Chapter One Introduction In recent years, the issue of parallel imports has been a controversial topic in various countries. Parallel import is about products that are legitimately produced and marketed abroad with the consent of the owner of the intellectual property rights but are then imported into a country or territory without the agreement of that owner or of the exclusive licensee in the place of importation, The imported products are not the same as pirated or counterfeit goods. The legitimacy of parallel imports has been a controversy by both theoretical research and legal practice worldwide. As the issue involved is too complex, it is easy to understand that uniform standard is never easily available. As long as the economic interests involved continue to be high, the fight in the grey market will continue. The fight between those involved in parallel imports and those who try to minimize or eliminate it is a tough and lasting battle, in which the law essentially plays the role of a weapon in the battle. Doctrine of right exhaustion is a fundamental rule in intellectual property law. According to the exhaustion doctrine, once an intellectual property good was put in the market, the intellectual property right holder cannot prevent the subsequent resale of that product. As his intellectual property rights in that product are said to have been “exhausted” by the first sale. It has been recognized widely that intellectual property is a sort of intangible, statutory and private property, To encourage people produce more new intellectual property products, intellectual property right holder is granted monopoly for a regulated term. But the doctrine of by right exhaustion violates this monopoly. Since this doctrine aims at avoid intellectual property right holder abusing his monopoly right. It is based on the balance between the personal interests and social interests. Its direct theoretical basis is repayment of economic interests. It is widely accepted in the field of the traditional intellectual property and usually used to analyze the parallel imports on international trade. The doctrine of territoriality is another important theory of intellectual property law, which refers, that intellectual property right only takes legal effect in scope of one country where it has obtained the right based laws of the country, And it could not be effective beyond the country. The doctrine of territoriality has a close relationship with doctrine of right exhaustion. Combine these two doctrines, three theories are produce: international exhaustion doctrine means that the intellectual property rights exhaust in the territory of worldwide: national exhaustion doctrine, means that the rights exhaust only in the nation: and regional exhaustion doctrine, means the rights exhaust in a region wide. The first is used to support parallel imports and the second is against it, the last has a similar nature to national exhaustion doctrine. The regional exhaustion doctrine has the same nature of national exhaustion doctrine. Both doctrines hold that rights of intellectual property right owner have exhausted only in a limited region, No matter the limited region is a nation wide or a community wide. Under both doctrines the goods move freely only in the limited region. The approach of a country when facing the parallel imports always depends on the choice of these above doctrines of exhaustion. Countries hold different attitudes to the issue of parallel imports by their own economic calculation. The theoretic controversy of which kind of exhaustion should be chosen essentially is of the relationship between exhaustion doctrine and based on different understandings of the relationship between exhaustion doctrine and territoriality doctrine. Both the doctrines are basic principles in intellectual property law. In perspective of history of intellectual property itself, the protection of intellectual property at an international level can roughly be divided into three periods: the territorial period, the international period and the global period. The scope of intellectual property protection becomes wider than ever before, and also the protection level becomes higher. International organizations, treaties and conventions, like WPO, WTO, TRIPS, Paris Conventions, and Bernie Treaties advocate convergence of intellectual property protection almost worldwide. Although the doctrine of territoriality is facing challenge, it is believed that it will be in existence for a long time. It leads to debate of choice between the three exhaustion doctrines above. Although the relation between exhaustion doctrine and parallel imports is close, the exhaustion of rights is never fully used to judge whether the parallel imports would infringe upon somebody's rights, or parallel imports should be allowed. Issue of parallel imports in practice is more complicated than theory dispute that which doctrine of exhaustion of rights should be adopted. It involves benefits of many parties, such as intellectual property right holder, consumer, licensee, authorized distributor, Disputes on free movement of goods public health and safety, damage of goodwill and reputation are usually seen in parallel import battle. In parallel imports of different kinds of intellectual property products(especially trademarked goods, patented goods and copyrighted goods);, specific intellectual property law may be involved. Parallel import of each kind of IP good has different peculiarity, although the commons of them should not be ignored. Intellectual properties are all intangible property, and it cannot be defined or identified by its own physical parameters. Aside from trademark law, patent law and copyright law, other laws, like customs law passing off, unfair competition, and violation of contractual obligations may be involved in practice when parallel imports happen in many countries. In parallel imports of goods are usually imported from a low-price country to a high-price country, Policy of a specific country to the issue depends on the country's economic considerations. Considering the differences of legislation and/or legal systems, different countries may take different approaches even they hold the same policy to parallel imports issue. The reasons that parallel imports have drawn universal attention are: more disputes on parallel imports will emerge with the globalization of economy and trade, and parallel imports have great impact on economic interests of various countries. Generally speaking, to allow parallel imports is not favorable to countries in which prices are high, but it is to those with lower prices. In developing countries, human labor and resources are much cheaper than those in developed countries. Prices of the same intellectual property products made in developing countries are lower than those made in developed countries. As a developing country, cases of parallel import in China now are fewer than those in developed countries. Historically, parallel import has been less of a problem in China because of the low manufacturing and labour costs of producing goods in the mainland. However, the cases of parallel import will increase greatly along with China's entry into WTO, the development of international economics and trade, and the increase of trade between China and other countries in the world. Despite the existence of parallel imports, the only related legislation lies in patent laws, there are no relevant governing laws in the fields of trademark and copyrights. By comparison of practices and policies on parallel imports in countries, mainly the United States, the European Union, Japan, in which countries cases of parallel imports often happens. Cases of parallel imports have long history in these countries, especially the EU and US. But in China the history of parallel imports is short. By analysis of issue on parallel imports in these countries, some useful findings may be concluded for China's policy to parallel imports. The doctrine of exhaustion of rights plays an enormously important role in determining the way that intellectual property rules affect the movement of goods and services in international trade. Next chapter will introduce the doctrine of exhaustion of right, including understanding this concept (some Chinese jurists have some wrong understanding of exhaustion doctrine)historical development and purpose. This doctrine violates right holder's monopoly right, and it is necessary to avoid right holder abusing his right. So in this chapter it is found that the doctrine of exhaustion of rights is theoretical foundation for parallel imports. The third chapter is analysis of parallel import issue, including its definition and how it occurs. Discussions of both economic and legal causes will enable the understanding of the controversial issue in a deeper level, As the issue involved is too complex or difficult, it is easy to understand that uniform standard or convincing answer is never easily available. As long as the economic interests involved continue to be high, the fight in the grey market will continue. One can find in the end of the chapter that the issue of parallel imports is very complex and the argument of whether parallel imports should be allowed or forbidden will never stop. The forth chapter discusses the doctrine of territoriality in intellectual property rights. The doctrine of territoriality refers that, intellectual property right only takes legal effect in scope of one country where it has obtained the right based laws of the country. And it could not be effective beyond the country. According to doctrine of territoriality, the intellectual property right is effective in a limited area. So it is believed that doctrine of territoriality is against parallel imports. Combine doctrine of territoriality and doctrine of exhaustion of rights, the controversial theories of international exhaustion, national exhaustion and regional exhaustion rare produce, which are the theoretic basis for or against parallel imports issue. The finding in this chapter is that international exhaustion makes parallel imports legal. While under national exhaustion and regional exhaustion parallel imports from outside of the limited region are forbidden. There is no uniform standard of parallel imports worldwide. These international treaties and conventions leave parallel imports to each state. From the international treaty perspective, the complex of issue of parallel imports is clearer. In chapter five to seven, issue of parallel imports in China is divided in trademark, patent and copyright perspectives separately, Because parallel imports of trademark, patent and copyright are different from each other, As there is no uniform requirement of international organizations, practices and policies of other countries should be studied. Some useful findings may be concluded from the study, Then it focuses parallel imports issues in China including present situations, cases of parallel imports happened in China, current legislations and economic situations at present. In the last chapter, conclusion of the thesis will be given. Whether current China's policy to parallel imports issue is suitable for China or not? What is an appropriate policy to parallel imports in China? Consider the legal practices in different countries some useful solutions could be worth studying. This chapter makes comments on the solution to parallel imports in China.