• June 21, 2023

IL TM Update: New Legislation To Encourage Parallel Importation

As part of government policy to encourage parallel importation, Amendment 23 of the Economic Competition Act, 2023 was enacted for the purpose of limiting activities by authorized importers to prevent parallel importation. Despite this recent legislative initiative, some exceptions to parallel trade still remain.

One of the key provisions of the new legislation bans the reporting by authorized importers to the foreign supplier/manufacturer of the batch codes of parallel goods in a manner which allows the tracing of the distribution chain, provided that such reporting is intended to prevent parallel trade or may reduce competition from parallel trade. Violation of the provision may result in significant monetary sanctions. The scope of the new provision is broad and insufficiently delineated. It may accordingly be invoked in a manner interfering with the reporting of batch codes of suspect counterfeit products as part of brand protection efforts although such practices are and should remain entirely legitimate.

The new provision does not apply to the foreign suppliers/manufacturers who are not banned from directly collecting information “on the ground” whether for brand protection practices or for monitoring parallel trade. Moreover, while Israeli law recognizes international exhaustion of trademarks, there may nevertheless be certain exceptions for parallel trade. For instance, importation of decoded products or of “materially different” products may be actionable and amount to trademark infringement. In addition, parallel trade may at times be in violation of regulatory provisions relating to importation of certain categories of products. Due to the complexity and sensitivity of this area of the law, please feel free to get in touch for specific advice.

This update article is provided for general information only and is not in lieu of legal advice. Please contact us directly for any required advice on specific matters.

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