New Delhi, Oct 5, 2012:
In a landmark judgement, a Division Bench of the Delhi High Court has
ruled that parallel importation is authorized under Indian trademark laws and
does not infringe the trademark of the rights-holder. In an appeal filed by
Kapil Wadhwa, Director of Champion Computers, the Bench of Justices Pradeep
Nandrajog and Siddharth Mridul overruled the findings of a Single Judge, who
had held in February 2012 that all imports of trademarked goods into India had
to take place through the authorized distribution chain of the trademark-holder
Samsung Electronics Ltd. or with their permission, failing which imports would
amount to infringement under the trademark law.
The suit was initially brought by Samsung Electronics Co.
Ltd. and its Indian subsidiary Samsung India last year, under which it was
claimed that Delhi-based Champion Computers was unauthorisedly selling Samsung
printers imported directly from foreign markets into India. The Single Judge had held Champion Computers
guilty of trademark violation. In an immediate cascading effect in the market,
Dell, another major IT brand owner had filed suits against parallel importers,
issued nation-wide alerts and attempted to stop imports.
In its detailed judgement, 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 Bench opined that “Trade Mark Law is not to regulate the sale and
purchase of goods. It is to control the use of registered trade marks.”
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”.
Expressing an apparent disapproval of the attempt by
rights-owners to use trademark law as a means to create market segmentation,
the Appeal Court said, “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…”
Champion Computers is a 23-year old Delhi-based IT hardware
and peripherals distribution house that markets and sells a range of products
under its own ‘Champion’ brand as well as products from several known
vendors. The company has offices in
major Indian cities and a network of over 3000 next-tier channel partners. For
Kapil Wadhwa, founder-Director, it was as much a moral battle as it was
commercial. Taking on the corporate might of the multinational company, Wadhwa
kept going in the firm belief that his actions were legal. Speaking of the
reversal, Wadhwa said, “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
Hon’ble 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. 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. Moreover it will reduce the outflow of foreign
exchange for the country”.
Intellectual property lawyer Ms. Shwetasree Majumder,
founder of Fidus Law Chambers whose team represented Wadhwa and Champion
Computers both before the Single Judge and the Appeals Court said, “We were of
the firm belief consistently throughout this case that we were correctly interpreting
the trademark law of the land and this judgement is a vindication of that
belief. Ultimately, a court is not the forum to decide policy. If the policy
enshrined in the Trademarks Act is international exhaustion then we have to
respect that policy decision. If this decision had gone any differently it
would have sounded the death knell for entire marketplaces like online trading
portals, assembled electronic goods industries, etc. We are very happy this
went the way it did.”
The All Delhi Computer Traders’ Association (ADCTA) backed
Champion Computers throughout the case and has welcomed the High Court ruling.
ADCTA president Mahinder Aggarwal said, “This is a landmark judgement as it
lends legitimacy to the whole concept of parallel imports – an area which
provides employment to many thousands and is the backbone of many SME
businesses. Several parallel importers incurred financial loss, damage to
reputation and mental agony due to restrictive trade practices of Samsung India
and Dell India.” Swarn Singh, Jt. Secretary ADCTA added, “Ultimately, the
judgement has to be seen in the light of benefit to consumers. This decision
will help consumers who are paying a premium of 30% or more for IT products
purchased directly through brand owners in the name of warranty.”
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