Alinea Customs Briefing Parallel trade occurs when a trader sells goods purchased from an external region on the domestic market, without the consent of the genuine brand owner. The prevalence of third party resale platforms may present a significant concern to companies that operates in multiple regional markets.
In certain circumstances the cost of a product in one region may differ greatly to its market price in another region. Professional “resellers” who operate in this sector may seek to conduct unauthorised “grey market” parallel trade, to conduct the sale of parallel imports through channels which are unauthorised by the trade mark owner, and benefit from regional price arbitrage. However, the fact that products are genuine does not, by itself, mean they can lawfully be imported and resold online in the UK.
Several matters must be considered. For trade mark rights and exhaustion, the question is whether the relevant rights are exhausted or the rights holder has otherwise consented to the goods being marketed in the UK. A seller’s right to resell a product does not automatically give them permission to use official brand imagery via The UK Copyright, Designs and Patents Act 1998. Genuine goods must also meet applicable product safety and labelling requirements, as exhaustion does not remove these obligations. Consumer protection is another consideration: even where a product is genuine, its listing may contain misleading information. Misleading actions and misleading omissions are separate issues from the product’s authenticity.
This article provides insight into intellectual property rights and protecting your brand from unauthorised parallel trade imports.
Exhaustion of Trade Mark Rights
Once a trade mark owner or authorised channel places a trade marked product on the UK market, the trade mark rights in that product become exhausted. This is known as the First Sale Doctrine, and therefore the resale of the product cannot be opposed on the basis of the trade mark exhaustion. If the product is sourced from an external market, and placed on the UK market without the consent of the UK trade mark owner, the trade mark is not exhausted, and the brand may challenge the unauthorised resale on the basis of their UK trade mark protection.
For exhaustion to arise under section 12(1) of the Trade Marks Act 1994, the goods must have been placed on the market in the UK or European Economic Area (EEA) by or with the consent of the rights holder. In practice, this means that a brand owner who retails their goods on a UK marketplace cannot prevent the resale of products sourced within the UK market on the basis of UK trade mark ownership, due to the First Sale Doctrine. Further, consent is generally not required to parallel import trademarked goods from Europe into the UK.
An asymmetrical parallel imports regime exists between the United Kingdom and the European Union. Goods placed on the UK market require the consent of the rights holder to be placed on the market of the EEA. The UK government has confirmed that the UK+ exhaustion regime will be maintained.
Exhaustion of trade mark rights does not mean that a brand becomes completely unprotected. It means that, once specific goods have been placed on the market under the relevant conditions, the rights holder’s ability to control their further commercialisation through trade mark rights is generally exhausted. The trade mark registration remains in force, and exhaustion concerning those goods does not automatically extend to other goods.
The rights holder’s sale of a shampoo product in the UK does not create exhaustion for every identical shampoo product worldwide. Exhaustion is assessed in relation to the specific goods concerned. For example, goods placed on the UK market with the rights holder’s consent and goods sold outside the UK and EEA may have identical packaging. Nevertheless, the second group must be assessed according to its own marketing history and the relevant consent. In Oracle v M-Tech [2012] UKSC 27, paragraph 10 describes an injunction mechanism under which Sun was required to check serial and part numbers against its records to establish whether goods had previously been marketed in the EEA by it or with its consent.
Even where exhaustion has occurred, the rights holder may have legitimate reasons to oppose further dealings in the goods. These include circumstances where the condition of the goods has been changed or impaired after they were placed on the market, as set out in section 12(2) of the Trade Marks Act 1994. Opposition must also interfere with others’ rights no more than is necessary to protect the rights holder’s property.
Where goods first placed on the market outside the UK and EEA are subsequently brought into the UK, the UK trade mark rights remain unexhausted, and consent covering the marketing of those specific goods in the UK must be established.
Genuine Goods and Parallel Imports
Genuine goods are authentic products, rather than counterfeits. The issue here is therefore whether those goods may lawfully be marketed in the UK, rather than whether they are counterfeit.
For example, an independent seller purchases genuine goods first placed on the market of India, and intends to sell them in the UK through an online marketplace. That first sale does not, by itself, exhaust UK trade mark rights. Similarly, the rights holder’s sale of the same product type in the UK does not automatically establish exhaustion for the specific goods being imported. The assessment concerns whether those goods have been placed on the market in the UK or EEA by or with the consent of the rights holder. If UK trade mark rights remain unexhausted, it is necessary to assess whether the rights holder has consented to those goods being marketed in the UK.
Before importation, the supply-chain history and relevant consent should be investigated. Purchase invoices, supplier records, and serial or lot numbers may assist in this process. The records linked to serial and part numbers within the injunction mechanism described in Oracle v M-Tech provide a practical example of how the history of certain goods can be checked.
The consent principles established in Zino Davidoff were expressly applied by the UK Supreme Court in Oracle v M-Tech [2012] UKSC 27, paragraph 4. Although both judgments predate Brexit, relevant pre-2021 case law continues to apply under section 6 of the European Union (Withdrawal) Act 2018, subject to the applicable rules on departure by higher courts. These principles should be read alongside section 12 of the Trade Marks Act 1994 and the UK’s current UK+ exhaustion regime: placing goods on a market outside the UK or EEA does not, by itself, exhaust UK trade mark rights.
Product Images and Copyright
A product’s resale may be lawful under the circumstances discussed earlier. However, copying images for use in a listing may still infringe copyright. Images are generally protected by copyright, and their use normally requires permission from the copyright owner, for example through an appropriate licence, unless an applicable copyright exception permits the use.
Brands must also consider their own rights in the images. Official brand imagery does not automatically mean that the brand owns the copyright. Ownership depends on the circumstances in which the photograph was created, the employment relationship and any subsequent assignment. A brand may instead use an image under a licence without owning the copyright.
An image does not need to be copied identically or in its entirety for copyright infringement to occur. Copying a substantial part without permission may also infringe copyright, unless an applicable exception permits the use. Whether a part is substantial depends on the protected creative expression copied, rather than simply its size. Courts tend to interpret “substantial part” broadly, meaning that even a small portion may qualify. Cropping an image or adding text does not automatically make its use lawful.
Product Safety and Consumer Information
A seller’s right to resell a product under trade mark law does not remove their obligations relating to product safety and labelling. Businesses that manufacture, import, distribute or sell consumer products in Great Britain have safety responsibilities, depending on their role in the supply chain.
For example, a cosmetic hair product imported from China must meet the applicable cosmetics requirements before being placed on the market in Great Britain. These include a Responsible Person with a UK-established address, a safety assessment, a Product Information File, appropriate labelling and notification to the Office for Product Safety and Standards (OPSS). However, notification to OPSS does not constitute government approval.
Sellers must also comply with consumer protection law. Misleading actions and misleading omissions are prohibited where the relevant legal conditions are met, including that the practice is likely to cause the average consumer to take a transactional decision they would not otherwise have taken. Under the Digital Markets, Competition and Consumers Act 2024, misleading omissions and most misleading actions can constitute strict liability criminal offences. This means that intent need not be proved, although the elements of the offence must still be established and applicable statutory defences remain available.
Consumer Contracts and Remedies
A consumer contract is a contract between a trader and a consumer purchasing goods or services for personal use. The trader does not have to be a large company. A purchase for personal use may be a consumer transaction, whereas purchasing stock for resale to customers is a commercial activity.
Under the applicable UK consumer protection rules, consumers have rights concerning product quality and conformity with the description. Before an online sale, traders must provide relevant information about the product, price, delivery arrangements and their identity. Depending on the circumstances, consumers may be entitled to a refund, repair or replacement.
Sections 15B and 15E of the Civil Jurisdiction and Judgments Act 1982 provide special jurisdiction rules for certain consumer contracts. For online sales, section 15E(1)(c) is particularly relevant: the trader must pursue commercial or professional activities in the part of the UK where the consumer is domiciled, or direct those activities to that part, and the contract must fall within the scope of those activities.
Where the consumer is domiciled in the UK and the relevant conditions are met, section 15B(2)(b) allows them to bring proceedings in the courts for the place where they are domiciled, even if the trader is domiciled abroad. However, this protection does not provide the rights holder with the same jurisdictional basis for an IP infringement claim. The consumer’s contractual claim and the rights holder’s infringement claim are separate.
Evidence and Platform Reporting
Online resellers platforms such as Ebay have policies implemented to protect the rights of intellectual property owners. They are able to support action that related to products or listings that infringe the intellectual property rights owned by others including copyrights, trademarks, designs, patents, and utility models. Examples of items not allowed are counterfeit products, replicas, unauthorised copies, and unauthorised parallel imports.
Before requesting the removal of a listing, the relevant right or rule alleged to have been infringed should be identified, together with the supporting evidence. Online marketplaces provide reporting mechanisms through which rights holders can raise concerns about infringing listings. One example is eBay’s Verified Rights Owner (VeRO) programme, which allows rights holders to report IP infringements and provide evidence so that eBay can take appropriate action, including removing listings.
For example, where a seller uses official brand imagery without permission, the brand may report copyright infringement through VeRO, provided it owns the relevant copyright and no applicable exception permits the use. However, removing a listing because of infringing imagery does not, by itself, prevent the product from being lawfully resold using non-infringing content.
A product recall does not, by itself, provide an IP infringement ground for a VeRO report. Instead, recalled or unsafe products are addressed under eBay’s separate Product Safety Policy, which provides for their removal and identifies OPSS among its official safety information sources. Any recall or safety notice should be matched to the specific product covered by the listing.
Jurisdiction over Overseas Sellers
A seller being domiciled abroad does not automatically prevent them from litigitation in England and Wales. However, the relevant jurisdiction and service requirements must be met. Where permission to serve the claim form outside England and Wales is required, three questions arise:
- What is the relevant jurisdictional connection with England and Wales?
- Does the claim have a reasonable prospect of success?
- Is England and Wales the proper place to bring the claim?
The rights holder’s geographical location alone does not establish jurisdiction. Whether the court has jurisdiction and whether the seller has infringed a trade mark are separate questions. Establishing jurisdiction does not mean that the claimant will automatically succeed.
For online offers and advertisements, an overseas seller’s website merely being accessible from the UK is insufficient to establish commercial targeting. Relevant indicators may include shipping to the UK, payment in GBP, and UK delivery options, times and charges. These factors must be considered together, as illustrated in Lifestyle Equities v Amazon [2024] UKSC 8. Targeting helps determine whether online activity constitutes trade mark use in the UK, but does not replace the separate jurisdictional assessment.
Where permission to serve abroad is required, PD 6B, paragraph 3.1(9), provides three alternative gateways for a claim in tort:
- Damage was sustained, or will be sustained, in England and Wales.
- Damage results from an act committed, or likely to be committed, in England and Wales.
- The claim is governed by the law of England and Wales.
One of these alternatives may satisfy the gateway requirement, but the merits and proper forum requirements must also be met. In FS Cairo v Brownlie [2021] UKSC 45, paragraph 25 identifies three assessments: a good arguable case that the claim falls within a gateway, a serious issue to be tried on the merits, and England and Wales being the appropriate forum. Paragraphs 78–79 explain that satisfying a gateway is not sufficient on its own.
Depending on the issue being assessed, relevant evidence may include UK trade mark registration, listings and orders directed at UK consumers, shipping addresses, invoices, sales records, the marketing and consent history of the goods, and evidence of where the alleged damage occurred.
Remedies for Trade Mark Infringement
If infringement is established, what can the rights holder ask the court to order? Section 14(1) of the Trade Marks Act 1994 allows the proprietor of a registered trade mark to bring infringement proceedings. Section 14(2) provides for remedies including damages, injunctions and accounts.
Damages compensate the rights holder for loss suffered as a result of the infringement. An account of profits concerns the profits attributable to the infringement, while an injunction is a court order aimed at stopping or preventing infringing conduct. The appropriate remedy depends on the circumstances of the case.
In many cases, a strongly worded ‘cease and desist’ letter, setting out the rights holders may present an effective approach to rights enforcement. This may include a comprensive explanation addressing why the seller’s conduct is illegal, and why the First Sale Doctrine would not apply. It should also include an explanation addressing grounds for jurisdiction over the seller. Relevant case law citations, including provision of previous claims in tort in which damages have been awarded against unauthorised sellers may present persuasive illustrations.
HMRC are able to support rights holders by preventing parallel imports arriving in the UK that have been marketed or overproduced without consent of the rights holder. Prohibited goods may be seized under UK customs law. In circumstances where the unauthorised seller, the port of import, and the expected date of import are known to the rights owner, following acceptance of a grey market goods notification the customs authorities will act on behalf of the rights holder.
How can Alinea Help?
Alinea can support businesses in identifying online listings that may infringe their intellectual property rights or raise product compliance concerns. Our support includes reviewing listing information, organising supporting evidence and assisting with reports through the appropriate platform channels, and legal representation. We also help businesses understand relevant import and regulatory requirements. Please contact customs@alineacustoms.com for further information.
Bibliography
Legislation and Procedural Rules
- Civil Jurisdiction and Judgments Act 1982, sections 15B and 15E
- Civil Procedure Rules, Part 6, rules 6.36-6.37
- Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, regulation 13 and Schedule 2.
- Consumer Rights Act 2015.
- Digital Markets, Competition and Consumers Act 2024, Part 4, Chapter 1.
- European Union (Withdrawal) Act 2018, section 6.
- Practice Direction 6B, paragraph 3.1(9).
- Trade Marks Act 1994, sections 12 and 14.
Case Law
- FS Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45, paragraphs 25 and 78-79.
- Lifestyle Equities CV v Amazon UK Services Ltd [2024] UKSC 8.
- Oracle America Inc v M-Tech Data Ltd [2012] UKSC 27, paragraphs 4 and 10.
- Zino Davidoff SA v A & G Imports Ltd and Levi Strauss & Co v Tesco Stores Ltd and Costco Wholesale UK Ltd, Joined Cases C-414/99 to C-416/99, paragraphs 45–47 and 55–60.
Official Guidance and Platform Policies
