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The legality of trademark protection in gray markets is determined by the principles of: universality, exhaustion and territoriality. Recent cases involving the Tariff, Lanham, and Copyright Acts have restricted the level of legal recourse where parallel imports jeopardize the trademark holder's investment and/or create confusion amongst the consumers. The landmark 1998 L'Anza Supreme Court decision clearly sends a message to trademark owners that legislative protection has been severely limited. The case opened the US market to greater importation of gray goods. This study also has important implications for marketing managers which include:

(1) competition from parallel imports will inevitably test trademarked products in profitable markets with "free-rider" potential;
(2) marketers understanding the law, and willing to devise proactive international strategy, may still find limited protection under the Tariff, Lanham and Copyright Act;
(3) a combination of legal and nonlegal measures may provide the best overall protection;
(4) failure to address gray market activities can erode trademark image and destroy marketing strategies.

Marketers may be best served by minimizing the conditions which create gray markets or looking for nonlegal response alternatives. Proactive strategies, such as the ones described in this article, to limit the opportunities for gray markets could prove the most viable alternatives for trademark protection.

Despite recent tariffs imposed by the United States on steel, barriers to international trade in general continue to fall, enabling U.S. importers, among others, to expand their use of low-cost overseas suppliers. But even though Wharton experts characterize today's global economy as deeper and broader than others in recent history, a GE Capital Trade Finance business leader says that some daunting obstacles remain for at least one class of importers--Small and Medium-Sized Enterprises. Learn more from the experts at Wharton and GE Capital.

Removing tariffs is easy. Breaking down social barriers to trade is hard.