IPR and Trade: A Perspective from the Tech Reseller and Service Market

            The Owners’ Rights Initiative (ORI) is an organization of over 20 companies and trade associations, including independent resellers, library associations and the eCommerce platform eBay – all of which are dedicated to the simple, fundamental principle that if “you bought it, you own it”, and should have the right to sell, lend, or give away your personal property.  That fundamental principle is the bedrock of any trading system.  Therefore, it must be a guiding principle of these negotiations if we are to have any meaningful trade liberalization between the U.S. and the EU.  Policies that violate that principle must be addressed and the EU’s regional trademark exhaustion rule is such a policy.

            The EU grants trademark owners the perpetual right to block imports of genuine trademarked goods.  Consumers, small entrepreneurs on platforms such as eBay, and independent resellers are prohibited from exporting a genuine trademarked product, new or used, to the EU without the permission of the EU trademark owner — unless the goods were first sold in the EU.  That regional “first sale” rule is recognition of the anti-competitive consequences of granting trademark owners a perpetual monopoly over the resale and importation of genuine trademarked goods, and was essential to ensuring the free flow of goods among EU member countries.  However, when it comes to trade with other countries, such as the United States, the EU maintains an anti-competitive trademark monopoly that allows trademark owners to block competition from imports of genuine products from outside the EU, and to do so for purely protectionist reasons – creating what is commonly known as “Fortress Europe”.  That policy not only fails to advance trade and the interests of consumers, it directly harms those interests.  Trademarks should not be used to distort markets and impede trade.

            We wish to reiterate that ORI’s membership includes companies that are themselves owners of intellectual property and we are strong supporters of enforcement of intellectual property rights (IPR), including the fight against trade in counterfeit goods.  Allowing trademark owners to block imports of genuine products does not serve the central purpose of trademarks, which is consumer protection.  The trademark is a shield to protect consumers from false or misleading information about who produced and/or stands behind a product.  There is no justification for enabling companies to turn that shield into a sword – a weapon for trademark owners to wield against those who wish to trade in genuine goods, and to do so for no other reason than to eliminate import competition.  Unfortunately, that is precisely what happens in U.S. trade with the EU.  The victims are independent resellers, both in the United States and in Europe, the vast majority of whom are small and medium size enterprises (SMEs).  These businesses are unquestionably critical to the global economy in terms of employment and entrepreneurship.  They are not large and politically powerful.  But, these independent resellers on both sides of the Atlantic are now speaking up and speaking out.  They are speaking with one voice and their message is clear – it’s time for a change.

            The ability of private companies to block imports of genuine products whenever they wish creates a substantial, unjustified and economically harmful barrier to trade must stop.  The secondary market for new and used computer equipment alone is estimated at over $300 billion dollars.  Approximately two-thirds of the secondary market is comprised of independent resellers who are predominantly SMEs.  The secondary market is an important and beneficial segment of the economy, which, for example, moves excess inventory, repurposes used equipment and facilitates sustainable use of products throughout their life cycle.  The EU allows companies to use trademark law to distort those markets by stifling trade and artificially enforcing price discrimination free from the disciplines of antitrust/competition rules. 

            Other non-EU trading partners have been allowed within the walls of “Fortress Europe” and an important trading partner such as the U.S. should be granted the same market access.  Iceland, Liechtenstein, Norway and Switzerland are non-EU countries that comprise what is known as the European Free Trade Association (EFTA). In 1992, EFTA and the EU (then known as the European Community) entered into an agreement establishing the European Economic Area (EEA).  The EEA extends the EU internal market to the EFTA states, creating a free trade area. To support the free movement of goods, Protocol 28 of the EEA applies the EU principle of regional exhaustion to the entire EEA free trade area.  As a result, once a branded product is placed on the market by the trademark owner (or with her consent) anywhere within the EEA, the rights holder cannot block importation of that product from another EEA member state even though they are outside the EU.

            The EEA stands as a model for expanding the EU’s regional exhaustion rule within the context of a free trade agreement.  ORI’s proposal for addressing this issue under TTIP, however, is more modest in that we seek only to extend the EU’s regional trademark exhaustion principle to exports from the United States.  We are not proposing to alter any of the existing rules with respect other types of intellectual property, i.e., patents and copyright, within the context of these negotiations. 

            While ours is a modest proposal, it would have a significant positive economic impact.  It would also finally demonstrate that trade agreements are not simply devices to further large corporate interests at the expense of SMEs and consumers.  

            ORI asks,

            Is the primary purpose of TTIP to eliminate barriers to enhanced trade between the EU and the U.S?  If yes, then what we have proposed is the right thing to do.

            Do the U.S. and the EU want to provide enhanced market access opportunities for SMEs in a way that is truly meaningful?  If yes, then what we have proposed is the right thing to do.

            Do the U.S. and the EU want to give consumers and SMEs a reason to support TTIP?  If yes, then what we have proposed is the right thing to do.

            We ask you to do the right thing.

  Joseph Marion, President of the Association of Service and Computer Dealers International and the North American Association of Telecommunications Dealers (AscdiNatd) testimony on behalf of the Owners Rights Initiative at the US-EU Transatlantic Trade and Investment Partnership (TTIP) hearings in New York City on April 23, 2015.  The testimony is part of AscdiNatd’s ongoing efforts to assure resellers of technology equipment and services the right to compete fairly in a free and open market. 

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