Trademark Law - Parallel Imports - article Federal Court Accepts Unique Copyright Attack on "Grey Market Goods"

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Source:
http://www.gesmer.com/publications/article.php?ID=121
December 6, 2006

Federal Court Accepts Unique Copyright Attack on "Grey Market Goods"
July 1989
The problem of "grey market goods," also known as "parallel imports," is pervasive in international trade. Grey market goods are products lawfully manufactured outside the U.S., and then imported into the U.S. without the permission of owner of the U.S. trademark, copyright or patent associated with the product. In the most common situation a U.S. dealer finds that, due to favorable exchange rates or for other reasons, it can obtain a product overseas for less than the price charged by the authorized U.S. distributor. The dealer then imports the product into the U.S., undercutting the price of the product sold by the authorized U.S. distributor.
The application of U.S. copyright law to the grey market sale of copyrighted works requires that an apparent contradiction be resolved. One provision in the law states that the owner of a copyright has a "bundle" of exclusive rights, including the right to distribute copies of the copyrighted work. Another provision of the law -- the so-called "first sale" doctrine -- states that once a copyrighted work is sold, the owner has no right to limit resale of the work.
The courts have resolved the inconsistency between the "distribution right" and the "first sale" doctrine by creating a "bright line" test: generally speaking, if goods are manufactured and first sold outside the U.S., the U.S. copyright owner can restrict their importation into the U.S. However, if the goods are first sold inside the U.S., and later sold outside the U.S. by a legal purchaser, the copyright owner cannot object to the sale of the goods back into the U.S. See, e.g., BMG Music v. Perez , 952 F.2d 318 (9th Cir. 1991), cert. denied , 112 S. 2997 (1992).
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