Brand Enforcement / 05.02.2019

Gray Market Goods: The Dirty Secret That Could Be Cutting Into Your Profits

By Alex Jones

Brand Enforcement

We live in a global economy, and companies operate in international marketplaces. As such, brands need to be aware of and monitor the increasing prevalence of gray market goods. Gray market goods – sometimes referred to as parallel imports – are genuine goods purchased in one market but resold in another market without the company’s consent.

Countries have different standards and quality controls that certain products must meet, which can drive up the cost to manufacture such products. As a result, international companies sell different versions of their products in different countries. This creates an opportunity for resellers to purchase products in marketplaces where they are cheaper and import and sell them into more expensive marketplaces. Despite the products being of a lesser quality, they are still marketed as genuine products.

This is troublesome for brands for a couple reasons. If these products are not made in accordance with the local laws and regulations, it exposes the company to liability. Additionally, gray market goods can harm a company’s brand by providing customers with a product that may not be of the standard and quality that such customers have come to expect with that brand.

Fortunately, brands have options to stop gray market resellers. As we have previously written about, the First Sale Doctrine (the theory of law generally permitting the resale of genuine goods) does not apply to products that are materially different from genuine products. In this instance, gray market goods are materially different than the products sold in the intended marketplace. Therefore, companies can go after gray market resellers for using their trademark without authorization and violating their intellectual property rights.

KJK’s Brand Enforcement Group can assist in identifying and taking down unauthorized and gray market resellers. If you need assistance or have any questions related to unauthorized or gray market sellers, contact Alex Jones at aej@kjk.com or 216.736.7241.

 

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