Exhaustion of Trade Mark Rights and Parallel Imports in Canada

Abstract

In most countries, the issue of exhaustion of trade mark rights is legislatively regulated, so that the conditions for the legality of parallel imports of trade-marked goods are quite clear. Canada belongs to the group of countries where no legislative provision for exhaustion of trade mark rights has ever been established and, therefore, the issue of the legality of parallel imports remains ambiguous. This Article reviews Canadian case-law on parallel imports of trade-marked goods. It concludes that Canada adopts a national exhaustion of trade mark rights regime based on two points: first, where physical differences or other sorts of material differences are identified between the goods imported in parallel and the goods distributed by authorized dealers in Canada, it is possible to prevent the parallel importation both under the doctrine of passing off and the Canadian Trade-Marks Act if a risk that the public may erroneously believe that the goods imported in parallel are identical to the ones offered for sale by authorized dealers (likelihood of confusion) is established and, second, if a foreign trade mark is validly assigned to a Canadian entity not related to the foreign manufacturer and the trade mark has become distinctive of the assignee’s goods, parallel imported goods may be banned through an action for trade mark infringement.

Keywords: exhaustion of rights, trade marks, goodwill, material difference rule