Indian Trademark Law and Parallel Imports

Mubasher Hussain Ansari B.Tech; L.L.M- IPR, Osmania

Abstract The Trademarks Act, 1999 through Section 30 contain specific provisions dealing with
the exhaustion of rights, the courts have granted injunctions preventing parallel imports of trademark
goods. A common feature of these suits have been not the violation of the Trademark Act but the allegation
that the importers were passing off the parallel imports as goods imported by or on authorization of the
original trademark holders, leading to confusion in the minds of the public and also damaging the
reputation of the plaintiffs. As the importers were smalltime importers unable to stand up to the might of
the original trademark holder (huge multi national corporations) the courts have not analysed the issue
adequately in the light of other allied laws dealing with the importation of the said parallel imports. Thus
the issue of Parallel Imports in the context of Indian Trademark and other laws is in need of a restatement.

One of the earliest cases on the issue of parallel import is Albert Bonnan vs.
Imperial Tobacco Co1 which was dealt with under the provisions of Indian Merchandise
Marks Act, 1889. Here the plaintiff- Albert Bonnan- towards the end of 1921 bought a
large quantity of Gold Flake cigarettes on the terms that they should not be sold in Great
Britain. The goods were two years old, they were made up in packets or cartons of tin and
25,000 cigarettes in their cartons were packed in a strong tin lined case. This brand of
cigarettes is very well known as having originally been the manufacture of W.D. & H.O.
Wills, of Bristol whose successors in business were the British American Tobacco
Company Limited. The goods so bought by the plaintiff had (under a temporary
arrangement necessitated apparently by the war) been manufactured in America and were
part of a very large number of cigarettes which had originally been intended for troops
but which were now being disposed of. They had been manufactured by the British
American Tobacco Company Limited itself and were thus genuine Gold Flake cigarettes
and not counterfeit. The plaintiff bought them cheap at eight or nine shillings per
thousand.

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"Gold Flake" cigarettes were sold in large quantities in India by the defendant
company-Imperial Tobacco Co- which is a "subsidiary" or "associated" company of the
British American Tobacco Company Limited, the latter company holding at least 80 per
cent of its shares. The defendant company had in 1910 acquired the business and
trademark rights of the British American Tobacco Company Limited so far as India,
Burma and Aden are concerned. For years it alone had been selling Gold Flake cigarettes
in India and its price to dealers was Rs. 36 per thousand. It obtained its goods from the
British American Tobacco Company in Great Britain though it had itself the right to
manufacture.

The plaintiffs venture was a very promising one. He could afford to sell at a price
far below the defendant companys price of Rs. 36 per thousand. If he could dispose, at a
start, of some 16 million cigarettes at Rs. 20 per thousand he would do very well for
himself and if he could continue so to do he would do very well indeed.

Thereafter, the Imperial Tobacco Co launched a series of litigation against the

plaintiff in order to protect their interest in the Indian market. These were as classified
below:
(a) Wrongfully and maliciously apply plying to the Collectors of Customs in Bombay and
Calcutta and obtaining from them orders for detention of the plaintiffs goods.
(b) Wrongfully and maliciously instituting and prosecuting suits against the plaintiff in
the High Courts in Bombay and Calcutta.
(c) Wrongfully and maliciously obtaining an injunction against the plaintiff from this
Court as referred to above.
(d) Wrongfully and maliciously giving notice of motion for an injunction against the
plaintiff in the Bombay High Court in which proceeding the plaintiff was made to give an
undertaking on the 19th June 1922.
(e) Wrongfully and maliciously publishing various statements slandering the plaintiffs
goods.

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After a prolonged litigation it was held by Mr. Justice Pearson that the plaintiffAlbert Bonnan- started off very well in Bombay in the matter of the sale of his cigarettes,
but instead of finding a fair field for his goods, he found himself faced with obstruction
after obstruction, maliciously raised by the defendants courses of delay, disparagement of
his goods, assertion of unfounded rights all of which interfered with the plaintiffs right
to trade in his goods in the ordinary way. In short, Mr. Justice Pearson came to the
conclusion that in this case the Imperial Tobacco Co- had acted mala fide and with
ulterior motive from beginning to end. He therefore directed an enquiry for ascertainment
of damages sustained by the plaintiff under heads (a) to (e) on the basis of a uniform rate
of Rs. 2380 per thousand cigarettes.

The issue of exhaustion of rights was not specifically dealt with in the Indian
Merchandise Marks Act, 1889. However Section 30(2) of the Trade and Merchandise
Marks Act, 1958 provided that where the goods bearing a registered trade mark are
lawfully acquired by a person, the sale of or other dealings in those goods by that person
or by a person claiming under or through him is not an infringement of the trade mark by
reason only of the trade mark having been assigned by the registered proprietor to some
other person after the acquisition of those goods..

Similarly, in the Trademarks Act 1999 too Section 30 which deals with limits on
effect of registered trade mark reads as follows:

(1) ...
(3) Where the goods bearing a registered trade mark are lawfully acquired by a person,
the sale of the goods in the market or otherwise dealing in those goods by that person or
by a person claiming under or through him is not infringement of a trade by reason only
of
(a) the registered trade mark having been assigned by the registered proprietor to some
other person, after the acquisition of those goods; or
(b) the goods having been put on the market under the registered trade mark by the
proprietor or with his consent.

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(4) Subsection (3) shall not apply where there exists 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 after they have been put on the market.
According to P Narayanan1, the object of Section 30(2)(c)(i) is to prevent the
owner of the trade mark claiming infringement in respect of a product which he has
produced and to which he ahs attached the trade mark. It has been held that where a
parent company (or a group of companies) chooses to manufacture and sell wholly or
partly through subsidiary companies in different parts of the world products which bear
the same trade mark, neither the parent company nor any member of the group nor any
subsidiary can complain in any country if those products are sold or resold under that
trade mark. The legal ownership of the mark does not go further and enable the owner or
registered user that products manufactured elsewhere (e.g. U.K or U.S.A) are not sold
within the territory of any country.(Winthrop v Sun ocean (1988) FSR 430 at 437.)

However, Section 30(4) seeks to protect the rights of the trademark holder by
giving him the right to oppose any further commercial in trademark goods where there
exists 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 after they
have been put on the market.

The wording of Section 30(4) is almost identical to the wording of the Article 7(2)
of the Trademark Directive of the European Union and arises among other situation when
the parallel imports are relabeled, repackaged, reboxed, re-stickered etc. There are a lot of
judgments by the European Court of Justice on the issue and the case law on the subject
in the EU is quite well developed. However, in the Indian context such a situation has not
arisen so far, and if and when it does arise it is doubtful as to what extent the European

Narayanan P., Law of trade Marks and Passing Off(6th Edition), Eastern Law House Pvt Ltd, Kolkata,
2004, P. 570

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Union case law can be used as the cases thereunder were decided keeping in the primary
objective of free movement of goods within the region.
In the case of Xerox Corporation Vs. Shailesh Patel1 the plaintiff submitted
before the court that certain defendants were importing or selling xerox second hand
machines which is not permissible, irrespective of the fact that they have requisite
documents for import. This plea is based interalia, on the provisions of Section 30(3) and
(4) of the Trade Marks Act, 1999 (hereinafter referred to as, the said Act). The plaintiffs
also pointed out that they have arrangements in the U.S.A whereby they sell secondhand
machines with the stipulation that the user of such machines can only be in U.S.A.

On the other hand the defendants submitted before the court that there were more
than the said source for obtaining second hand machines since it is possible that a party,
who purchases a machine of xerox, decides to sell the same to a third party without
entering into any written agreement or exchange scheme with the plaintiff. It was further
submitted that the interest of the plaintiffs is taken care of Subsection (4) of Section 30
of the said Act since the defendants undertake that in case the goods are changed or
impaired, they will not put the same into market. Thus it is stated that only such of the
machines be permitted to be imported, which have proper documentation and there is no
change or impairment. In case after importation, there is any change or impairment, the
condition of removal of the xerox sticker would have to apply to those machines.

The court held that:

I am of the considered view that it will be appropriate to permit import of

such xerox machines, which have proper documentation provided there is
no change or impairment in the machine. Such prohibition of change or
impairment is not to be confined only to the physical characteristics, but
also in respect of the working systems and the software to be used for the
1

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said purpose. In case after importation, there are any changes, the sticker
of xerox must be removed so as to indicate to the purchaser that the
machine is not being sold as a xerox machine.
The case was finally decided by the Delhi High Court1 on 15.05.2008 when both
the parties effected a compromise agreement with the following terms:

1) The defendants, who are importers and resellers, shall affix the following disclosure on
each of the second hand Xerox machines imported / sold by them:-

i) Second hand and used machine not imported directly from Xerox
Corporation

or

any

of

its

affiliates;

ii) Not serviced or maintained by Xerox Corporation or any of its

affiliates;
iii) This machine has been sold exactly as received by the importer /
reseller. It has not been altered in any way or examined for operatibility
or completeness by the importer / reseller. No part or any accessories have
been

added

or

removed

by

the

importer

reseller.

iv) This machine is not covered by any guarantee or warranty from Xerox
Corporation or any of its affiliates.

2) The aforesaid disclosure shall appear prominently on each of the second hand
machines at a prominent place in the front of the machines where the word
Xerox appears on the machines so that the same can be easily viewed by
customers. The disclosures shall be permanently affixed on the machines.

3) The same disclosure shall also be incorporated in publicity materials,

manuals, advertising and other communications to the public by the defendants in
respect of the said Xerox machines.

As available at the Delhi high Court Website :

http://courtnic.nic.in/dhcorder/dhcqrydisp_j.asp?pn=1864&yr=2008

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4) In case, after importation, any changes to the said machines are made
by the defendants, the mark Xerox shall be removed from them before further
sale / use so as to indicate to the purchasers / users that the machines are not
Xerox machines
.
5) Once the said disclosure has been affixed on the machines by the importers and / or the
resellers, the other defendants (jobbers / photocopying shops) shall not remove or
obliterate the same.

The issue of parallel imports in relation to the Trademark Act, 1999 was first dealt
with in a comprehensive manner by the Delhi High Court in the case of Samsung
Electronics Company Ltd. and Anr. vs Mr. G. Choudhary And Anr.1

The Plaintiff Samsung Electronics filed a suit for praying for an interlocutory
injunction which, in essence sought to combat and eradicate parallel importation by third
parties into India of products manufactured by the Plaintiff itself, but in China. The case
set up by the plaintiffs was that although the products were genuine, they are not meant
for Indian markets, inter alia because their sale does not strictly conform to Indian laws
and regulations, such as being accompanied with literature in English or the Vernaculars;
and/or with a label indicating the maximum retail price; and/or that they are not covered
with a warranty; and/or that use of these products is likely to constitute a breach of the
warranty of other machinery which has been legally purchased etc.

The Court held that:

The issue of exhaustion was not expressly addressed in the 1958 Act, but
the New Act statutorily introduces this concept. Section 30 of the New Act

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provides that where the goods bearing a registered trade mark are lawfully
acquired, the further sale or other dealings in such goods by the purchaser
or by a person claiming to represent him is not considered an infringement
if the goods have been put on the market under such mark by the
proprietor or with his consent. Such goods may not have been materially
altered or impaired after they were put on the market, however. A cause of
action for trade mark infringement may be available to the proprietor
against an importer where the genuine goods have been materially altered
without the proprietors consent after they were put on the market. The
burden of proving such consent is on the importer. A cause of action on
the grounds of passing off is available if the trade mark proprietor can
show that the importer is passing off the goods in a misleading or
improper way causing confusion in the minds of the public. To date, there
are no reported Indian court decisions on the issue of exhaustion or
parallel imports involving trademarked goods..

Then abruptly the High Court held that:

In view of this brief discussion I am satisfied that a prima facie case has
been disclosed for the issuance of ex parte ad interim injunction. The
balance of convenience is in favor of the Plaintiff who is likely to suffer
irreparable loss and injury if only notice is issued in the first instance. It is
almost certain that the goods and the evidence to substantiate the
complaints of the Plaintiff shall be removed if an injunction is not granted
forthwith.

In these circumstances, the Defendants, their partners, directors, principal

officers, servants, agents and all others acting for and on their behalf are
restrained from importing, exporting, distributing, selling, offering for
sale, advertising, directly or indirectly dealing in grey market ink
cartridges/toners or any other products of the Plaintiffs under the

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trademark SAMSUNG or under any other mark as may be deceptively

similar to the Plaintiffs trademarks amounting to the infringement of the
Plaintiffs registered trademarks.

Subsequently in another case M/s General Electric Company Vs Altamas Khan

and others1 the plaintiff M/s General Electric Company instituted the suit objecting to
the business in the name and style of GE Dehumidifiers being carried on for the reason of
breach thereby of the registered trademark of the plaintiff and the defendants thereby
passing themselves off as the authorized distributor or affiliate or having association with
the plaintiff. It was also the case of the plaintiff that the defendants are illegally using the
GE monogram of the plaintiff and of which the plaintiff is the registered proprietor. It
was further the case of the plaintiff that the plaintiff though manufacturing and selling
Dehumidifiers, was not marketing the same in India; that the defendants appeared to be
acquiring the Dehumidifiers of the plaintiff from territories other than India and illegally
marketing the same in India. It is the case of the plaintiff that such action of the
defendants of importation of the genuine products of the plaintiff to territory for which
they were not meant, amounted to the violation of the trademark of the plaintiff and
caused loss to the plaintiff. It was the case of the plaintiff that the plaintiff for the reason
of not marketing Dehumidifiers in India was neither giving any warranty nor any after
sales service for the said Dehumidifiers in India and the illegal sale thereof by the
defendant caused loss of reputation to the plaintiff in as much as the purchasers from the
defendants on not being able to claim on the warranty and not being able to get the after
sales service were likely to think ill of the plaintiff.

The defendants in their written statement while admitting to be carrying on

business in the name and style of M/s GE Dehumidifiers explained the same as Global
Enterprises and denied thereby infringing the trademark of the plaintiff; they denied that
they were in any manner infringing the trademark of the plaintiff or passing themselves
1

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off as a distributor or associate or affiliate of the plaintiff; they further pleaded that the
defendant was earlier in collaboration with M/s Godrej marketing Dehumidifiers in India
and pleaded that they were in the business of purchasing old Dehumidifiers, repairing and
reselling the same.

Ruling in favour of the plaintiff, the Delhi High Court held that:

As far as the relief of permanent injunction is concerned, I have no

hesitation whatsoever in holding the plaintiff entitled to the same. The
name GE Dehumidifiers in which the defendant No.1 is carrying on
business is suggestive of the defendant No.1and3 being an authorized
distributor affiliate or associate of the plaintiff. The Dehumidifiers in
which the said defendants are dealing are generally sold and marketed
from same outlets from which electrical household goods viz.
refrigerators, freezers, electric cookers, microwave, washer cookers, water
systems, ventilation system etc. in which the plaintiff is admittedly dealing
in India through various companies and subsidiaries and authorized
distributors. The Dehumidifiers fall in the same class of goods in which
the plaintiff is carrying on business in India. Even though the plaintiff is
not carrying on business in Dehumidifiers in India for the present but the
same would not come in the way of the plaintiff being entitled to the grant
of injunctive relief in as much as a common man wanting to
purchase/acquire a Dehumidifier is not likely to know that the plaintiff is
not dealing in Dehumidifiers in India and is likely to believe that the
Dehumidifiers being sold by the defendants No.1and3 are under
authorization from the plaintiff. Such a consumer is further likely to
expect the compliance of the warranty conditions and after sales service
and support associated with the other products of the plaintiff in India and
is definitely likely to blame the plaintiff and the esteem in which the
plaintiff is held by the said consumer is likely to fall, upon such consumer

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not getting the same, in as much as the plaintiff has stated that it is not
providing such services in India in relation to Dehumidifiers.

10. Though, the defendants sought to explain the trade name of GE

Dehumidifiers adopted by it as Global Enterprises but the name Global
Enterprises nowhere appears on the invoices seized by the local
commissioner from the premises of the defendant. The report of the local
commissioner, in the absence of any objection to the same is entitled to be
read by this court. Had the intentions of the defendants been bonafide,
nothing prevented them from using the name Global Enterprises for their
business and which would have not led anyone to believe that the
defendants had any association with the plaintiff, in as much as the
plaintiff is equally well known as GENERAL ELECTRIC as it is as GE.
However, the use by the defendants of GE instead of Global Electronics
on its invoices can lead to only one assumption i.e. that the defendants
thereby wanted to pass off their business and their products as that of the
plaintiff and intended to confuse and deceive the customers and public at
large. Not only so, the invoices seized by the commissioner also contain
the GE monogram and which puts the matter beyond any pale of
controversy. The defendants by using the said monogram clearly infringed
the trademark of the plaintiff and sought to pass themselves off as the
plaintiff.
Thereafter, in the case of Louis Vuitton Mallettier v. Abdul Salim and others1
a suit was instituted by the plaintiff as the registered proprietor of the aforesaid
marks/logo/monogram seeking order against the defendant No. 1 carrying on business as
defendant No. 2 from selling, offering for sale, advertising or dealing in hand bags,
wallets luggage, footwear, leather and imitation of leather and goods bearing the
aforesaid trademarks/logo/monogram. The cause of action for the suit was the import by

Indian Kanoon http://indiankanoon.org/doc/1021249/; Date of decision: 6th May, 2009 last visited on
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the said defendants of counterfeit goods of the plaintiff bearing the aforesaid
trademarks/logo/monogram. Injunction was also claimed restraining the said defendants
from importing the aforesaid goods bearing the trademarks/logo/monogram of the
plaintiff and from passing off the same as plaintiffs goods. The relief of delivery and of
rendition of accounts and damages is also claimed. It is the case of the plaintiff that the
Deputy Commissioner of Customs, Mumbai had seized the contents of a container which
had arrived at Mumbai on 7th October, 2005, for the reasons of containing counterfeit
goods of well known brands including of the plaintiff. The plaintiff on investigation
found amongst the seized goods its counterfeit goods also. The Deputy Commissioner of
Customs, Mumbai has been impleaded as the defendant No. 3 in the suit. In the
application for interim relief direction was sought against the defendant No. 3 for
directing him to deliver the goods of the plaintiff.

The court ruled in favour of the plaintiff and held that:

The marks of the plaintiff are undoubtedly well known, transcending

borders and known/recognized by all who are connoisseur of such goods.
The defendants No. 1 & 2 are proved to be illegally importing counterfeit
goods of the plaintiff and infringing the registered trademarks /logo /
monogram of the plaintiff. The defendants are not entitled to do so and the
plaintiff is entitled to a decree for permanent injunction in terms of para 28
(a) & (b) of the plaint. Though the plaintiff had as aforesaid claimed
interim order of delivery against the defendant No. 3 but vide ex parte
order dated 17th January, 2006 only the defendants No. 1 & 2 were
restrained from importing the counterfeit goods or from infringing the
registered trademarks/logo/monogram of the plaintiff and from passing off
their goods as that of the plaintiff. If the goods seized by the defendant No.
3 and found to be counterfeit goods of the plaintiff are still in existence,
the defendant No. 3 is also directed to deliver the same to the plaintiff who
shall be entitled to destroy the same. The actions of the defendants No. 1
& 2 are also found to have caused damage to the plaintiff. The defendants

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by remaining ex parte cannot avoid liability in damages. However the

plaintiff having not proved the length of time for which the defendants No.
1 & 2 have been carrying on the said business of selling counterfeit goods
of the plaintiff and the volume of the said trade of the defendants, nominal
damages in the sum of Rs. 2 lacs are awarded to the plaintiff. A decree for
damages in the said amount is passed in favour of the plaintiff and against
the defendants No. 1 & 2 jointly and severally.

Analysis

An analysis of the aforementioned case law establishes the surprising fact that
although in the earlier Indian Merchandising Marks Act of 1898 the provisions dealing
with the exhaustion of rights were not specifically spelt out, the courts did not hold
parallel imports to be infringing goods.

In sharp contras, the Trademarks Act, 1999 through Section 30 contain specific
provisions dealing with the exhaustion of rights, the courts have granted injunctions
preventing parallel imports of trademark goods. A common feature of these suits have
been not the violation of the trademark act but the allegation that the importers were
passing off the parallel imports as goods imported by or on authorization of the original
trademark holders, leading to confusion in the minds of the public and also damaging the
reputation of the plaintiffs.

As the importers were smalltime importers unable to stand up to the might of the
original trademark holder (huge multi national corporations) the courts have not analysed
the issue adequately in the light of other allied laws dealing with the importation of the
said parallel imports.

Rule 2(l) of the Standards of Weights and Measures (Packaged Commodities)

Rules, 1977 defines pre-packed commodity with its grammatical expressions and cognate
expressions means a commodity or article or articles which without the purchaser being

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present, is placed in a package of whatever nature, so that the quantity of the product
contained therein has a pre determined value and such value cannot be altered without the
package, or its lid or cap, as the case may be, being opened or undergoing a perceptible
modification and the expression package , wherever it occurs, shall be construed as a
package containing a pre-packed commodity.

It is explained that where, by any reason merely of the opening of a package, no

alteration is caused to the name, quantity, nature or characteristic of the commodity
contained therein, such commodity shall be deemed to be a prepacked commodity. For
example an electric bulb or a fluorescent tube is a pre-packed commodity, even though
the package containing it is required to be opened for testing.

It is further explained that where a commodity consists of a number of

components and these components are packed in one, two or more units for sale as a
single commodity, such commodity shall be deemed to be a prepacked commodity.

Thus all the items concerning whose parallel importation the courts have issued
injunctions such as printer cartridges, lux soaps, shampoos, suitcases, travel bags, wallets
etc are covered by the definition of pre packed commodities.

Further. rule 33(1) of the Standards of Weights and Measures (Packaged

Commodities) Rules, 1977 provides that all pre-packed commodities imported into India
shall carry the following declarations:(i)

Name and address of the importer;

(ii)

Generic or common name of the commodity packaed;

(iii)

Net quantity of the standard units of weights and measures. If the

net quantity in the imported package is given in any other unit, its
equivalent in terms of standard units shall be declared by the
importer;

(iv)

Month and year of packing in which the commodity is

manufactured or packed or imported;

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(v)

Retail sale price.

Rule 13(2) provides that the responsibility for making mandatory declarations as
required in sub-rule(1) shall rest with the importer. Further, Rule 33(3) mandates that the
declarations shall be made in the following manner:

(i)

All declarations may be printed on a label securely affixed to the

package; or

(ii)

All the declarations may be made on an additional wrapper and

imported package may be kept inside the additional wrapper; or

(iii)

All declarations may be printed on the package itself; or

(iv)

Declarations may be made on a card or tape affixed firmly to the

package or container and bearing the required information.

Furthermore, the Director General Foreign Trade, exercising the powers under
Foreign Trade Development and Regulation Act, 1992 issued Notification RE- 44/2000
dated 24/11/200 stipulating that all such packaged products, which are subject to
provisions of the Standards of Weights and Measures (Packaged Commodities) Rules,
1977 when produced/ packed/ sold in domestic market, shall be subject to compliance of
all the provisions of the said rules, when imported into India. The compliance of these
shall be ensured before the import consignment of such commodities is cleared by
Customs for home consumption. All pre-packaged commodities, imported into India,
shall in particular carry the following declarations:
(a) Name and address of the importer;
(b) Generic or common name of the commodity packed;
(c) Net quantity in terms of standard unit of weights and measures. If the net quantity in
the imported package is given in any other unit, its equivalent in terms of standard units
shall be declared by the importer;

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(d) Month and year of packing in which the commodity is manufactured or packed or
imported;
(e) Maximum retail sale price at which the commodity in packaged form may be sold to
the ultimate consumer. This price shall include all taxes local or otherwise freight
transport charges, commission payable to dealers, and all charges towards advertising,
delivery, packing, forwarding and the like, as the case may be.
The Customs authorities ensure that all the pre-packed goods comply with
provisions of Packaged Commodities Rules1977 and DGFT Notification RE-44/2000,
before the same are cleared from customs area. Therefore, it would be totally wrong on
the part of the original trademark holders to assert that the parallel imports are being sold
in the domestic market as products imported by the original trademark holders. This
aspect was neither brought to the notice of the courts nor did the courts by themselves
examine the issue in the light of these allied laws. Even otherwise, if the imported goods
are not labeled adequately, then appropriate action in the form of monetary fines per
package can be imposed on the said dealers of parallel imported goods under the
provisions of Standards of Weights and Measures Act only.

Therefore, the issue of parallel imports in the context of trademark law too is in
the need for a judicial reexamination and a comprehensive restatement.

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