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TMI Blog2012 (10) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... eas, the course of the ship was steered in a wrong direction to reach a wrong port of destination. The waters are that the respondents ('Samsung Electronics Company Ltd.' and 'Samsung India Electronics Pvt. Ltd.') are companies incorporated as per laws of Korea and India respectively; the latter being a subsidiary of the former. They are a part of 'Samsung Group of Companies' having 14 listed companies and 285 worldwide operations. The respondents manufacture and trade in electronic goods such as colour televisions, home appliances, washing machines, microwaves, air-conditioners, computers, printers cartridges etc. The business is done under the brand-name/corporate-name using the Trade Mark 'SAMSUNG/Samsung'. In India, the first respondent has licensed the use of the Trade Mark 'SAMSUNG/Samsung' to the second respondent as per Trade Mark Agreement dated July 08, 2003 which has been filed for registration in the Trade Mark's Registry. The respondents are the registered proprietor/user of the Trade Mark as under:- Sl. No TRADE MARK CLASS REGISTRATION NO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants for ₹ 9,500/- and the printer SCX-3201FN/XIP is sold by the respondents after importing the same into India for ₹ 8,999/-. To which stand of the appellants, the respondents plead that there is a difference in the features of the compatible products and highlight that the injury caused to the Indian consumer, who may pay less for a compatible product, is that the consumer buys the product of the appellant thinking that it is having the same features as that of the product sold by the respondents. 2. The issue pertains to what is popularly known as parallel-imports/grey-market goods. 3. The learned Single Judge has obviously held in favour of the respondents, who were the plaintiffs, and this explains the defendants being the appellants before us in an intra-Court appeal. The port of destination: 4. Whether the Trade Marks Act 1999 embodies the International Exhaustion Principle or the National Exhaustion Principle when the registered proprietor of a Trade Mark places the goods in the market under the registered trade mark. The port of destination reached by the learned Single Judge: 5. The Trade Marks Act 1999 embodies the National Exha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods or services in respect of which the trade mark is registered. (6) For the purposes of this section, a person uses a registered mark, if in particular he- (a) affixes it to goods or the packaging thereof; (b) offers or exposes goods for sale, puts them on the market, or stocks them for those purposes under the registered trade mark, or offers or supplies services under the registered trade mark; (c) imports or exports goods under the mark; or (d) uses the registered trade mark on business papers or in advertising. (7) A registered trade mark is infringed by a person who applies such registered trade mark to a material intended to be used for labelling or packaging goods, as a business paper, or for advertising goods or services, provided such person, when he applied the mark, knew or had reason to believe that the application of the mark was not duly authorized by the proprietor or a licensee. (8) A registered trade mark is infringed by any advertising of the trade mark if such advertising- (a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters; or (b) is detrimental to its distinctive character; or (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son in relation to goods adapted to form part of, or to be accessory to, other goods or services in relation to which the trade mark has been used without infringement of the right given by registration under this Act or might for the time being be so used, if the use of the trade mark is reasonably necessary in order to indicate that the goods or services are so adapted; and neither the purpose nor the effect of the use of the trade mark is to indicate, otherwise than in accordance with the fact, a connection in the course of trade between any person and the goods or services, as the case may be; (e) the use of a registered trade mark, being one of two or more trade marks registered under this Act which are identical or nearly resemble each other, in exercise of the right to the use of that trade mark given by registration under this Act. (3) 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) the registered trade mark having been assigned by the registered p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conjoint reading of Section 29(1) and Section 29(6) which require it to be held that when a person uses a Trade Mark in the course of import or export of goods, the same would be under the registered Trade Mark and thus the act of import is in clear and explicit terms of the two provisions, and would be infringement when import is made without the consent of the registered proprietor of the Trade Mark. (Refer paragraphs 19, 22 and 23 of the impugned decision). 9 (ii). Section 29 clearly suggests that the legislative intent is to put barriers on the free flow of goods in the world market inasmuch as the said Section contemplates both import as well as export of goods while enacting the statutory provisions pertaining to infringement of registered Trade Marks. (Refer para 26 of the impugned decision.) 9 (iii). Section 29(1) does not distinguish between the import of genuine and non-genuine goods. Thus, imports, whether of genuine or non-genuine goods would amount to infringement if not effected by the consent of the registered proprietor of the Trade Mark or the permissive right holder of the Trade Mark. (Refer paragraphs 28 and 30 of the impugned decision.) (N.B.: In parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the right under Section 30(3) in the context of legitimate reasons to oppose further dealing and in particular where the conditions of the goods has been changed or impaired after they have been put on the market by the registered proprietor of the Trade Mark, has not to be understood as recognizing that the Indian statute embodies the principle of International exhaustion and the two provisions i.e. Section 30(3) and Section 30(4) operate in the domestic market i.e. goods are placed in domestic market by the registered proprietor of the Trade Mark and further dealing with the goods takes place by way of sale in the domestic market. (Refer paragraphs 88 to 96 of the impugned decision.) (N.B. : In paragraph 94 of the impugned decision, the learned Single Judge has clarified that the foreign judgments on the subject of legitimate reasons to oppose further dealings, would thus not be relevant in the context of import, but would certainly be relevant for the purposes of gauging further dealing of the goods by a purchaser thereof in the domestic market and further sale in the domestic market.) 10. While understanding the direction in which the ship has to be steered, on seeing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Lastly, the learned Single Judge has discussed and opined that nothing turns on the subject : that the appellants were earlier on the authorized dealers of Samsung products in India and their act of importing Samsung products from markets abroad and selling the same in India would be a misrepresentation to the purchasers, who would purchase Samsung products sold by the appellants, thinking that the sale in India is with the consent and permission of the respondents. The reason for the opinion being that the import of Samsung products for sale in the Indian market being without the consent of the respondents amounted to an infringement of the respondents' Trade Mark. 15. This in brief, is an analysis of the impugned order dated February 17, 2012, passed by the learned Single Judge with reference to the chartered journey and reaching the port of destination, resulting in dismissal of IA No. 10124/2011 filed by the appellants under Order XXXIX Rule 4 of the Code of Civil Procedure praying that the ex-parte ad-interim injunction granted be vacated and allowing IA No. 7774/2011 filed by the respondents praying that during pendency of the suit, appellants be restrained from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graph 39. Thereafter from paragraph 40 onwards the learned Single Judge has proceeded to analyze Section 30(3) of the Trade Marks Act 1999 and has reached a conclusion in paragraph 47 that Section 30(3) carves out only an exception to Section 29 and does not confer any additional right; it only operates as a defence to an infringing act. From paragraph 48 onwards the learned Single Judge has proceeded, on what is called by the learned Single Judge a plain and contextual interpretation of Section 30(3) and 30(4) of the Trade Marks Act 1999. And a conclusion is arrived that 'the market' envisaged by the said Section has to be only one market i.e. where the buyer and the seller of the goods co-exist. The discussion concludes in paragraph 17 and thereafter the learned Single Judge has referred to the U.K. Trade Mark Act to draw a distinction between the law there and India. Thereafter, from paragraph 86 onward the learned Single Judge has again discussed Section 30(4) of the Trade Marks Act 1999 in its textual setting to reach a conclusion that said Section does not negate the interpretation put by the learned Single Judge to sub-section (3) of Section 30 of the Trade Marks Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary conclusion ought to have been drawn after Section 30 had been analyzed for the reason Section 30 operates as, if we may use the expression, and exception to Section 29. Sub Section 1 and sub Section 2 of Section 30 stipulate conditions where the use of a mark by a person who is not the registered proprietor of the trade mark in question would not make the use actionable by the registered proprietor of the trade mark in question. As per sub clause (b) of sub Section 2 of Section 30 if a trade mark is registered subject to any condition or limitations, the use of the trade mark in relation to goods to be sold or traded in any place and in relation to goods to be exported to any market would not constitute an infringement. 23. We have reasoned here-in-after in para 53, as to what would be the use of the adverb 'any' before the noun 'market' in clause (b) of sub Section 2 of Section 30 to bring home the point of the contextual usage requiring the pronoun 'any' to be a determiner and thus 'any market' in the context of 'goods to be exported' meaning the global market. 24. But since various sub Sections of Section 30 contemplate differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ean that unless goods are imported into India by the consent of the registered proprietor of the trade mark (registration being in India) the act of importation is not permitted as per sub Section 3 of Section 30. In other words, 'lawfully acquired' in sub Section 3 of Section 30 have been read as acquisition by consent for the purposes of import. 30. We reproduce once again sub Section 3 of Section 30 of the Trade Marks Act, 1999. It reads:- (3) 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) the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods; or (b) the goods having been put on the market under the registered trade mark by the proprietor or with his consent. 31. We may highlight that there is an apparent printing error in subsection (3), even the Gazette Notification issued by the Central Government contains the same. 'Not infringement of a trade by reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor or with his consent and are lawfully acquired by a person and the further sale of the said goods in the market. It is here, where the issue of lawful acquisition of the goods, when put in the market and further sold in the market arises for consideration, and whatever be the view taken i.e. the market contemplated being the international market or the domestic market, would not make sub clause (a) otiose. 35. The further reasoning of the learned Single Judge in paragraphs 56 to 58 is an extension of the error afore noted. We quote:- 56. The wordings in sub clause (a) the registered trademark has been assigned by the registered proprietor to another person after acquisition of the said goods controls the language of the opening words where the goods under the registered trade mark are lawfully acquired by the person . Reading of same along with the opening words makes it clear said lawful acquisition presupposes the existence of three persons, a person acquiring the goods, a person selling the goods which is the registered proprietor and third person to which the trademark has been assigned at the same place. 57. Thus, the said acquisition for the purposes of the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and the havoc (the word used by the learned Single Judge in paragraph 60) which would be created, in our opinion is seeing a ghost, when none exists. 39. The learned Single Judge has made good his reasoning and the conclusion with reference to the example of Samsung goods purchased in the market at Hong Kong and imported into India and in the meanwhile the Indian entity of Samsung selling the brand name to some other company for Indian territory. The learned Single Judge has opined that havoc would be created because the assignee would not be in a position to control the inflow of the goods. But where is the havoc? Merely because the assignee of a trade mark cannot prevent the further sale of goods which were lawfully acquired prior to the assignment, is not a situation of a havoc. The reason is that it would be presumed that the assignee knew that the assignor has already placed, under the trade mark, certain goods in the market and that the right of the assignee would not be to prevent further dealing in the goods already placed on the market. Thus, whether the goods are placed in the international market or in the domestic market and thereafter the assignment takes place i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the learned Single Judge has discussed in paragraph 68(d). 42. Thus, the conclusion arrived at by the learned Single Judge, which we note has preceded a lot of reasoning done by the learned Single Judge after the conclusion has been arrived at, in paragraphs 56 and 57, that Section 30(3)(a) presupposes the existence of three actors: (i) The trade mark Proprietor, (ii) the trade mark assignee, and (iii) the acquirer of the goods in the same market, is incorrect. 43. The learned Single Judge has recognized that the Statement of Objects and Reasons to a Bill which becomes Law can be used to interpret the law, as an external aid of construction. But has not used the same inasmuch as he has found that a plain reading of the provisions makes it clear that 'the market' contemplated by the statute is domestic market i.e. Section 30(3) contemplates lawful acquisition in the domestic market. We shall discuss this aspect a little later, but now note the reasoning of the learned Single Judge, on comparative analysis of the U.K. Trade Marks Act 1994. 44. Let us note the language used by the legislature in foreign countries:- (A) European Union. Article 7 of the EU Directiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged or impaired after they have been placed on the market. (F) Singapore. Section 29 (1) of the Singapore Trademarks Act, 2005: Notwithstanding Section 27, a registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market, whether in Singapore or outside Singapore, under that trade mark by the proprietor of the registered trade mark or with his express or implied consent (conditional or otherwise). (G) Hong Kong. Section 20(1) of the Hong Kong Trade Mark Ordinance, 2003: Notwithstanding Section 18 (infringement of registered trademark), a registered trademark is not infringed by the use of the trademark in relation to goods which have been put on the market anywhere in the world under that trademark by the owner or with his consent (whether express or implied or conditional or unconditional). 45. With reference to the seven statutory provisions, it would be relevant to note that the legislature in said seven jurisdictions abroad has clearly indicated the legislative intent to either follow the Principle of International Exhaustion or National Exhaustion. For example, Brazil and Turkey, which have incorporated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 30(4) would thus operate as an exception to Section 30(4) (Refer paragraph 86 of the decision). 49. Now, where the goods bearing a registered trade mark are put in the market, whether it be the domestic market or the international market, by the registered proprietor of the trade mark, the right to oppose further sale for the reason of the goods being impaired or conditions changed would be equally relevant and no distinction can be made with reference to the right in relation to the nature of the market. The reason is that if the condition of the goods is changed or the goods are impaired, they may diminish the value of the trade mark, causing injury to the registered proprietor of the trade mark. 50. We have noted herein above that the learned Single Judge, though has opined that his conclusion is based on a plain reading of the statute, but actually is the result of a laborious decision which spans 156 pages. Surely, it would be a contradiction in terms to write 156 pages on a subject of interpretation of a statute and simultaneously maintain that a plain reading of the statute is being done. We have noted herein above that the learned Single Judge has recognized a sile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words:- Sub-clauses (3) and (4) recognize the principle of 'exhaustion of rights' by preventing the trade mark owner from prohibiting on ground of trade mark rights, the marketing of goods in any geographical area, once the goods under the registered trade mark are lawfully acquired by a person. However, when the conditions of goods are changed or impaired after they have been put on market, the provision will not apply. 57. The expression 'in any geographical area', in the Statement of Objects and Reasons to the Trade Mark Bill 1999 clearly envisage 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. But the argument was that it hardly matters if the blacksmith proclaims that he has fabricated a spade, if one can visually see that the tool fabricated has a long handle with a thin metal blade i.e. a hoe. The fabricated implement has to be called a hoe. 58. We can see no hoe and thus the logic of the argument is wanting. If the fabricated implement does not clearly define its features and there is a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une with the national policy on exhaustion of rights. 62. Mr. Pravin Anand, learned counsel for the respondents had drawn our attention to the views expressed by international bodies such as International Trade Mark Association, International Chamber of Commerce and International Association for the Protection of Intellectual Property and had highlighted therefrom the gains and the losses to the stakeholders if the Principle of National Exhaustion or the Principle of International Exhaustion was adopted; and had highlighted that the gains from the adoption of the Principle of National Exhaustion far outweighed the gains to the consumer from the adoption of the Principle of International Exhaustion. Learned counsel had highlighted that from an economic point of view, the Principle of National Exhaustion was more favourable. Tabulated in a chart, keeping in view the stakeholder : consumer, right holder and importer the gain and the loss would be:- S. No. Perspective National Exhaustion International Exhaustion 1. Consumer Uniform price (LOSS) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intellectual property of the right holder from any misuse. (GAIN) Is not obliged to protect the intellectual property of the right holder from any misuse. (LOSS) 63. Learned counsel for the respondents had also highlighted that from an economic perspective, National Exhaustion would be more beneficial beca use it encourages foreign investments to flow into India; for brand owners would set up manufacturing units in India. But, if the Principle of International Exhaustion is applied, there would be no incentive to set up manufacturing units in India because the brand owner would face competition as his goods sold abroad, at a lesser price in poor countries, would be imported and sold in the Indian market. Learned counsel urged that the Foreign Direct Investment in the manufacturing sector would create jobs. Indigenous brands would be encouraged to compete with International brands and this would enhance the quality of the products as also the market forces would themselves ensure fair prices to the consumer due to competition amongst the various players. 64. This is a matter of policy, and it is for the legislature to take a call. A statute cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same goods improperly so called, or to put it differently, if a physical condition of goods is changed, it would no longer be the same goods. But, sub-section 4 of Section 30 is not restricted to only when the conditions of the goods has been changed or impaired after they have been put on the market. The section embraces all legitimate reasons to oppose further dealings in the goods. Thus, changing condition or impairment is only a specie of the genus legitimate reasons, which genus embraces other species as well. What are these species? (i) Difference in services and warranties as held in the decisions reported as 423 F.3d 1037 (2005) SKF USA v International Trade Commission Ors.; 35 USPQ2d 1053 (1995) Fender Musical Instruments Corp. v. Unlimited Music Center Inc.; 589 F. Supp. 1163 (1984) Osawa Co. v. B H Photo. (ii) Difference in advertising and promotional efforts as held in the decisions reported as 70 F.Supp 2d 1057 PepsiCo Inc v Reyes; 589 F. Supp. 1163 (1984) Osawa Co. v. B H Photo. (iii) Differences in packaging as held in the decision reported as 753 F. Supp. 1240 (1991) Ferrerro USA v. Ozak Trading. (iv) Differences in quality control, pricing and presentation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution of the goods. With respect to after sales services, since the respondents do not warranty anything regarding their goods sold abroad, but imported into India and further sold, they not being responsible for the warranty of those goods, nothing turns thereon, as regards said plea. There may be some merit that the ordinary consumer, who is provided with warranties and after sales by the appellants, on not receiving satisfactory after sales service, may form a bad impression of the product of the respondents and thus to said extent one may recognize a possible damage to the reputation of the respondents pertaining to Samsung/SAMSUNG printers and Samsung/SAMSUNG products sold in India after importation. But, this can be taken care of by passing suitable directions requiring the appellants to prominently display in their shop that the Samsung/SAMSUNG printers sold by them are imported by the appellants and that after sales services and warranties are not guaranteed nor are they provided under the authority and control of the respondents and that the appellants do so at their own end and with their own efforts. This would obviate any consumer dissatisfaction adversely affecting t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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