Arun Mohan, an upcoming IP lawyer from Chennai, who has previously blogged for us over here and here, has sent us the following guest post analysing the recent judgement of the Delhi High Court in the case of Samsung v. Kapil Wadhwa. This judgement significantly impacts the law on ‘parallel imports’. The order also touches on the issue of trademark infringement in the case of meta-tagging. Image from here.
An analysis of Samsung Electronics Company Ltd. v. Kapil Wadhwa & Ors.
by, Arun C. Mohan
The Delhi High Court delivered the much anticipated Samsung judgement on parallel imports, on 17th February 2012. A copy of the judgement can be found here.
The 1st plaintiff in the case, was Samsung Electronics Company Limited, Korea and the 2nd plaintiff was its Indian subsidiary and exclusive licensee in India. The 1st plaintiff produced records to show 7 registrations for the mark “SAMSUNG” across classes 7, 9 and 11.
The defendant was admittedly an erstwhile authorized dealer of Samsung products, more specifically printers. The cause of action arose due to the sales of imported Samsung printers by the defendant. These “grey market” goods, though genuine Samsung printers, were as per the plaintiff, not sold without due adherence to various statutory norms including affixing a MRP, not being given with a manufacturers guarantee, and most interestingly, “not earmarked to be sold in the Indian market”. A further grievance was that the defendant was operating a website whereby the imported Samsung printers were offered at a price much lower than that of the plaintiffs, and that the defendants used a technique of “deep hyperlinking” to establish that they were connected with the plaintiffs.
The questions primarily arising were:
1. Does sale of imported, genuine products without consent of the right holder in India, constitute infringement under section 29(1) read with 29(6)?
2. Does section 30(3) recognise national exhaustion or international exhaustion?
3. Does meta tagging and deep hyperlinking of a registered trademark constitute infringement?
In answering the first question, the Court held that any importer who is not a registered proprietor or permissive right holder, even if importing genuine products, is culpable of infringement. There is also an interesting observation that had the legislative intent been to facilitate free movement of goods, section 29(6) would have not existed at all. These fetters on the right of importation of genuine goods, is justified on the basis of section 29(1), which does not provide any distinction between genuine and non-genuine goods. In the absence of any legislative provision or exception for genuine imported goods, such importation is deemed to be an act of infringement. The Learned Judge, in substantiating his view, relies primarily upon an extract from Trademarks by Morcom, Roughton & Malynicz which stated that “because a parallel import of a genuine product amounts to use of an identical mark or identical goods, the importation of such goods is treated in some senses as a very straightforward infringement”. The qualification of “some senses” does not find any comment or interpretation by the Learned Judge or counsels.
In answering the second question, the Court held that section 30(3) recognises only national exhaustion in India. The section is interpreted to mean that once goods are acquired by a person from the registered proprietor within the same market, the registered proprietor cannot turn around and state that there in an infringement of his trademark on the count that there is change of ownership by way of an assignment between the registered proprietor and some other person and seek prohibition on the dealings of the goods. This cannot subsume in favour of a person acquiring goods from a foreign market. The implication and effect of section 30(3) is stated to be limited to acquisitions within the domestic market. Section 30(3) permits an exception only on those goods which bear registered trademarks, and are acquired lawfully, and the word “lawfully” is to include the trademark law in force. The only “market” for the purpose of section 30(3) is deemed to be the Indian market. The Court unequivocally held that section 30(3) does not recognise any concept of international exhaustion, and the section operates only within the market where the registration of the mark extends. There is also considerable discussion on the UK, EU and American concepts of exhaustion. The Xerox case is distinguished on the basis that it dealt with second hand imported goods and is on a different set of facts and circumstances.
On the issue of meta tagging and deep hyper linking of registered trademarks, the Court held that the promotion on the basis of the same in order to take advantage of the plaintiff’s registered trademark cannot in any manner be categorized as fair use, and would tantamount to an act of infringement.
After discussing the same, the Learned Judge goes on to discuss prima facie case, balance of convenience and irreparable injury. In deciding on prima facie case, the Learned Judge held in favour of the plaintiff on the basis of the above reading of section 29(6) and 30(3). As regards irreparable injury and balance of convenience, it was also held in favour of the plaintiffs, as the case of the defendants was that it was selling genuine Samsung products, and would not suffer by switching to the plaintiffs products. To sum up, the outcome of the case was that if a trademark was registered in one country, then goods bearing the registered trademark can be acquired from that country only.
In reading this order, the benefit to MNCs in India is obvious and addresses a deep rooted fear of parallel imports amongst subsidiary concerns, which have to deal with the daunting statutory mechanism and consequent costs in India. FMCG goods will probably be the first to jump the bandwagon in embracing the benefits of this order, as amongst others, cosmetic products, liquor and tobacco markets are chronically afflicted by such parallel imports. However, the cooperation of the Customs authorities and their efficacy in these matters will only be tested over time.
In an aside to the judgement, I found that the argument as to who was the registered proprietor in the territory from which the printers were imported, was not addressed. What would have been the outcome if the registered proprietor was common in the importing territory and India? I feel this may not have changed the outcome, but would have explored further the concept of exhaustion against a single entity. The outcome of the order is that only the registered proprietor or persons authorized by it can import goods bearing the registered mark. This allows companies to follow their time honoured practise of “earmarking” goods for markets, at certain prices and features. When goods are “lawfully acquired”, by payment of due taxes and so forth, does trademark law still come in the way of the same? Do goods acquired by us in duty free or trips abroad, suffer the implications of this order, as even though we have paid due taxes/duties, it is still “import” as per Trademark law? The Act does not distinguish between commercial use and an individual’s use. Wistful thinking maybe, but the perpetuation of the hegemony of MNCs in continuing delayed/limited releases of products is concretized with this Order. Can we no longer depend on our friendly/shady import-wallah to get us the ipad3 a day after its launch?
Also, in reading the judgement there were numerous international precedents citied and provisions discussed. However, interestingly in examining the ratio portion of the judgement, the same have been completely overlooked, and the Learned Judge come to the conclusion primarily on a plain reading of the statute along with various Apex court decisions. This brings me to my next point. Are we over thinking? I admit to being guilty on this count. The outcome of such reliance on foreign precedents and law being that the arguments on the holy trinity of Order 39 often take a beating. In reading this case, I stand convinced that the statute in India and the precedents till date, are sufficient to decide even the most complicated of issues. Order 39 remains wide enough to encompass whatever new and myriad forms of infringement are thrown at us. In fact in this case, it appears to me that the reading on balance of convenience and irreparable injury was rightly arrived at by the Learned Judge suo moto, and neither party made representations on the same. Should we go back to our basics?
Hi Arun,
Allow me to congratulate you for writing an extremely interesting and well-reasoned analysis.
However, I’d like to take the liberty of disagreeing with you on a small point. You say that the Act does not distinguish between commercial use and an individual’s use when it comes to the issue of parallel imports. I’d like to draw your attention to S. 29(1), wherein, at the very outset, it states that ‘A registered trade mark is infringed by a person who…, *uses in the course of trade,* a mark which is…’ thereby suggesting that the said provision will only apply to commercial use, and not otherwise.
Thus, coming back to your question, if you buy the iPad 3 in the US and get it back with you for your own use, you may not be held liable for infringement. Conversely, if you ask your friendly/shady import-wallah to get it for you, things might change there.
In fact, the Government does allow for the import of one laptop computer per person (for personal use, of course) when returning home from overseas. Such a provision, when harmoniously read with the provisions of the Trade Marks Act, do thereby suggest that the intention is never to make parallel import prohibitions applicable to personal use.
Thanks.
Best wishes,
Ankit Sahni
Hi Ankit
I absolutely agree with you. I made an error. Insteading of stating the order does not distinguish use, I said the act does not.
The order categorically states that goods of a registered holder in India can be accquired only in India. Where’s does this leave us individuals?
On laptops I agree with you, but what about other goods which don’t have the benefit of such a specific allowance?
I imagine that this order can have far reaching consequences in the hands of an aggressive litigant.
Do let me know your thoughts.
Regards
Arun
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Can any one comment the relevance of this decision on parallel import of patented product in view of Section 107A(b)of the Patent Act
order does distinguishes between the two when it lodges a caveat while concluding the infringement by stating that the infringement shall be applicable only when importation is effected “in the course of the trade”, thus plz read the order carefully….
there are no draconian effects…. only what requires is a complete reading….. the judgment specifically states that only when the ingridients of section 29 are satisfied, the infringement shall be made out…. Theres no room to imagine or even argue that the private importation shall tantamount to infringement…. Thats not a complete reading of judgment with respect…. The Act similarly also distinguishes between the two acts when section 29 provides in the course of trade…..
It is a poorly written judgment and ends up confusing the readers and has completely misinterpreted the law. Even the Plaintiff was reluctant to argue national exhaustion. Hopefully the judgment is set aside and rights of Indian consumers are protected by not compelling them to pay additional for similar goods.
A very nice post.
From the reading of the post what I was thinking is that the people infringe the trade mark law by importing the goods, whether purchased in a foreign country or at a duty free shop at the airport in a foreign country. I presume that the price of the goods that people purchase in other countries/duty free shops and bring in India are pre-supposed to be cheaper in price than the price in India. Otherwise why at all a person would buy a product in other country if it is available in India at same or cheaper price? The goods so purchased were not meant to be sold in India and have admittedly been purchased in other country.
Please tell me if I am wrong in my thinking.
Rite….. its correct…… But you are caught only when u make this as a business which will not be lawfully acquiring those goods…….. The duty free shop purchase may not lead to value addition or substraction to the country much but the trading does as it not only bars the legitimate tradesmen business but also reduce the value addition which a proprietor is going to add in the country specific…….. Thus, it is very easy to criticize with any forceful legal argument and for the sake of condemning it….. The actual principle of law and statute speaks otherwise…..
The Defendants have now filed an appeal numbered FAO(OS) 93/12 against the order, which is listed for April 30th for final arguments.
The current status of the appeal is pending and the matter is scheduled on 28/05/2012.
The orders are available on the Delhi HC website.
Division bench order out:
http://lobis.nic.in/dhc/PNJ/judgement/03-10-2012/PNJ03102012FAOOS932012.pdf
Freq. Anon.