Getting to the regulatory heart of medical parallel imports

As global trade continues to advance, the phenomenon of parallel importation of medical devices is gaining increasing prominence. In fact, it is becoming a significant issue in the international trade arena.

Alongside the parallel-imported products come questions regarding their legality, safety and regulation, posing new challenges to the protection of rights holders’ interests. This article focuses on delineating the legal regulation and the primary risks associated with parallel importation of medical devices, as well as offering strategies for rights holders.

Distinctive characteristics

Parallel importing typically refers to the cross-border trade method of importing legitimate goods that are produced or sold by rights holders abroad, and then offering them for sale in the receiving country without the consent of the rights holders or their licensees.

It is true to say that judicial practices in different legal domains have granted legality to parallel imports of ordinary goods in typical situations, based on principles like exhaustion of rights, license-in mode and indicative use. However, in the case of medical devices – due to the potential impact of these devices on human health and their inherent risks – it is crucial to strike a balance between safeguarding public health and IP rights.

To avoid ambiguity, this article pertains solely to the parallel importation of brand-new, genuine products where the rights holder in the exporting country is identical to the rights holder in China.

Administrative regulation

The Regulations on the Supervision and Administration of Medical Devices stipulate that imported medical devices must have Chinese instructions and labels that comply with prescribed standards and relevant mandatory requirements. Failure to provide such instructions or labels, or providing non-compliant instructions or labels, renders the importation impermissible.

During the importation process, customs primarily require importers to provide:

• A valid import medical device registration certificate issued by the National Medical Products Administration (NMPA) or the certificate and the registration form;
• A China compulsory certification (3C) certificate for medical devices listed in the Catalogue of Product Subject to Compulsory Product Certification;
• An automatic import licence for some equipment;
• Photographs, nameplates, technical parameters, end-use, Chinese instructions and labels of the devices; and
• Import contracts, packing lists and invoices.

Failure to provide these documents violates the regulations, leading to import prohibition. Even if cleared by customs, there remains a risk of subsequent investigation.

Trademark infringement

In addressing parallel imports, Chinese judicial authorities do not adhere to the international exhaustion of rights principle, but focus on whether there is an impairment to the three major functions of the involved trademark – source identification, quality assurance and reputation.

Original packaging. In China’s judicial practice, this scenario is generally not considered an infringement because the essential functions of the trademark are not compromised. However, cases such as Jelly Belly and Michelin tyres have been deemed infringements as the imported products failed to meet China’s mandatory requirements for food and 3C certification, thus impairing the quality assurance and reputation functions of the trademark.

If imported medical devices are subject to different mandatory standards in the exporting country than in China, there remains a risk of trademark infringement in cases of parallel imports with original packaging.

Repackaging. Importers often open original packaging to add Chinese instructions and labels, potentially compromising the sterility or reliability of medical devices and leading to detachment from the rights holder’s quality management system. If importers fabricate Chinese instructions or labels inconsistent with those submitted during registration, they violate the regulations, thus constituting infringement. Furthermore, judicial authorities may refer to the Bristol-Myers Squibb v Paranova case in establishing five criteria tailored to China’s circumstances.

Since parallel-imported medical devices without the rights holder’s consent lack its quality management, their Chinese agents typically refrain from providing after-sales services. However, if importers still push the responsibility to legitimate Chinese agents, it creates the predicament of the product having no after-sales service, further damaging the reputation carried by the trademark.

Copyright infringement

As mentioned earlier, to clear customs, unauthorised importers often fabricate Chinese instructions or labels, potentially infringing rights holders’ copyright.

Strategies for rights holders

In contrast to parallel imports of ordinary goods, rights holders of medical devices can both utilise regulations to block parallel imports at customs, and also have greater leverage in claiming trademark infringement. There exists the possibility of pursuing liability for copyright infringement of pirated Chinese instructions.

Additionally, if importers claim to be legitimate agents or import second-hand medical devices, rights holders can further pursue unfair competition or investigate criminal liability, depending on the circumstances.

Che Xiaoyan is a partner at Llinks Law Offices. She can be contacted by phone at +86 0755 3391 7698 and by email at cherri.che@llinkslaw.com
Wang Xi is an associate at Llinks Law Offices. He can be contacted by phone at +86 021 3135 8693 and by email at wonssi.wang@llinkslaw.com