Delhi High Court adjudicates on the “grey” area of parallel importation

Indian courts have always towed the ‘ambiguous’ line on the issue of parallel importation in intellectual property matters – never obviously or directly pronouncing a verdict that grey market goods are “infringing” goods under the Trademarks Act, and instead granting injunctions against their imports on the basis of violations under the Standards of Weights and Measures Act, etc.

A 6th September order of the Delhi High Court in Samsung Electronics Company Ltd. And another v. Mr. S. Sahani [CS(OS) 1603 of 2006] tilts that balance in favour of trademark owners by categorically prohibiting parallel importations. The thirteen page ex parte order which painstakingly elaborates the reasoning for the grant of the injunction makes for very interesting reading.

Some extracts are reproduced below:

The Plaintiff prays for an intelocutory injunction which, in essence seeks to combat and eradicate parallel importation by third parties into India of products manufactured by the Plaintiff itself, but in China. The case set up is that although the products are genuine, they are not meant for Indian markets inter alia, for their sale does not strictly conform to Indian laws and regulations…

And then, very interestingly,

It is common knowledge that multinational corporations have made a conscious preference to establish their manufacturing units in countries where a large percentage of the products leave from the ‘back door’ and thence for purveyance in the ‘grey market’. Countries not connected with the manufacturing process (such as India in the present case) whose economies have not received any economic benefit; are expected to expend their resources to fight malpractices to which they are not privy. It also places an added and heavy burden on the Indian judicial system, already staggering under the weight of an exponential increase in litigation, not adequately matched by a corresponding increase in the strength of judges, to fight an illegality in another country.”

The Judge evaluates the appropriateness of the Chinese laws in the aforesaid backdrop with the observation

It appears that Section 3 of the Customs Regulation of Intellectual Property Rights forbids the import or export of goods that infringe property rights protected by Chinese laws. However, there is prevailing doubt over whether “infringing goods” will include parallely imported goods, as has been expressed in ‘Exhaustion and Parallel Imports in China’ a research supported by the National Natural Science Foundation of China.”

Consequently the Judge relies on Sections 29, 30 and 140 of the Indian Trademarks Act and Article 50 of TRIPS to conclude that the Indian legal regime permits an interpretation of the term ‘infringement’ to mean ‘parallel importation’ and grants an ex parte ad interim injunction against the Defendants from dealing in grey market ink cartridges and toners of the Plaintiff.

Needless to say, the members of the trade are up in arms on the issue and have been making fairly heated remarks to the press; it remains to be seen if it ultimately results in an actual contest in the courts.

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