BPI Wins First Internet-based Parallel Importing Case

March 2004

Record Labels, Internet

The online retailer CD Wow!, based in Hong Kong, has agreed to stop sourcing CDs from outside the European Economic Area (EEA), in particular from Asia, in a move that will add o its retail price of CDs sold. The BPI (British Phonographic Industry) which had filed a law suit against CD Wow! has now settled its legal action. CD Wow! has been one of the internet’s biggest success stories in the UK with a turnover last year estimated at m ($181.7m). The settlement represents the music industry’s first success in its battle against parallel imports, where genuine CDs are purchased in one country before being sold in another without the copyright owner’s consent via the Internet. Parallel importing used to be a major problem for record labels in Europe, but the European Community’s common market means that goods can flow freely within Europe from one member state to another member state. However, this does not apply to goods purchased outside of the European Community. The BPI is also investigating amazon.com, the world’s largest online retailer, and has issued legal proceedings against play.com, a Jersey-based company, over parallel imports.
This decision only affects CD Wow’s business in the UK and Ireland but it faces lawsuits in other countries, including Germany, from the record industry.
COMMENT : The BPI admitted that the CDs imported by CD Wow! were genuine products bought from subsidiaries of major record companies all who have a legal presence in the UK. However the BPI but argued that they had been sold to CDWow! for re-sale without the consent of the companies. It is still a slightly grey area in law as it is not one hundred percent clear where the ‘sale’ of the goods to the public is taking place. If CD Wow! take and order and take payment in Hong Kong and ship product from Hong Kong then it is arguable that the sale itself takes place in Hong Kong as that is where CD Wow! accepts a (UK) customer’s offer to purchase and payment for that payment. In a statement in the Times (22/01/04) Philip Robinson argues that “we are a Hong Kong company that is selling and distributing products from Hong Kong, so each sale is a personal import by the customer. That is not parallel importing”. However copyright law provides that to import and sell even legitimate copy of a work from a non-EC state counts as issuing copies to the UK public and therefore a licence would be needed. Without a licence, the act of issuing copies is a primary infringement of copyright law and therefore illegal (see section 18[ss1-3]) Copyright Designs & Patents Act 1988).

See : http://www.ilmc.com (News 09/01/04 and 21/01/04


After the settlement, CDWow! emailed their UK and Eire customers announcing that the BPI action and the settlement had caused CDWow! to increase the price of CDs, adding two pounds) to each. The BPI took exception to the implication that it was responsible for the price rises, and has now won a temporary injunction at the High Court preventing the internet retailer from claiming that the BPI had forced the price rise or repeating this claim.

See : http://www.out-law.com/php/page.php?page_id=bpigetscourtorder1075988753&area=news

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