Impact of Doctrine of First Sale on Parallel Importation
Whether Parallel Imports tantamount to infringement of trademarks of the trademark owners in the country of Import?
‘Parallel Importation’ refers to the import of non-counterfeit or genuine goods without the permission of the Intellectual Property Owner (herein under, referred to as ‘IP Owners’). In other words, it refers to the import of genuine goods that are legitimately acquired from the IP rights holder and subsequently sold at lower prices through unauthorised trade channels in the same or a different market.
Therefore,?in the context of trademark laws means the?procurement of goods from the trademark owners or their authorised personnel through legitimate trade channels in a different market (mostly in a different country) and thereafter importation of such goods without the knowledge of the trademark owners of such products for sale to the general public in a different market.
Such import market is commonly referred to “Grey Market”, wherein the products are not counterfeit, pirated or duplicate, however, they are offered for sale in a market place through channels that are not authorised by the trademark rights holder or owner.
Furthermore, since Parallel interpretation affects the rights of a manufacturer or trader in one way, question arises as to whether parallel importation constitutes infringement under Section 29 and 30 of the Trademarks Act, 1999.
In order to understand the legal aspects surrounding the permissibility or legality of parallel imports under the trademark laws in India, it is important to also understand the ‘principle or doctrine of territorial exhaustion of rights’ from the perspective of sale of products by a trademark owner or rights holder in a particular territory.
Doctrine of Territorial Exhaustion of Rights
Doctrine of Exhaustion, also known as the ‘Doctrine of first sale’ can be understood as –
“Once the goods are in the first instance, LEGITIMATELY purchased by another person in a particular territory or market from a trademark rights owner or his authorised person, the rights of the trademark owner to prevent further sale of such goods is exhausted after such first sale.” Consequently, the title in the goods passes on to the purchaser and the title of the trademark owner in such goods exhausts after the first sale.
Moreover, as per Article 6 of the Trade Related Aspects of Intellectual Property Rights (TRIPS), the issue of exhaustion of Intellectual Property Rights is a matter of national discretion and each member country is entitled to prohibit or allow parallel imports within its own legal framework.
Accordingly, the doctrine of Exhaustion has been divided into three types –
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1.???International Exhaustion - Under this, once a product is put in the market anywhere in the world by the IP owner himself or authorised licensee, such sale leads to an exhaustion of the rights of the trademark owner to prevent further sale of such goods anywhere internationally, in order words, One World, One Market.
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2.???National Exhaustion - Under this, an authorised sale of a good incorporating the protected IP will exhaust the right to use and resale the product in question within the domestic market and hence will prevent the IP owner’s domestic enforcement of the related IPRs against those possessing, using or redistributing the particular good.?
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3.???Regional Exhaustion - Under this, once the IP protected goods have been put in the market in any part of that particular region, then?the right of the IP owner is exhausted and the IPR protected product can move freely within that region.?For example, UK follows the Doctrine of regional, where the goods that are marketed in the European Economic Area (EEA) cannot be prevented from being resold across the Member States on the basis of IPRs however, the?rights holders have the ability to control imports from outside the EEA.
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India follows the Doctrine of International Exhaustion. This was established in 2012, in the case of Kapil Wadhwa & Ors vs. Samsung Electronics Co. Ltd. The Hon’ble High Court of Delhi in this case, held that the Intellectual Property rights are exhausted once the product has been sold by the IP Owner or with his/her consent in any part of the world and therefore, the parallel importing of goods without prior permission of the registered proprietor DOES NOT amount to infringement of trademark rights. However, the court constituted a condition with the further sale of such grey imports, i.e., the conditions of the goods must not have been changes or impaired after they are put in the market.
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Therefore, from preliminary research it can be understood that Trademark law in India allows parallel imports by acknowledging the concept of international exhaustion of rights of the owner.?However, it is pertinent to note that the trademark owners’ rights are still intact if the goods which are being imported are counterfeit and not genuine goods.