Delhi High Court Clears Confusion On Parallel Imports
CRN Network, October 5, 2012, 1530 hrs
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…”
The court inserted two conditions upon the appellants: They will not metatag or hyperlink their Websites with Samsung’s site; and they will carry prominent signage in their store to indicate that the product sold by them has been imported and that Samsung does not provide any warranty or after-sales services for those goods.
The suit was initially filed by Samsung Electronics and its Indian subsidiary Samsung India last year, under which it was claimed that Champion Computers was unauthorizedly selling Samsung printers imported directly from foreign markets. The Single Judge had held Champion Computers guilty of trademark violation. In an immediate cascading effect in the market, Dell had filed suits against parallel importers, issued nation-wide alerts and attempted to stop imports.
For Kapil Wadhwa, Founder-Director, Champion Computers, it was as much a moral battle as it was commercial. “The printers were being imported by us in due regard to all laws and policies, in the spirit of open and free trade. We are happy the Delhi High Court has upheld our point of view and cleared the confusion and fear spread in the market by MNCs which were using trademark law as a tool to thwart competition and protect their own pricing and profit margins.”
He added, “By comparing legitimate goods directly imported into the country with counterfeit and fake goods, brand owners have created immense confusion in the minds of consumers. This judgement will be a great boon to Indian consumers who will derive the benefit of competitive pricing.”
The All Delhi Computer Traders’ Association (ADCTA), which backed Champion Computers throughout the case, has welcomed the ruling. “This is a landmark judgement as it lends legitimacy to the whole concept of parallel imports. Several parallel importers incurred financial loss, damage to reputation and mental agony due to restrictive trade practices of Samsung India and Dell India,” said Mahinder Aggarwal, President, ADCTA.
