Samsung Electronics Co. Ltd. v. Kapil Wadhwa (Single Judge Bench)

Samsung Electronics Co. Ltd. v. Kapil Wadhwa

C.S. (OS). No.1155/2011

Decided on 17.02.2012

Keywords: Parallel Import, Exhaustion Principle, National Exhaustion, International Exhaustion, Trade Mark, Market

FACTS:

The first plaintiff, Samsung Electronics Company Ltd. (P1) was a company incorporated in Korea. The second plaintiff, Samsung India Electronics Pvt. Ltd. (P2) was a company in the same group (subsidiary), incorporated in India. P1 had licensed the use of the SAMSUNG trademark in India to P2.

The grievance of the plaintiffs is that the defendants (D) are purchasing, from the foreign market, printers manufactured and sold by plaintiff No.1 under the Trade Mark ‘SAMSUNG/Samsung’ and after importing the same into India are selling the product in the Indian market under the Trade Mark ‘SAMSUNG/Samsung’ and are thereby infringing the registered Trade Mark of the plaintiffs in India. They further alleged that defendants were guilty of passing off the imported products as emanating from P2.

CONTENTIONS:

D submitted that when acting as P2’s authorised retail outlet in the years 2000-2004 they had sold parallel imported products with P2’s full knowledge, and P2 had itself sold parallel imported products in the same way as D. D also argued that the principle of international exhaustion applied.

ISSUE: Whether the provisions of the Trade Marks Act 1999 (India) provided for the import of goods as an infringement and, if so, whether it included genuine products emanating from the proprietor on the international market without the proprietor’s consent.

HELD:

On conjoint reading of s.29(1) and s.29(6) it was clear that a person used a registered trade mark if he imported or exported the goods under the mark. Therefore, any importer who was not a registered proprietor or permissive right holder infringed the mark if he imported goods under the mark. There was no proviso in s. 29(6)(c) excluding genuine products from the acts of import or export. It could not therefore be assumed that the importation of genuine goods was an exception to the rigors of infringement. Permissive rights had to emanate from the registered proprietor by way of permitted use, and could not be implied on the basis of the proprietor putting the goods in any market. The import of genuine goods was an equal infringement as that of counterfeit goods in the absence of any legislative measure distinguishing the two, and also by virtue of the plain reading of s.29 (see paras 19, 22-25, 30-32, 38).

Section 30(3) acted as an exception to s.29. It operated as a defence to an infringement where the person dealing in the goods under the mark could plead that the goods were lawfully acquired from the market where the proprietor had put the goods. It did not confer any additional rights. If the trademark was registered in one country, then the goods bearing the trade mark could be lawfully acquired from that country only. Once the lawful acquisition had been made from the domestic market, then the sale of the goods or further dealings in the market had to be in the same market from where the goods were acquired. Section 30(3) could not give permission to the acquirer to sell the goods to the worldwide market. The words “the market” were therefore confined to the domestic Indian market. The same conclusions could be reached from an examination of the position under United Kingdom trade mark law. There was no indication in s.30(3) of any concept of international exhaustion (paras 40, 43, 47 57, 68-69, 83-85).

By virtue of ss.29(1) and (6) D’s importation of the products was prima facie an infringing act. D had been unable to establish any plausible defence to such an infringement. The past relations between P1, P2 and D could not be used in D’s favour. P2 was an authorised user and exclusive licensee of P1, which clearly removed P2 from s.29, whereas D had been dealing with the products without consent or authorisation. The plaintiffs were able to establish a prima facie case of infringement of their registered trademarks and the balance of convenience also was in their favour. Hence, the injunction was allowed to be continued (paras 139, 142-144).

Read Summary of Division Bench judgment here 

COMPARISON OF SINGLE JUDGE BENCH AND DIVISION BENCH DECISIONS

Interpretation of Section 29 of the Trade Marks Act, 1999:

Single Judge Bench – 

A conjoint reading of S. 29(1) and S. 29(6) requires 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. (para 19, 22 and 23)

S. 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. (para 26)

Since S. 29(1) does not distinguish between the import of genuine and non-genuine goods, 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. (para 28, 30)

Division Bench –

Division Bench also agreed that in view of sub-cl. (c) of sub S. 6 of S. 29 where reference is to import as well as export of goods, in the context of S. 29 of the Trade Marks Act 1999 even import of genuine goods under a trade mark which is registered in India and proprietorship whereof vests in some third party in relation to the description of the goods would constitute an act of infringement. However, it did not agree with the conclusion drawn by the single judge bench that this expresses the legislative intent to put barriers on importation for the reason of it being premature. (para 22, 23)

Interpretation of Section 30 of the Trade Marks Act, 1999:

Single Judge Bench –

S. 30(3) of the Trade Mark Act 1999 serves merely as an exception, by limiting some of the rights conferred upon the registered proprietor. It could not be read as giving an additional right to some other person to import, from the International market, even genuine goods and sell them in the Indian market. (para 40 to 44). 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 S. 3 of S. 30. (para 45)

Division Bench –

S. 30 operates as an exception to S. 29. Sub S. 1 and sub S. 2 of S. 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 (para 23).

Various sub Sections of S. 30 contemplate different situations where, not withstanding Section 29, the proprietor of the registered trade mark cannot prevent the use of the registered mark by other persons, various sub Sections of S. 30 have to be construed with reference to the situation contemplated with respect to the use of the registered trade mark and said use not being capable of being prevented by the registered proprietor of the trade mark. (para 25)

Although Single Judge rightly held that sub S. 3 of S. 30 encompasses further exceptions to the rule of infringement provided in S. 29, Single Judge posed a wrong question in paragraph 44 i.e. whether sub-s. 3 of S. 30 is a right conferring Section or merely acts as a defence to the infringement? (para 27).

This is because S. 30 (with all its sub Sections) would be by way of defence limiting the limits the effect of registered trade marks. The wrong question to be examined, led the Single Judge to conclude that sub S. 30 cannot be equated as giving some additional rights to some other person to import genuine goods from the international market. (para 28). Therefore the conclusion reached by single judge in para 45 is also erroneous. (para 30)

Interpretation of ‘market’: 

Single Judge Bench –

There is no indication clearly spelt out whether ‘the market’ is the domestic market or not in the context of S. 29(6) it must be held that if a trade mark is registered in one country, then the goods bearing the said registered trade mark can be lawfully acquired from that country alone. (para 68(d))

S. 30(4)(a) suggests that the registered proprietor, the purchaser of the goods and the assignee must all co-exist within the same market, meaning thereby, it cannot be said that the lawful acquisition takes place in the International market and use of the Trade Mark takes place in some other market. Thus, the import of S. 30(4)(a) would also apply to S. 30(4)(b), meaning that if the Trade Mark is registered in one country, the goods bearing the registered Trade Mark can be lawfully acquired in that country alone. (para 68 w.r.t para 48 to 67)

Once the goods have been lawfully acquired, sale of goods or further dealings have to be in the same market. This means the words ‘in the market’ in S. 30(3)(b) means the domestic market and not any market i.e. the International market. The law of Trade Mark has territorial operation within the municipal limits of the country and exceptions must also be within the territorial bounds. (para82)

In UK, the words ‘in the European Economic Area’ after the words ‘the market’ have given a wider effect by widening the concept of market. Not finding any such expressions which expressly expand the scope of ‘the market’ in the Indian Statute, Single Judge opined that the legislative intent was obviously to restrict the expression as confined to the Indian market. (para 71-85)

Division Bench –

There is no law which stipulates that goods sold under a trade mark can be lawfully acquired only in the country where the trade mark is registered. Lawful acquisition of goods would mean the lawful acquisition thereof as per the laws of that country pertaining to sale and purchase of goods. Trade Mark Law is not to regulate the sale and purchase of goods. It is to control the use of registered trade marks. The learned Single Judge has himself recognized that the law of trade marks recognizes the principle of international exhaustion of rights to control further trade of the goods put on the market under the trade mark. (para 42)

Use of the adverb ‘any’ before the noun ‘market’ in cl. (b) of sub S. 2 of S. 30 in the context of ‘goods to be exported’ mean the global market. (para 24, 53, 54, 55)

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. (para 50)

The conclusion arrived at by the Single Judge ignores that legislation abroad, wherever the intent was to confine ‘the market’ to the domestic market, have expressly used words to so indicate. Thus the neutral expression ‘the market’ without the legislature adding words to indicate whether it was the domestic or the international market which was in the mind of the legislature does not justify the conclusion arrived at by the Single Judge as the only logical conclusion. (para 48)

Interpretation of “lawfully acquired”:

Single Judge Bench –

The statute book does not reflect as to what was the source contemplated by the legislature with reference to goods bearing registered trade mark being lawfully acquired. (para 51)

The use of the word ‘where the goods bearing a registered trade mark are lawfully acquired by a person’ and the possible interpretation of S. 30 (3) so as to include import by reading S. 30 (3) in isolation with sub cl. (b) ignoring cl. (a) will result in anomalous results or what can be termed as absurd results under the principles of interpretation. (para 52)

Division Bench –

The situation contemplated by sub cl. (b) of sub S. 3 of S. 30 is the goods having been put on the market under the registered mark by the proprietor 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 cl. (a) otiose. (para 35)

Principle of Interpretation

Single Judge Bench –

It is well settled cannon of interpretation that the Courts must do their endeavors to read the provisions plainly so as to give harmony between the two provisions and interpretation which renders any provision otiose or redundant must be eschewed. (para 53)

Plain and contextual interpretation of S. 30(3) and 30(4) of the Trade Marks Act 1999 suggests 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.

Division Bench –

The two situations in cl. (a) and (b) of sub S. 3 of S. 30 are distinct and operate in mutually exclusive areas and the question of any one being interpreted in a manner to render the other otiose does not arise. (para 38)

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. (para 51)

Principle of Exhaustion:

Single Judge Bench –

S. 30(4) recognizes the Principle of Exhaustion in a limited sense by curtailing the right of the proprietor to prohibit further sale of the goods. Within the domestic market, if there existed legitimate reasons to further oppose the sale of those goods due to impairment, S. 30(4) gave a right to the registered proprietor of the trade mark to oppose further sale of the goods. S. 30(4) would thus operate as an exception to S. 30(3). (para 86)

The right of the registered proprietor of the Trade Mark to oppose further dealings as per S. 30(4), which carves out an exception to the right under S. 30(3) in the context of legitimate reasons to oppose further dealing has not to be understood as recognizing that the Indian statute embodies the principle of International exhaustion. (para 88-96)

Division Bench –

Sub-s. 4 of S. 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. (para 68)

The ‘market’ contemplated by S. 30(3) of the 1999 Act is the international market and the legislation in India adopts the Principle of International Exhaustion of Rights. (para 71)

Statements of Objects and Reasons, Trade Marks Bill 1999:

Single Judge Bench –

Statements of Objects and Reasons in the bill (The Trade Marks Bill 1999 here) which is introduced and ultimately finds expressed as an Act can only be invoked if there is an ambiguity in the language of the statute and they can very well be used as an external aid of interpretation.

Division Bench –

Statement of Objects and Reasons as an external aid to interpretation is a most appropriate tool to be used. (para 56)

The expression ‘in any geographical area’, in the Statement of Objects and Reasons clearly envisage that the legislative intent was to recognize the principle of international exhaustion of rights. (para 58, 60). However, single Judge did not use the same inasmuch as he found that a plain reading of the provisions makes it clear that ‘the market’ contemplated by the statute is domestic market i.e. S. 30(3) contemplates lawful acquisition in the domestic market. (para 44)