NCAER Report on Parallel Imports OUT!

The National Council of Applied Economic Research has released its much awaited report on the Impact of Parallel Imports on Copyrighted Works. Stakeholders can send in comments by 21st March 2014 and comments will be reviewed by the NCAER on 26th March 2014.

The report adequately considers the opposing views of the producers as well as the consumers. It also urges all the stakeholders to amicably, through a healthy exchange of views, come to an optimal solution to the parallel imports problem. However, in case this fails, the report strongly suggests the addition of the new proviso to section 2(m) with requisite safety valves.

The conclusion reads:

A strong publishing sector activity adds value to knowledge as well as to the national income of a country. It provides jobs at the stages of generating ideas by authors for new books, the process of design and copyediting and the final printing. We refer to these as publishing, producing and printing (PPP). While imports of good books are important, mere distribution of imported volumes does not meet the PPP criteria. The Copyright Act may not necessarily be used to protect the distribution channels of books.

How then should one proceed?

There are some hard questions that the producers must answer. The consumers must look at the fears expressed by publishers about the likely decay of publishing activity in India and the consequent loss for Indian students and other readers.

Thus, it is of the utmost importance that serious data and evidence-based studies are undertaken to assess the real situation rather than create a sensation of life after death if the new proviso is added to Clause 2(m).

In our view, a mature publishing industry in India must mean PPP in India along with import and rational distribution regime.

We do not envisage that permitting parallel imports of printed books will have an immediate damaging effect on the publishing sector or on the economy as a whole. The impact of the effect of amending Clause 2(m) will be tested over time.

A cautious opening may be a good way to start. Acrimonious debate must give way to harmonious meetings between producers, consumers and other stakeholders. It is only through mutual understanding and healthy exchange of views that we can come to an optimal solution.

If such a meaningful exchange is not feasible, we suggest going ahead to add the new proviso to Clause 2(m) with the requisite safety valves. India must learn to manage its affairs with its own logic and on its own terms. “

Shamnad’s articles on this issue have been cited frequently in the report! As previously reported, this study was commissioned by the Ministry of Human Resource Development after the amendment to S. 2(m) was dropped from the Copyright Amendment Bill, 2010. S. 2(m) sought to legalize parallel import of copyrighted works in India. The objective of the study is to examine the concerns of producers and consumers with regard to the issue of parallel imports of copyrighted works. The primary focus of the report is the impact of parallel imports on the availability of academic books for students.

To contextualize, a parallel import is the import of genuine copyrighted works without the permission of the owner of copyright i.e. through a trade channel not authorized by the copyright owner. Therefore, this trade channel runs parallel to and competes with the authorized trade channel of the producer. Whether a parallel trade channel is legal or not, depends on the kind of ‘exhaustion’ principle followed by a country. A ‘national exhaustion’ regime enables territorial control over markets and parallel imports would be illegal if such a regime is followed. On the other hand, an ‘international exhaustion’ regime facilitates parallel imports. The TRIPS allows members to adopt their own policies on the issue of exhaustion and parallel imports. As per the report, parallel imports are permitted in USA, Argentina, Chile, Costa Rica, Mexico, Mongolia, Singapore, South Korea and Brazil.

Producers and consumers have taken completely diverging views with regard to the issue of exhaustion and parallel imports in India:

The producers of copyright material (books, films / music and software) argue that:

  • Parallel imports would dilute the ‘commercial potential of exploitation of a work’.
  • National exhaustion is beneficial to the economy. It allows exclusive distribution arrangements to be formed and respected. It keeps prices low in the country and helps build a strong domestic copyright industry.
  • Parallel import would lead to imbalance of trade. Counterfeiting activities would increase across borders. There would be total disruption of authorised distribution channels. It would be impossible for customs and border police to apprehend the import of illegal copies.

The consumers including some of the IP law experts have countered the arguments put forth by the producers of copyright material. They argue that:

  • Indian copyright law from the very inception recognised the principles of international exhaustion.
  • Parallel imports and the concept of international exhaustion promote free trade and reinforce the principle that ‘ownership’ of property.
  • India would reap the benefits of an intelligent copyright regime. The students would have to the latest editions of books at affordable prices.”

The report entails a detailed study of price comparison of books, student interest in buying books, the issue of editions, remainder books and dumping and many other pertinent issues related to the debate of parallel imports in India.

For more on this debate see here, here, here and here.


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