IP rights and Parallel Imports

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Comparative Ipr rights and Parallel imports in India UK and USA


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Sanjeev Kumar Chaswal Advocate and IPR Attorney LL.M (IPR,ARB&ADR) M.S (Cyber Law and Cyber Security) :

Sanjeev Kumar Chaswal Advocate and IPR Attorney LL.M (IPR,ARB&ADR) M.S (Cyber Law and Cyber Security) International Trademark rights and Parallel Imports

Intellectual Property Rights- A Intro:

Intellectual Property Rights- A Intro Intellectual Property Rights are the rights given to persons over the creation of their minds. They usually give the creator an exclusive right over the use of his or her creation for a certain period of time. Like any other property, ownership of intellectual property can be transferred. Once a product protected by an IPR is sold the IPRight is “exhausted ”.

Purpose of Trademark Law :

Purpose of Trademark Law The trademark rights exist in each country with basic purpose of a trademark is to ensure according to that country’s 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 Cadbury’s

Trademark is Territorial law:

Trademark is Territorial law Trademark rights are territorial as the products identify the a source of origin. Trademark laws are territorial as they are promulgated primarily by national law making , whether judiciary or legislature. A trademark is acquired through national statutory provisions Thus, a manufacturer has to obtain separate registrations in different countries for entitled to protection. Trademark rights are enforced on the basis of respective national 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 .

Doctrine of Exhaustion of IP Rights:

Doctrine of Exhaustion of IP Rights It is a concept in Intellectual property law whereby an intellectual property owner will “lose” or "exhaust" certain rights following the sale of that IP. Exhaustion occurs at the moment when the intellectual property rights (IPR) holder’s 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 control further sales of a product bearing its mark is generally "exhausted". The rights of commercial exploitation for a given product end with the product’s first sale.

PowerPoint Presentation:

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 rights are "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 on whether 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.

PowerPoint Presentation:

Intellectual property Legal principle that, in general, the first 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 of first sale.


PATENTS EXHAUSTION For a patent, the Doctrine of Exhaustion means once a patent owner makes a first sale of an item covered by a patent, the patent owner is not entitled to any additional royalty or compensation for subsequent sales of the same item. The subsequent purchasers have an “implied license” to use the 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 a purchaser f or 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 owner’s patent rights.


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 of such 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.


TRADEMARKS EXHAUSTION In trademark law, a trademark owner cannot control further sales of a product bearing its trademark 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 trademark rights would not be exhausted.


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 goods in 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 the registered trade mark by the proprietor or with his consent. The wording of Section 30 is wide enough to subsume both national and international exhaustion principles. Section 30 (3) provides that the general legal proposition that once certain 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.


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 copyrighted products, 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 CD’s or tapes. 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.


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 exhausts his right to control further sale or distribution of that particular copy .

PowerPoint Presentation:

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 a particular 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 its sale? 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 “national exhaustion”. By analogy, in the second and third cases, the first sale would result in the “international exhaustion” and, possibly, the “regional exhaustion” of rights, respectively.

Case Law in Copyright Exhaustion:

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 international exhaustion 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 of films 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 or give on hire a particular copy “regardless of whether such copy has been sold or given on hire on earlier occasions”; under the latter, he ceases to exercise these rights over copies which are “already in circulation.”

CASE LAW Contd….:

CASE LAW Contd…. In John Wiley & Sons Inc. v. Prabhat Chander Kumar Jain IA No. 11331 of 2008 in CS (OS) No. 1960 of 2008 order dated 17?5?2010 (Del)., the Delhi High Court stated that “as the express provision for International Exhaustion is absent in our Indian law, it would be appropriate to confine the applicability of the same to regional exhaustion”. In this case , LPEs intended for sale in the Indian subcontinent were being sold online by the defendants after purchasing them in the territory designated by the publisher. The sale , and offer for sale, of such LPEs, meant for exclusive use in India, by the defendant, who is clearly targeting overseas buyers, to whom such products cannot be sold at Indian prices, constitutes acts of infringement under Section 51 of the Copyright Act.


PROPOSED AMENDMENT TO COPYRIGHT LAW The Copyright (Amendment) Bill, 2010 (the Bill) proposes to recognize the principle of international exhaustion for all classes of works by amending Section 2(m) of the Act (which defines 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 country outside India with the permission of the author of the work and imported from that country into India shall not be deemed to be an infringing copy;” If this proposed amendment were to become law, it would become abundantly clear that India follows a principle of international exhaustion.


TYPES OF EXHAUSTION OF RIGHTS There are three kinds of exhaustion of rights: a) National exhaustion of rights : National exhaustion of rights 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 manufacture as 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 of goods 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.

PowerPoint Presentation:

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 only domestically, 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 but at 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 .


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 outside the 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 the manufacturer/IP owner and hence he opposes such importation in order to separate his market


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 of Intellectual 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 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.

Parallel imports:

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 a significant 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 sold in the first country by the right holder, and in some countries their importation is legal. Parallel imports are often referred to as grey product , and are implicated in issues of international trade and IPR


APPROACH FOLLOWED BY DIFFERENT COUNTRIES All countries allow parallel imports. However, little uniformity 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


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 further distribution of such goods in the same country, but may prevent such distribution in other countries, the so-called national exhaustion rule.


THE UNITED STATES APPROACH The US adopted the universal rule (international exhaustion through s526 of Tariff Act 1930 and s42 of Lanham (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 importation and 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 Fed 18 (SDNY 1886).

PowerPoint Presentation:

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 care products 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 primary rights 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

The European Union approach:

The European Union approach The European Union  has adopted a regional exhaustion rule that originally developed through decisional law on the theory 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 with respect 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.

PowerPoint Presentation:

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 with his 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 A ssociation 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 member state, and are seized in the EEA member state as parallel imports voilative of the trademark owner’s trademark rights in the member state.

PowerPoint Presentation:

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 Directive functioned 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 EU’s 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

Commonwealth approach :

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 Kingdom Trade 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.

PowerPoint Presentation:

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 goods throughout their passage 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 a trademark has been placed by the trademark owner or registered user. As Atari Inc. & Futuretronics Australia Pty. Ltd. v. Fairstar Electronics Pty. Ltd . , (1984) 50 ALR 274 (action to stop import of genuine goods for sale in Australia where first plaintiff owned trademark and second plaintiff was sole Australian distributor) adopted the Champagne theory of exhaustion, denying interlocutory relief.

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See also R.A. & A. Bailey & Co Ltd v. Boccaccio Pty Ltd. (1986) 6 I.P.R. 279 (S.C. of N.S.W.)(parallel import of 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 trade mark owner who releases goods "on the billowing ocean of trade" will not be able to use the trademark to control the ultimate destination of those goods.

Approach of Australia :

Approach of Australia Both Australia's Trade Mark and Copyright Acts had been amended 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 found that Ziliani's conduct came directly under this provision and an exemption applied. The judgment is one of the first cases to deal with 1998 legislative amendments which were designed to free up the ability of independent third parties to "parallel import" products into Australia..

PowerPoint Presentation:

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, the Federal 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 bearing Polo/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.

New Zealand Approach :

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 owner’s express 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 other’s use of the trade mark, and


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 as Japan 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

PowerPoint Presentation:

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 as preventing 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; or unjustly 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 On September 10th 2008, the Moscow Arbitrazh Court rejected the claim of a customs authority which initiated an administrative proceeding against a Russian importer. This company 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 rights because the imported automotive parts were an original production of Honda Motors Co. and Nissan Motor Co. and therefore they were not deemed to be counterfeit by Russian IP legislation.


INDIAN APPROACH India has adopted the national exhaustion principle to regulate parallel imports, the same being enshrined in s30 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, the owner 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 to operate in India as long as the same is sufficiently indicated in English.

PowerPoint Presentation:

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 deceptively similar 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's permission, 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.

PowerPoint Presentation:

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 to whom 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 lawfully acquired, the further sale or other dealings in such goods by the purchaser or 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 proprietor or with the proprietor's consent. Here the words "by the proprietor or 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 no infringement 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 consent of the registered proprietor of the trade mark in India.

PowerPoint Presentation:

In Samsung Electronics Company Ltd & anor v G Choudhary & anor [2001], the plaintiff prayed for an interlocutory injunction that, in essence, sought to combat and eradicate the parallel importation (by third parties into India) 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 under the 1999 Act and the Monopolies and Restrictive Trade Practices Act 1969, which was – at the time – India’s competition statute (substituted with the Competition Act 2002).

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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 through authorized 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 the Trade 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.” Overruling Samsung’s stand that national exhaustion was in the country’s best interest, the judges said that India does not follow the policy of national exhaustion in its trademark statute. “This is a matter of policy, and it is for the legislature to take a call. We must note that the adoption of the principle of national exhaustion may not necessarily encourage industry to be set up in that country. Dual pricing may cause injury to the consumer…”

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