Fair Trade, Monopoly and Competitiveness
THE NIGERIAN LEGAL FRAMEWORK
As stated earlier, grey goods generally are genuine (not counterfeit) products, but they may have been manufactured for a different market, and are usually imported into a target market without the consent of the patent/trademark owner. These goods are then further distributed within the target market without the permission of the franchisee(s) appointed for that market. Therefore, the legal status of parallel import in a given jurisdiction rests squarely, on the treatment that is given to the doctrine of exhaustion of IPR, in the applicable IP laws.
The Nigerian IP regime is governed by a number of statutes which include the: Trademarks Act (Cap. T13, LFN 2004); Merchandise Marks Act (Cap. M10, LFN 2004); Copyright Act (Cap. C28, LFN 2004); Trade Malpractices (Miscellaneous Offences) Act (Cap. T12, LFN 2004); and the Patents and Designs Act (Cap. P2, LFN 2004).
Admittedly, these statutes create the basis for the ownership, proprietorship and authorship of patentable inventions and registrable innovative brands, and (sometimes) criminalize any acts that violate or compromise the genuine image of registered proprietary rights, such as counterfeiting or false misrepresentation or any other forms of infringement. However, the laws unfortunately are all silent on the extent to which an IP owner, or his licensed representative in respect of any branded product, can legally restrict the distribution and sale of such product in the market by an unlicensed importer or trader.
In the Nigerian IP statutes as earlier stated, neither parallel imports nor the exhaustion doctrine is specifically noted. However, there have been a number of judicial pronouncements by the Nigerian courts on the knotty issue of parallel imports. In the case of The Honda Place Limited Vs. Globe Motors Limited [2005] 14 NWLR (Pt.945) 273, the Plaintiff, who was licensed by the Japanese manufacturer of Honda cars for the Nigerian market, entered a sub-dealership agreement with the Defendant granting the right to import and sell the cars allotted to the Plaintiff by the manufacturer. The Plaintiff claimed that the Defendant, in breach of their contract, was engaging in parallel importation of Honda cars from the United States instead of Japan and in order to protect its business and reputation, sued the Defendant on the grounds that Honda cars from the United States were ill-adapted for the Nigerian climatic conditions and fuel specifications. In delivering a consent judgment (adopted by the parties), the Federal High Court ordered the defendant to cease from importing Honda cars from the United States or any other country different from Japan.
Whilst the decision by parties to amicably settle the above case seems to have deprived us of the opportunity of a full judicial pronouncement, on the legal rights of IP owners and their licensed agents against the parallel importation of their branded goods, the issue appears to have been settled by the Court of Appeal in the case of Pfizer Specialties Limited Vs. Chyzob Pharmacy Limited (LER [2006] CA/L/282/2001), where the court held that parallel importation is a foreign doctrine, which is not actionable under Nigerian Law.
INTERNATIONAL REGIMES COMPARED
In other countries of the world, and of course in major regional and international economic groups, the legality or otherwise of parallel imports has always revolved around the sole consideration of the Exhaustion Doctrine. Exhaustion of IPR may operate at the National, Regional, or International levels.
Where exhaustion of IP right is upheld within a country/State (National Exhaustion), an IPR owner cannot object to the resale of goods that have been put in a national market by him or by another with his consent. In the case of a region/allied States within which the exhaustion principle operates (Regional Exhaustion), resale of goods that have been put on the regional market by an IPR owner or by another with his consent cannot be prevented by the IPR owner, using national laws. And in similar vein, the principle of International Exhaustion seeks to extinguish the legal right of an IP owner to prevent the resale of goods which have been put on the market anywhere in the world by him or by another with his consent.
In the past few decades, negotiations of international trade agreements have centered on the promotion of policies that encourage free movement of goods and competition across different jurisdictions. This has “inadvertently” legitimized parallel importation of goods across the global economy.
The World Trade Organisation (“WTO”) introduced IP law into the international trading system at the end of the “Uruguay Round of the General Agreement on Tariffs and Trade” (GATT) in 1994 by coordinating negotiation of the agreement on “Trade-Related Aspects of Intellectual Property Rights (“TRIPS”). Unfortunately TRIPS, which ‘remains the most comprehensive international agreement on IP to date’ and which ordinarily would be expected to cover issue of parallel importation (the overall objective of the WTO/GATT is promotion of international free trade), is neutral on the subject. To avoid confusion, it was then provided in Article 6 of the TRIPS that; “for the purposes of dispute settlement under this Agreement, … nothing … shall be used to address the issue of exhaustion of intellectual property rights.” Impliedly, this means that no international consensus on the issue of parallel imports currently exists.
The European Union (“EU”) however operates an effective regional exhaustion principle within the European Economic Area, which have both been legislated and developed by the European Court of Justice (“ECJ”). Article 101 and 102 of the Treaty on the Functioning of the European Union (“Treaty of Rome”) collectively prohibit “ (101) all agreements between undertakings, decisions by associations of undertakings and concerted practices … and (102) any abuse by one or more undertakings of a dominant position within the internal market … which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market …” In the light of this, the ECJ has constantly decided that “the substance of a patent right should basically confer the exclusive right on the inventor to the first marketing of the patented product in order to permit a remuneration for the inventive activity” (see: Merck & Co. Inc. Vs. Stephar, 13 IIC 70 (1982) – Merck) and that in cases where a product has been marketed by the patentee or with his consent in countries of the European Union, the exclusive right of the patent owner becomes exhausted after the first sale (see: Merck Vs. Primecrown [1997] 1 CMLR 83).
In the United States of America (“the U.S.”), neither an exclusive right of control is given to owners of branded products that have been put on the market in any of the States within the U.S., nor an outright ban placed on parallel importation of such goods. The U.S. Customs Service regulation on importation of branded goods (effective March 26, 1999) allows importation of goods which are physically and materially different from those authorized for sale in the U.S. even if they carry the same trademark; as long as the goods carry a label with information identifying them as so.
In the West African sub-region, the treaty on free trade which encompasses the principle of exhaustion of IPR in marketed products has remained ineffective unlike the EU’s Treaty of Rome. In 2008, the Economic Community of West African States (“ECOWAS”) in an attempt to foster international trade within the region developed the ECOWAS Competition Rule. The ECOWAS Treaty therefore prohibits all agreements which may affect trade between ECOWAS member states and the object or effect of which are or may be the prevention, restriction, distortion or elimination of competition.
Notably to date, neither the domestication of the ECOWAS Competition Rule nor an enactment of a locally developed competition law has taken place in Nigeria. For this reason therefore, a parallel importer who is sued by an IP owner of a branded product, cannot make the ECOWAS Competition Rule a defence before the courts in Nigeria. The legal rights of IP owners to the exclusive control of their branded products in the country and the legal options available to enforce such rights will therefore continue to vary, according to the facts of each case.
CONCLUSION
In view of the fact that Nigeria is currently seeking to raise its level of competitiveness by opening its economy to more international trade and investments, it will be more expedient to adopt policies, like in the U.S., which will attempt to strike a fair balance between the proprietary rights of patentees, trademark owners and their franchisees on the one hand and the rights of the average entrepreneurs and consumers to legitimately trade and have free access to choices on the other.
In the meantime, in so far as Pfizer Specialties Limited Vs. Chyzob Pharmacy Limited continues to represent the state of the law on parallel imports in Nigeria, it is clear that ‘parallel imports’ is not actionable in Nigeria. Consequently, legal redress to parallel imports will have to be pursued through a multifaceted course of action which may include enforcement of contractual right; injunction for the preservation of proven economic interest; relief against the violation of registered licenses and trading standards; and any other actions in tort against unlawful interference with trade.
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The Grey Matter Concept is an initiative of the law firm, Banwo & Ighodalo
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