(2004; 110 pages)
II.1.2 Parallel Imports and Exhaustion of Rights
Parallel importation refers to a situation where a third party, without the authorization of the patent holder, imports a foreign manufactured product put on the market abroad by the patent holder, his licensee or in another legitimate manner in competition with imports or locally manufactured products by the patent holder or his licen-see.14 The practice is based on the principle that the patent holder has been remunerated through the first sale of the product and his further control over the resale of the product would unreasonably restrain trade and stifle competition. In other words, having been remunerated the right holders are said to have exhausted their rights. Under article 6 of the TRIPS Agreement, as confirmed by the Doha Declaration, WTO Members are free to choose their own regime of exhaustion of rights without challenge.15
14 For further discussion on parallel imports, see Correa (2000). See also Lettington and Musungu (2000) and Abbott (1998).
15 See para. 5(d) of the Declaration.
Parallel importation is used as a measure to prevent market division and price discrimination on a regional or international scale.16 Since pharmaceutical companies set prices for the same products at different levels in different countries, parallel importation enables consumers to gain access to the product without affecting the right of the patent holder to receive remuneration in the country where the product is first sold. While allowing parallel importation in developed countries could be seen as undermining efforts to provide lower prices in developing countries, the same argument can not be made where it is developing countries allowing parallel imports. Even in cases where importation takes place from markets where medicine prices are regulated, it remains true that patent holders will be compensated albeit at a lower rate than where price regulation does not exist.
16 Correa (2000), p. 72.