April 1, 2012
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INDIA: National—Not International—Exhaustion of Rights
In a significant decision, the Delhi High Court held that in India the Trade Marks Act provides only for national exhaustion of rights and not international exhaustion. Samsung Electronics Co. Ltd. et al. v. Kapil Wadhawa et al. (Delhi High Ct. Feb. 17, 2012).
Samsung initiated an action against certain parties distributing, retailing and selling gray-market printers that did not bear the proper Maximum Retail Price stickers and were not designated to be sold in the Indian market. The plaintiff asserted that these parties were not authorized sellers of Samsung’s products and that they did not have its permission or authorization to sell the products in India. The price quoted for the gray-market goods was much lower than that of the printers ordinarily sold in the Indian market by Samsung.
The High Court stated that the Trade Marks Act clearly contemplates that importation of goods into India without the registered proprietor’s permission amounts to infringement of the registered trademark. It categorically held that in law there was no unfettered right of importation of goods under a registered trademark. The concept of free flow of goods in the world market was not applicable in India, as the Trade Marks Act clearly had placed barriers on importation. In particular, the court found, Section 29(1) of the Act (defining infringement of a registered trademark) does not distinguish between a person importing genuine goods and a person importing non-genuine goods; indeed, on a plain reading of the Act, there was no such distinction. The court held that a permissive right must emanate from the registered proprietor by way of permitted use in the manner prescribed by the Act, not an implied right based on the proprietor’s placing the goods on the market. Therefore, the importation of genuine goods could be as much infringement as was the sale of counterfeit goods.
Regarding the exception under Section 30(3), which applies “[w]here the goods bearing a registered trade mark are lawfully acquired by a person,” the court held that “lawful acquisition” could only occur within the domestic market where the trademark was registered, and not from elsewhere. Section 30(3) permits further sale of goods or further dealings in the Indian market only once the lawful acquisition had been made from the domestic market. The term “market” had to refer to the same market as that from which the goods were acquired. The court categorically held that Section 30(3) did not permit the acquirer to sell the goods on the worldwide market.
The High Court also found that the Trade Marks Act declared such goods to be infringing where their condition had been changed or impaired after they had been put into the domestic Indian market. This restriction was in addition to that imposed on the importation of unchanged/unimpaired goods.
This is the first authoritative decision of the Indian courts on the subject, and it may be appealed.
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