Crack Down On Parallel Imports

Thursday 1st May 2008

Under the Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003, the onus of proof of copying has now been reversed, with imported copies of films, DVDs, CDs or videos being presumed to infringe in the absence of evidence to the contrary.

The timing is probably pure chance, but changes passed to the New Zealand parallel importation laws coincide with the impending international release of The Return of the King , the third part of the fantastic Lord of the Rings trilogy on 1 December 2003.

The new provisions in the Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003 mean that no-one other than the producers of The Return of the King and their licensed distributors will be able to import into New Zealand any copies of The Return of the King , or for that matter, any other new film, for nine months following public release anywhere in the world. The new law covers all commercial films, regardless of format, whether this is DVD, CD or videos.

Private individuals will still, of course, be able to buy these overseas and bring them in for their own use. The restriction on parallel importation is directed essentially at commercial distributors.

Nine month period

The nine month period for new films has been selected as an appropriate period within which copyright owners and cinema operators may derive an economic return on the cinematic release of films. Whether the measure will have any real impact on the targeted rural cinema owners remains to be seen. The fall-off in cinema audiences may have more to do with distance, the reluctance by Kiwis to leave their own couch, the large screens in their living rooms, and competing entertainment choices.

The definition of films covered by the measure relates to those intended for commercial release, having been specifically amended during passage to exclude films intended for educational distribution. The nine month window has a sunset provision, expiring in 2008.

Coupled with the nine month ban are beefed up provisions to protect against imports of counterfeit films, sound recordings and computer programs. Infringement will occur if the importer knows or ought reasonably to know that the imported item is an infringing copy. The onus of proof of copying has now been reversed, with imported copies being presumed to infringe in the absence of evidence to the contrary. It will be up to the importer to prove that parallel imports are not pirated copies.

The changes are essentially technology driven. The ability to mass produce identical/perfect copies at the push of a button makes it much harder to distinguish counterfeit copies from genuine copies which have been parallel imported. It is much more difficult to distinguish between a counterfeit DVD and the genuine article than it is to pick a fake pair of Nike shoes.

Extent of the counterfeiting problem

The extent to which there is a genuine problem is unclear. The current government was critical of the previous regime when parallel importation restrictions were removed in 1998, and promised a review. The review did not show up any particular difficulties, with the possible exception of the movie industry.

Microsoft puts the incidence of software piracy in New Zealand at 26 percent of the market and a cost of $30million a year, although how much of this is due to legitimate parallel imports is not clear. Counterfeit sound recordings are being imported into New Zealand, with some of the packaging containing such bad mistakes that they provoke hilarity, but internet down-loads are probably a much greater problem.

One rather unusual feature of the new laws is the stipulation that the court must not require the defendant to reveal its source of product in circumstances where it would be unreasonable for it to do so. In a normal court proceeding for copyright infringement, revealing the source of the product would be an expected outcome of the discovery process.
Once the copyright owner had the identity of the source, its response would most likely be an attempt to shut down the parallel importer’s source of supply. Because the government remains of the view that parallel importation is in the interests of consumers, it has attempted to reduce the impact of the presumption that products are counterfeit by leaving it open to the importer to argue to the court that it would be unreasonable for it to disclose where it obtained its products. Defendants may find it difficult to establish that they are importing genuine products, without revealing the source of supply, so the practical effect of this particular provision will be of interest. It has the appearance of a trade-off for no longer requiring copyright owners to prove copying.

The changes may spur copyright owners to make greater use of the under-utilised customs notice procedure. This allows notices to be lodged with the Customs Department by copyright and trade mark owners identifying their intellectual property rights. Customs can then intercept and detain any suspicious looking imported products at point of entry for a short period of time, while IP rights holders can determine whether to issue court proceedings to seize them. While it is by no means foolproof, it is cheap and effective.

Adjustment to the Trade Marks Act 2002

Finally, one small adjustment is made to the Trade Marks Act 2002 as part of this legislation. This is to prevent registered trade marks being used to stop parallel importation of goods. If goods bearing a particular trade mark have been put on the market anywhere in the world by the trade mark owner or with the trade mark owner’s consent, then these goods will be able to be parallel imported into New Zealand.

Until now, this has been unclear, and there was case law which raised the possibility of having the trade mark held by a different company in New Zealand to the overseas brand owner and using that separate ownership to prevent the importation of trade mark goods into New Zealand.

This article was previously published in The Independent, 19 November 2003

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