ip rights and parallel imports

7/29/2019 IP Rights and Parallel Imports

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SANJEEV KUMAR CHASWALADVOCATE AND IPR ATTORNEY

LL.M (IPR,ARB&ADR)

M.S (CYBER LAW AND CYBER SECURITY)

International Trademark

rights and ParallelImports


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Intellectual Property Rights- A Intro

Intellectual Property Rights are the rightsgiven to persons over the creation of theirminds. They usually give the creator anexclusive right over the use of his or hercreation for a certain period of time.

Like any other property, ownership ofintellectual property can be transferred.

Once a product protected by an IPR is soldthe IPRight is exhausted.


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Purpose of Trademark Law The trademark rights exist in each country with basic purpose

of a trademark is to ensure according to that countrys

statutory provisions to ensure:

A trademark indicates source of origin of goods.

Minimal consumer confusion by clearly relating to trademark.

Indentifying the territorial character from a particular

manufacturer.

Consumer satisfaction through quality control that the

foundational intellectual property conventions.

Thus, for example, the mark Dairy of national treatment. As

Milk on chocolate bars indicates that those particular different

rules of trademark law possess a territorial bars have been

manufactured by Cadbury and the character for different

reasons: customers can expect such bars to be of quality that

the public has come to associate with Cadburys


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Trademark is Territorial law Trademark rightsare territorial as the products identify the a

source of origin. Trademark lawsare territorial as they are promulgated

primarily by national law making , whether judiciary or

legislature.

A trademark is acquiredthrough national statutory provisionsThus, a manufacturer has to obtain separate registrations indifferentcountries for entitled to protection.

Trademark rights are enforcedon the basis of respectivenational statutory provisions.

This means that, irrespective of the trademark owner holding

rights in different countries, an action for infringement will lie

so far as it involves the vindication of the rights available in

such country .


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Doctrine of Exhaustion of IP Rights

It is a concept in Intellectual property law whereby an

intellectual property owner will lose or "exhaust" certainrights following the sale of that IP.

Exhaustion occurs at the moment when the intellectual

property rights (IPR) holders control over the use and

disposition of goods and services embodying IPR ceases

in order to permit the free transfer of goods and services

within and across national borders. This generally occurs

when goods and services are first sold or placed on the

market.

For example, the ability of a trademark owner to controlfurther sales of a product bearing its mark is generally

"exhausted".

The rights of commercial exploitation for a given product

end with the products first sale.


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Exhaustion of Intellectual Property Rights, also known as "The

First Sale Doctrine" -

Basically the doctrine says whenever a good protected by

patents, copyrights, or trademarks is sold, then the owner of the

goods has realized the benefits of the protection. Those rightsare "exhausted" at the point of first sale.

That "first purchaser" of the good is free to resell the good

wherever he wishes, even if he is competing against the original

producer.

The exhaustion doctrine has received the blessing of the

European Court of Justice (Merck v. Stephar, 1981) and the

Supreme Court of Japan.

The WTO rules, specifically the TRIPS accords, Article 6, permit

the "exhaustion doctrine." Countries make their own laws onwhether to permit parallel imports--if they do, they have ruled in

favor of "Exhaustion" or "First Sale" doctrine. Pharmaceutical

firms object to the Exhaustion Doctrine (and Parallel Imports),

and lobby vigorously against both.


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Intellectual property Legal principle that, in general, thefirst sale of a copyrighted, patented, or trademarked good

exhausts the Copyright patent Trademark

owners intellectual property right (IPR) in that he or she

cannot control the distribution or resale of the good.

Therefore if 'A' (the IPR owner) sells to 'B,' then 'B' can

sell to 'C' without the approval of 'A.' Also called doctrine

offirst sale.


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PATENTS EXHAUSTION For a patent, the Doctrine of Exhaustion means once a

patent owner makes a first sale of an item covered by apatent, the patent owner is not entitled to any additional

royalty or compensation for subsequent sales of the same

item.

The subsequent purchasers have an impliedlicense to usethe invention. However, like any rule there are exceptions.

What if the sale of the patented item was made out the

back door by a licensee? If such a sale was not an

authorized sale and the patent owner did not receive

compensation for the sale, the patent owner could sue apurchaser for infringement. Another exception is if a

patented item is merely being leased or licensed, then a

subsequent sale of that item would not exhaust the owners

patent rights.


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EXHAUSTION UNDER PATENT ACT

SECTION 107 B EXHAUSTION OF RIGHTS

1. For the purposes of this Act, the rights of a patentee or

anyone claiming through such patentee shall be

exhausted after a patented article has been sold once

anywhere in the world (including within India), by or with

the authorization ofsuch patentee.

2. The provisions of section 107B(1) shall apply in case

of sale of any patented article, notwithstanding:

any contractual stipulation

any notice in relation to the article placed by the patentee

or her authorized representatives or any other party

selling the patented article; unless such notice is

essential to ensure public health or safety.


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TRADEMARKS EXHAUSTION

In trademark law, a trademark owner cannot

control further sales of a product bearing itstrademark after the first sale. Thus, a buyer can

resell a product bearing the trademark.

Of course, the first sale must be an authorized or

unrestricted sale. If the first sale were to someone

outside an authorized territory, such as in the

case of gray market goods, then the trademarkrights would not be exhausted.


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EXHAUSTIONS UNDER T M ACT Section 30(3) of the Indian Trademarks Act, 1999 which

provides that: Where the goods bearing a registered trade

mark are lawfully acquired by a person, the sale of the goodsin 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)

b) the goods having been put on the market under theregistered trade mark by the proprietor or with his consent.

The wording ofSection 30 is wide enough to subsume both

national and international exhaustion principles. Section 30

(3) provides that the general legal proposition that oncecertain goods bearing a registered trademark are lawfully

acquired by a person, the subsequent sale of the goods in

the market or otherwise dealing in those goods is not an

infringement.


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COPYRIGHTS EXHAUSTION The first-sale doctrine plays an important role

in copyright by limiting certain rights of a copyright owner.

The doctrine enables the distribution chain of copyrightedproducts, library lending, gifting, video rentals and

secondary markets for copyrighted works (for example,

enabling individuals to sell their legally purchased books

or CDs to others). The doctrine is also referred to as the"right of first sale," "first sale rule," or "exhaustion rule."

example, the distribution right could be infringed when a

retailer acquires and sells to public unlawfully made audio

or video CDs ortapes.

The first-sale doctrine creates a basic exception to the

copyright holder's distribution right. Once the work is

lawfully sold or even transferred gratuitously, the copyright

owner's interest in the material object in which the

copyrighted work is embodied is exhausted.


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EXHAUSTION UNDER COPY RIGHT ACT

The first sale doctrine with respect to literary works is

primarily derived from Section 14 of the Act. Section

14(a)(ii) authorizes copyright owners to issue copies of the

work [they own] to the public not being copies already in

circulation Explanation clarifies that a copy which has been sold once

shall be deemed to be a copy already in circulation.

By the first sale of a copy, the copyright owner exhaustshis right to control further sale or distribution of that

particular copy.


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The precise scope of exhaustion, however, hinges on the

question of the applicable territory:

Is a legal copy, which has been lawfully sold once in aparticular territory, deemed to be already in circulation

1. only within the particular territory/ country of sale, or

2. worldwide, or

3. in the territory designated by the copyright owner for itssale?

In the first case, a copy once sold in India would be

considered to be already in circulation only within India,

and the first sale would result in nationalexhaustion. Byanalogy, in the second and third cases, the first sale would

result in the international exhaustion and, possibly, the

regionalexhaustion of rights, respectively.


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Case Law in Copyright Exhaustion Justice Bhat in Warner Bros. vs V.G Santosh Cs(OS)

1682/2009 explicitly recognised that, in the context of

copyright law, while the principle of internationalexhaustion may apply to literary, musical, dramatic or

artistic works; it does not apply to cinematographic film

[and to sound recordings as well]. This case involved the

import from US into India of legally purchased DVDs offilms produced by Warner Bros. which were not yet

released for public viewing in India. He based his decision

on the difference between the wordings of Sec. 14(1)(d)

[and (e)] and 14(1)(a)/(b)/(c). While under the former, the

copyright owner continues to exercise his right to sell orgive on hire a particular copy regardless of whether such

copy has been sold or given on hire on earlieroccasions;

under the latter, he ceases to exercise these rights over

copies which are already in circulation.


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CASE LAW Contd.

In John Wiley & Sons Inc. v. Prabhat Chander KumarJain IA No. 11331 of 2008 in CS (OS) No. 1960 of 2008order dated 17?5?2010 (Del)., the Delhi High Court statedthat as the express provision for International Exhaustion isabsent in our Indian law, it would be appropriate to confinethe applicability of the same to regional exhaustion.

In this case, LPEs intended for sale in the Indiansubcontinent were being sold online by the defendants afterpurchasing them in the territorydesignated by the publisher.The sale, and offer for sale, of such LPEs, meant forexclusive use in India, by the defendant, who is clearlytargeting overseas buyers, to whom such products cannot besold at Indian prices, constitutes acts of infringement underSection 51 of the Copyright Act.


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PROPOSED AMENDMENT TOCOPYRIGHT LAW

The Copyright (Amendment) Bill, 2010 (the Bill) proposes torecognize the principle of international exhaustion for allclasses of works by amending Section 2(m) of the Act (whichdefines infringing copies).

The Bill proposes to add a proviso to Section 2(m) of the Act

stating:

Provided that a copy of a work published in any countryoutside India with the permission of the author of the work andimported from that country into India shall not be deemed tobe an infringing copy;

If this proposed amendment were to become law, it wouldbecome abundantly clear that India follows a principle ofinternational exhaustion.


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TYPES OF EXHAUSTION OF RIGHTS There are three kinds of exhaustion of rights:

a) National exhaustion of rights: National exhaustion ofrights refers to one of the limits of intellectual property

rights. Once a product protected by an IP right has been

marketed either by manufacturer or by others with his

consent, the IP rights of commercial exploitation over this

given product can no longer be exercised by manufactureas they are exhausted. Any proper use of the goods after

the first sale of the product would not amount to

infringement. The concept of national exhaustion does not

allow the IP owner to control the commercial exploitation ofgoods put on the domestic market by the IP owner or with

his consent. However, the IP owner (or his authorized

licensee) could still oppose the importation of original

goods marketed abroad based on the right of importation.


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Regional exhaustion of rights:

Regional exhaustion of rights refers to the first sale of the

IP protected product by the IP owner or with his consent

exhausts any IP rights over these given products not onlydomestically, but within, the whole region and parallel

imports within the region can no longer be opposed based

on the IP right.

International exhaustion of rights:Once a product is exported in a market outside India and

the further sale of the same product there, would come

under the purview of International exhaustion of rights butat the same time if the goods are purchased from the

international market and sent back to India for the purpose

of selling them here would not be allowed as per principle

of parallel imports

.


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EXCEPTIONS PRINCIPLE OF EXHAUSTION

A parallel import is a practice whereby an unauthorized

third party exploits the doctrine of exhaustion and imports

goods which are less expensive in one country to be sold

parallel with more expensive goods which are either non

imported or imported from a source controlled by the

trademark owner.

Parallel importation refers to the import of goods outsidethe distribution channels contractually negotiated by the

manufacturer. Because the manufacturer / IP owner has no

contractual connection with a parallel importer, the

distribution channels are not controlled by themanufacturer/IP owner and hence he opposes such

importation in order to separate his market


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NO WORLD CONSENSUS ON

EXHAUSTION OF RIGHTS

There is currently no international treaty in the field of

trademarks dictating a standard of national or international

exhaustion. The Paris Convention does not address the

issue. The Agreement on Trade Related Aspects ofIntellectual Property (TRIPs) is deliberately neutral on the

subject. Article 6 of TRIPs states:

For the purposes of dispute settlement under this

Agreement...nothing in this Agreement shall be used to

address the issue of the exhaustion of intellectual property

rights.

In general, it was found that most countries favor some

concept of national exhaustion.

EXHAUSTION AND PARALLEL IMPORTS


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EXHAUSTION AND PARALLEL IMPORTS

A standard of national exhaustion appropriately takes

into account many brand protection concerns that are

not addressed under a standard of international

exhaustion.

The prices at which products are sold can vary from

country to country for a great variety of legitimate

reasons, among them differences in regulatory

requirements, environmental standards, labor and

material costs, and government subsidies and taxes.

Parallel importers exploit these conditions by buying

products in a market where they are relatively cheap

and selling them where the price is higher.


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Parallel imports Parallel import means that patented or marked goods are

purchased in a foreign market and resold in the domestic

market. These are known as passive parallel imports. Parallel imports involve cross-border trade in a product

without the permission of the manufacturer or right holder in

the importing country.

This type of trade generally occurs where there is asignificant difference in price, quality, or availability of the

subject product in the second country.

The Parallel import products are different from counterfeit or

pirate goods, since they are legally manufactured and soldin the first country by the right holder, and in some countries

their importation is legal.

Parallel imports are often referred to as grey product, andare implicated in issues of international trade and IPR


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APPROACH FOLLOWED BY DIFFERENT

COUNTRIES

All countries allow parallel imports. However, littleuniformity exists in the overall approach.

Article 6 of the General Agreement on Tariffs and

Trade/the Agreement on Trade-Related Aspects of

Intellectual Property Rights (TRIPS), of the World Trade

Organization (WTO) Agreement, provides that appropriate

laws regarding parallel imports should be drafted in such a

way that they do not violate the non-discrimination rules of

the most-favoured national and international treatments.

Nothing in this Agreement shall be used to address the

issue of the exhaustion of intellectual property rights.

It is therefore clear that the treatment of parallel imports is

subject to the national laws of different countries


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There are two prevailing theories regarding exhaustion,

namely, that once goods bearing a trademark have been

placed into commerce by, or with the consent of, the

trademark owner either (a) the owner cannot use his trademark rights to prevent

the further distribution of such goods anywhere, the so-

called international exhaustion rule; or

(b) he cannot use his trademark rights to prevent furtherdistribution of such goods in the same country, but may

prevent such distribution in other countries, the so-called

national exhaustion rule.


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THE UNITED STATES APPROACH

The US adopted the universal rule (international

exhaustion through s526 of Tariff Act 1930 and s42 ofLanham (Trademark) Act 1946, with respect to parallel

imports). Under these provisions, once a genuine trade

marked product is placed in the global market by, or with

the consent of, the trade mark owner, no infringement of

the rights of the trade mark owner occurs.

Although there are a number of laws in the United States

that address the issue of parallel imports of trademarked

products, the treatment of parallel imports is fairly uniform.

In an early decision permitting the unauthorized importationand sale of genuine bottled water from Europe, it was held

that once a trademarked product is placed on the market,

trade mark rights may not be used to control the product's

further destination Apollinaris Co. Ltd v. Scherer , 27 Fed18 SDNY 1886 .

Although decided under common law principles of trademark


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Although decided under common law principles of trademark

law, this early decision was subsequently applied to the

codified trademark law and has remained the law to this day

under the infringement provisions of the present day Lanham

Act.

The U.S. Supreme Court has recently decided a case

involving parallel imports in the copyright context, although

the imports involved would not normally be thought of as

warranting copyright protection. The goods were hair careproducts that contained a label bearing copyrightable subject

matter.

The Copyright Law provides the right to exclude others from

using any one of a bundle of exclusive rights. The primaryrights provided by Section 106 of the Copyright Act are the

right to exclude others from (1) reproducing the copyrighted

work, (2) preparing derivative works, (3) distributing copies

of a work, (4) performing a work publicly and (5) publicly

displaying a copyrighted work


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The European Union approach

The European Union has adopted a regional exhaustion

rule that originally developed through decisional law on thetheory that the ability to prevent further distribution of

genuine goods would distort trade among the member

states.

Thus the principle of exhaustion of rights was adopted withrespect to trademarks, although this has been adopted only

on a regional level; namely, only with respect to goods first

placed on the market within the Community, or previously

imported into the Community through a member state.

This regional exhaustion rule has been codified in the

harmonization directive [8] ("Directive"), in accordance with

which the member states were required to conform their

national trademark laws.


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Article 7 of the Directive provides that "the trade mark shall

not entitle the proprietor to prohibit its use in relation to

goods which have been put on the market in the

Community under that trademark by the proprietor or withhis consent" except under the provisions of Article 7(2),

which exempts altered or damaged goods. In addition, as a

result of the Agreement on the European Economic Area

(EEA) between the EU and the European Free Trade

Association countries of Iceland and Norway.

However, the regional exhaustion rule does not imply

international exhaustion, where, for example, parallel

imports are in transit from one non-EEA member state,

through an EEA member state, to another non-EEA

memberstate, and are seized in the EEA member state as

parallel imports voilative of the trademark owners

trademark rights in the member state.


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The regional exhaustion rule does not imply international

exhaustion, as held by the European Court of Justice

and Silhouette International v. Hartlauer (Case C-

355/96)[1998] ETMR 539, holding that Trademark Directivefunctioned as a complete harmonization of the rules and,

therefore, did not permit the member states to adopt an

international theory of exhaustion, which would conflict with

the EUs regional theory of exhaustion and cause barriers

to the free movement of goods and provision of services.

It is interesting to note that the European Commission

made overtures in 2000 to introduce an international

exhaustion theory into Community law, by publishing a

working paper on the issue. However, after the working

paper was laid open for debate and consideration, the

Commission withdrew from the debate by deciding in June

2001 not to propose changes to the law


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Commonwealth approach

The United Kingdom applies the European Union law on

exhaustion with respect to goods first placed on the market

in an EEA country. Article 12 of the new United KingdomTrade Marks Act of 1994 has enlisted the language of the

Directive. However, a separate body of English

jurisprudence, developed under the former Trade Marks

Act 1938 adopted an international exhaustion principle,uninfluenced by the European Union law, and this body of

law, although arguably no longer applicable under the new

United Kingdom Trade Marks Act, serves as the model for

other British law countries in the Commonwealth.

As a result, the court decided that proprietorship of a

registered trade mark does not entitle the proprietor to

control the distribution of his branded goods after they

have left his hands.


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Thus, the Commonwealth position considers that a

trademark serves as an indication of the origin or source of

the goods, not as a "badge of control" which would allow

the trademark owner to control the trademarked goodsthroughout theirpassage in commerce.

Other British law countries have interpreted these

passages to provide no cause of action to trademark

owners against sellers of genuine goods on which atrademark has been placed by the trademark owner or

registered user.

As Atari Inc. & FuturetronicsAustralia Pty. Ltd. v. Fairstar

Electronics Pty. Ltd. , (1984) 50 ALR 274 (action to stopimport of genuine goods for sale in Australia where first

plaintiff owned trademark and second plaintiff was sole

Australian distributor) adopted the Champagne theory ofexhaustion, denying interlocutory relief.


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See also R.A. & A. Bailey & Co Ltd v. Boccaccio PtyLtd. (1986) 6 I.P.R. 279 (S.C. of N.S.W.)(parallel importof genuine BAILEY'S Irish Creme did not infringe

trademark since there was no deception as to the origin

of the goods.

Smithers, J. articulated in the Atari /Fair star case, the

trademark ownerwho releases goods "on the billowing

ocean of trade" will not be able to use the trademark tocontrol the ultimate destination of those goods.


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Approach of Australia

Both Australia's Trade Mark and Copyright Acts had beenamended to provide for a specific exemption to infringement

in this case in that the Act provided, for example: "The

copyright in a work a copy of which is, or is on, or embodied

in, a non-infringing accessory to an article is not infringed by

importing the accessory with the article". The judge foundthat Ziliani's conduct came directly under this provision and

an exemption applied.

The judgment is one of the first cases to deal with 1998legislative amendments which were designed to free up the

ability of independent third parties to "parallel import"

products into Australia..


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The judge appears to have effectively given teeth to the

amendments. In the recent decision of Polo/Lauren

Company LP v Ziliani Holdings Pty Ltd[2008] FCA 49, theFederal Court has closed off the capability of trade mark

owners to shut down parallel importation of a genuine

product using our Copyright Act.

Ziliani purchased genuine out-of-season clothing bearingPolo/Ralph Lauren's polo player logo at heavily

discounted prices in the US and imported the clothing

into Australia for retail sale. Polo/Ralph Lauren attempted

to shut down Ziliani's actions by arguing that the

importation amounted to an infringement of their

copyright in the polo player logo.

N Z l d A h


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New Zealand Approach In New Zealand, the exhaustion of rights defence is more

broadly worded. In New Zealand, the exhaustion of rights

defence applies where the goods have been put on the

market elsewhere under the trade mark:

by the owner

with the ownersexpress or implied consent, or

by an associated person of the owner.

The Act also broadly defines associated person to

include:

same group companies body corporate consisting of substantially the same

members or directly or indirectly under the control of the

same person, where the person has effective control of the

others use of the trade mark, and

JAPAN AND KOREA


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JAPAN AND KOREA Although many countries allow the war against parallel

imports to be fought by private parties in the courts or

before administrative tribunals, certain countries, such asJapan and Korea, not only expressly permit parallel

imports, but also take affirmative steps to protect parallel

importers.

However, under the current practice, if such acts fall under"parallel import of genuine goods," they do not constitute

trademark infringement, even if no trademark license has

been obtained from the trademark owner. As an example,

the general requirements of "parallel import of genuine

goods," as presented by the Supreme Court in its

February 27, 2003


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The Fair Trade Commission Guidelines Concerning

Distribution Systems and Business Practices enacted in

Japan in 1991 under the Anti-Monopoly Act also prohibit

acts that serve to inhibit parallel imports, such aspreventing an overseas supplier, except a direct supplier to

an exclusive distributor, from supplying products to the

parallel importer; alleging, without sufficient basis, that the

parallel importer is handling counterfeit products;

purchasing all of the parallel imports from the distributor; orunjustly interfering with advertising of parallel imports.

Trademark owners, their licensees and authorized

distributors must always be cautious when contemplating

preventive or curative action against parallel imports since

such action, in many countries, may be considered to

conflict with local antitrust and free competition laws.

RUSSIA


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RUSSIA On September 10th 2008, the Moscow Arbitrazh Court

rejected the claim of a customs authority which initiated an

administrative proceeding against a Russian importer. Thiscompany imported automotive parts labeled with Honda

Motors Co. and Nissan Motor Co. trademarks without being

an official distributor for these companies or having any

agreements with them. The customs authority accused the Russian firm of

importing counterfeit goods and of infringing the trade-mark

rights of the Japanese companies. The Court decided that

the importer had not breached any trade-mark rightsbecause the imported automotive parts were an original

production ofHonda Motors Co. and Nissan Motor Co. and

therefore they were not deemed to be counterfeit by

Russian IP legislation.


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INDIAN APPROACH

India has adopted the national exhaustion principle to

regulate parallel imports, the same being enshrined ins30 of the Trade Marks Act 1999 (the 1999 Act). As

per this principle, if the goods are sold for the first time

in a domestic market or within the territory of the

country in which the trade mark is registered, theowner of that particular trade mark loses their rights

over the goods and cannot prevent any subsequent

sale of the same in the domestic market of that

country. Section 107 of the 1999 Act authorises

representation of a trade mark registered abroad tooperate in India as long as the same is sufficiently

indicated in English.


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Subsection (1) of Section 29 of the Act prescribes that an

infringement action can be initiated against a person who,

not being a registered proprietor or a permitted user, uses

the registered trade mark or an identical or deceptivelysimilar mark in the course of trade. Moreover, clause (c) of

subsection (6) of Section 29 prescribes that import and

export of goods under the mark shall be treated as use of

the mark for the purposes of Section 29.

Thus, when subsection (1) of Section 29 and clause (c)

subsection (6) of Section 29 are read together it becomes

clear that if anybody imports the goods who is not a

registered proprietor and acts without the proprietor'spermission, then this action of import would fall under "use"

of the mark in the course of trade and hence would lead to

infringement of the right of the trade mark proprietor.


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From the provisions contained in the statute, it is clear that

the main objective behind Section 30(2) (c)(i) is to prevent

the owner of a trade mark from claiming infringement in

respect of a product against its use by another party towhom the owner has expressly or implicitly granted

consent.

A bare reading of Section 30(3)(b) reveals that where

goods bearing a registered trade mark are lawfullyacquired, the further sale or other dealings in such goods

by the purchaseror by a person claiming to represent the

purchaser is not considered an infringement, if the goods

have been put onthe market under the mark by the

proprietoror with the proprietor's consent. Here the words

"by the proprietoror with his consent" are to be stressed;

the proprietor is the trade mark owner in India.


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Hence this clause further reiterates that the consent of the

proprietor of trade mark in India is a must. Otherwise its use

(here, import for trade) would lead to infringement of the

trade mark. It may be pointed out that there can be noinfringement action if the goods are imported by the

importer for the importer's own use. In other words, the

statutory provisions contained in Sections 29 and 30 of

Trade Marks Act 1999 are applicable only in if the goods

are imported for trading purpose

In the landmark case of Samsung Electronics Company &

Anr v G Choudhary & Anr the Delhi High Court held that

under Section 30 of the Trade Marks Act 1999 import of

even genuine goods must be made by or with the consentof the registered proprietor of the trade mark in India.


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In Samsung Electronics Company Ltd & anor v GChoudhary & anor [2001], the plaintiff prayed for aninterlocutory injunction that, in essence, sought to combat

and eradicate the parallel importation (by third parties intoIndia) of products manufactured by the plaintiff itself. The

Delhi High Court observed that Indian law was quite liberal

in permitting parallel imports of genuine goods bearing

registered trade marks, provided that such goods had not

been materially altered after they entered the market. The

Court held that the trade mark proprietor could, however,

impose contractual restrictions on a third party, such as a

foreign licensee, against importing genuine goods into

India, provided that such restrictions pass muster underthe 1999 Act and the Monopolies and Restrictive Trade

Practices Act 1969, which was at the time Indias

competition statute (substituted with the Competition Act

2002).

Th D lhi Hi h C t h l d th f i d ll l


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The Delhi High Court has cleared the confusion around parallel

imports. In a landmark judgment, a Division Bench of the Delhi High

Court has ruled that parallel import is authorized under Indian

trademark laws and does not infringe the trademark of the rights-

holder. In a lawsuit between Samsung Electronics and Champion Computers,

Delhi-based IT hardware and peripherals distribution house, the bench

of Justices Pradeep Nandrajog and Siddharth Mridul overruled the

findings of a single judge who had in February 2012 held that

trademarked goods should be imported to India only throughauthorized distributors of the trademark-holder or with his permission.

The Division Bench observed that the learned single judge had

followed an erroneous approach to conclude that import of goods into

India needed the consent of the registered trade mark owner.

The court recognized the principle of international exhaustion under theTrade Marks Act, 1999, and held that the expression in any

geographical area, in the Act clearly envisages that the legislative

intent was to recognize the principle of international exhaustion of

rights to control further sale of goods once they were put on the market

by the registered proprietor of the trade mark.


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ip rights and parallel imports

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