INTA Bulletin

December 15, 2012 Vol. 67 No. 15 Back to Bulletin Main Page

INDIA: Appeals Court Recognizes International Exhaustion of Trademark Rights

The legality of parallel imports/gray market goods is much debated and important in India.

In Samsung Electronics Co. Ltd. & Anr. v. Kapil Wadhwa & Ors., the High Court of Delhi considered whether the parallel importation of goods bearing a registered trademark and the sale of those goods without permission of the proprietor of the mark amounted to infringement of the trademark.

Samsung Electronics Co. Ltd. sought a permanent injunction against the defendants, complaining that they were importing SAMSUNG printers from a foreign market. Sa0msung alleged that, after importing the printers into India, the defendants were selling them under the trademark SAMSUNG, thereby infringing its registered trademark in India. The plaintiff also complained that the defendants were using SAMSUNG in metatags for their website.

On application by Samsung to the High Court of Delhi for an interim injunction, the single judge concluded that India follows only the principle of national exhaustion of trademark rights) and not the principle of international exhaustion. Therefore, the judge held that parallel importing amounts to trademark infringement under Section 29(6)(c) of the Trade Marks Act, 1999.

The defendants were successful on appeal. The Appellate Bench of the High Court of Delhi held that India follows the principle of international exhaustion. Thus, the parallel importing of goods without prior permission of the registered proprietor does not amount to infringement of trademark rights.

Some of the reasons given by the Appellate Bench were:

  • In Section 30(2)(b) of the Act, the words “any market” are included in the phrase “in relation to goods to be exported to any market.” Thus, in the Section 30(2)(b) context, “exported to any market” implies a global market.
  • The expression “in any geographical area” mentioned in the Statement of Objects and Reasons of the Trade Marks Bill, 1999 clearly envisages that the legislative intent was to recognize the principle of international exhaustion of rights to permit further sales of goods once they had been put on the market by the registered proprietor of the Indian trademark.
  • During the Uruguay Discussions that preceded the TRIPS Agreement, the Indian position was that parallel imports should be permitted.
  • The term “the market” in Section 30(3) of the Act refers to the international market; thus, the legislature intended to adopt the principle of international exhaustion of rights.
  • In arriving at his conclusion the single judge did not take into consideration legislation abroad. After referring to legislation of various countries, the Appellate Bench opined that wherever the intent was to confine “the market” to the domestic market, the foreign legislation (e.g., in Brazil and Turkey) had expressly used words to so indicate. Thus, in Indian law, the fact that the neutral expression “the market” was used without the legislature’s adding words to indicate whether it was the domestic or the international market did not justify the judge’s conclusion.
  • Lawful acquisition of goods is regulated by the laws pertaining to sale and purchase of goods. Trademark law is not designed or intended to regulate the sale and purchase of goods. It is to control the use of registered trademarks.
  • The appellate Bench restrained the defendant from metatagging its website to Samsung’s website.
The appellate court noted that parallel imports may diminish the reputation of a trademark because the registered proprietor of the trademark does not give any warranty or after-sale service (in the importing country) on the parallel-imported goods. Thus, the court directed that during the sale of parallel-imported goods the seller/importer must prominently display at its shops signs stating that the goods being offered for sale have been imported from abroad and the manufacturer (Samsung Electronics Limited) neither gives any warranty nor provides any after-sales service; and that the warranty and after-sales service are provided by the seller/importer personally.

Samsung has filed an appeal against the judgment of the Appellate Bench to the Supreme Court of India. If the judgment is upheld by the Supreme Court, this will be a landmark decision allowing the sale of parallel imports in India.

Although every effort has been made to verify the accuracy of items in the INTA Bulletin, readers are urged to check independently on matters of specific concern or interest.

© 2012 International Trademark Association