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Parallel imports – good for printers, bad for medicine?

Peter Leung

A report from the House of Representatives looks at why tech companies charge higher prices in Australia and ways to encourage parallel imports to address this. What does this mean for differential pricing schemes around the world?

The Standing Committee on Infrastructure and Communications released the full report of its findings on Monday. Noting that Australia historically had to deal with higher prices for identical goods due to factors such as geographical isolation and historically unfavourable exchange rates, the report pointed out that the price gap has held fairly constant even as the Australian dollar gained in strength and the internet reduced the cost of delivering certain types of goods such as digital downloads.

From its research over the past year, the committee found that Australians pay considerably more for tech-related goods than their US counterparts: a 50% premium for professional software, 52% for music, 46% for hardware and 84% for video and computer games. The difference persists with digitally distributed goods, though companies such as Microsoft claim that there are still cost differences for downloads, such as Australian warranty requirements and marketing.

IP laws are obviously one tool that companies use to maintain these price differences. The committee makes several recommendations, such as getting rid of restrictions on parallel imports under the Copyright Act and broadening the parallel import defence of the Trade Marks Act. It also recommends amending the Copyright Act’s anti-circumvention provisions “to clarify and secure consumers’ rights to circumvent technological protection measures that control geographic market segmentation”. In addition, the report suggests educating users about their rights to evade geoblocking restrictions, such as those found on web storefronts that use IP location detection to prevent Australian users from buying software at lower US prices.

In one sense, this report is not surprising. As the internet has made it trivial to compare prices across international borders, consumers are increasingly unwilling to accept that a digital copy Microsoft Office Professional should cost some $200 more simply due to where they live.

The legal tide seems to be moving that way as well: Last year, India’s Delhi High Court held that parallel imports are not prohibited by trade mark law, while the US Supreme Court found that the first sale doctrine allowed for the importation and resale of less expensive textbooks intended for the Thai market.

One area bucking this trend is patent law, specifically in the pharmaceutical industry where differential pricing is commonplace. In India, there is increasing concern about the high cost of drugs, that even with lower prices, many life-saving medicines are still out of reach for all but the richest Indians. In fact, the government takes the position that the price differential is too small, arguing that if purchasing power is taken into account, drugs in India are actually less affordable than in countries such as New Zealand and France.

Similarly, those advocating for better access to medicines in developing economies push for increased affordability, which generally means lowering prices for developing countries. This, combined with developments such as compulsory licensing in India, may drive the international price differential even higher.

Does this mean that price differential schemes based on trade mark and copyright will begin to disappear, while those for pharmaceuticals continue? Will IP laws generally allow for parallel imports, except for pharmaceuticals? Perhaps, but there are other pressures as well; there are growing concerns about the affordability of medicines even in advanced economies such as the US and Australia. If that continues, consumers in places such as the UK may start wondering why the exact same medicine costs so much less in other countries.


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