Dr Hazbo Skoko

Theory of parallel import and its protection

Abstract
Since the mid-1980s there has been a growing interest in the international business literature in so-called “gray market”, or what is referred to, in this study, as parallel imports. Imported parallel goods are products that entered a market in ways not intended by the original manufacturer. In fact, the term “parallel import” is a loosely used expression intended to explain any goods sold outside “normal”, authorised distribution channels.
Many countries restrict parallel imports of intellectual property. This study examines that question from an economic perspective with a particular focus on copyright laws. It starts by looking at the economic aspect underlying copyright laws and examines the economic arguments for extending intellectual rights beyond the sphere of production into the sphere of distribution, which may include the right to control importation. The study then provides an overview of the current international policy debates about whether parallel imports should be allowed, followed by the general theory of parallel imports, literature review on the topic, and an economic modelling of the parallel imports protection. The study concludes by summarising the main points and about the future of parallel imports.

Keywords: parallel imports, copyright, ban, protection, price discrimination, intellectual property rights.

Contents
Abstract
Preface
Contents
Chapter 1 Introducing the topic
1.1 Introduction
1.2 General introduction
1.2.1 Intellectual property rights (IPRs)
1.2.2. New forms of IP and technologies
1.2.3 International IPR Legislature
1.2.4 New Zealand Intellectual Property Rights policy
1.2.5 Copyright law
1.2.5.1 Copyright and software protection
1.2.6 Competitive policy and intellectual property
1.2.6.1 Competition policy in New Zealand
1.7 Conclusion
Chapter 2 General theory of parallel imports
2.1 Introduction
2.2 The treatment of parallel imports in various legislation
2.3 The process of parallel imports
2.4 The effects of parallel channels
2.5 Combating parallel imports
2.6 Conclusion
Chapter 3 Software industry analysis
3.1 Introduction
3.2 Characteristics of the software industry
3.2.1 Economies of scale
3.2.2 Network externalities
3.2.3 Other characteristics of software
3.3 Structural analysis of the software industry
3.4 The strategic business unit and competitive strategies
3.5 Conclusion
Chapter 4 Parallel import and its protection in literature
4.1 Introduction
4.2 Economics of parallel import restrictions
4.2.1 Parallel import protection: Case studies
4.2.2 Price discrimination and parallel import
4.3 The legal aspect of parallel import restrictions and competition policy
4.3.1 Competition policy and intellectual property
4.4 Conclusion
Chapter 5 An economic model for evaluating PI protection
5.1 Introduction
5.2 Theoretical background and general propositions of the model
5.3 The empirical model
5.3.1 Export demand function
5.3.2 Export supply function
5.3.3 Dummy variable for the parallel import ban
5.3.4 The network externalities effect
5.3.5 Inverse price elasticity of demand
5.4 Conclusion
Chapter 6 Summary and conclusions
6.1 Introduction
6.2 Summary of the study
6.3 Policy recommendations
6.4 Future research
6.5 Future of parallel imports
6.6 Conclusion
7. Bibliography
8. Index

Reviews of the book

Prof Greg Walker PhD
This thesis is one of a small number of studies in the literature that examines the economic impact of parallel imports protection. Starting with the proposition that software suppliers exercise price discrimination policy because of strengthened parallel import protection, this study influenced the debate in New Zealand that subsequently saw the Government change its policy and remove the parallel imports ban in 1998. The study provided a timely insight into the price discrimination, interlocks, bundling and other pricing practices of a selected sample of software vendor firms in New Zealand. Although the study does not provide answers for all Intellectual Property Rights (IPR) issues, it does provide a simple yet valuable model for benchmarking business practices and for developing a better understanding of the structure and effects of IPR policy adoption in the business sector.

Prof Soumitra Sharma PhD
From a theoretical point of view Skoko’s this study provides a highly valuable insight in the problem of software pricing. He provides a simple model for benchmarking the IT business practices, and for developing a better understanding of the structure and effects of Intellectual Property Rights policy. The research also has an applied value for information economics for it did lead and influence the NZ government to change its software import protection policy in 1998.

Dr Faiz Kermani, Author of 'Pharmaceutical Parallel Trade - Past and future scenarios' (Urch Publishing, UK)

Dr Hazbo Skoko’s thesis has proved to be an excellent guide in my own understanding of the field of parallel trade in pharmaceuticals as not only do his analyses and case studies span different industrial sectors they also examine such issues from an international dimension. As global trade increases, it will become even more important to understand the inter-relationships between countries. Dr Skoko’s thesis proved invaluable in providing me with the necessary details in order to make my conclusions regarding the outlook for the parallel trade in pharmaceuticals on a global basis.

If you want to buy this book either contact the publisher (online seller) or the author

Article

Hazbo Skoko: Parallel Imports: The New Zealand Case

Hazbo Skoko: Theory and Practice of Parallel Imports

Introduction (full paper)

Few commercial events in recent years have generated as much controversy as parallel importation. Parallel trading has emerged as one of the major issues of ongoing discussion in the theory of international trade and practice. It contains a variety of pragmatic issues, including economic, legal, and marketing matters. On the one hand, it is desirable to shield the public from possible confusion or deception regarding the origin of a branded good. On the other hand, there are considered to be good reasons for preventing copyright and trademarks from being used to divide markets and to create artificial barriers to free trade. Therefore, there is no consensus about the current policy relating to parallel imports.

Every year billions of dollars worth of products in the world market are imported outside (in parallel to) manufacturers' (or copyright owners') authorised distribution channels. The term parallel imports is used to emphasise the fact that unauthorised products are imported across country borders and a parallel channel is created to rival authorised ones.

Since the mid-1980s there has been a growing interest in the international business literature in so-called "grey market", or what is referred to, in this study, as parallel imports. Imported parallel goods are products that entered a market in ways not intended by the original manufacturer. In fact, the term "parallel import" is a loosely used expression intended to explain any goods sold outside "normal", authorised distribution channels. Taking about the topic Rothnie (1994) wrote: "Taking advantage of the lower price, some enterprising middleman buys stocks in the cheaper foreign country and imports them into the dearer, domestic country. Hence, the imports may be described as being imported in "parallel" to the authorised distribution network." In addition, Rothnie (1994, p. 193) extended the legal meaning of parallel imports noting that under most current parallel import provisions the plaintiff is also required to prove that the defendant has:
" imported copyrighted goods into the domestic jurisdiction (for selling, letting for hire or by way of trade exhibiting, exposing or offering for sale or hire after such importation),
" imported without the license of the copyright owner: an article the making of which (a) infringed copyright or (b) would have infringed copyright if it had been made in the domestic jurisdiction, and
" with knowledge that the article so infringed, or would have infringed, the copyright subsisting in the domestic jurisdiction.

The crucial point made here by Rothnie (1994) is that parallel imports have, by definition, been made lawfully. Therefore, the actual making of the imported articles did not infringe copyright. The articles imported in parallel are not "pirate" copies. In effect, a parallel import channel exists alongside the authorised one set up by a manufacturer resulting in intrabrand competition.