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Trade Marks – Delhi High Court rules in favour of international exhaustion

By Jasneet Kaur      

In a significant ruling involving the question of parallel import, the Division Bench of High Court of Delhi has held that the Indian Trade Marks Act, 1999 embodies the Principle of International Exhaustion [Kapil Wadhwa & Ors. v. Samsung Electronics Co. Ltd. & Anr., - FAO(OS) 93/2012]. The Division Bench differed with the narrow interpretation of the word ‘the market’ to mean domestic market and restriction on lawful importation of genuine goods as adopted by the Singe Judge in his order passed earlier this year.      

Facts in brief      

Samsung Electronics Co. Ltd (Plaintiff No. 1) alongwith its exclusive Indian licensee (Plaintiff No. 2) filed a suit for trademark infringement and passing off against the defendants (who were engaged in distribution and sale of various models of computer and peripherals including printers). The plaintiffs alleged that the defendants were importing Samsung printers from Korea and retailing the same in India. The plaintiffs also alleged that the defendants were, without any authorization, meta-tagging their website for marketing plaintiff’s products. The Single Judge Bench of the High Court of Delhi, held in favour of the plaintiffs on the ground of Principle of National Exhaustion under the Trade Marks Act, 1999 and restrained defendants from importing, exporting and dealing in printers and their cartridges/toners bearing the plaintiffs’ trade mark as well as from using the same in respect of any promotional activities on their website. The defendants, aggrieved by the order of the Single Judge, preferred an appeal before the Division Bench of the High Court. The sole issue before the Division Bench was to determine which Principle of Exhaustion (whether National or International) has been embodied under the scheme of the Trade Marks Act, 1999.      

Even imports of genuine goods can be infringement        

The Division Bench evaluated the relevant provisions of the Trade Marks Act, 1999. Sections 29 (1) provides that a registered trademark is infringed by a person who,  not being a registered proprietor or a person permitted to use the mark, uses it in the course of trade in a manner that it is likely to be taken as being used as a trademark. According to Section 29(6)(c), a person who imports or exports goods under the mark, is said to use the registered mark. The Division Bench concurred with the finding of the Single Judge that in view of above provisions, even imports of ‘genuine goods’ under a registered trade mark in India, made without consent of the registered proprietor, would constitute infringement.      

Limits on effect of trade mark        

The Division Bench overruled Single Judge’s observation on Section 30 (3), wherein the Single Judge had held that the said provision cannot be interpreted as granting additional rights to a third person to import genuine goods from the international market and that unless goods are imported into India with the consent of the registered proprietor of the trade mark in India, the act of importation is not permitted. The Division Bench held that the role of the Trade Marks Act, 1999 is not to regulate sale and purchase of goods but to control the use of the registered trade marks. It may be relevant to note Section 30 (3) which reads:    

“30. Limits on effect of registered trade mark.— (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—  (a) the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods; or (b) the goods having been put on the market under the registered trade mark by the proprietor or with his consent.”           ‘

The market’ in Section 30(3) as interpreted by the Court        

The Division Bench did not concur with the Single Judge’s interpretation of the expression ‘the market’ in Section 30(3) to mean the domestic market only.  The Division Bench relied on Clause 30 of the Statement of Objects and Reasons to the Trade Mark Bill, 1999 for the purpose of ascertaining the legislative intent and concluded that in using the expression ‘in any geographical area” (used in Clause 30), the legislature intended to recognize the Principle of International Exhaustion. The Court also observed that the expression ‘lawfully acquired’ does not necessarily mean acquisition by consent. Goods should be acquired lawfully as per the laws of the country and it is not necessary that goods must be acquired only in the country where the trademark is registered.        

Right to control further sale and distribution of goods        

The Division Bench concurred with the Single Judge on the finding that the applicability of Section 30(4) is not restricted to only when the condition of the goods has been changed or impaired after being put on the market and added that “changing condition or impairment is only a specie of the genus legitimate reasons, which genus embraces other species as well”. The Bench observed that that the Principle of International Exhaustion of Rights itself takes away the right of respondents to control further sale and distribution of goods. Therefore, even though the Bench found some merit in the arguments of the respondents (earlier plaintiffs) on Section 30(4), it proceeded to overcome the same by prescribing certain directives to the appellants (earlier defendants), like prominently displaying on their printers the statement that the same have been imported from Korea and the warranty and after sales services are not guaranteed by the respondent.      

Thus, the injunction order qua the import of respondents’ printer by the appellant was vacated by the Division Bench on the ground that the Trade Marks Act, 1999 recognises the Principle of International Exhaustion. 

[The author is an Associate, IPR Division, Lakshmikumaran & Sridharan, New Delhi]
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