Parallel Importation
Deidre Silver
3:00 pm May 19, 2004
Legal Director at John Wiley and Sons
Parallel Imports are aka grey goods. Stories with respect to pharmaceuticals – drugs from Canada being purchased here due to difference in pricing. Issue has been around for years. Legitimate goods, not pirated, but intended for sale in market outside of US and re-imported without authority of manufacturer.
Goods are often sold in other countries at level lower than US due to different market conditions.
With respect to publishing industry we see it most often with respect to higher ed titles as those titles are over $100 in price range whereas in UK it may be half and in Asia one fourth of US price.
Due to difference in markets and custom. Custom in UK is paying less in tuition and materials – therefore market can’t bear higher prices. In Asia and South America, poverty issues mean they can’t afford the higher prices [so are we subsidizing?] If publishers charge more than market bears, then piracy increases. So there is consider pressure for publishers to price to market.
[hmm.. had a conversation yesterday where rep for AAP said the problem is the margins that college bookstores are charging. They were surprised to learn those stores are run by Barnes/Noble , etc in our state]
Internet is allowing cross market price comparison – the ease of purchasing from those markets has thus allowed increase in grey market problem.
Differential pricing is driven by needs in US market that are unique. For example, US is only market with significant used book market. Because of decreased sales caused by used books, higher prices are charged. Faculty here require complimentary copies, lecture notes, ppt slides, etc. These are driven by US demands but the “free” stuff affects price of book. US market requires 4 color hard cover text whereas foreign markets are b/w paperback. [Do demands conflict with existence of used book market?]
Pressures
- From authors who feel grey goods are driving royalties down
- US bookstores pressuring publishers bks their sales are being undercut when students source books elsewhere they sell fewer titles.
- Articles on Internet about US students objecting to prices
- US goods are more expensive – foreign goods aren’t the same despite student thinking to the contrary
- Better quality hardware – int’l has less diagrams etc
- US Students think they are subsidizing int’l students
- A lot of markets where they couldn’t afford the price
- Differential market pricing means publishers aren’t fighting piracy so that’s an avoided cost not factored into price of book
How to respond to grey market sales
- Filed suit against small family run business
- Sold grey goods through amazon and ebay
- Bought international editions
- Tore out copyright notice pages and restriction language
- Then on website used picture of US edition for ads
- Grounds for suit were
- Under 602(a) copyright owner controls right of importation
- In late 90’s Sup Ct decided case which said first sale doctrine allowed for import of goods manufactured in US, exported outside – allows for re-import as the first sale occurred here. Therefore, copyright owner no longer controlled that work. Left open question of goods manufactured outside US. Significant language in decision saying 602(a) is strong where manufacture occurs outside US.
- So, 602 claim is valid here
- Also possibility of damage to trademark owner (dilution) as the int’l version may be significantly different from domestic version of the product
- Unfair competition also possible claim
- Bait and switch (falsely advertising what they are selling)
- Using the cover of US issue to advertise –
- Deceptive practice
- Not fair use – thus copyright violation
- A Claim under DMCA
- Tearing out copyright page and eliminating restriction language is a violation
- State law claims as well
- Unfair competition
- Deceptive trade practices
- Defendants settled very quickly
- Injunction
- 6 figure settlement amount
- But they started selling other publishers works
- Other courses of action
- Tariff act section 337 unfair competition import trade
- Legal action through US Trade Commission
- Relates to materials as well as services that go with the book (e.g. faculty resource networks) Those types of resources are not available to international purchasers of a work
- These actions are quick, take about 12 months.
- But, before you bring a 337 need to understand if Exec Branch will look unfavorably on such action as the Executive can overrule in 30 days.
Copyright 2004 Jim Flowers
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