Kapil Wadhwa v. Samsung Electronics

Citation: 194 (2012) DLT 23

Court: Delhi High Court

Bench: Pradeep Nandrajog, J.

Facts:

Samsung Electronics Co. Ltd. and Samsung India Pvt. Ltd. (now “Respondents”) are the brand owners and registered proprietors of the mark “SAMSUNG” in India. The Respondents had originally filed a suit against Kapil Wadhwa and a few other distributors (now “Appellants”) who were importing Samsung printers from licensed dealers in foreign markets and selling it in India without authorisation at a cheaper price. The Respondents alleged that the Appellants infringed their trademark rights in India and accordingly a Single Judge Bench of the Delhi High Court passed a judgement in favour of the Respondents. The present judgment by the Division Bench of the Delhi High Court arises out of an appeal to the judgement passed by the Single Judge.

Issues:

• Whether India follows the principle of national exhaustion or international exhaustion?

• Whether parallel import of goods is permissible in India?

Rules:

Trademarks Act, 1999

• Section 29 – Infringement of registered trademarks.

• Section 30 – Limits on effect of registered trademark.

Analysis:

Whether India follows the principle of national exhaustion or international exhaustion?

Section 30(3) of the Trademarks Act, 1999 provides for the principle of territorial exhaustion of trademark rights in India. It states that once lawfully acquired, the purchaser of the goods may further sell those goods in the market without it constituting as trademark infringement.

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Principle of Territorial Exhaustion of Trademark Rights The principle of territorial exhaustion of rights means that after goods are lawfully acquired from the first owner, the rights of the first owner to prevent further sale of such goods is exhausted. Principle of Territorial Exhaustion of Trademark Rights may be national, international, and in some cases, regional.

• National Exhaustion – means that any product can be lawfully acquired and sold within the borders of a country, e.g. within India.

• International Exhaustion – means that any product lawfully purchased could be sold anywhere in the world, e.g. product lawfully acquired from Thailand sold in India.

• Regional Exhaustion – means that any product may be lawfully acquired and sold within a certain region, e.g. European Union.

The principle of territorial exhaustion of rights is based on the doctrine of first sale where the title over any product passes on to the purchaser once it has been sold. In such a scenario, the purchaser has complete rights over the product and may even choose to sell it to someone else. This is also embodied in Section 19 of the Sale of Goods Act which provides that upon a contract of sale for specific property, the property and the goods are transferred to the buyer. Once the title passes to the buyer, no condition can be further imposed on the buyer.[i]

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In order to determine whether parallel imports to India were permissible, the court had to first determine whether the term ‘market’ in Section 30(3) of the Trademarks Act, 1999 referred to a national or a global market. The Single Bench of the Delhi High Court held that India only recognised the principle of national exhaustion.

However, on appeal, the Division Bench made a reference to additional documents to determine the intent of the legislature while inserting ‘the market’ in Section 30(3). The Division Bench relied upon the Statement of Objects and Reasons of the Trademark Bill 1999 placed before the Indian Parliament at the time of passing the Trademarks Act, India’s communication at the Uruguay Rounds and a Report of the Standing Committee on the Copyright (Amendment) Bill, 2010. It concluded that India follows the principle of international exhaustion of rights.

Whether parallel import of goods is permissible in India?

Section 29 of the Trademarks Act, 1999 provides for circumstances where a trademark is said to be infringed. Section 29(1) of the Act states that trademark infringement means the use of a registered trademark by any person unauthorised to do so, in the course of business and in relation to deceptively similar goods and services. Section 29(6) enumerates what constitutes use of a trademark – and includes but is not limited to import and export of goods bearing such mark. Based on the aforementioned, the Single Bench held that import of goods, whether genuine or fake, without authorisation, constitutes as trademark infringement.

On appeal with the Division Bench, the Respondent argued that it was entitled to prevent such further sale based on Section 30(4) of the Act which seeks to limit the exception to a trademark infringement already granted by Section 30(3). The Respondents argued that allowing parallel imports would prejudice the rights of the trademark owners, and consumers.

In response, the Division Bench stated that Section 29 could not be read in isolation and must be read with Sections 30(3) and 30(4). The Division Bench also stated that denial of parallel imports will restrict the consumers’ access to a wider range of products at better prices and stated that trademark laws are not intended to regulate the sale and purchase of goods but to protect trademark rights.

It further held that since India recognised the doctrine of international exhaustion, the Respondent cannot prevent the parallel import of its products in India. It also permitted the sale of the printers under the condition that the Appellants shall provide disclaimers that the product sold by them are imported independently and the Respondent gives no guarantees/warranty qua the goods nor provide any after-sales service. The warranty and after-sales services provided by the Appellants is at their own cost.

Conclusion:

The Division Bench of the Delhi High Court permitted parallel imports to India, on the condition that the Appellants would provide certain disclaimers in their shops. The principle of international exhaustion laid down in this judgment has clarified a rather grey piece in India’s trademark legislation. However, until the Supreme Court doesn’t pass a judgment in a similar case, the judgment of the Division Bench of the Delhi High Court would only have persuasive value in other jurisdictions.

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References:

[i] Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd., 2020 (81) PTC 399 (Del).