Parallel Imports and Trademark Risks in Singapore – Trademark

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Does your business import and resell goods from foreign markets? Parallel import products are commonly found in the Singapore market, cars, chocolates and beauty products being just a few examples. However, does their prevalence mean that it is safe to deal with parallel imports? In this article, we highlight some of the trademark issues that companies may encounter when negotiating parallel imports in Singapore.

What are parallel imports?

One way to understand parallel imports is to identify what they are not. It is important to note that parallel imports are not counterfeit goods. The term “parallel imports” refers to goods that are first sold in a foreign market with the authorization of the trademark owner and then imported into another market (in this case Singapore) without the authorization of the trademark owner. Mark.

Not only are the goods genuine, but they can potentially retail for less than counterparts sold by authorized retailers. In fact, during a parliamentary debate in Singapore, it was noted that parallel imports provide consumers with “a wider choice of products that they can buy and also at cheaper prices”.1

Parallel import trade also provides opportunities for local entrepreneurs. Small or medium-sized businesses, in particular, may find that parallel import trade allows them to compete with more established traders in the Singapore market.

In many cases, these goods already have a sufficient reputation in Singapore to attract customers, which saves parallel importers from having to advertise extensively. Additionally, local businesses may wish to avoid being tied down by licensing and distribution agreements. By operating as parallel importers, they may also not need to provide warranties, warranties and customer follow-up services.

In summary, parallel imports are here in the Singapore market, and local consumers and businesses seem to benefit from it. However…

Is it legal to trade in parallel imports?

This is a common question from local businesses, but without a simple answer because there is no specific law on parallel imports. Instead, parallel imports are regulated by various rules and systems in Singapore, including trademark laws.

Under Singapore’s Trademarks Act (TMA), trademarks include not only names and logos, but potentially even shapes, colors, packaging aspects or combinations thereof. this. If a person or company wishes to use a third party’s marks in commercial activities, it is usually necessary to obtain a license to prevent infringement. A business or individual with a trademark registered in Singapore has the right to claim infringement against the unauthorized use by a third party of an identical or similar sign for identical or similar goods or services in Singapore, which could result in a risk of confusion.

This would include trade in parallel import goods that bear third party marks, except for a defense in the CML commonly referred to as “exhaustion of rights”. The defense applies to commercial activities such as importing and retailing genuine products that were first put on the market with the consent of the registered owner. This “market” may be located in Singapore or overseas, which expressly covers parallel imports from overseas markets.

In practice, however, relying on this defense is not so simple. Here are some key points to note:

  1. Are the goods genuine products?

First, the defense only applies if the goods are genuine products. This can be difficult to verify, especially if the goods come from a complex cross-border supply chain. In many cases, a parallel importer may not be able to carry out his own checks and/or seek assurances from his supplier. What they assume to be genuine products may actually turn out to be fakes.

A 2021 decision involving global group Fujifilm and a Singapore-based company illustrates this risk.2 The local company claimed to be a parallel importer of Fujifilm products. However, since there was no credible evidence of the supplier’s identity, the judge concluded that they were not genuine goods and the infringement defense did not apply.

  1. Have the goods been placed on the market with the consent of the owner?

Second, the parallel importer will need to verify that the registered owner’s goods have been placed on the market (whether overseas or in Singapore) with his consent.

In a 2017 case3, this became the main reason why the Singapore-incorporated company, An Sheng Trading, could not raise this defense. Although An Sheng imported genuine Samsonite backpacks, the Court found that An Sheng infringed on Samsonite’s trademarks.

Indeed, Samsonite had only consented to its backpacks being supplied to the computer manufacturer, Lenovo, as part of a co-branding agreement. The backpacks were to be offered with the sale of select Lenovo laptops in China. Before this could be realized, genuine products were diverted by authorized Samsonite dealers to other traders such as An Sheng. As such, Samsonite’s products had never reached the market with their consent.

Therefore, even if the goods are genuine products, the question of whether the registered owner has actually put them on a market raises a potential obstacle to invoking the defense of exhaustion of rights.

  1. Are there any changes in the condition of the goods?

Furthermore, the defense cannot come into play if the condition of the goods has been modified or altered since they were first placed on the market with the consent of the registered owner.

Alterations to merchandise are not limited to visible damage or deterioration. There could be subtle changes such as the removal of barcodes and machine-readable labels that might not be easily identifiable by parallel importers. If these changes are considered to have unfairly diluted the distinctive character of the registered mark, the parallel importer will also not be able to rely on the defense of exhaustion of rights.

In the Fujifilm case discussed above, the judge held that even if the goods had been genuine products, the Singaporean company would have been liable for the infringement because changes had been made to the firmware and speed configurations of the device. printing machines.

What are the consequences of counterfeiting a registered trademark?

Trademark counterfeiting is a serious offence. Penalties include the requirement to pay the registered owner monetary damages or a profit account. The amount will be based on various factors, including proof of losses incurred due to the unlawful conduct. In addition, the Court may order the disclosure of information and documents relating to the wrongful conduct. Based on the court’s findings of infringement, the registered owner can also request e-commerce sites to remove a parallel importer’s product listings.

Key points to remember

Parallel importers have a defense against trademark infringement, but various conditions must be met, including but not limited to those described above.

Moreover, counterfeiting of a registered trademark is not the only risk a parallel importer faces. Trademark holders may also be able to take action based on unregistered rights if the retail sale of parallel import goods gives rise to misrepresentation and likelihood of confusion.

In addition to trademark rights, trademark owners may also seek to enforce other intellectual property rights. In some cases, several types of intellectual property rights may exist in the same product. For example, the software and firmware in the Fujifilm case was also copyrighted. By importing the machines to Singapore with unauthorized modifications, the local company was found to have infringed not only Fujifilm’s trademark rights, but also their copyrights.

In conclusion, local businesses should be aware that parallel import trade is not without risks. The legality of parallel import trade varies on a case-by-case basis and professional advice may be considered to better manage these risks.

This article was first published on the ASME website.

Footnotes

1 Sing. Speak. Debates, Official Report (August 25, 1994) Vol. 63 at passes 413 – 416

2 FUJIFILM Business Innovation Asia Pacific Pte Ltd et al v PTC Business Systems Pte Ltd. [2021] SGHC 272

3 Samsonite IP Holdings Sarl. against An Sheng Trading Pte Ltd. [2017] SGHC 18

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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