Litigating the Gray Market: An Intellectual Property Approach to Curtailing Parallel Imports

AuthorIsabel Torres Sastre
PositionUniversity of Puerto Rico School of Law, Juris Doctor Candidate, May 2010
Pages149-161
149
LITIGATING THE GRAY MARKET: AN INTELLECTUAL PROPERTY
APPROACH TO CURTAILING PARALLEL IMPORTS
NOTE
ISABEL TORRES SASTRE*
I. Introduction ........................................................................................................ 149
II. The Trademark Approach .................................................................................. 151
III. Customs Regulations: The T ariff Act ............................................................... 152
IV. Copyright Law: A More Effective Tool ............................................................. 154
A. First Sale Doctrine ..........................................................................................155
B. First Sale Doctrine Copyright Case Law ......................................................... 156
V. Conclusion .......................................................................................................... 160
I. INTRODUCTION
RAY GOODS ARE PRODUCTS BEARING A VALID TRADEMARK WHICH ARE SOLD
by unauthorized distribu tors in contravention of comme rcial
arrangements. Also referred to as parallel imports, these products
are usually obtained abroad and not intended to be resold in the Uni ted States.1
Gray marketers take advantage of existing price differentials between countries
and benefit from the goodwi ll and reputation that the author ized dealer has
developed in a particular market. Gray goods are generally understood to be
legal, although, to some, they may appear to be unethical. If the gray goods are
identical to the authorized products and they are being offered at a lower price,
then there is the presumpti on that the consumer is not being harmed, and
therefore, trademark law cannot be applied to bar the sale of these goods. Gray
goods are not to be confused wi th counterfeit products, s ince they are genuine
products, usually produce d under a valid licens e, yet intended for a different
market than the one whe re they are being sold. They also differ f rom counterfeit
products because they are identical or very similar to the authorized products
and bear a registered trademark.
Distributors of authorized goods are those most interested in litigating and
curtailing the sale of gra y goods, since these products compete with th eirs and
cause them to lose huge profits. The gray market has been described as a multi-
billion dollar industry whic h competes with the autho rized distribution system,
* University of Puerto Rico School of Law, Juris Doctor Candidate, May 2010.
1 Lisa A. Nester, Keywords, Trademarks, and the Gray Market: Why the Use Is Not Fair, 7 MARQ.
INTELL. PROP. L. REV. 235, 242 (2003).
G

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