Académique Documents
Professionnel Documents
Culture Documents
Prepared by
Dr. Ana María Pacón, LL.M.
June 2019
June 2019
Prepared by:
Dr. Ana María Pacón, LL.M.
Disclaimer
The contents of this publication are the sole responsibility of the contractor and can
in no way be taken to reflect the views of the European Union.
Address
TABLE OF CONTENTS
1. Introduction 1
2. Factual background ................................................................................................ 3
3. Economic foundations of parallel trade .................................................................. 5
3.1 Causes of parallel trade .......................................................................................... 6
3.1.1 Price differences between import and export countries ......................................... 6
3.1.2 Transaction costs, market entry barriers and framework conditions in the import
country .................................................................................................................... 7
3.2 Extent and importance of parallel trade .................................................................. 8
3.3 Economic assessment of parallel imports .............................................................. 9
3.3.1 Interest of the TM titleholders and the exclusive distributors ................................. 9
3.3.2 Interest of the parallel importer ............................................................................. 10
3.3.3 Consumer interest ................................................................................................ 10
4. Arguments in pro of national exhaustion of trademark law .................................. 11
5. Arguments in pro of international exhaustion of trademark law ........................... 16
6. The economic model ............................................................................................ 19
7. Automotive Industry .............................................................................................. 24
7.1 Companies operating with foreign brands ............................................................ 26
7.2 Contribution of companies in terms of employment, added value, investment and
innovation ............................................................................................................. 27
7.3 Social costs and benefits of the eventual transition to the international exhaustion
of trademark rights ................................................................................................ 28
8. Pharmaceutical Industry ....................................................................................... 30
8.1 Companies operating with foreign brands ............................................................ 32
8.2 Contribution of companies in terms of employment, added value, investment and
innovation ............................................................................................................. 33
8.3 Social costs and benefits of the eventual transition to international exhaustion of
trademark rights .................................................................................................... 35
9. Textile and Clothing Industry ................................................................................ 39
9.1 Companies operating with foreign brands ............................................................ 41
9.2 Contribution of companies in terms of employment, added value, investment and
innovation ............................................................................................................. 42
9.3 Social costs and benefits of the eventual transition to international exhaustion of
trademark rights .................................................................................................... 46
10. Food and beverages ............................................................................................. 48
10.1 Companies operating with foreign brands ............................................................ 48
10.2 Contribution of companies in terms of employment, added value, investment and
innovation ............................................................................................................. 50
10.3 Social costs and benefits of the eventual transition to international exhaustion of
trademark rights .................................................................................................... 52
11. Perfumery, cosmetic or toilet preparations ........................................................... 54
1. Introduction
Analysis of the costs and benefits resulting from the transition from the
national to the international exhaustion of trademark rights regime,
focusing on the socio-economic impact of adopting the international
exhaustion of rights.
It is attributed to Sir Winston Churchill the assertion that war is too important to
be left to the military, a phrase that can be extended to all professions and State
decisions. That is, the government should not wait for a mathematical formula to
take a decision, but should gather opinions from different professional
approaches and stakeholders, to weigh them and decide thinking about the long-
term benefit of the country.
In the present case, the historical context places the decision in the aftermath of
a break in the orientation of world trade policy in 1994. It was a break because
the previous orientation was towards free trade.
This orientation begins as far back as the eighteenth century, with Adam Smith
and the beginning of the modern economy, followed by David Ricardo and the
controversy over the free import of grains. The last episode began with the Breton
Woods agreements of 1944, at the end of the Second World War.
The process did not end with the TRIPS Agreement, but instead began a new era
that has not yet ended, in which the developed countries struggle to promote a
new wave of strengthening of intellectual property rights, beyond the provisions
of TRIPS and the treaties of WIPO in the frame of the Free Trade Agreements
(FTA).2
In Braithwaite and Davos (2000) developed countries press to create new rules
and regulations, while developing countries tend to accept them but trying to
reduce their impact incorporating other principles, among them the exhaustion of
intellectual property rights at national and international level. In this line, Álvaro
Díaz of the UN-ECLAC indicates that, in the debate on Free Trade Agreements,
the United States underlines the principle of national exhaustion of rights while
the countries of Latin America and the Caribbean emphasize the principle of
international exhaustion of the rights.3 Indeed
“The countries of the region need to pursue intellectual property policies that
facilitate the creation of a new intellectual property system for the twenty-first
century, one that will help the region to achieve its goals in terms of growth,
1 The TRIPS Agreement is Annex 1C of the Marrakesh Agreement establishing the World Trade
Organization, signed in Marrakesh, Morocco on 15 April 1994, available at:
https://www.wto.org/english/docs_e/legal_e/27-trips_01_e.htm.
2 See Antons, Christoph/Hilty, Reto, Intellectual property and free trade agreements in the Asia-
Pacific region, Springer, Heidelberg/New York/Dordrecht/London, 2015; Maskus, Keith/Ridley,
William, Intellectual Property-Related Preferential Trade Agreements and the Composition of
Trade, 2017, available at:
https://www.oecd.org/site/stipatents/IPSDM17_1.1_Maskus_paper.pdf
3 Comisión Económica para América Latina y el Caribe (CEPAL), La propiedad intelectual
después de los tratados de libre comercio, Santiago de Chile, 2008.
equity and democracy. The challenge consists of striking a new type of balance
between the protection of intellectual property rights and social interests, and
between the need for private control over and public access to knowledge and
information”. 4
2. Factual background
Mauritius is an island state of 1.3 million inhabitants in 1,979 square km, which
implies that the population density is high, about 650 per square kilometre.
The country’s economy has made great strides since independence in 1968, and
in 2017 real gross domestic product (GDP) growth reached 4%. The main drivers
of growth were the services sector, especially finance, and the trade and
accommodation services. The latter benefited from a buoyant tourism sector; a
key sector supported by the recent acceleration in the global economy. Tourist
arrivals increased by 5.2% in 2017 to reach 1.34 million—a number equivalent to
the island’s entire resident population.
Mauritius has a liberal economic and trade policy, with a trade-to-GDP ratio of
98% (World Bank, 2017). The country is a member of the WTO, as well as
other regional economic groups (COMESA, SADC, IOC). Mauritius aims to
transform the island into an open and globally competitive economy and to fully
integrate it into the world trade system through its trade policies.
Comparatively, the island does not have many trade barriers and customs
duties are low (the average applied tariff is only 0.9%).5
Mauritius has been a Member of the WTO since 1995, and of the General
Agreement on Tariffs and Trade (GATT) since 1970.6
The country's main trade partners are the European Union (led by France and
the United Kingdom), China, India, South Africa and the United States.7
Mauritius exports clothing, textiles, sugar, cut flowers, molasses and fish and
radio transmission equipment. Sugarcane occupies 90% of the country's
cultivated land and represents 15% of its exports. The export of services has
been on the rise. As far as services are concerned, the country has a positive
trade balance.
The island imports petroleum products, fish, cars, medicine and radio
transmission equipment.8
Mauritius imports more than it exports, and the current account deficit continued
to be supported by financial and capital net inflows, including net inflows to the
large offshore corporate sector. Thus, the overall balance of payments remained
moderately in surplus, and gross international reserves rose to $ 6.1 billion in
January 2018 (equivalent to over 10 months of imports).
The graphic shows that the export of services grew strongly between 2007 and
2011, and the country maintains a positive balance of services.9
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
X 2238 2384 1939 2261 2565 2649 2869 3094 2662 2376 2363
M 3894 4651 3733 4386 5149 5354 5397 5610 4790 4655 5253
Trade deficit -1656 -2267 -1794 -2125 -2584 -2705 -2528 -2516 -2128 -2279 -2890
Xs 2194 2530 2225 2656 3215 3364 2734 3119 2802 2835 2981
Ms 1562 1910 1586 1951 2428 2382 2143 2426 2188 2038 2231
Services balance 632 620 639 705 787 982 591 693 614 797 750
X Total 4432 4914 4164 4917 5780 6013 5603 6213 5464 5211 5344
M Total 5456 6561 5319 6337 7577 7736 7540 8036 6978 6693 7484
Balance in Current C -1024 -1647 -1155 -1420 -1797 -1723 -1937 -1823 -1514 -1482 -2140
Source: World Trade Organization. World Trade Statistical Review 2018, available at:
www.wto.org/statistics
X and M = merchandise exports and imports
Xs and Ms = exports and imports of commercial services
6000
5000
4000
3000
2000
1000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
X M Xs Ms
The ability to use intellectual property rights to avoid parallel imports has been
discussed for decades, and is still being discussed. The patent grant the right to
monopolize the commercialization of the product protected by the patent, which
constitutes an argument to obtain an exception to the economic principle of the
free circulation of goods in international trade. That is why discussions on parallel
imports have focused on patent law and less attention has been paid to trademark
law.Therefore, it is important to distinguish whether parallel imports correspond
to products with current patent or trademarks.10
Parallel imports are a good business if the same products are sold in different
countries at different prices and the parallel trader can sell the product purchased
in the exporting country at a price in the importing country that covers the cost of
the business (purchasing price + transaction costs) and gain additional profit
(arbitrage potential). For the business to be profitable for the parallel importer, the
spread between the prices on the low-price and high-price markets must be so
great that it promises the parallel trader a profit after subtracting the transaction
costs.
In addition, the intensity of competition, the cost of production, the level of VAT,
and the purchasing power and willingness to pay of consumers 11 are also
significant for the differences in demand conditions.
10 For example, on an article of the WTO dealing with the TRIPS Agreement, there is no reference
to trademark law and there are 23 references to patents, available at:
https://www.wto.org/spanish/tratop_s/trips_s/art27_3b_background_s.htm.
11 However, the behavior of the consumer is not determined solely by his solvency. Especially with
certain luxury and branded articles, the so-called snob effect can be observed, according to
which consumers pay attention to a good only after a certain price, because they assume that
the corresponding product is not acquired by a broad layer.
costs. These differences in market cost are transmitted to the price charged by
the national licensees. Where local marketing costs are lower, the selling price is
lower, and result in a price difference with countries where the costs are high
enough to cover cross shipping and various transaction costs.
It could even happen that licensees in export markets sell to parallel importers at
prices that exclude some or all of the local marketing expenses incurred in the
export market, making dumping possible.
In addition, differences in selling prices for the same product may arise as a result
of proprietors not owning investments in marketing, advertising, repair and
warranty services,13 but rather to national licensees and independent distributors
who reimburse their costs according to the individual expenses incurred through
the sale cover the trademarked products.
Transportation costs are mainly influenced by the ratio of the specific value of the
product to its physical weight. In addition, sensitivity and perishability of the goods
can cause increased transport costs.
Further costs that the parallel importer has to cover arise by overcoming market
entry barriers in the importing country. If parallel trade is not conducted within a
free trade area, the importer has to pay customs duties. In individual cases,
imports may even be excluded due to import quotas or other trade policy
measures. In addition, market entry costs are incurred if the parallel importer in
the importing country has to modify his products due to health and safety
regulations, technical standards and packaging requirements in the importing
country. This is especially true in the pharmaceutical sector. In certain sectors, in
particular in the fertilizer and plant protection sectors, and in the price-regulated
pharmaceutical sector, the parallel importer must also carry out licensing and
12 See Vautier, in: Heath (eds.) Parallel Imports in Asia, 2004, pp. 1, 5.
13 See OECD (eds.), Synthesis Report on Parallel Imports, 2002, p. 8.
14 According to the NERA study (1999, p. 79), parallel transport of motor vehicles, non-alcoholic
drinks and electrical and domestic appliances is associated with relatively high transport costs.
The extent and importance of parallel trade varies in different countries and
sectors, as only part of the trade volume is effectively eligible for parallel
imports.15 Which volumes are actually affected by a parallel import depends on
the factors mentioned above (the actual price difference and the specific amount
of the transaction costs) and the tradability of the goods concerned and the
maximum volume of goods involved.
The tradability of protected products presupposes that they are transportable and
that there is a sufficiently broad customer base. Tradeable are medicines and
most consumer goods. On the other hand, capital goods that enter into production
processes of other companies as intermediate consumption are in principle not
suitable for parallel imports.
To define the scope of the customer base, among other things, customer demand
and the existence of parallel high and low-price markets are relevant. Consumer
demand is important in that it determines the size of the sales market and thus
the volume of trade that is effectively affected. If the priority of consumers is to
maintain a certain standard of warranty and other services, and consumers are
prepared to pay more for their products, then this will be as negative for the
parallel importer as consumers are for goods to order the private use also over
the Internet.16
Positive demand effects, on the other hand, result for the parallel importer in
parallel high- and low-price parallel markets and price elasticity of demand. The
more price-elastic the demand is, the greater the additional quantity demanded
for the cheaper products.
The real importance of global and national parallel trade is difficult to ascertain,
as parallel imports as legal components of trade are not specifically identified in
the trade balance. Empirical studies on the worldwide extent of parallel trade do
not exist, as far as can be seen. According to the studies to date, parallel trade in
industrialized countries has not been significant.17 In individual sectors, however,
parallel imports may play a significant role.
The subject of the parallel trade is primarily technically high-quality goods with
luxury and prestige character as well as pharmaceuticals. According to the
international studies, in particular, car components and auto spare parts, compact
discs and records, clothes, motorcycles, shoes, sporting goods, perfumes and
cosmetics, consumer electronics, photographic equipment, optics, watches, tires,
food and champagne will have varying market shares in the countries imported
from 3% and 15% in parallel.18 It has also been found that parallel imports can
account for up to 20% of trade in specific products. Unfortunately, there is
currently a lack of meaningful empirical research on the extent of parallel trade in
developing and emerging countries. The study by the OECD does not provide
any reliable material on the importance of parallel imports in these countries.19
On the one hand, the parallel import question affects a wide range of private and
public interests. Depending on the perspective, parallel imports are therefore
considered to be economically advantageous or disadvantageous. A parallel
import ban is initially fundamentally in the interest of trademark proprietors and
exclusive distributors, while parallel imports clearly benefit the parallel importers.
billion and for consumer goods at CHF 0.6-1.1 billion. This corresponds to about 0.19-0.28% of
the gross national product.
18 According to the NERA study (SJ Berwin & Co and IFF Research. 1999. The economic
consequences of the choice of regime of exhaustion in the area of trademarks. Page iv.
London), parallel trade in the EU covered, in particular, beverages, leather goods and footwear
with a market share of up to 5% of clothing with a market share above 5%, and cosmetics and
alcoholic beverages with a market share of 5-10%. According to Konkurrensverket, parallel
trade in car components and car wheels each has a market share of 20% and parallel trade in
clothing and motorcycles each has a market share of 10%. Critical in relation to both studies
OECD, which contains a summary of all relevant studies.
19 OECD (eds.), Synthesis Report on Parallel Imports, 2002.
prices because he is not under pressure to lower his prices for the protected
products due to the lack of parallel import competition.
Allowing parallel imports to these countries through open parallel import schemes
in developing countries is seen by developing countries as being in the interest
of their consumers, as they can benefit from lower prices and wider product
range. Parallel imports are particularly important in the pharmaceutical sector as
a means to ensure access to affordable essential medicines against epidemics.
These effects occur when parallel imports to the developing country are in fact
attractive and profitable because the developing country has a higher price level
and a large and efficient market. In addition, the transaction costs incurred in
parallel trade must be relatively low.
There are different opinions about the positive or negative effects of the
application of international exhaustion of trademark law, and there are economic
arguments in pro and against it. These arguments may relate to parallel imports
in the developed world or in developing countries; or refer to any restriction on
free trade or, in particular, to the prohibition on parallel imports.
The main arguments in favour of national exhaustion and against parallel imports
are, in summary, the following:20
Only the owner of the trademark, and not the parallel importers, can
adequately assume the handling of certain products in terms of packaging,
deposit conditions, and other aspects.
The intellectual property owner will be forced to withdraw the product from
low priced markets altogether, denying access to beneficial products, or
may be compelled to converge prices internationally to stop leakage from
the lower priced market to the higher priced market, and such convergence
will inevitably exclude less developed regions, or may also reduce the
investment in manufacture, supply and customer service in certain
countries, further reducing consumer welfare.
21 NERA, op.cit.
22 Harmonization of Trademark Law and Practice Committee. 2011. INTA Model Free Trade
Agreement. New York
23 International Chamber of Commerce, ICC, Commission on Intellectual and Industrial Property.
Policy statement. Exhaustion of intellectual property rights. Washington, 2000.
For the reasons indicated, it is important to focus on the analysis on the position
of The Mauritius Chamber of Commerce and Industry (MCCI), expressed in the
document: International Exhaustion of IP Rights in Mauritius, MCCI Position.
November 2016. MCCI Position Papers/ 2016/ No. 1.
The position paper of MCCI24 includes several lists of arguments similar to those
of INTA and ICC:
The citation26 of the OECD document27 “The high entry cost together with
rapidly decreasing margins from parallel imports due to country size are
likely to limit the number of parallel imports in a small country - the resulting
oligopolistic market structure could leave little benefit for the customer”
refers to the low probability of parallel imports entering a small country,
something that may be in the interests of the current representatives of
foreign trademarks, but in no way allows concluding that parallel imports
could raise consumer prices in Mauritius. On the other hand, the
comparison with a Mediterranean country, with borders with four
24 MCCI Position Paper, International Exhaustion of IP Rights in Mauritius, November 2016. MCCI
Position Papers/ 2016/ No. 1.
25 “The Economic Impact of Pharmaceutical Parallel Trade, Special Research Paper, LSE, p. 15
(sic).
26 “OECD Economic Surveys: Switzerland, 2004, p. 120.
27 Giorno, C./Jimenez, M./Gugler, P., "Product Market Competition and Economic Performance in
Switzerland", OECD Economics Department Working Papers, No. 383, OECD Publishing,
Paris, 2004, available at: https://doi.org/10.1787/336304241158.
28 Müller-Langer, Frank. 2008. Does Parallel Trade Freedom Harm Consumers in Small Markets?
Croatian Economic Survey 2008.
29 Müller-Langer, op.cit., p. 25.
30 “Some intellectual property owners may set their retail prices lower in less developed countries
to reflect local economic conditions, such as lower per capita incomes. The example of
HIV/AIDS Drugs were taken. In the absence of parallel import restrictions, a seller would lose
this ability to price discriminate. This could force the seller to raise prices in those countries to
the detriment of their consumers”.
higher and that parallel imports could reduce that margin in favour of
Swedish consumers.
Finally, a real fact stands out: Parallel importers get a free ride in the
market demand and the brand image of the product created by the
authorized distributor, without sharing the efforts and expenses of
marketing communications that have generated the demand and the
associated image. However, the OECD citation refers to the owners of
patents, not trademarks. In the face of increased competition, authorized
channels will have to face the cost of marketing to maintain their sales, a
cost that the authority will include in its overall social cost-benefit
assessment.
The studies cited in the MCCI document refer to the possible effects of parallel
imports of products with patent in force in developed countries, not to products
with a foreign trademark in the Mauritius market.
The main arguments of those who promote parallel imports are the following:32
Increasing the supply, satisfies the demand of the public and decreases
the prices to the consumer.
The obligation of the State to protect consumers is not only to protect them
from possible harm, but also to promote their freedom to choose between
different products and alternative suppliers, which can occur through
parallel imports.
The ability to use intellectual property rights to avoid parallel imports is questioned
because the economic function of trademarks is limited to:
1) Inform consumers about the origin of the products, improving their ability to
judge the quality of these.
2) Represent the value of the investments made by the owner to maintain the
quality of their products, which allows them to fight against piracy and unfair
competition.
On the other hand, the principle of free circulation of goods and services is the
basis for the creation of the WTO and of multiple regional agreements, because
it promotes growth and well-being, both in developed countries and in developing
countries.
In the conflict between trademark law and the economic principle of freedom of
trade, the United Nations (UN) considers that restrictive business practices
include:
33 Stucki, Marc. 1997. Trademarks and Free Trade. An Analysis in Light of the Principle of Free
Movement of Goods, the Exhaustion Doctrine in EC Law and of the WTO Agreements. Bern:
Stampfli Verlag AG.
Indeed, the balance between the protection of intellectual property and the
principle of free trade is difficult, by which goods must circulate between countries
in the same way as within their country of origin: no obstacles to export in the
country, country of origin, borders or destination.
From this point of view, the argument in favor of the application of international
exhaustion of trademark rights derives, as a logical conclusion, from the priority
accorded to freedom of trade; so it would only be necessary to demonstrate that
free trade is better than imposing restrictions on the free transit of goods and
services, to conclude that it is appropriate to authorize parallel imports.
34 United Nations Conference on Trade and Development. The United Nations Set of Principles
and Rules on Competition. https://unctad.org/en/Pages/DITC/CompetitionLaw/The-United-
Nations-Set-of-Principles-on-Competition.aspx
35 Philip Kitchen, Lynne Eagle, Lawrence Rose and Brendan Moyle. 2003. The Impact of Gray
Marketing and Parallel Importing on Brand Equity and Brand Value. Research Memorandum
38. The University of Hull Business School, UK.
https://www.researchgate.net/publication/242642165_The_Impact_of_Gray_Marketing_and_P
arallel_Importing_on_Brand_Equity_and_Brand_Value
The most discussed trade restriction has been the imposition of tariffs on imports,
a subject that is briefly presented below. It should be noted that the argument
begins, paradoxically, stating that the country that imposes tariffs gets a benefit.
This was what happened before the Second World War, which was preceded by
a commercial war; with tariffs, other restrictions on trade and combat
devaluations. The experience of both wars led most nations to sign the General
Agreement on Tariffs and Trade (GATT) consecrating the general principle that
goods should circulate between countries as they circulate within each one,
without any restriction.36 Thus, in practice it was shown that, even for countries
that can impact the world market, trade restrictions are harmful for everyone.
To distinguish the different impacts that parallel imports can have, a partial
equilibrium model with functions of supply and demand is applied, in which the
price and volume of a product traded are the result of the balance of the internal
market forces, together with the international price of the imported product.
The first graph represents a situation of autarky, without international trade. The
balance point between supply and demand is marked with the letter A, the
quantity produced and consumed will be Qa, and sales will be made at the price
Pa. The benefit or surplus of the consumer, is measured by the area of the upper
triangle and that of the producer by the lower triangle.
36 The last of the recitals of the General Agreement on Tariffs and Trade of 1947 is: Being desirous
of contributing to these objectives by entering into reciprocal and mutually advantageous
arrangements directed to the substantial reduction of tariffs and other barriers to trade and to
the elimination of discriminatory treatment in international commerce.
Price
Domestic offer
Consumer
surplus
A
Pa
Producer
surplus
Domestic demand
Quantity
Qa
To study the impact of imports (which include parallel imports) in Mauritius, the
simplest and most appropriate assumption is that, given the small size of the
national economy in relation to the rest of the world, any quantity of the product
that it demands can be bought without affecting the international price. For this
reason, the following graph shows the international offer of the product by a
horizontal straight line at the Pm level of the world market price.
Price
Domestic offer
1
A
Pa
2
4 5
Pm International price
3 Domestic demand
Quantity
Qp Qa Qc
Due to imports, the price of the product falls to the level of the international price
Pm, the quantity consumed rises from Qa to Qc and domestic production falls to
Qp. The difference between the quantity demanded and the quantity offered is
covered by imports.
The fall in the domestic price means that the surplus of the consumer rises and
that of the producer goes down.
In the graph it can be seen that the consumer surplus indicator, which was
represented by area number 1, increases in areas 2, 4 and 5; and the surplus or
benefit of the producer is reduced in area 2. This last area does not mean a net
gain for the economy, because the consumer's profit is made at the producer's
expense; but there is a net gain that is measured by the sum of areas 4 and 5,
which corroborates that if a country is opened to international trade there is a net
benefit to society and, on the contrary, any restriction on imports harms the
consumers.
Under the current regime of national exhaustion of trademark law, there are
imports, but parallel imports are restricted. Therefore, the following graph is
based on a global supply that does not include parallel imports (price Ps) and the
result of greater trade opening is a reduction in the domestic price of the product
from Ps to Pm.
Price
Domestic offer
Domestic demand
Quantity
Q2 Q1 C1 C2
This price reduction in turn reduces the surplus of the domestic producer in area
1 and that of the importers with trademark licenses in area 3.
Since two groups of economic agents have the indicated losses due to the price
reduction, the net benefit for the national economy as a whole is equal to the sum
of the 2 + 4 areas.
It should be remembered that this is a partial static equilibrium model, very useful
for estimating the short-term impact on the market of a product that has no greater
effect on the economy as a whole, as in the case of tea, which is an example
used by Professor Marshall.37 In particular, it should not be forgotten that the
partial equilibrium model is short-term, and that it does not take into account the
37 Marshall, Alfred, Principles of Economics. Eighth Edition. Palgrave Classics in Economics, 1920,
available at: http://www.library.fa.ru/files/Marshall-Principles.pdf
In summary, the model demonstrates that there is a positive net impact on the
well-being of the population, but the quantitative estimate of the impact would be
less than the actual impact. A more accurate estimate would require the
application of a dynamic general equilibrium model, much more complicated than
the one used.
The situation of five sectors is presented in some detail below, to estimate the
possible consequences of the international exhaustion of trademark law in
Mauritius.
7.Automotive Industry
In Mauritius there are several car dealers that cover the most popular brands in
the world, which benefits the consumer by the multiple options to choose
according to their acquisition capacity. Dealerships have thrived selling a variety
of cars, from luxury cars to compact cars, in differentiated markets.
In 2017, 531,797 vehicles were registered on the island, of which 8,799 are
owned by the government. The private ones were 522,998: of which 51.4% were
cars and dual-purpose vehicles and 39.0% were two-wheeled motorized
vehicles. The remaining 9.6% consists of vans, lorries and trucks, buses and
other vehicles.
B. Private/commercial vehicles:
38 Ministry of Finance and Economic Development, Annual Digest of Statistics – 2017, Port Luis,
Mauritius, 2018, Table 13.1.
39 The National Transport Authority, Ministry of Public Infrastructure and Land Transport, Mauritius.
40 Moorghen, Shanda, Automotive Industry: facing the challenges, 2017, available at:.
https://www.lexpress.mu/node/307525.
There are several entities involved in car dealership covering most of the popular
brands in the world, and it seems that the automotive market in Mauritius is
becoming more and more competitive for suppliers.
Source: DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition.
La Sentinelle Editions
41 DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition. La Sentinelle Editions.
42 Moorghen, Shanda, op. cit.
The vehicles imported by the main companies, registered every year, are the
ones that led to reach the 531,797 units registered in 2017. As can be observed
in the following table, the value of imports in 2015 was higher than nine billion
Rupees.43
In contrast, the Gross Domestic Fixed Capital Formation of the industrial group
was greatly reduced in real terms in those years, to the point that its real value in
2015 was only 45.9% in 2012. It should be noted that Wholesale and retail trade
activities represent most of the industrial group.
Wholesale & retail trade; repair of motor vehicles and motorcycles 36807 36464 42469 44861
43 The Mauritius Chamber of Commerce and Industry. MCCI. 2017. Annual Report 2015 | 2016. Port-Louis
Gross Domestic Fixed Capital Formation at current prices by type and use
Wholesale & retail trade; repair of motor vehicles and motorcycles 8875 6020 5047 4624
As indicated, all trade liberalization in a small country has a positive net impact,
although not all economic agents benefit.
Regarding the positive impact in general, parallel imports do not occur if there is
no substantial price difference, so that, if this form of commercial release occurs,
there will be a reduction in the price of vehicles and motorcycles in Mauritius that
will benefit the consumers.
The national added value will also increase, in proportion to the increase in
wholesale and retail trade of the sector, as well as the greater activity of the repair
of motor vehicles and motorcycles activities.
For this, it will be essential to invest in the repair of motor vehicles and
motorcycles activities, so that the formation of fixed capital will increase, which,
as has been pointed out, was reduced between the years 2012 and 2015.
Employment in the sector, which remained stable during those years, should
increase in proportion to the increase in imports of vehicles and motorcycles and
the economic activity they generate.
with the unfair competition of the so-called "Dumping of used cars",44 and it
seems that they handled it well.
In this case, different scenarios can be presented according to the way in which
representatives of foreign brands react to the authorization of parallel imports.
One possible way of reacting is to diversify its offer by including lower-priced
vehicles (even lower-quality ones) to better take advantage of the different
income levels of the population. That is, participating themselves in the business
of parallel imports, for which they have the advantage of positioning in the market.
At this point, it is convenient to consider the Chinese experience, but not exactly
that of the great country but that of its free trade zones, which are more similar
territories to the geography of Mauritius.45
Indeed, a recent pilot scheme launched in the new Shanghai Free Trade
Zone (SFTZ), later extended to Tianjin, Guangdong and Fujian, admits the
parallel imports of cars, especially luxury cars that are much more
expensive in the PRC than in the US.
(…)
For some time, the issue of parallel imports in China has been somehow
underestimated. However, the rise in prices following the economic
growth, development, increasing wealth and the abolition of many
restrictions to the establishment of foreign business in the country have
begun to attract more foreign entrepreneurs and, therefore, more parallel
traders. One of the most interesting openings of the Chinese market to
parallel imports occurred in the context of the Shanghai Free Trade Zone
(SFTZ). This one is the first free-trade zone in mainland China and features
among its goals the promotion of trade and investment in China.
44 Centre for Science and Environment (CSE), Clunkered: Combating Dumping of Used Vehicles
-- A roadmap for Africa and South Asia, 2018, available at: https://www.cseindia.org/clunkered-
combating-dumping-of-used-vehicles-8863.
45 Zappalaglio, Andrea, The exhaustion of trademarks in the PRC compared with the US and EU
experience: a dilemma that still needs an answer. European intellectual property review ·
September, 2016, available at: https://www.researchgate.net/publication/308618825.
With all that being said, there is no doubt that the automotive industry is
set to face challenging times ahead. However, given the market in
Mauritius and the poor public transport system, the industry is set to thrive
for years to come.47
8. Pharmaceutical Industry
Health is one of the most important aspects worldwide. The introduction and set
up of the World Health Organization (WHO) further enhances the value and
importance of Health worldwide.
In Mauritius, although it was a small island with a little per capita gross domestic
product of price US$ 5406 (National Accounts Estimates, 2003) it has managed
to put a system of health care which has brought major achievement in order to
put Mauritius to the level top in health among developing countries. The general
state towards health in Mauritius’ population has been improving and is in good
terms for the present years. Among other countries, in Mauritius the public health
care services are tax funded and free as it is considered health to be a human
right issue48.
In delivering the best health care services, it will missed an important point that
is the safety of the health care workers who are responsible in deliver the health
care services including the patient and the cleaners in the health care
establishment. Among the different hazards in the hospitals, there consist of
biological hazards which affect the health care workers, patients and cleaners
(guidelines for health care worker, n.d). The health safety executive suggested
that the rate of infection among nurses may be at 30/100,000 a year. There may
be cases which are unreported (protecting staff from infection, n.d).
46 Zappalaglio, Andrea, The exhaustion of trademarks in the PRC compared with the US and EU
experience: a dilemma that still needs an answer. European Intellectual Property Review
(EIPR), September, 2016, available at: https://www.researchgate.net/publication/308618825.
47 Moorghen, Shanda. 2017. Automotive Industry: facing the challenges, available at:
https://www.lexpress.mu/node/307525.
48 WHO, 2008.
In the opinion of foreign trade officials of the United States, the pharmaceutical
sector of Mauritius has relevant characteristics for the interest of the service
providers or North American investors.
Mauritius has a well-developed health system. About 73% of the health needs
of the population are catered to by public health institutions and 27% by the
private sector. Non-communicable diseases, such as cardiovascular
diseases, diabetes, cancer, and chronic respiratory diseases account for 80%
of total mortality in Mauritius every year.
Public hospitals are free in Mauritius, but there are also several private clinics.
Mauritius’ healthcare infrastructure includes five major public hospitals, six
specialized public hospitals, 18 private multi-specialty clinics, 11 private
specialized clinics, and 28 medical laboratories. There are more than 4,500
beds in both public and private hospitals. The Government has announced
plans to upgrade the healthcare infrastructure, and tenders are issued on a
regular basis for medical equipment as well as for the procurement of
pharmaceuticals and disposables.49
And in the opinion of the officials of The Economic Development Board (EDB) the
pharmaceutical sector of Mauritius has bright development prospects.
Over the years the number of private institutions has doubled and future
projections indicate that the sector is expected to substantially contribute to
GDP and become a pillar of the economy.
Private institutions have multiplied and are expected to continue growing until
they become an important sector of the national economy.
49 Export.gov Helping US Companies Export. Healthcare Resource Guide: Mauritius, available at:
https://2016.export.gov/industry/health/healthcareresourceguide/eg_main_116239.asp#P179_
12554.
50 The Economic Development Board (EDB), available at:
http://www.edbmauritius.org/opportunities/healthcare/.
The health sectors operators showed notable growth in 2017, in both turnover
and profitability. Their cumulated turnover reached Rs. 5.30 billion in 2017,
compared to Rs. 4.32 billion in 2016. The total profit stood at Rs. 602 million.
Seven newcomers make their entry in the list of Top 100 Companies 2018-
Mauritius, and two companies no longer form part of the ranking51. The attached
table includes a list of the main private companies in the sector, as well as two
indicators of their economic activity in 2007.
51 DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition. La Sentinelle Editions.
The state health services employ over 650 doctors and 17 pharmacists.
The private sector employs over 400 doctors and 275 pharmacists.
Turnover was 5,300’ in 2017, superior in 23% to the 4,320´in 2016. Profit was
602’ in 2017.54
The information included below has been taken from Healthcare Resource Guide:
Mauritius:56
About 27% of the health needs of the population are catered to by the private
sector.
Public hospitals are free in Mauritius, but there are also several private clinics.
Mauritius’ healthcare infrastructure includes 18 private multi-specialty clinics, 11
private specialized clinics, and 28 medical laboratories.
In the past few years several global companies have invested in “centers of
excellence” to cater to the growing healthcare needs of both national and
international patients. In 2017, Mauritius attracted more than 11,500 foreign
patients for treatment in specialty areas such as cosmetic surgery and
procedures, orthopedics, cardiology, fertility treatment, and ophthalmology.
54 DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition. La
Sentinelle Editions.
55 Three-Year Strategic Plan 2017/18-2019/20, available at:
http://budget.mof.govmu.org/budget2017-18/2017_183-YearPlan.pdf
56 Export.gov Helping US Companies Export. Healthcare Resource Guide: Mauritius, available at:
https://2016.export.gov/industry/health/healthcareresourceguide/eg_main_116239.asp#P179_
12554
As of July 2018, there were 371 registered private drugstores and 38 registered
pharmaceutical wholesalers in Mauritius. Of the US$ 114 million of
pharmaceuticals imported in 2017, the private sector accounted for 75% of the
import value. Mauritius imports the vast majority of its pharmaceuticals.
The medical device manufacturing industry has also seen sustained growth over
the last few years. Due to the preferential market access that Mauritius enjoys
with the EU, leading medical device manufacturers (mostly from France and
Germany) have established operations here. They produce high-precision
medical devices such as catheters/stents; cardiovascular, orthopaedic, and
ophthalmic equipment; dental implants; artificial skin; and biomedical products.
Gaviscon 125 85 40 47
Pricing
As for patient prices, the Median Price Ratio in the public sector was 0 for
originators and 0 for generics as all medicines are provided for free. On
the other hand, prices in the private sector are high (19.3 for originators
and 6 for generics).
On the other hand, said document indicates that the participation in market value
of generic pharmaceutical products is 65%.
In order to obtain more recent statistical values, the calculations were made using
the absolute values of 2017 and the percentages of the Pharmaceutical Country
Profile of 2011. In addition, part of the imports is of products with current patent,
so it will be assumed that the international exhaustion of Brand rights will only
impact on generic products.
Regarding the amount of pharmaceutical imports (the value reported for the year
2017 is Rs Million 4148), the Ministry of Health represented 25%, so that only the
reduction of the average price of the private import of pharmaceutical products
implies an annual benefit of Rs Billion 10.11 for patients in Mauritius.
The total annual benefit of consumers must be greater, as prices and quantities
of domestic production must also decrease, and that the reduction of prices will
cause an increase in imports.
Coke and refined petroleum products / Chemicals and chemical products / 2,456 2,378 2,433 2,429 2,328
Basic pharmaceutical products and pharmaceutical preparations
The number of large establishments in the same industrial group NSIC in the
previous table, has remained between 34 and 36 in the years 2013-2017, the
value added in 2016 was 2095.3 million Rupees, and the tax payment of 12.1
million.
In the Export Oriented Enterprises (EOE) Group the pharmaceutical sector is also
grouped in statistics such as chemicals and chemical products / basic
pharmaceutical products and pharmaceutical preparations; and among the Non-
EOE appears together with the group of rubber and plastic products; therefore,
the values corresponding to the national production of pharmacists are not
indicated, with any precision; and it is only clear that these values do not exceed
those corresponding to the total of activities of the NSIC, which are relatively
small.
Likewise, parallel imports should not be expected to affect the research and
development activities of pharmaceutical products in Mauritius, because they are
activities aimed at developing export products, or services to cater the growing
healthcare needs of both national and international patients.
As for the expenditure on advertising that has been incurred to publicize the
foreign brand in the domestic market, the experience of other countries that have
gone through the regime of international exhaustion of the trademark right,
suggests that it is likely to increase, since the companies must invest to maintain
the loyalty of their customers and inform consumers of possible quality
differences between products; as well as to make changes in the labeling or
marking, packaging, color or special shape of the products, and all this without
greatly increasing the price58.
58 Philip Kitchen, Lynne Eagle, Lawrence Rose and Brendan Moyle. 2003. The Impact of Gray
Marketing and Parallel Importing on Brand Equity and Brand Value. Research Memorandum
38. The University of Hull Business School, UK, available at:
It should be remembered that, although the exclusive right over the trademark is
exhausted internationally, its owner maintains the right to prohibit third parties
from making acts of using the trademark that may harm the value of the trademark
or confusing the consumer public about the true origin of the trademark product.
On the other hand, the use of trademark law to prevent access to products that
save or preserve lives, as is the case of pharmaceutical products, would require
a different response, one that takes into consideration not the value of the
trademark, but rather the value of the underlying product or service.59
In the 70s of the XX century, Mauritius began its export promotion strategy with
the enactment of the Export Processing Zone (EPZ) Act, that attracted foreign
and national investments beginning in the textiles sector.
The policy of trade liberalization and export promotion was successful in the
textile and garment industry in terms of income generation, job creation and
capacity building for local entrepreneurs. The export-oriented policies led to the
fact that for some thirty years the textile and clothing sector in Mauritius was the
most developed in Africa South of the Sahara61.
https://www.researchgate.net/publication/242642165_The_Impact_of_Gray_Marketing_and_
Parallel_Importing_on_Brand_Equity_and_Brand_Value
59 Ghosh, Shubha, The Implementation of Exhaustion Policies: Lessons from National
Experiences. ICTSD Programme on Innovation, Technology and Intellectual Property, 2013,
available at: https://www.ictsd.org/sites/default/files/downloads/2014/01/the-implementation-of-
exhaustion-policies.pdf
60 Joomun, Gilles, The Textile and Clothing Industry in Mauritius, in: Herbert Jauch / Rudolf Traub-
Merz Eds. The Future of the Textile and Clothing Industry in Sub-Saharan Africa. Friedrich-
Ebert-Stiftung, Bonn, 2006.
61 Ghosh, Shubha, The Implementation of Exhaustion Policies: Lessons from National
Experiences. ICTSD Programme on Innovation, Technology and Intellectual Property, 2013,
In addition to these policies, other factors contributed to the success of the textile
and clothing sector in Mauritius:
1. The European Union and the United States imposed import quotas on
exports from third countries, while Mauritius had preferential access to
these two main markets through trade agreements the Benin/Cotonou
Convention and The African Growth and Opportunity Act (AGOA),
respectively.
Aveeraj S. Peedoly describes the rapid result of the policy followed and the
environmental factors:
At the turn of the twenty-first century, Mauritius was the world’s second-
largest fully fashioned knitwear producer, the third-largest exporter of new
wool products and Europe’s fourth-largest supplier of T-shirts62.
At the beginning of the current century, this situation changed, because the labour
cost was raised and the margin of preference enjoyed by Mauritian textile exports
to the EU and the United States was reduced. 80% of the Mauritian textile
products (sweaters, tee-shirts, trousers) were not in the high-quality category and
faced stiff competition from Chinese, Indian or Bangladeshi producers. Most
Hong Kong investors moved elsewhere after the ending of the favourable tax
regime. Some estimates point to a loss of 22,000 jobs in the EPZ63.
This forced investors and the government to rethink the textile and clothing sector
in the country. In 2003 the Textile Emergency Support Team was set up and an
independent assessor analysed the textile and clothing sector of Mauritius to
Another effect was the investment in other countries with lower wage costs.
According to James: The growth of Madagascar’s clothing industry is also largely
attributed to foreign investment from Mauritius, which was attracted by
Madagascar’s cheap labour supply.65
64 Aveeraj S. Peedoly,The Textiles and Clothing Industry and Economic Development: A Case
Study of Mauritius. In Innovation Policies and International Trade Rules. K. Lal et al. (eds.),
Palgrave Macmillan, a division of Macmillan Publishers Limited, 2009, available at:
https://link.springer.com/chapter/10.1057/9780230246201
65 James, William E., Status of Protection Facing Exporters of Textiles and Clothing from Asia and
the Pacific in the North and South Markets. In Economic and Social Commission for Asia and
the Pacific (ESCAP), 2008.
66 DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition. La
Sentinelle Editions.
61 Articles of apparel and clothing accessories, knitted or crocheted 678 13,111 274
62 Articles of apparel and clothing accessories, not knitted or 1,687 12,010 279
crocheted
63 Other made up textile articles; sets; worn clothing and worn 511 49 136
textile articles; rags
64 Footwear, gaiters and the like; parts of such articles 1342 22 237
Source: The Mauritius Chamber of Commerce and Industry. MCCI. 2017. Annual Report 2015 | 2016. Port-Louis
There were 30 large companies in 2017 in the Industrial Textiles Group, Section
13 NSIC, National Standard Industrial Classification of all Economic Activities. In
2013 there were 33, a reduction of 9%. In the Industrial Group Wearing apparel,
the reduction in the number of large companies was greater (17%), since it went
from 152 in 2013 to 126 in 2017.
67 The Mauritius Chamber of Commerce and Industry. 2017. MCCI Annual Report 2015-2016,
available at:. https://www.mcci.org/media/139082/mcciannualreport2015-2016.pdf
Sources: Mauritian Central Statistical Office. Cited by: Sawkut, Rojit. 2008. The Textile and
Clothing Sector in Mauritius. The World Bank, Washington. www.worldbank.org (2000). Statistics
Mauritius. Ministry of Finance and Economic Development. Digest of Industrial Statistics-2017.
Port Louis. (2013-2017).
http://statsmauritius.govmu.org/English/Publications/Documents/Regular%20Reports/industry/Di
gest_%20Industrial_Prod_Yr17.pdf
Employment in the industrial group wearing apparel is more than six times that of
the textile group, and this ratio has decreased from 7.10 times in 2014 to 6.14 in
2017.
It should be noted also that, comparing the figures of 2017 with those of the year
2000, the number of companies and employment has been reduced by half.
The compensation to employees in 2016 was 4.27 times higher in the industrial
group wearing apparel than in the textile group, as can be seen in the following
table, which reflects lower remunerations in the first group due to the greater
employment of not qualified workers. The values of production indicators (gross
output, Intermediate and value added) more than tripled those of the textile group.
The added value represents around 40% of gross output in both sectors, and only
compensation to employees represents 24% in the textile group and 31% in the
wearing apparel group.
Source: Ministry of Finance and Economic Development. 2018. Annual Digest of Statistics –
2017. Port Luis, Mauritius.
Gross Domestic Fixed Capital Formation at current prices by type and use
Source: The Mauritius Chamber of Commerce and Industry. MCCI. 2017. Annual Report 2015 | 2016. Port-Louis
68 News on Sunday. Janvier 2019. Textile Investment News. Perspectives 2019 - Textile and Manufacturing Industry -
Ahmed Parkar: “The market is very unstable”
The crisis endured by the sector must be considered a crisis of growth, because
at the end of the 20th century the employment grew and wages increased, and
this contributed to the loss of competitiveness; but this was also an important
contribution to the well-being of the population. Hourly labor costs increased at
an average of 5 percent per annum over the period 1990–2000, from $0.76 to
$1.17.69
That is why it is difficult to estimate monetary costs and benefits with a study
based on supply and demand curves, because "the product" to be studied
(female dress, following the example) includes products that in no way fulfil the
hypothesis that they are perfect substitutes, which implies the hypothesis that a
woman who buys a dress from the Dior trademark is willing to receive a diary
dress.
On the other hand, after the crisis of growth, the textile sector of Mauritius has
concentrated on the export of high-end products, and this trend should continue
in the future according to the indications of several experts, among others Sawkut
(2007) in the page 107 of the cited study70 of the World Bank:
69 Sawkut, Rojit, The Textile and Clothing Sector in Mauritius. In: Knowledge, Technology, and
Cluster-based Growth in Africa, edited by Douglas Zhihua Zeng. The World Bank, Washington,
2008.
70 Sawkut, Rojit,The Textile and Clothing Sector in Mauritius. In: Knowledge, Technology, and
Cluster-based Growth in Africa, edited by Douglas Zhihua Zeng. The World Bank, Washington,
2008.
Consequently, for most of Mauritian textile production the market is the world, not
the country; and this market will not be affected (positively or negatively) by
parallel imports that may reach Mauritius.
However, it is possible that the smaller companies that sell in the domestic market
competing against low cost producers, have to go through a process of
adaptation to the new conditions. If this is the case, the Mauritian government
could adopt temporary policies and measures that help the industry correct
weaknesses; particularly to restructure its operations, improve technology,
improve quality and design, innovate, and focus on the production of high added
value for niche markets.71
… the AMM has identified its added value for local manufacturers with four
thrusts leading to collaborative projects over the next three years: train,
innovate, internationalise, maximise the social and environmental
responsibility.72
71 Aveeraj S. Peedoly, The Textiles and Clothing Industry and Economic Development: A Case
Study of Mauritius, , in: Kaushalesh Lal and Pierre A. Mohnen (Eds.), 2009, p.141.
72 https://defimedia.info/bruno-dubarry-manufacturing-sector-needs-national-strategy
About half of the territory of Mauritius is used for agriculture, most of it dedicated
to the production of sugar cane and a quarter covered in forests. In addition,
Mauritius has an Exclusive Economic Zone of the largest in the world, 1.9 million
km2 of the Indian Ocean and manages another 395,000 km2 along with the
Seychelles.
A large part of agricultural primary products, domestic or imported, are not sold
under a registered trademark; companies that operate with foreign brands import
processed foods, which are distributed to consumers in supermarkets. These
companies also sell other products, but most of their sales correspond to the food
and beverages sector, so that their economic activity indicates approximately that
of the sector and, therefore, the attached list corresponds to companies engaged
in distributive trade.
73 World Trade Organization Secretariat, Trade Policy Review. Report by the Secretariat.
Mauritius, 2015, available at: https://docsonline.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-
DP.aspx?language=E&CatalogueIdList=130110,127036,51175,61348,65698,8452&CurrentCa
talogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSp
anishRecord=True
74 FAO. Mauritius and FAO, available at: http://www.fao.org/3/a-az485e.pdf
nutrition, baby care, personal care, feminine hygiene, products for the care of the
home, food, wine and liquors75.
75 http://www.lealgroup.com/default.aspx
Source: DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition.
La Sentinelle Editions.
11 Beverages 16 16 14 13 13
Total
Source: Mauritian Central Statistical Office. Statistics Mauritius. Ministry of Finance and Economic
Development. 2018. Digest of Industrial Statistics-2017. Port Louis. (2013-2017), available at:
http://statsmauritius.govmu.org/English/Publications/Documents/Regular%20Reports/industry/Di
gest_%20Industrial_Prod_Yr17.pdf
As shown in the previous table, the number of large food and drink companies in
Mauritius decreased by 5% between 2013 and 2017, while the reduction in
employment was lower (0.5%); it increased 1.5% in the industrial food group and
decreased 9.1% in the beverage group.
It should be noted that there was a relatively large reduction in the number of
sugar mill workers, because it was reduced by 238 (18%) in the same period and,
nevertheless, employment in the sector it remains practically constant.76
Source: Mauritian Central Statistical Office. Statistics Mauritius. Ministry of Finance and Economic
Development. 2018. Annual Digest of Statistics – 2017. Port Luis, Mauritius.
The market value of the food produced represents an important 39.2% of the
national manufacturing. On the other hand, compensation to employees is 17%,
reflecting the greater occupation of unskilled labour in food production. However,
the contribution to collection exceeds 30% and the rate of profit is even higher,
42.54%.
76 Mauritian Central Statistical Office. Statistics Mauritius. Ministry of Finance and Economic
Development, Digest of Industrial Statistics-2017. Port Louis. (2013-2017), 2018, p. 60,
available at:
http://statsmauritius.govmu.org/English/Publications/Documents/Regular%20Reports/industry/
Digest_%20Industrial_Prod_Yr17.pdf
77 Gross output of industries covers the market value of goods and services produced, including
work-in-progress and products for own use.
78 The basic price is the amount receivable by the producer, exclusive of taxes on products but
including any subsidy on these products.
79 The value added for a particular producer is equal to the gross output at basic prices less the
value of intermediate consumption at purchaser's prices.
The sector’s added value is 32% of the total manufacturing, much lower than 44%
of intermediate consumption, probably due to the high content of agricultural
inputs in the production of poorly prepared food.
The majority of consulted businessmen who oppose the adoption of the regime
of international exhaustion of trademark rights, consider that there are no notable
differences between the prices of the products sold in the domestic market and
international prices; which implies a contradiction because, if there is no
substantial difference between these prices, there will be no parallel imports and,
therefore, no effect to be feared.
On the other hand, those who support the transition to the new regime consider
that there are notable differences in prices, which would be affecting the country's
competitiveness. The fact that companies in the sector have applied to be
included in the Single Amnesty Program of the Competition Commission is an
indication that their domestic sales prices are higher than international ones,
because this is a particular form of restrictive commercial practice known as
resale price maintenance80.
In the denied assumption that distributive trade entrepreneurs do not take any
action to adapt to the new situation, they could see their sales level reduced if
there are parallel imports.
The merchants who are exclusively dedicated to the activity of importing, who
sell the products without any transformation, will not be negatively affected by the
legalization of parallel imports.
On the other hand, the State could be affected if the greater diversity in the supply
of products that would bring parallel imports implies a higher cost to maintain the
validity of quality standards and prevent the entry into the country of counterfeit
products.
• Those who sell primary products, from the countryside or the sea, in the
domestic market and without marks that distinguish them, would be less
affected.
• Those who sell products made in the domestic market and with national
brands would be more affected.
Those who export or re-export would not be negatively affected. Rather, they
could be positively affected if the prices of their inputs are reduced due to parallel
imports.
Consumers would benefit from the arrival of products at lower prices than current
ones. However, they will face some drawbacks, especially in the short term after
the opening of the market to parallel imports:
• This greater diversity of products with the same trademark could affect the
understanding of consumers at first, which would lead distributors to invest
more in advertising to differentiate their products from the competition
generated by parallel imports.
• Parallel importers generally do not have the ability to offer the level and
scope of services that local brand owners offer their consumers in:
customer information, after-sales service, response to complaints,
promotion campaigns, traceability, etc.
The evaluation of pros and cons led one of the interviewees to conclude that, in
the long term, an isolationist system is not good for the economy of the country.
That some goods are more or less tradable depends, above all, on the
relationship between the cost of transfer and the value of the product, and a
measure of this relationship is the percentage difference between the CIF and
FOB prices, which is normal to represent 20%.
In the case of the importation of cosmetics, the incidence of transfer costs is very
low because, in general, they are products of little weight and volume in relation
to their monetary value. In fact, in 2017 the difference between the CIF and FOB
prices represented 6.6% of the FOB, a percentage lower than that of most
imported products.81
Also, the fact that cosmetics do not deteriorate easily, reduces transfer costs and
makes products more tradable than perishable goods; such as fruits, flowers and
vegetables; whose freight rates are so high that in Mauritius it was considered
necessary to create a compensation mechanism, the Export Freight Cost
Reduction Plan.
This explains why there are pages on the Internet that offer a wide variety of
cosmetic products directly to the consumer, so that the product arrives from the
factory (anywhere in the world) to the address of the final consumer with only one
intermediary.
For example, an office in Lisbon “Care to Beauty”82 offers more than 3,000
products of the best international brands, with free and fast shipping for high value
orders: “✈ Mauritius Deliveries in 4 Days Free and Fast Shipping for orders
above 117.07USD”. And continues to introduce new brands and products to its
offer, according to the latest trends and to what consumers request. Inform the
client with experts trained by representatives of beauty and hairdressing brands,
such as Mesoestetic, Institut Esthederm, Nuxe, Sesderma, Bioderma, ISDIN,
Phyto, Lierac, Crescina, Viviscal and Heliocare. Currently all its products come
from Europe, are 100% original and are purchased directly from the manufacturer
or authorized distributor.
In other sectors considered in the present consultancy, it was found that the list
of companies of the publication The TOP 100 Companies85 includes the majority
of those that operate with foreign trademarks, reason why it was used as a base
to locate them. However, said publication does not include a cosmetic sector, and
it was necessary to look for other sources of information.
The statistics of the State (as it will be specified later) do not distinguish a
cosmetic sector, but include products in larger groups. There is information on
imports that, as shown in the following table, is by countries of origin, without
reference to the companies involved. The main imports (exceeding one million
CIF in 2017) come from France, the United Kingdom, South Africa, China,
Thailand, Spain, the United States and Greece.
83 https://www.cosmostore.org/
84 https://www.simple.mu/about-us/
85 DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition. La
Sentinelle Editions.
CIF
Country Quantity (Kg) FOB (MuR) CIF-FOB (%)
(MuR)
AE - United Arab Emirates 412 107,128 126,903 18.46
AU - Australia 165 140,833 152,099 8.00
BE - Belgium 68 62,801 73,619 17.23
BG - Bulgaria 21 4,302 4,968 15.48
CH - Switzerland 126 171,037 193,136 12.92
CN - China 30,677 3,428,580 3,687,001 7.54
DE - Germany 69 61,868 63,651 2.88
ES - Spain 4,383 1,908,341 2,019,485 5.82
FR - France 15,296 7,875,378 8,385,794 6.48
GB - United Kingdom 19,330 4,771,105 5,067,558 6.21
GR - Greece 2,304 1,081,406 1,170,448 8.23
HU - Hungary 3 4,004 4,119 2.87
ID - Indonesia 982 165,282 185,993 12.53
IE - Ireland 486 662,475 673,669 1.69
IN - India 2,396 315,598 339,592 7.60
IR - Iran (Islamic Republic Of) 22 29,734 30,178 1.49
IT - Italy 3,457 633,809 753,451 18.88
JP - Japan 234 81,850 84,923 3.75
LV - Latvia 80 47,918 57,921 20.88
MY - Malaysia 6,675 548,341 587,129 7.07
NL - Netherlands 682 326,572 341,000 4.42
PL - Poland 1,673 316,411 334,490 5.71
SG - Singapore 1,599 230,095 259,629 12.84
TH - Thailand 4,795 2,987,265 3,133,465 4.89
TR - Turkey 12,351 700,893 784,082 11.87
TW - Taiwan 365 158,466 164,819 4.01
US - United States 2,161 1,313,066 1,371,399 4.44
ZA - South Africa 13,190 4,187,275 4,412,815 5.39
TOTAL 124,002 32,321,833 34,463,336 6.63
86See
http://statsmauritius.govmu.org/English/Documents/External%20Trade/DetailedTradeData/Tot
alImports/Total_Imports_Yr17.zip.
87 See https://maps.me/catalog/shops/shop-beauty/country-mauritius/.
Jean-Michel Janvier Trading Company, Perfume, hair shampoo, skin lotion, beauty Not
Distributor/ Wholesaler mask, nail varnish, lipstick Provided
Amenities Product Resource Distributor/ Wholesaler wooden hangers & craft, bath & toilet, hotel 5 - 10
Ltd linen, slippers, caps
Mauritius Cosmetics Ltd Distributor/ Wholesaler Health & beauty care, food 101-500
Antz Design Ltd Distributor/ Wholesaler Health & Nutritional Products, Cosmetics and 5-10
Network Marketing
Cosmo Products Co Ltd Distributor/ Wholesaler Cosmetics, perfumes, baby products 5-10
(powder, cream, etc)
IBL Ltd (BrandActiv) Distributor/ Wholesaler/ Food & Beverage, Frozen & Chilled and 101-500
Exporter Personal & Home Care
88 See https://www.gmdu.net/join-31-join-118-p1.html.
PNL – Pharmacie Nouvelle Distributor Food & Beverage, Cosmetics, Textile and 101-500
Ltd Pharmaceuticals
The companies included in the previous list employ approximately 1,850 people.
Statistical information of the production index is available for the sub-group 2023
Soap and detergents, cleaning and polishing preparations, perfumes and toilet
preparations, which increased by 2.1% in 2017.
As for the production of the companies, they can offer a wide variety of products;
such as Archemics90, a chemical products company, whose cosmetic production
is marginal, since it also produces adhesives; goods for industrial cleaning, the
textile and construction sector, and professional hair care. Likewise, the IBL Ltd
group, which includes 280 companies, is located in nine sectors: agriculture,
construction, commerce, financial services, hospitals, logistics, manufacturing,
real estate and, finally, in the IBL Life sector that includes businesses that offer
clinical research and development for the cosmetic and pharmaceutical
industries, in an international expansion strategy based on innovation:
CIDP performs clinical research and research and development for the
cosmetic and pharmaceutical industries. It operates in three areas of
89 Ministry of Finance and Economic Development, Annual Digest of Statistics – 2017. Port Luis,
Mauritius, 2018.
90 See https://www.archemics.mu/content/about-us.
In 2015, MCL stopped producing Blendax toothpaste under the license of P & G
and launched its new brand, Dentamax, which became the market leader in
Mauritius. He also manufactures Kamill cosmetics under the license of Burnus
GmbH (Germany) and has a licensing partnership with Beauté Diffusion (Paris)
for perfumes such as Eau de Cologne and Eau de Toilette. In addition, it produces
soap and is an official supplier of GM products (France), which manufactures and
distributes exclusive brands such as Yves Rocher, Blaise Mautin, Azzaro,
Clarins, etc. to hotels.93 It distributes products manufactured by sister companies:
toothpaste, creams and lotions, perfumes and paper products. It has internal
marketing and commercialization support, and a fleet of 13 trucks for deliveries
to more than 2,500 customers in the country. In addition, it exports to
Madagascar.
Since the cosmetic sector of Mauritius is very varied, the impact of parallel
imports will also have to be very varied, and it is convenient to review the impact
that could arise in each of the different areas:
91 https://www.iblgroup.com/sites/default/files/IBL_INTEGRATED_REPORT_2017.pdf
92 http://www.mcbstockbrokers.mu/downloads/News/MCOS%20Rights%20Issue%20160718.pdf
93 https://www.marketscreener.com/MAURITIUS-COSMETICS-LIMIT-20705910/company/
Exporters would not be affected, unless there were parallel imports of cheaper
inputs, which would make the impact positive.
Domestic producers, whose market is not the world but the island of Mauritius,
would be affected by increased competition if cosmetic products enter the country
at a lower price. However, it must be taken into account that these domestic
producers have already had to endure competition from exporters from Mauritius
itself, as it is normal practice for export balances to be sold at a reduced price in
the country of origin, which makes it difficult that parallel imports enter to compete
massively in the national market.
In this sense, it should be noted that the national production benefits from the
findings made in phytotherapy research centres created to supply the demand
for new ingredients for the cosmetic and pharmaceutical sectors, sectors where
it is necessary to innovate to compete in the world market. This makes the
national producers interested in bringing new aromas, cosmetics, medicines and
therapies of local medicinal plants to the world.
Those that only import and do not produce would be affected, if the basic
condition for parallel imports is met: if there is a sufficiently large difference
between prices in other countries and the prices paid by consumers in Mauritius.
In this sense, those who import and sell in the domestic market when they oppose
parallel imports incur an apparent contradiction and, at the same time, affirm that
there is no difference between their domestic prices and the international prices
of their products. In effect, if there is no price difference there are no parallel
imports and there is no impact.
94 CIDP Group Communication & Business Development. 2014. Editorial - Journal for Clinical Studies – April.
On the other hand, the importer who has the monopoly on the sales of the marked
product loses control of the availability of stocks in the market, since many
importers would supply the same product.
But it would be somewhat forced to conclude that products with a shorter shelf
life will be exhausted and, therefore, stocks will be depleted. For example, in the
case of typically perishable products, such as fruits; if there are numerous
importers from several countries, with products of different qualities; the
probability of shortages should decrease and not increase.
If imports increase and the number of importers; It can increase the number of
quality problems and, consequently, the number of cases in which it will be
necessary to determine who is responsible for the quality problem.
In this sector of importers that sell in the domestic market, it is expected that the
appearance of parallel imports will result in an increase in the total volume of
imports of cosmetic products, an increase in import operations and,
consequently, a higher level of imports job.
Finally, given the greater magnitude of the world market, it is convenient that the
country concentrates on the production of high-end goods, those whose high
prices make the incidence of the transaction costs of exports lower. As we have
seen, this is the case of many cosmetic products, and the growth of production in
recent years shows that entrepreneurs have responded accurately to the
particular conditions of geography, so it is convenient to facilitate their evolution
by means of a greater freedom of commerce.
According to the proposed model, those directly affected by the transition from
the national regime to the international exhaustion of trademark rights would be:
1. Those who operate with licenses of foreign brands or those who distribute
exclusively foreign branded products.
Before discussing the costs and benefits of each of the three groups affected, it
is important to take into account the market conditions that impact the three
groups:
For grey markets to operate there must be a source of supply, easy access
from one market to another, and price differentials that are large enough
to make the venture financially viable.95
Therefore, in the cited document there are two conditions for parallel imports to
exist: easy access between the market of origin and Mauritius, and a substantial
difference between the prices of both markets.
The main driver of parallel imports is the difference between the prices in the
market of destination and the price of origin of parallel imports; engine that acts
when the importers can earn in the operation, that is, when the difference
between prices is substantial, high enough to cover the costs and risks of the
import operation. If there is no substantial difference between these prices, there
are no parallel imports and there are no costs or benefits.
Therefore, a basic datum to estimate costs and benefits is that price difference,
but, only in the case of the pharmaceutical sector (in which the International
Health Organization collects data on national and international prices of a basket
95 Kitchen, Philip/Eagle, Lynne/Rose, Lawrence/ Moyle, Brendan, The Impact of Gray Marketing
and Parallel Importing on Brand Equity and Brand Value. Research Memorandum 38, The
University of Hull Business School, UK, 2003, available at:
https://www.researchgate.net/publication/242642165_The_Impact_of_Gray_Marketing_and_Pa
rallel_Importing_on_Brand_Equity_and_Brand_Value.
That is to say, if domestic prices in Mauritius are not much higher than in the rest
of the world, there is no reason to fear or congratulate if the international
exhaustion of trademark rights is applied, because there will be no costs, no
benefits. But, if the parallel imports generate a substantial reduction of the
domestic price of the products they import, the representatives of foreign brands
could be adversely affected.
With the objective, among others, of knowing the companies that would be
directly affected by the parallel imports, exclusive importers were interviewed,
who indicated that their companies would be seriously affected.
According to the proposed model, the benefit that consumers would receive
would be greater than the sum of the losses of representatives of foreign brands
and domestic producers, plus the impact of price elasticities. It was not possible
to apply this scheme to the cosmetic industry for not having the turnover data.
The data used and the results of the calculations performed are shown in the
attached table.
In addition, if the substantial price difference occurs in a product with patent rights
in force, there is no reason to fear or congratulate, because what is at stake is
not the international exhaustion of patent rights but the right of trademarks.
In general, consumers of products from all sectors would benefit from lower prices
in the market. However, they will face some disadvantages, especially in the short
term after the opening of the market to parallel imports:
It is not clear that the companies that represent foreign brands will suffer a
significant economic impact, since they will be in a privileged position to assume
the trade of parallel imports, and thus expand their offer in the market with
products of different qualities and prices with the same brand.
It must be remembered that, although the exclusive right over the brand is
exhausted at the international level, its owner maintains the right to prohibit third
parties from making acts of using the trademark that may damage the value of
the brand or confusing the consumer about the true origin of the product.
The merchants who are exclusively dedicated to the activity of importing and
selling the products, without any transformation, will not be negatively affected by
the legalization of parallel imports. Rather, they could benefit from the increase
in imported volume.The state may incur a higher cost of control to maintain the
validity of quality standards and prevent the entry into the country of counterfeit
products.
Parallel imports should not be expected to affect the research and development
activities of pharmaceutical products in Mauritius, because they are activities
aimed at developing export products, or services to cater the growing healthcare
needs of both national and international patients.
The net benefit to society would be about 2,100 Ru Billion per year, according to
the data of the previous table, and taking into account that the national production
will not be reduced in the sectors in which this is not relevant.
The employment in the services of import and distribution of products should not
be affected, since these services will be replaced by those needed to carry out
the parallel imports. Rather it is possible to increase, given that the total of imports
must increase.
Likewise, those who carry out parallel imports will also require the services
associated with these activities, such as marketing, which will offset the reduction
in the advertising demand of the companies affected negatively.
But the exclusive importers interviewed stated, all of them, that if a regime of
international exhaustion of trademark rights in Mauritius were introduced, it would
immediately stop investing in the development of the trademarks, especially in
the image and promotion of the brands. This would imply giving up work to a
series of companies, mainly SMEs. None of the exclusive importers could give
an exact or approximate number of companies with which they would stop
working, but indicated that this would have an impact on advertising agencies,
printing companies, polling companies, market research companies, radio,
television, among others.
by doing parallel imports on their own, which is a possible advantage that will
include the new competition scenario.
From another point of view, it should be noted that Mauritius has concentrated on
high-end production, and this trend should continue in the future, so that what
was affirmed in a World Bank study applies to several productive sectors:99
For most of Mauritian production, the market is the world, not the country; and
this market will not be affected (positively or negatively) by parallel imports that
may reach Mauritius.
However, it is possible that the smaller companies that sell in the domestic market
competing against low cost producers, have to go through a process of
adaptation to the new conditions. If this is the case, the government could adopt
temporary policies and measures that help the industry correct weaknesses.
… the AMM has identified its added value for local manufacturers with four
thrusts leading to collaborative projects over the next three years: train,
innovate, internationalise, maximise the social and environmental
responsibility.100
The danger that must be avoided is that, after three years, the beneficiary
companies try to maintain indefinitely those collaborative projects, which would
be a permanent burden for the other sectors of the economy, given that "there is
no free lunch". To compete in the world market, it is convenient that all productive
sectors are highly competitive because, if not, exporters (and the country) will be
penalized by the higher cost of inputs purchased from less competitive producers.
99 Sawkut, Rojit, The Textile and Clothing Sector in Mauritius, in: Knowledge, Technology, and
Cluster-based Growth in Africa, edited by Douglas Zhihua Zeng. The World Bank. Washington,
2008.
100 See https://defimedia.info/bruno-dubarry-manufacturing-sector-needs-national-strategy.
Finally, an island in the middle of the ocean offers the natural protection of the
freight to the national production destined to the internal market, and it is also a
natural barrier for those who produce for the world market. And, given the greater
magnitude of this market, it is convenient that the country concentrates on the
production of high-end goods, those whose high prices make the incidence of
transaction costs of exports lower. In addition, exporters should be able to
purchase their inputs at the lowest prices on the world market, which can be
achieved through greater trade freedom from parallel imports.
However, from what has been seen in the previous pages, it is not expected a
significant impact of the eventual opening of the market of Mauritius to parallel
imports that could justify the abandonment of the market by the companies of
each of the sectors considered.
And in all sectors, unless employers decide not to take management measures
appropriate to the new situation, it seems unlikely that representatives of foreign
brands can be drastically affected by parallel imports. As indicated, one possibility
is to take advantage of their position in the market to expand their offer by carrying
out these parallel imports themselves. It is possible that this happens in the
automotive sector, given that:
The textile sector of Mauritius, which has focused on the export of high-end
products, will not leave the business because of parallel exports, because these
will allow it to buy its inputs at the lowest prices in the world.
14.1 Objective
If any country or group of countries join the Madrid Protocol after protection has
been obtained, then the trademark owner can apply to have its trademark
protection extended to the new contracting party by way of a subsequent
designation.
The main advantages for trademark owners consist of the simplicity of the
international registration system and the financial savings made (expenses
related to translation, exchange-related fees and fees for local representatives)
when obtaining and maintaining the protection of their marks abroad.
After registering the basic mark, or filing an application for registration, with the
Office of origin, the trademark owner has only to file one international application,
in one language, and pay one fee, in one currency.
This procedure takes place instead of filing separately in the trademark Offices
of the various Contracting Parties, in different languages and paying fees to each
Office, in different currencies. Different national/regional procedures, involving
different languages and fees payable in different currencies, give rise to
translation and exchange-related expenses.
The companies most affected by the considerable cost involved in registering and
maintaining marks abroad are Small and Medium Enterprises (SMEs). While a
large company may afford to devote considerable funds to protect its marks
abroad, an SME can ill-afford the registration of marks abroad, due to the high
procedural costs. The Madrid system is used by one-third of worldwide
applicants seeking protection of their marks through the Madrid system. Of these,
about 80 per cent may be categorized as an SME, having a small portfolio of one
or two marks.
Moreover, the holder does not have to wait for the Office of each Contracting
Party in which protection is sought to take a positive decision to protect the mark.
If no refusal is notified by an Office within the applicable time limit, the mark is
automatically protected in the Contracting Party concerned. In some cases, the
holder does not even have to wait until the expiry of this time limit in order to know
that the mark is protected in a Contracting Party, since he may, before the expiry
of the time limit, receive a statement of grant of protection from the Office of that
Contracting Party.
A further important advantage is that changes subsequent to registration, such
as a change in the name or address of the holder, or a change (total or partial) in
ownership or a limitation of the list of goods and services may be recorded with
effect for several designated Contracting Parties through a single, simple and
centralized procedure with the International Bureau of the World Intellectual
Property Organization (WIPO) (the International Bureau) and with the payment
of a single fee. Moreover, there is only one expiry date and only one registration
to renew, which makes for easy portfolio management.
The Madrid system supports the country’s exports to the extent that it simplifies
protecting trademarks abroad. Furthermore, it allows individuals and companies
established in other Contracting Parties of the Madrid system to have easier
access to the protection of their marks in the country/regional territory, since they
can seek protection of the mark in any of the applicable Contracting Parties by
merely designating these in the international application, or in a subsequent
designation. This facility helps to strengthen the climate for foreign investment.103
Moreover, they are compensated for the work that they perform; the individual
fees collected by the International Bureau are transferred to the Contracting
Parties in respect of which they have been paid, while the complementary and
supplementary fees are distributed annually among the Contracting Parties not
receiving individual fees, in proportion to the number of designations made of
each of them.
14.4 Disadvantages
Once the international registration has been in effect for five years, it becomes
independent from the basic registration. At that point, the possible limitation,
abandonment or cancellation of the basic application or registration no longer has
any effect on the international registration.
The Madrid Protocol provides for a limited period during which an international
registration may be transformed into new national or regional applications in the
designated contracting parties. But as already mentioned that could only be done
at significant expenses.
Another limitatation of the Madrid Protocol is that the owner of the International
Registration cannot transfer ownership of any dependent trademarks to an owner
that is not resident in a Member country. This means, for example, that
trademarks obtained under the Madrid Protocol cannot be transferred to a South
104 Wells, Nicholas, Eight Reasons Not to Use the Madrid Protocol for Trademark Protection in
the United States, available at: https://www.wellsiplaw.com/eight-reasons-not-to-use-the-
madrid-protocol-for-trademark-protection-in-the-united-states/.
African owner without first withdrawing the marks from the Madrid System at great
expense.105
Any State which is a party to the Paris Convention may become a party to the the
Protocol. In addition, an intergovernmental organization may become a party to
the Protocol, where the following conditions are fulfilled: at least one of the
member States of the organization is a party to the Paris Convention and the
organization maintains a regional office for the purposes of registering marks with
effect in the territory of the organization.
The treaty will enter into force three months after the date of deposit of the
instrument of accession.
The main substantive obligation deriving from accession to the Madrid system
will be to give effect to Article 4(1) of the Agreement and the Protocol. Under this
provision, a mark registered in the International Register, in which the Contracting
Party has been designated, must be protected from the date of international
registration (or, in the case of a Contracting Party designated subsequently, from
the date of that subsequent designation), in the same way as if that mark had
been applied for directly with the national or regional trademark Office. That
Office is, however, fully entitled to carry out a substantive examination of the mark
and may, within the period stipulated, refuse to grant protection to the mark (either
totally or partially). If the Office does not issue a provisional refusal within the
applicable period, the mark is deemed to be protected in the same way as if it
had been registered directly with that Office.
Then acceding to the Madrid system, the country must also be in a position to
give full effect to the provisions of the relevant treaty. The International Bureau
will provide any necessary advice and technical assistance required for that
purpose. One service that is offered to potential members of the Madrid system
is to analyse the domestic legislation and provide comments on its compatibility
with the Madrid system. Model Provisions have been established to provide
information and assistance to these potential members. See Annex II for such
Model Provisions.
Statistics show that the accession of a country to the Madrid system will gradually
produce an increase in the total number of marks for which protection is
requested in the country (resulting from combining the number of applications
received at the national level and the designations received internationally) 108.
This can be explained by the fact that it is relatively easy and economical for the
owner of a mark to designate a country/regional territory in an international
application.
As regards the workload of the national trademark Office, accession to the Madrid
system has been seen not to bring an overwhelming number of new applications,
but rather a gradual increase in registration activity. Moreover, although the
Office should carry out, in respect of the marks filed through the Madrid system,
the usual substantive examination, it will not need to carry out the formalities
examination, or to publish the mark, since those procedures will already have
been conducted by the International Bureau.
108 See, for example, the experience of Japan. Madrid Experience Sharing Report. Japan’s
Experience in Joining and Using the Madrid System, available at:
http://www.ipo.gov.tt/downloads/Madrid_Protocol/wipo_pub_2014_madrid_japan.pdf.
15. Recommendations
The owner may oppose the marketing of the imported product when there
is a risk of creating confusion in the public about the essential
characteristics of the product or its commercial origin.
The authority will not allow a branded product to be presented with
substantial modifications that could damage the reputation of the brand.
Neither is advertising permitted that could mislead the consumer about the
commercial origin of the product.
15.3 Enforcement
If the number of suppliers of the product with a brand increases, it will be more
difficult to establish responsibility in the event of a quality problem.