MERPEL'S PLAYSTATION - AN EXPERT RESPONDS

Merpel's PlayStation - an expert responds

Last week, on this selfsame weblog, Merpel asked:

" ... but WHY can't I buy legitimate PlayStation and other Sony goods from whomsoever I want? Try selling the concept of non-global exhaustion of rights in a world which is now a global village."

Well, we now have a comment on the Sony v Pacific dispute which sparked off Merpel's comment. It comes from a distinguished IP practitioner who has requested anonymity. He says:

"I don't know the facts here, but I'd venture a guess that there are very good reasons behind it. The case looks like it is about IP rights but other factors are likely to lie behind a decision to prevent non-EEA imports. The instinct in practitioners is to say it is always driven by price, but I do not think that is, in fact, the case. The entire decision to oppose parallel imports can be, and often is, driven by non-price factors such as (i) differences in the offering in different markets in otherwise similar products and (ii) differences in regulation between EEA and non-EEA markets.

In relation to (i), quite often the products differ from one market to another. This is not necessarily about differences in quality (as in the old Colgate toothpaste case). The products may be technically similar in quality but differ in specification, because customers differ from one market to another. Memory capacity, mains adapters, the leads and connectors packaged with the product, and other things that accompany the product can make a significant difference to price, and are tailored to the local market expectation. Companies do not want to see products produced for a different market put on a shelf in a similar box with similar trade marks through competing retail outlets when, in fact, what is in the box may be different and the difference may not be fully explained or understood by the purchaser. Companies have to choose, for instance, whether a product is sold with very little memory and no connecting leads at a low price (but risking customer dissatisfaction when it proves effectively useless without a further separate purchase), or with loads of memory and all the connectors needed but at a higher price (which may put customers off, but those who buy will be happy). These sorts of differences can generate unjustified complaints from purchasers of parallel imports when the customer finds that the (grey market) product is missing something that all his friends got in their (legitimate) product.

In relation to (ii), there are very real differences in regulation between EEA and non-EEA markets. These may just mean that products require testing to verify that they meet EEA standards before they can be put on the EEA market, or it may even require changes in product specification. The latter is particularly true of products utilising the radio spectrum where there is often international inconsistency, making the use of products from one market illegal in other markets. This can, incidentally, even apply between one country and another within the EEA. It is frequently apparent from inspection of the product whether it has been verified as complying with EEA regulations. One has to remember that, if non-EEA products are imported without the manufacturer's knowledge that do not comply with EEA requirements, it is still very likely that the enforcement agency will take it up with the manufacturer. For the manufacturer to prove that the transgression is nothing to do with it may be difficult or impossible, and in any event will cost time and money.

I don't know whether any of that applies in this particular case, but it may do. One can hardly blame manufacturers for wanting to avoid unnecessary run-ins with the regulators.

The fact is of course that the law doesn't require proprietors to explain why they regard it as being in their interests to enforce IP rights against parallel imports. And, because the motivation is legally irrelevant, proprietors generally don't explain their motivations and the court (probably) wouldn't be interested in hearing about them. But it does not follow that there is anything wrong in wanting to ensure that products not intended for the EEA market are not sold on the EEA market; and in many cases there is quite a lot wrong, aside from IP matters, in allowing such parallel imports".