Entering Foreign Markets

Eventually, you may consider taking your product international. It's important to keep in mind that patents, trademarks, industrial designs and copyright are "territorial" rights, i.e., they only have legal force in the country or region in which they were granted. Where copyright is concerned it is automatic in all states party to the Berne Convention.

Important: If you are considering operating at an international level you must protect your rights in the markets of interest.
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IP and international markets: Why is it important?

Whether you intend to export, outsource manufacturing or collaborate with overseas partners, you may be engaging in markets in which your intellectual property (IP) rights are not protected.

Obtaining IP rights in target markets will ensure that third parties in the those markets are prevented from exploiting your IP rights and they will be interested in collaborating with you and obtaining the right to use your IP rights through licensing or other such arrangements.

Remember – If you haven't obtained protection in a foreign market, competitors are free to use your patents, designs and trademark rights (exceptions do exist in the context of what are called famous or well-known marks). They are not obliged to obtain a right to use through a licensing agreement. Licensing agreements are only relevant when there are valid IP rights.

(Image: Getty Images/Mingirov)

Remember – If you haven't obtained protection in a foreign market, competitors are free to use your patents, designs and trademark rights.

Can I protect my IP globally?

There is no such thing as a global patent, trademark or industrial design (the situation is a bit different with copyright).

The closest you can come to global protection is by using WIPO's global IP services.

These services offer inventors and creators a single gateway through which they can make a single application for protection in multiple countries.

Watch your language! A trademark should have no adverse meaning or undesirable connotations in the market in question and it should be easy to pronounce and remember in the relevant languages.

Exhaustion and parallel importation

Exhaustion

Let us imagine that a patent owner markets his patent protected vacuum cleaner in country A at USD 100 and in country B at only USD 50. This provides an interesting business opportunity for someone to import into country A the vacuum cleaner from country B and sell it at USD 75. As to whether the patent owner can prevent such an importation into country A depends on the exhaustion regime adopted in country A.

As a general principle, once a product has been put into the market with the consent of patent owner, the rights of the patent owner over the subsequent sales of the same product are said to be exhausted.

That means that the good will be free to circulate without the need for further agreement of the patent owner for those subsequent sales. This doctrine, known as the “first-sale doctrine”, is useful in order not to overburden future buyers with excessive requirements which would be difficult, if not impossible, to meet.

If the market in question that the good is free to circulate in without the need for approval from the patent owner is the whole world, a region or a country depends on whether the country to which the good is being imported into has adopted an exhaustion regime that is international, regional or national. Countries that adopt an international exhaustion regime consider that once a product has been put into a market anywhere in the world, that product will be free to circulate anywhere in the world. In such a regime, the importation into the country of a patented product from another country where the same good is available at a cheaper price cannot be prevented because the rights of the owner of the patent to control the circulation anywhere in the world is said to be exhausted. To refer to the example above, if country A adopted international exhaustion, it will be possible to import the patented vacuum cleaner from country B, where it is available at USD 50.

On the other hand, under a national exhaustion regime, the rights of the patent owner to control the circulation of the patented article are exhausted only in the domestic market where the patented product has been marketed. That is, the good can circulate in the domestic market and the patent owner cannot control the subsequent sales of that product. However, their rights remain with respect to goods that are marketed elsewhere and sought to be imported into the domestic market. Therefore, if country A adopts a national exhaustion regime the patent owner can, based on the right of importation inherent in the patent right, prevent the entry into country A of the vacuum cleaner marketed in country B. Finally, a regional exhaustion regime allows the free circulation of a good protected by a patent or other industrial property right once it has been put in the market of a country member of a regional trade jurisdiction (for example, the European Union).

Parallel importation

The concept of exhaustion and parallel importation are two sides of the same coin. While exhaustion looks at the issue of the rights of a patent owner to control the importation of his or her patent-protected product from one market into another, parallel importation looks at the same issue from the perspective of the importer.

Therefore, parallel importation is the attempt to profit from price differentiation in different markets and to move products from a higher priced market to a lower priced market and to charge a price in between these two prices and to gain the difference as profit.

Whether that importation is legal or not depends on the exhaustion regime adopted by the importing country. If it had adopted a national exhaustion regime the patent owner would be able to prevent the importation whereas if the country had adopted an international exhaustion regime the patent owner would not be able to prevent the importation.

Parallel importation is sometimes referred to as gray market goods. This is somewhat misleading as the goods as such are original. The only difference relates to the distribution channels, which are not those directly controlled by, and previously agreed to, the IP owner.

More information

  • The 'Outsourcing Offshore' Conundrum – An IP Perspective PDF,The 'Outsourcing Offshore' Conundrum – An IP Perspective