Banwo & Ighodalo Logo

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


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).