Tumi: Delhi High Court recognizes International Exhaustion Principle in ...

Abhishek Singh [abhishek.singh@pxvlaw.com],

Amit Jain [amit.jain@pxvlaw.com]

1.???????? The Division Bench of the Delhi High Court has in a judgment[1] held that international exhaustion principle applied to the trademark law in India. The Division Bench overruled the decision of the Ld. Single Judge who had held that trademark law in India is governed by the principle of national exhaustion. The applicability of international exhaustion implies that importation of genuine goods from abroad and its sale within India will not infringe the trademark of the registered trademark holder of the same goods in India. The judgment removes a major hurdle in promoting parallel exports, meaning the same genuine goods can be imported and sold without the permission of the trademark owner in India.

2.???????? BACKGROUND

2.1?????? The appellants were importing genuine Samsung products and selling them in India. The respondents (?Samsung Electronics Company Ltd.? and its subsidiary ?Samsung India Electronics Pvt. Ltd.?) are companies incorporated under the laws of Korea and India respectively. The business of the respondents is conducted under the brand name using the trademark ?SAMSUNG / Samsung?. The respondents are the registered proprietor / user of the trademark ?SAMSUNG / Samsung?.

2.2?????? The hallmark of the respondents? complaint was that the appellants were purchasing printers directly from Samsung Korea, under the trademark ?SAMSUNG / Samsung?. The respondents further complained that the appellants were importing these printers into India and were selling it in the Indian market, without their consent. The respondents filed a suit in the Delhi High Court alleging that appellants? importation of the printers and its sale in India infringed their registered trademark in India.

2.3?????? The Ld. Single Judge found for the respondents and held that national exhaustion principle applied to trademark law in India and importing of unauthorized genuine Samsung products without the consent of the registered proprietor of the trademark in India would infringe their trademark. According to national exhaustion principle, if the product is sold in the domestic market by Samsung, then any further sale of the product in the domestic market is permitted and does not amount to infringement of the trademark. The Ld. Single Judge interpreted Sections 29 and 30 of the Trademarks Act, 1999 (?Act?) and held that Indian trademark law does not follow international exhaustion principles and thus, the act of importation and selling the goods into the Indian market infringed the respondents? trademark.

2.4?????? The appellants appealed the decision of the Ld. Single Judge to the Division Bench. This article summarizes and analyses the judgment of the Division Bench.

3.???????? KEY ISSUE

3.1?????? The central issue arising for determination by the Division Bench is whether the trademark law in India adopts the international exhaustion principle or the national exhaustion principle. In other words, the Division Bench had to decide, whether genuine goods imported into India by any person can be further sold without infringing the Indian trademark law. The decision involved the interpretation of Section 29 read with Section 30 of the Act.

3.2?????? The Division Bench concluded that if Section 29 of the Act is read in isolation, like the Ld. Single Judge did, then one can conclude that the importation and sale by the appellants from abroad infringed the trademark. However, the Division Bench held that Section 30 of the Act operates as an exception to Section 29. It further observed that use of a registered trademark in situations contemplated by various sub-sections of Section 30 shall be good defence for an action of infringement, as Section 30 limits the effect of registered trademarks.

3.3?????? Interpreting Section 30(3) of the Act, the Division Bench observed that ?there is no law which stipulates that goods sold under a trademark can be lawfully acquired only in the country where the trademark is registered. In fact, the legal position is to the contrary. Lawful acquisition of goods would mean the lawful acquisition thereof as per the laws of that country pertaining to sale and purchase of goods. Trademark law is not to regulate the sale and purchase of goods. It is to control the use of registered trademarks.? Thus, the implication being once the goods have been purchased in accordance with the law of sale and purchase of goods i.e. once the goods are lawfully acquired whether in India or any other country, the sale of such goods in the market is not infringement of the trademark. Further, it is to be noted that Section 30(3) talks only about lawful acquisition. Hence, if the goods are lawfully acquired whether in India or any other country, the sale of such goods in India would be legitimate and will not infringe the registered trademark in India.

3.4?????? Recognizing the principle of international exhaustion under the Act, the Division Bench observed that the ?Statement of Objects and Reasons to the Trade Mark Bill 1999? clearly envisaged 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.? It further relied on India?s internationally held position in favour of parallel imports to come to the conclusion that the trademark law in India followed principles of international exhaustion.

[1] Kapil Wadhwa & Ors vs. Samsung Electronics Co. Ltd & Anr., FAO(OS) 93/2012 before the Delhi High Court.