premiums paid to the trademark owner for genuine goods when competitors are underselling them. Another concern raised is about consumer protection. Consumers purchasing genuine products expect that those products are sold through authorized distribution channels overseen by the trademark owners or their licensees. However， if those parallel imported “genuine” products do not carry the warranties and service guarantees that accompany authorized sales， unwary consumers who bought Parallel imported goods probably may not enjoy the same after-sale service as other authorized products' service.

　　Cases Review

　　Though there haven't been laws， regulations or judicial interpretations specifically regulating the issue of trademarked parallel imports in China， inevitably， the court encountered and was challenged by such cases. The author believes that the difficulty and uncertainty for the court to judge on these parallel imports cases will continue， as long as laws on this issue are not articulate. The high-profile cases in China's judicial practices are the “Lux soap” case and the “AN' GE” case.

　　The “Lux soap” case， [FN7] a classic parallel importation in character， is interpreted as being decided purely on its particular factual matrix， because its decision was decided mainly on the fact that the defendant failed to show that the soaps at issue were genuine goods manufactured in Thailand with authorization from the foreign trademark owner. The question of whether parallel importation is allowed if the parallel importer is able to produce the requisite evidence is not yet settled. [FN8] However， this case perhaps could be regarded as a prelude of parallel imports cases in China， and it indeed raised some thought-provoking questions to be discussed. For instance， if the defendant was able to prove the goods were legally authorized from the trademark owner？ In this case， should the court adopt the “first sale doctrine” to permit such parallel imports or adopt the territoriality principle to prohibit？ What should be noted is， unlike the Patent Law， the Trademark Law did not mention whether “exclusive right” included the right to import. [FN9]

　　Compared with the “Lux Soap” case， the following “AN' GE” case，to some extent， reflected much more deeply on the court's attitudes and comprehension on China's parallel importation issues. In the “AN' GE” case， [FN10] the plaintiff argued that the two defendants infringed his exclusive right as a sole licensee to sell the products， and violated business principle of honesty and credit. Thus， the plaintiff advocated it was a kind of unfair competition which should be stopped immediately. The plaintiff claimed compensation for economic losses and apologies. On the part of the defendants， both of them denied the plaintiff's claims above. The parallel importer （one of the two defendants） insisted that his activity was legal because the parallel imports followed the formal import procedures.

　　This case went through two trials. At the first trial， the judge ruled that the parallel importer's behavior was legal business operations. The rationale behind the decision was that though the business licensing agreement concluded between the licensor and the licensee was authorizing the licensee the exclusive right. However， it is legally permissible for the third party's resale activity， because contractual rights cannot directly be asserted as a defense against a third party's resale. No statutory restrictions stipulated that the buyers who bought the products must be direct consumers or users. Thus there was a possibility that the products were sold for the second time by the third party. The judgement finally denied the plaintiff's claims. The plaintiff appealed to a higher people's court. The appeal court maintained the decision of the lower court that the defendant's behavior was legal and there was no unfair competition involved. The court pronounced against the plaintiff's appeal in the end.

　　In brief， this case typically characterized the general picture of parallel importation in China. There seemed to be an indication that the court in this case preferred to adopt the international exhaustion principle. It is known that the decisions or judgements from the local People's Court in China are not binding on subsequent cases， because “stare decisis” is not established in Chinese legal system as opposed to common law legal system， nonetheless， the “AN' GE” case significantly provides a number of valuable references in the court's judicial practice.

　　In substance， the fundamental theories embedded in parallel importation ascribe to “exhaustion of rights” （“first-sale doctrine”） and “territoriality principle”。 The former is a concept in intellectual property law whereby an intellectual property owner will lose or “exhaust” certain rights after the first use of the subject matter which is the subject of intellectual property rights. For example， the ability of a trademark owner to control further sales of a product bearing its mark are generally “exhausted” following the sale of that product. [FN11] The concept typically arises in the context of parallel imports. Under this principle， trademark owners lose control over their trademarked goods once the goods are released into the stream of commerce. Neither he， nor anyone deriving trademark rights from him， will be entitled to stop the further use or distribution of the product. [FN12] While regarding to the concept of “territoriality principle”， [FN13] it means that intellectual property rights do not extend beyond the territory of sovereign which has granted the rights in the first place. An intellectual property law passed by one country did not apply in the second country. In this sense， the unauthorized importation and sale of the goods in foreign markets， i.e. parallel importation， is infringing on the rights of the trademark owner. [FN14]

　　With regards to trademarked parallel imports， besides considering the two theories above， it is also important to differentiate “the exclusive right to use a registered trademark” from “the exclusive right to use a licensed trademark”。 The subtle differences reflect on their respective legal status. “The exclusive right to use a registered trademark” is a statutory right conferred in accordance with relevant law； While “the exclusive right to use a licensed trademark” is a contractual right arising from the agreement of relevant parties. The former could be directly asserted as a defense against third parties because it is supported by law. The latter， on the other hand， its validity and scope to use the trademark is wholly determined in accordance with the specific “trademark licensing contract”。 In other words， contractual rights cannot be directly deemed as a defense against a third party. Once any dispute arises in connection with such an exclusive right to use， the court or arbitration board must decide the validity and scope of the right pursuant to the relevant contractual provisions and governing law. [FN15] Therefore， if any infringement of a trademark right by a third party arises in the territory of the exclusively licensed right to use， pertaining to the judicial interpretation of China， the exclusive licensed user of the trademark may bring an action independently. However， the substantive right it claims shall be the “exclusive right to use a registered trademark”， not the “exclusive right to use a licensed trademark”。 To some extent， such burden of proof increases the licensee's difficulty of showing the document evidence.

　　Trademarked Parallel Imports Under International Treaties

　　With regard to whether parallel imports should be permitted， although the issue has been raised in the international arena， there is no reconciliation on the matter. The general view is that developed countries oppose parallel imports， whereas developing countries favor parallel imports. Neither Paris Convention nor TRIPS addresses the issue of parallel importation clearly. The final text of the TRIPS Agreement left that issue unresolved， permitting the debate to continue. But it did not ignore the issue of exhaustion altogether， implicitly left it for each Member State to decide for themselves whether or not to recognize international exhaustion of IPRs. Article 6 of TRIPS states that “for the purposes of dispute settlement under TRIPS， subject to the provisions of Articles 3 and 4 above， nothing in TRIPS shall be used to address the issue of the exhaustion of intellectual property rights.” This article clearly suggests that the issue of IPR exhaustion was considered， but that neither consensus nor compromise could be reached. Equally clear is the suggestion that each member state is left to define its own laws regarding IPRs exhaustion， by the legislature and/or the courts. [FN16]

　　However， in 1995， shortly after the TRIPS Agreement was concluded， the International Trade Law Committee （ITLC） of the International Law Association （ILA） met to discuss issues relating to the implementation of the TRIPS Agreement， and a study of the role of parallel imports in the international trading system was commissioned. In its deliberations， the ITLC appeared to reach a conclusion that an affirmative policy favoring parallel imports should be adopted as a matter of international trade policy. This conclusion was reflected the First Report （Final） to the Committee on International Trade Law of the International Law Association on the Subject of Parallel Importation， authored by an ITLC Rapporteur Professor Frederick M. Abbot， was released in April 1997 for comment （the “Report”）。 The Report expressly suggested the adoption of a basic rule that： “A Member shall not restrict the importation of a good or service on the basis of an intellectual property right if such good or service was first sold， or ownership of it was otherwise transferred， on the market of any Member with the consent of the intellectual property rights holder.” [FN17]

　　Though TRIPS doesn't directly address to allow parallel importation， article 6 of TRIPS on “Exhaustion” stipulates that “For the purposes of dispute settlement under this Agreement， subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.” Furthermore， article 30 addresses “exclusive right of importation”， subject to article 6 and parallel import exception. Article 51 on “broader measures”， its obligation does not apply to parallel imports. From these provisions， TRIPS seems to be in favor of parallel imports. It is obviously reflected in the article 6， which indicates that even a parallel import dispute arises， there is no dispute settlement procedure to apply， with an implication that accusation of infringement is impossible.

　　Regarding to The United Nations Convention on Contracts for the International Sale of Goods （CISG）， article 42 addresses that “The seller must deliver goods which are free from any right or claim of a third part based on industrial property or other intellectual property， of which at the time of the conclusion of the contract the seller knew or could not have been unaware， provided that the right or claim is based on industrial property or other intellectual property……”； And some restrictions are stipulated following this provision. However， it doesn't address whether parallel imports are legal or not either. When disputes on this matter arises， it can only be resolved by national court pertaining its national laws on parallel imports.

　　Implication from the United States and European Union

　　Since WTO provisions allow member countries to establish their own rules for parallel imports， the flexibility leaves each country to legislate on the basis of their various national situations， such as economic development， trade policy etc.

　　The United States

　　The position of the United States on parallel imports， generally speaking， adheres to the principle of territoriality. It is governed by both statute and case law. The main statutes are the Tariff Act， the Lanham Act， and the Customs Regulations. Existing legislation and recent court decisions demonstrate that the United States is not likely to departing from its current position that parallel imports are not allowed and that exhaustion is limited to nationwide boundaries. [FN18] Section 526 of the Tariff Act prohibits the importation into the US of merchandise bearing a trademark registered in the US and owned by a US entity， unless the importer has written consent from the trademark proprietor. [FN19] The gist of the section is on consent to importation， not consent to affixing the mark onto the product and the prohibition requires no proof of likelihood of confusion. The intended beneficiaries of the section are American citizens who had purchased trademarks from foreigners. [FN20]

　　Over the years， the Customs and the Treasury Department have promulgated regulations supplementing and providing exceptions to the operation of Section 526. [FN21] These exceptions allow Customs to refuse seizure of parallel imports where： the US and foreign marks are owned by the same entity （the “same entity” exception）； Or both trademark proprietors are subject to common ownership or control （the “common control” exception）。 [FN22]

　　However， there are further exceptions put forward by the Federal Supreme Court of the United States， based on the “same entity” exception and the “common control” exception. In other words， under certain circumstances， the “same entity” exception and the “common control” exception are not applicable. One situation is when material difference exists between parallel imports and legally authorized products， parallel import is prohibited. The other situation is： when the US trademark owner is independent from the foreign manufacturer， or the US trademark owner authorizes foreign independent companies to manufacture trademarked goods， parallel import is also prohibited. Regarding to the first situation， the court in Nestle ruled that the threshold of “material differences” between products should be kept quite low because the potentially confusing differences are not always blatant and it is by subtle differences that consumers are most easily confused. [FN23] In Societe des Produits Nestle v Casa Helvetia， [FN24] the court held that to establish trademark infringement， the domestic trademark proprietor need not prove that the Defendant's imports are of inferior quality. It is sufficient to show that they are materially different. If material difference exists between goods sold simultaneously in the same market under the same name， a legal presumption of consumer confusion automatically arises. [FN25] Furthermore， Section 43 of the Lanham Act， it provides for civil liability against making false representations or advertisements of products， including misrepresentations. This act has been used to block parallel imports by claiming their materially different quality.

　　The US Customs Regulations amended in 1999 were also of importance to rule parallel imports. The Regulations now permit parallel importation of materially different goods manufactured abroad by entities that are affiliated with the US domestic trademark proprietor， provided that the products bear a prominent and legible label stating that the product is not authorized by the US trademark owner for importation and is physically and materially different from the authorized product. [FN26]

　　In general， the United States permits parallel imports of trademarked goods unless the trademark owner can show that the imports are of different quality from goods sold locally， or otherwise might cause consumers' confusion.

　　European Union

　　Although the European Union （EU） has enacted regional exhaustion boundaries， the EU policy is not now substantially different from the U.S. policy. The EU policy of regional exhaustion is similar to that of the U.S. policy of domestic exhaustion， as the member nations of the EU are analogous to the individual American states. Exhaustion is recognized within the region/states， but not outside the region/states. Each member nation of the EU has their own intellectual property laws， but the creation of the EU region has brought with it uniformity. [FN27]

　　EU treats parallel imports in two different ways. In the European Economic Area （EEA）， once a product bearing a trademark is sold either by the trademark owner or the distributor with the trademark owner's permission， it is impossible for the trademark owner to use his registered trademark rights in other EEA countries to prevent that original product's importation. However， it is still not clear how far a parallel importer can go， in case he decides to alter the original goods in any way. While outside the EEA， parallel imports of trademarked goods are blocked for non-member countries. As a result of recent European Court of Justice （ECJ） decisions， the owner of trade mark rights in the EEA can prevent the importation of an original product bearing that mark into the EEA from outside that European Economic Area unless the importer can unequivocally demonstrate that the trade mark owner has renounced his right to oppose the placing of the product on the EEA market. [FN28]

　　China's Current Legal Environment of Parallel Importation in Trademark Goods

　　Debates on the controversial issue of parallel imports have been ongoing in China， in particular after China's accession to the WTO. Nevertheless， China's major laws and regulations surrounding trademarked parallel imports issue haven't regulated it systematically. In the article 52（1） of the New Trademark Law （2001）， it stipulates that “using a trademark which is identical with or similar to the registered trademark on the same kind of commodities or similar commodities without a license from the registrant of that trademark” should be held as an infringement act. And article 52（5） provides a “catch-all” provision that “causing other damage to the right to exclusive use of a registered trademark of another person.” Moreover， under Regulation For Implementation of the Trademark Law （2002）， article 50（a） of the Regulation provides that it is an infringement of the trademark proprietor's exclusive right to use a registered mark by： “using on identical or similar commodities or using a sign which is identical or similar to the registered trademark of other people as the name of commodity or as the decoration of commodity so that the general public are misled.” In addition， this article makes it clear that confusion caused to the general public is indispensable if one is to successfully sue a parallel importer. Therefore， we may put it in this way， if there is no product confusion misleading the public， generally， the parallel importer should not be held liable for unlawful behavior.

　　With a view to other relevant laws of PRC， such as the Contract Law， the Customs Law， the Anti-Unfair Competition Law and so on， they have not addressed the parallel imports issue directly. In general， the parallel imports do not seem to be prohibited by laws in China.

　　Conclusion

　　Probing into the issue of trademarked parallel imports has a far-reaching influence on China's foreign trade. It is acknowledged that different country faces different political， social and economic challenges， thus what is ideal for one country is not necessarily applicable to another. Based on this philosophy， in conjunction with China's current position of trademarked goods' parallel importation， when faced with the intractable issue of whether China should permit parallel importation， it is my view that， China should have a mixed policy on trademarked parallel imports. In other words， what might be feasible is to permit parallel imports with certain exceptions. In detail， I would suggest that the exceptions are the trademarked parallel imports should be of no material difference and should not generate consumers' confusion； The criteria for “material difference” could refer to the U.S. law's standard as a benchmark. Moreover， in some special industries， e.g. cosmetics， health care products and pharmaceuticals， parallel imports in these areas are suggested to be prohibited， because these products directly affect public health and safety. Thus a stringent standard for product imports is significantly needed.

　　From my viewpoint， the grounds for allowing the trademarked goods' parallel importation in China are on the basis of the following reasons.

　　Firstly， the aim of the WTO is to eliminate all international trade barriers. Restriction to parallel imports would be construed as an artificial trade hindrance. In the last three or four decades， globalization has intrinsically changed the structure of international trade and economic relations. With the advent of globalization， free trade policy has become a dominant trend in international trading world. The principal objective of multilateral trading system is to push forward free trade to the utmost on the condition that no negative influence arises. To eliminate barriers to the free movement of goods across national borders is the most extraordinary path to realize more liberalizing free trade system. As Professor Verma has forcefully argued： “The objectives of TRIPS include to reduce distortions and impediments to international trade and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to international trade. Territorial exhaustion， by creating artificial barriers against the free movement of goods， would be an impediment towards the stated purposes of these Agreements.” [FN29]

　　It is said that countries that participate in international trade grow out of poverty faster than those that do not. The evidence for this proposition is clear. World bank research shows that per capita real income grew three times faster in the 1990s for developing countries that most increased their participation in globalization through trade than for the rest of the developing countries. The world bank also finds that trade barrier elimination in conjunction with related development policies would lift tens of millions of people from poverty by 2015. Developing countries that generate growth through trade will be less dependent on official aid over time. [FN30] In this regard， to permit parallel importation is possibly conducive to trading-encouraged developing countries. China should treat the parallel imports problem as a challenging test with willingness， to bring harmonization to the global legal and economic environment by establishing and enforcing national predictable， equitable laws and regulations. China is able to steer towards the goal of achieving a barrier–free international system of trade on its own initiative.

　　Secondly， from an economics perspective， with an analysis of vertical price control， a manufacturer selling its product through an independent agent sets the wholesale price sufficiently low to induce a desired retail price abroad. This permits the agent to sell the product profitably in the originating market. Parallel imports can increase retail-market competition， it can also affect a rights-owner's incentive in setting the wholesale price it charges a distributor， thereby reducing vertical pricing efficiency. There exists a U-shaped welfare curve of parallel trade with respect to trade cost. Restricting parallel imports benefits the manufacturer， but could raise or reduce global surplus. However， it is said that parallel imports are more likely to increase welfare within a region. [FN31] Therefore， prohibition of parallel imports is not necessarily a good choice.

　　Thirdly， to compare trademarked goods with patented goods， it is understandable to provide for the former a more flexible legal environment. Because patents incorporate useful scientific discoveries or knowledge which are costly to acquire. It is clear that， given that the investment of time， energy and money into developing a patentable item is substantial， and the low probability of any given patented item being successful， it is important to provide innovators with an incentive to undertake research and development. [FN32]

　　By contrast to patent protection， trademark is a tool which reduces search costs and enable consumers to enjoy the benefit of previous satisfactory experiences with products. Trademark acts as a signal from producer to consumer that they can be assured of a given quality of product. Regarding to the trademarked parallel imports are genuine goods， in this manner it is reasonably persuasive to permit trademarked parallel imports.

　　Fourthly， from a social point of view， Chinese consumers may enjoy the same quality products at less expensive prices. The benefit is to increase the living standard of Chinese people. This is important for developing countries， and perhaps it could also explain why very few developing countries choose to restrict parallel imports completely. Moreover， if parallel importation is not allowed， high prices and lucrative profits in selling famous foreign brand-name products will only increase the likelihood of unscrupulous traders producing and selling counterfeits of such products. [FN33]

　　Lastly， at the current stage， China only has the Anti-Unfair Competition Law， but without Antitrust Law. Therefore， there are no real safeguards against abuses of monopolistic or anti-competitive behavior which might happen in the local market. Permitting parallel importation of trademarked goods， to some extent， could play a role of mitigating unfair monopoly of the trademark owners in order to maintain sound market order. Although it is true that in the short run， interests of domestic trademark proprietors are harmed by the presence of parallel imports in the market， it is asserted that the picture is incomplete. [FN34] The loss of domestic trademark proprietors from such competition would be largely offset by the gain they would make from the reduction in tariff and elimination of quota system upon China's WTO accession. [FN35] To conclude， in the progressively globalized world， free trade has been gaining increasing popularity. Striking the balance among a variety of interests， parallel importation of trademarked goods in China， the advantages outweigh the disadvantages.

　　【注释】

　　[FN1] Cindy Wai Chi Wong， “Parallel Importation of Trademarked Goods in Hong Kong and China”（2004） 34 HKLJ 151.

　　[FN2] The “Lux” case and the“AN'GE” case， the details of which are analyzed in the third section of this article.

　　[FN3] See article 52（1） and 52（5） of the New Trademark Law of PRC（2001）。

　　[FN4] Keith E. Maskus， “Parallel Imports In Pharmaceuticals： Implications for Competition And Prices In Developing Countries——Final Report To World Intellectual Property Organization”， April 2001.

　　[FN5]From Wikipedia， the free encyclopedia， available at http://en.wikipedia.org/wiki/Grey_market

　　[FN6] Gene M Grossman and Edwin L. –C.Lai， “Parallel Imports and Price Controls”， July 2006， available at http://nt2.fas.nus.edu.sg/ecs/res/IO/22012007.pdf.

　　[FN7] See Wu Jian-chuang， “Legal Questions on Parallel Imports arose from the Shanghai Unilever Trademark case” （in Chinese） （2000） Part 2， available at http://article.chinalawinfo.com.eproxy1.lib.hku.hk/article/user/article_display.asp？ ArticleID=20221.

　　[FN8] See note 1 above.

　　[FN9] See note 7 above.

　　[FN10] Yuan Xiao-dong， “Balance Required in Approaching Parallel Battle” （2002） MIP 36， 38 （July/August）。

　　[FN11] See note 5 above.

　　[FN12] Shira R. Yashor， “Competing in the Shadowy Gray： Protecting Domestic Trademark Holders from Gray Marketeers Under the Lanham Act” （1992） 59 U Chi L Rev 1363， 1369-1371

　　[FN13] Peter Drahos， The Universality of Intellectual Property Rights： Orgins and Development“， available at www.wipo.int/tk/en/hr/paneldiscussion/papers/pdf/drahos.pdf

　　[FN14] For more explanation of the two principles， see Friedrich-Karl Beier， “Territoriality of Trademark Law and International Trade” [1970] 1 IIC 48.

　　[FN15] Chi Shaojie， “Exclusive Right to a Licensed Trademark： A Defense against parallel importation？” available at www.lawinfochina.com/dispfree.asp？db=4&id=40 - 21k.

　　[FN16] Alan J. Kasper， “A View of the Parallel Imports Issue From An International Perspective”， available at www.sughrue.com/……/Presentation/PublicationAttachment/bb332de0-48be-b0f4-1f5a991feabc/par_imports.htm.

　　[FN17] See note 16 above.

　　[FN18] See note 16 above.

　　[FN19] 19 USC §1526 （1999）。

　　[FN20] Carl Baudenbacher， “Trademark Law and Parallel Imports in a Globalized World - Recent Developments in Europe， with Special Regard to Legal Situation in the United States” （1999） 22 Fordham Int'l LJ 645， 679

　　[FN21] 37 Fed Reg 20，678 （1972） （codified at 19 CFR §133 （1981））。

　　[FN22] 19 CFR §133.21（c）。

　　[FN23] Mark S. Sommers， “US Grey Market Goods： What's In， What's Out” [1994] 7 EIPR 269， 272.

　　[FN24] 982 F 2d 633 （1st Cir 1992）。

　　[FN25] Ibid.， p 640.

　　[FN26] 19 CFR § 133.23（b）。

　　[FN27] See note 16 above.

　　[FN28] “Protecting Trade Marks”， R. G. C. Jenkins & Co.， available at http://www.jenkins-ip.com/serv/t_trad03.htm#intro.

　　[FN29] S. K. Verma， “Exhaustion of Intellectual Property Rights and Free Trade - Art 6 of the TRIPS Agreement” （1998） 29 IIC 534， 553.

　　[FN30] “2006 Trade Policy Agenda and Annual Report”， March 2006， available at

　　http://www.ustr.gov/assets/Document_Library/Reports_Publications/2006/

　　2006_Trade_Policy_Agenda/asset_upload_file897_9076.pdf

　　[FN31] Keith E. Maskus and Yongmin Chen， “Vertical Price Control and Parallel Imports： Theory and Evidence”， Review of International Economics，12（4） ，551-570，2004.

　　[FN32] Patrick Kenny & Patrick Mcnutt， “Competition， Parallel Imports & Trademark Exhaustion： Two Wrongs From A Trademark Right”， December 1999， Competition Authority Discussion Paper.

　　[FN33] See note 1 above.

　　[FN34] See note 1 above.

　　[FN35] Nine months after joining the WTO， the average tariff rate of more than 5，000 kinds of products has dropped to 12 per cent from 15.3 per cent and more than 200 kinds of products requiring licences and subject to quotas have had these restrictions removed. See “Foreign Trade Booming Since WTO Entry”， China Daily， 27 Aug 2002， available at： http:// www.china.org.cn/english/40525.htm.

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　　US Trade Representatives' 2002 Report to Congress on China's WTO Compliance at p 40， available at http://www.ustr.gov/regions/china-HK-mongolia-taiwan/2002-12- 11China_WTO_compliance_report.PDF.　（2008 LL.M. graduate student at HKU·刘璐）

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