Fair Trade, Monopoly And Competitiveness: Appraising The Legal Rights Of Franchisees Against Parallel Imports In Nigeria

EXHAUSTION DOCTRINE AND TRADE PROMOTION

Except in few permitted instances, agreements that tend to limit acts of free trade or economic exploitation generally have long been held to be contrary to public policy (particularly in the UK and Europe). Hence, at Common Law (applicable in Nigeria by virtue of Section 32 of the Interpretation Act, Cap. 123, Laws of the Federation of Nigeria, 2004, which affirms the ‘reception clause’ in the Supreme Court Ordinance of 1914), clauses which impose restraint of trade in commercial agreements are prohibited except if shown to be reasonably necessary in protection of relevant commercial rights. Similarly, the exclusive proprietary control of an owner of a trademark, or of a product covered by IPR, is limited only to the “right of first sale”, after which such exclusive right becomes exhausted against a bonafide third party purchaser, who is then permitted to resell the product in the market. This is generally known as the “Exhaustion Doctrine”.

In essence, the Exhaustion Doctrine extinguishes the proprietary rights of owners of trademarked, copyrighted or patented products, once the products are sold, either by the rights proprietors or their licensed importers. For this reason, the purchaser of a branded product is deemed to have, amongst other implied licenses, an implied license to re-sell the product wherever he chooses; and this license runs with the product. Therefore, a parallel importer of goods is presumed to have the right to sell the goods anywhere, inclusive of a territory where the trademark proprietor or his licensee did not intend that product to be sold or in spite of any exclusive rights granted by the trademark proprietor in relation to the exploitation of the product in the territory.

The current wave of globalization is further driving the Exhaustion Doctrine across the various regions of the world and in effect, oiling the wheel of parallel importation. This appears to be the unintended consequence of the vigorous promotion by major political and economic blocs around the world of free market economy, elimination of trade barriers and the adoption of single, common market and tariff system for regional groups. As a result, developing countries such as Nigeria are mostly encouraged to adopt trade policies which remove restraints to trade and keep competition alive so as to stimulate growth. This then creates a dilemma for such countries which may want to protect the IPR of domestic inventors, trademark owners and their licensees, against unauthorized parallel importation and sale of their goods.