Parallel imports under Patent Law are genuine, non-counterfeit products that are first sold in one country and later brought into another country without the intellectual property owner’s permission. Under a strict patent regime, any third party importing a patented product can infringe the patent owner’s rights. However, India’s law creates an important exception. Section 107A(b) of the Indian Patents Act, 1970 says that importing a patented product will not count as infringement if the goods come “from a person who is duly authorized under the law to produce and sell or distribute the product”. In plain terms, this means that once a patented item is lawfully sold, its patent rights are considered exhausted (used up) for that item. A third party may then import that item into India without violating the Indian patent, provided the item was sold abroad by someone legally allowed to do so.
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What Are Parallel Imports Under Patent Law?
Parallel imports under Patent Law (sometimes called “gray‐market goods”) refer to bringing a genuine patented product into India from abroad without the patent owner’s consent. For example, suppose a patented drug is sold at a lower price in Country A than in India.
If an Indian importer legally purchases that drug from Country A and ships it to India, this constitutes a parallel import. The goods are not counterfeit or unauthorized copies – they are the original product, but the importer did not get permission from the Indian patent holder to make that sale. This is distinct from illegal knock-offs; parallel imports are legitimate, non-infringing goods according to Indian law, provided certain conditions are met.
Put another way, a parallel import is an act of cross-border trade in genuine goods. It often happens because companies price products differently in different countries. If a patented product is much cheaper in one market, traders can arbitrage this price gap by importing it into a market where it sells for a higher price.
This practice is economically normal: it increases competition and can lower prices in the higher-price market. However, patent owners may object because it undercuts their ability to segment markets and set different prices. The law of exhaustion balances these interests.
Section 107A(b) of Patents Act, 1970
India’s Patents Act grants patent owners exclusive rights, including the right to prevent others from importing the patented product into India (Section 48). Section 107A lists certain exceptions. Clause (b) provides that if a patented product has already been sold by someone lawfully entitled (for example, by the patentee himself or a licensed manufacturer), then a third party can import it. The importer does not infringe the patent, even if the patent owner did not expressly authorize the import.
It is important to note how this provision came into existence. The concept of parallel imports was introduced by amendments in the early 2000s. The 2002 Patents Amendment Act (enacted in 2005) first added a clause like Section 107A(b). Initially, however, the wording was narrower: it said parallel importation was allowed only if the seller abroad was “duly authorized by the patentee”. In other words, the Indian law at first only protected imports that originated from someone explicitly permitted by the Indian patent owner.
In 2005 this was changed. The law was revised so that the importer must obtain the product from a person “duly authorized under the law” (not necessarily by the patentee). In effect, this broadened the rule to cover any sale that is legal under the law of the country where the product was made or first sold.
For example, if a foreign government or court licensed a company to make the patented product, that license counts as “authorization under law.” As one commentator explains, after the 2005 amendment “parallel import is allowed by the third party, provided that the import is from a person duly authorized under the law,” and the importer need not verify that the seller was authorized by the patentee. Briefly:
2002 Amendment (effective 2005): Allowed parallel imports only if the goods were bought from someone explicitly authorized by the patentee. This was a tight limit on exhaustion.
2005 Amendment: Changed the wording so the goods can come from anyone “authorized under the law,” not just someone authorized by the patentee. This opened the door to full international exhaustion in practice.
Also, read about Patent Law vs Copyright Law
How Exhaustion of Rights Works: Doctrine of Exhaustion
The concept behind Section 107A(b) is the exhaustion of rights (also called the “first sale doctrine”). This principle says that once a patented item is sold (with the patentee’s consent) the patent owner’s control over that specific item ends. The buyer can resell or use the item freely. In intellectual property law, exhaustion means the right to exclude others “is exhausted” by the first authorized sale of the product.
Patents use this idea to allow parallel imports. Under exhaustion, the patent owner cannot block lawful resale of its product. For example, if a company sells a patented machine in Country X, a parallel importer can bring that machine into India without infringing the patent. The patent holder has already been paid (through the first sale) and cannot object to secondary sales of that item.
In national exhaustion, rights are exhausted only by domestic sales. A sale in India exhausts the Indian patent (so the item can be resold within India), but sales abroad do not exhaust it. In regional exhaustion, a sale in any member country exhausts rights across the region (as in the European Union).
In international exhaustion, a sale anywhere in the world exhausts the patentee’s rights globally. Under international exhaustion, if a patent owner sells a product in Japan, that sale exhausts its patent rights in India too, so the item can be imported into India without patent infringement.
India has explicitly opted for international exhaustion. Government sources and expert studies confirm that India’s law is intended to allow imports of any genuine product sold abroad by someone authorized to sell it.
In a 2011 World Trade Organization review, India stated that “parallel imports are allowed when authorized under the law” and clarified that “the law” refers to the law of the country where the product was first sold. In other words, if a product was lawfully sold in Country Y by someone permitted under Country Y’s law, India will regard that as authorization under law, and the importer can bring it into India even if there is no Indian patent or if the Indian patent holder did not consent.
This position is supported by the text of Section 107A(b) itself, which uses the broad phrase “authorized under the law”, and by the context that the Patents Act has no express limitation to domestic law. It contrasts with the Copyright Act (which follows national exhaustion) and aligns more with the Trademarks Act (which likewise exempts import of legitimately sold goods).
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Why Allow or Restrict Parallel Imports?
India’s law and policy reflect a balance of interests. Allowing parallel imports can have significant benefits for consumers and competition, but patent owners have legitimate concerns too.
Benefits (pro-parallel imports)
Lower Prices and Access: Parallel imports often reduce prices in the domestic market. If a product is sold cheaply abroad, importers can bring it here and sell at a price still below the original. This is especially important for essential goods like medicines. Health experts note that allowing parallel imports can make life-saving drugs more affordable, complementing price controls or government schemes. Indian policy (e.g. the Doha Declaration on TRIPS and Public Health) encourages such flexibility to improve access to essential medicines.
Consumer Welfare: More competition generally benefits consumers. When importers challenge the local seller, the patentee may have to lower prices or improve service to stay competitive. This cross-border competition can erode artificial price differences and prevent market segmentation. Economists describe parallel imports as a form of arbitrage that spreads goods more widely.
Alignment with TRIPS Flexibility: The WTO’s TRIPS Agreement explicitly leaves exhaustion rules up to each country. India’s approach exercises this flexibility to favor public health and trade. A WTO analysis explains that even if a country’s rule on parallel imports might seem to contradict another country’s interests, TRIPS forbids challenging it as a trade dispute. India, in international discussions, has emphasized that its law actually permits parallel importation and follows international exhaustion.
Drawbacks (concerns of patentees and opponents):
Reduced Control and Profits: Patent holders usually set different prices or terms in different markets to maximize return on investment. Parallel imports can undercut this strategy. For example, if a drug company charges more in India than in a neighboring country, parallel importers can capture the profit margin by importing. This may reduce the patentee’s profit margins and could, in theory, dampen incentives to invest in new R&D (as argued by U.S. industry defenders of stricter control).
Quality and Brand Issues: Though parallel imports are genuine products, the original seller has less control over how they reach consumers. Importers might not offer the same warranties or support, and buyers may not realize the difference. This can sometimes lead to consumer confusion or disputes over post-sale services.
TRIPS Article 28 Concerns: Some argue that unrestrained parallel imports violate TRIPS Article 28 which grants patent owners the exclusive right to import their patented product. However, since TRIPS Article 6 specifically neutralizes exhaustion as an issue for dispute, such arguments carry limited weight internationally. India’s official stance is that its law is TRIPS-compliant because TRIPS does not mandate any particular exhaustion rule.
Summary
Parallel imports under the Patents Act, 1970 occupy an interesting space between promoting public interest and protecting intellectual property. India’s law explicitly permits parallel imports of genuine patented products (once lawfully sold), embodying the international exhaustion doctrine. This stance is intended to help consumers by making needed products more affordable, while still respecting patent rights once the patentee has been paid. At the same time, patent owners must recognize that their control ends after the first sale, even across borders.
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Parallel Imports Under Patent Law: FAQs
Q1. What is a parallel import?
Parallel import is the import of genuine goods, protected by intellectual property rights (IPR), into a country without the authorization of the IP rights holder, typically through a third party.
Q2. Is parallel import legal in India?
Yes, parallel imports are legal in India under Section 30(3) of the Trade Marks Act, 1999, which allows the import of genuine goods that have been lawfully acquired.
Q3. What is the case law for parallel importation?
Samsung Electronics Co. Ltd. v. Kapil Wadhwa (2012, Delhi High Court). The court upheld that parallel imports of genuine goods do not infringe trademarks if the goods are not altered.
Q4. Are parallel imports legal?
Parallel imports are legal in many countries, including India, under the principle of international exhaustion, but legality varies by jurisdiction and specific IP laws.
Q5. What are parallel imports in IPR?
In IPR, parallel imports refer to the importation of authentic goods protected by patents, trademarks, or copyrights into a market without the IP owner's consent, often exploiting price differences across regions.
