An Economic Analysis of the Common Control Exception to Gray Market Exclusion

Normative legal systems have struggled to define international property rights. This struggle has been particularly intense in the area of intellectual property because the level of protection afforded to trademarked goods varies tremendously from nation to nation.1 Thus, international trade often leads to infringement of domestic property rights. The tension between the global mobility of goods and intellectual property rights creates significant economic and legal trade-offs. This Article will analyze these tensions in the context of gray market goods (i.e., parallel imports), utilizing U.S. intellectual property law as the framework for the analysis. The gray market arises when goods bearing identical trademarks are sold at different prices in two different geographical regions.' Because of the price difference, there are incentives for an arbitrageur to buy goods in the market with the lower price and resell those goods in other markets at higher prices (assuming transportation costs are not