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Article: Whether Parallel Import Of Goods Is Permitted Under The Trade Marks Act, 1999?
Author: Siddharth Varshney
Introduction
Section 30 (3) [1] of the Trade Marks Act, 1999 (“Act”) recognizes ‘exhaustion of rights’ of the proprietor of a trademark after the first sale of goods. Section 30 (3) of the Act states that –
“(3) Where the goods bearing a registered trade mark are lawfully acquired by a person, the sale of the goods in the market or otherwise dealing in those goods by that person or by a person claiming under or through him is not infringement of a trade by reason only of—
(c) the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods; or
(d) the goods having been put on the market under the registered trade mark by the proprietor or with his consent.
A bare reading of the Section 30 of the Act raises questions such as – What does the term ‘market’ mean? Whether Section 30 intends to mean the term market as ‘domestic market in India’ or ‘world market’? Whether Section 30 intends to follow the principle of national or international exhaustion? How would a different interpretation of the term ‘market’ in Section 30 determine infringement of a trademark? This is the statutory interpretational issue explored in this article.
Principle of National Exhaustion v. International Exhaustion
Legality of parallel imports is determined through the principle of exhaustion of rights, which examines to what extent the proprietor of the IP can control the distribution of its goods in markets worldwide. The scope and reach of Section 30 of the Act primarily depends on whether the legislature while drafting the provision intended to follow the principle of national or international exhaustion.
From a reading of Section 30 (3), it appears that further sale of goods after initial sale by the right holder in ‘a market’ would not constitute infringement of the registered trademark. Section 30 (4) [2] of the Act provides an exception to this by stating that if the goods are tampered with then the registered proprietor can enforce its rights irrespective of Section (30) (3) of the Act.
However, it is important to note here that the Act fails to clarify the meaning of the term “market” in Section 30 (3) and it could be interpreted to mean either ‘domestic market in India’ or ‘world market’. The scope of the word ‘market’ was analyzed by the High Court of Delhi (“Court”) in the case of Kapil Wadhwa v. Samsung Electronics [3] [2013 (53) PTC 112 (Del.) (DB)]. The Author will examine the Kapil Wadhwa case in detail in the following section since currently this is the only judgement that examines and clarifies on the meaning of the term ‘market’.
Interpretation of the term ‘market’ in Section 30 (3) of the Act
The interpretation of the term ‘market’ in the Section 30 (3) of the Act came before the Court for the first time in the Kapil Wadhwa case. To give a brief background of the case – the appellant purchased Samsung printers outside of India and then imported them into and sold in India. The respondent claimed infringement of its SAMSUNG trademark on the ground that the appellant without its authorization imported and sold the goods. The Division Bench (Pradeep Nandrajog, Siddharth Mridul, JJ.) of the Court examined the Section 30 (3) of the Act and stated that the word ‘market’ in Section 30(3) of the Act means ‘International market’. Accordingly, the Court stated that the legislation in India adopts the Principle of International Exhaustion of Rights”. It also noted that the only prerequisite is that the goods must have been legally acquired in the international market and the importer should have legal title over such goods.
The Court also noted that the right of a trademark owner to oppose further dealing in goods bearing its trademarks is just not limited to when it’s tampered with but also when the conditions of the goods has been changed. Further, the Division Bench referred to US Court decisions and noted that reasons such as difference in advertising and promotional efforts; difference in packaging; differences in quality control, pricing and presentation, etc. can also be a legitimate reason to oppose parallel imports of the goods in India.[1]
Lastly, the Court noted that seller of such parallel imported goods must display a disclaimer that goods sold by them have been imported from abroad and for which the brand owner does not provide any warranty and after-sales service. Also, the parallel importer in addition of display of a disclaimer need to provide an adequate warranty and after-sales services.
Conclusion
From the above discussion, it is evident that India follows principle of international exhaustion in respect of parallel imports of goods under the Trade Marks Act provided that certain compliances are adhered to. It is also important to note that allowing parallel importation of goods is also viable for economic reasons as it avoids the formation of a trade monopoly and promotes free trade. Further, parallel imports also allow consumers with benefit of buying authentic goods at a cheaper price, provided with the risk of not availing the original warranty and after-sales services.
Endnotes:
1. Section 30 (3) of the Trade Marks Act, 1999
2. Section 30 (4) of the Trade Marks Act, 1999
3. Kapil Wadhwa v. Samsung Electronics [2013 (53) PTC 112 (Del.) (DB)].
[1] Paragraph 68, Kapil Wadhwa v. Samsung Electronics [2013 (53) PTC 112 (Del.) (DB)]
Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.
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