PARALLEL IMPORTS


A parallel imported product is, by definition, a genuine branded product imported from another country without permission of the IP owner. With the world becoming flatter and more connected, traders are easily able to access the price of branded products in different countries. Also, the life cycle of products, in particular electronic products, is getting shorter. As the price of older models drops, goods move from developed to emerging economies where consumers are price-sensitive and amenable to accepting older versions of the product/brand. Tis is particularly relevant in the context of electronic products such as mobile phones, laptops, tablets, etc. Further, in some cases, the products are cheaper due to differences in duty structure, leading to movement of goods from one country to another.


Te Indian market has seen an influx of imported branded goods from Asian and Middle Eastern countries in last five years. A host of factors is responsible for the sudden jump in parallel imports in the electronic, confectionery, tobacco, cosmetics and alcoholic beverages sectors, including rising consumerism and the Indian middle class becoming more brand-savvy; the Indian economy growing by more than 8 percent per annum; and the reduction of customs duty.


The brand owner’s perspective


Brand owners are obviously concerned about this growing problem: it eats into their profits and makes locally produced products less attractive from a price point of view. Brand owners argue that encouraging parallel imports is counterproductive, as local manufacturing generates employment and the collection of taxes. Further, in each product a certain amount of customisation takes place locally, taking into account local preferences and demand, which are obviously lacking in an imported product. Brand owners also cite the lack of warranty on such products as a discouragement for consumers to buy them.


The trader’s perspective


Traders who deal in parallel imported, or grey market, goods argue that they benefit consumers and keep a price check on locally manufactured products. Te traders rely on the principle of exhaustion to say that once the brand owner, or any party authorised by him, has sold a branded


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product, they cannot prohibit the subsequent resale of that product since their rights have been exhausted by the act of selling the product.


Te traders also argue that parallel import is allowed under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement; in fact, TRIPS explicitly states that it does not address the issue of parallel import, thereby leaving countries free to determine their own policy in this respect.


Legal position


To claim trademark infringement under Section 29(1) of the Trademark Act, the following needs to be satisfied: the use of a mark identical, or similar, to a registered trademark:


• In the course of trade;


• Without permission/authorisation of the registered proprietor; and


• Use in the manner to be taken as use of a trademark.


Te Indian Trademark Act, Section 29(6)(c) also provides that import and export of goods under the mark will be considered use of a registered trademark.


Combined reading of the above provisions makes it clear that importing and exporting of goods is “use” of a registered mark, and such import is an infringement if the importer is not permitted or authorised by the registered proprietor,


although there is no provision under Section 29 that distinguishes between genuine goods or counterfeit goods being imported. However, import of genuine goods must be treated differently and the exceptions to infringement as laid down under Section 30 of the Trademark Act must be looked into when determining whether such use would come within the exceptions to infringement.


Defences to infringement


Section 30(3) provides that where goods bearing a registered mark are lawfully acquired by a person, then sale of such goods in the market, or dealing with such goods, is not an infringement by the only reason that:


• Te registered trademark having been assigned by the registered proprietor to some other person aſter the acquisition of those goods; or


• Te goods having been put on the market under the registered trademark by the proprietor, or with his consent.


Section 30(4) provides that Section 30(3) shall not apply where there exist legitimate reasons for the proprietor to oppose further dealings in the goods, in particular where the condition of the goods has been changed or impaired aſter they have been put on the market.


Judicial decisions


Overall, the above discussion show that Indian trademark law provides for exhaustion of rights once the goods are put into the market; it is not clear, however, whether the markets referred to are national or international.


In the decision of the court in Samsung Electronics Company Ltd v Kapil Wadhwa, the court has analysed the issue of parallel imports and come up with the clear finding that the interpretation of various provisions under the Indian trademark law would show that it is national, as opposed to international, exhaustion that is provided for under the Trademark Act.


In this case Samsung Electronics instituted civil action for trademark infringement and passing off against three parties who were alleged to be importing genuine Samsung branded printers without permission of Samsung Electronics.


World Intellectual Property Review Annual 2012 103


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