AI Drafter 
TaxTMI 
TaxTMI 
2012 (10) TMI 1246
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....ly mirages, and due to which, on the wrong belief that these were rocky areas, the course of the ship was steered in a wrong direction to reach a wrong port of destination. The waters are that the respondents ('Samsung Electronics Company Ltd.' and 'Samsung India Electronics Pvt. Ltd.') are companies incorporated as per laws of Korea and India respectively; the latter being a subsidiary of the former. They are a part of 'Samsung Group of Companies' having 14 listed companies and 285 worldwide operations. The respondents manufacture and trade in electronic goods such as colour televisions, home appliances, washing machines, microwaves, air-conditioners, computers, printers & cartridges etc. The business is done under the brand-name/corporate-name using the Trade Mark 'SAMSUNG/Samsung'. In India, the first respondent has licensed the use of the Trade Mark 'SAMSUNG/Samsung' to the second respondent as per Trade Mark Agreement dated July 08, 2003 which has been filed for registration in the Trade Mark's Registry. The respondents are the registered proprietor/user of the Trade Mark as under:- Sl. No TRADE MARK CLASS REGISTRATION NO....
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....ys the product of the appellant thinking that it is having the same features as that of the product sold by the respondents. 2. The issue pertains to what is popularly known as parallel-imports/grey-market goods. 3. The learned Single Judge has obviously held in favour of the respondents, who were the plaintiffs, and this explains the defendants being the appellants before us in an intra-Court appeal. The port of destination: 4. Whether the Trade Marks Act 1999 embodies the International Exhaustion Principle or the National Exhaustion Principle when the registered proprietor of a Trade Mark places the goods in the market under the registered trade mark. The port of destination reached by the learned Single Judge: 5. The Trade Marks Act 1999 embodies the National Exhaustion Principle. The lighthouses seen by the learned Single Judge while chartering the voyage: 6. Section 29 and Section 30 of the Trade Marks Act 1999 fell for consideration and interpretation. They read as under:- 29. Infringement of registered trade marks:- (1) A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use,....
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.... mark; (c) imports or exports goods under the mark; or (d) uses the registered trade mark on business papers or in advertising. (7) A registered trade mark is infringed by a person who applies such registered trade mark to a material intended to be used for labelling or packaging goods, as a business paper, or for advertising goods or services, provided such person, when he applied the mark, knew or had reason to believe that the application of the mark was not duly authorized by the proprietor or a licensee. (8) A registered trade mark is infringed by any advertising of the trade mark if such advertising- (a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters; or (b) is detrimental to its distinctive character; or (c) is against the reputation of the trade mark. (9) Where the distinctive elements of a registered trade mark consist of or include words, the trade mark may be infringed by the spoken use of those words as well as by their visual representation and reference in this section to the use of a mark shall be construed accordingly. 30. Limits on effect of registered trade mark:- (1) Nothing in secti....
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....e effect of the use of the trade mark is to indicate, otherwise than in accordance with the fact, a connection in the course of trade between any person and the goods or services, as the case may be; (e) the use of a registered trade mark, being one of two or more trade marks registered under this Act which are identical or nearly resemble each other, in exercise of the right to the use of that trade mark given by registration under this Act. (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. (4) Sub-section (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 a....
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..... (Refer paragraphs 19, 22 and 23 of the impugned decision). 9 (ii). Section 29 clearly suggests that the legislative intent is to put barriers on the free flow of goods in the world market inasmuch as the said Section contemplates both import as well as export of goods while enacting the statutory provisions pertaining to infringement of registered Trade Marks. (Refer para 26 of the impugned decision.) 9 (iii). Section 29(1) does not distinguish between the import of genuine and non-genuine goods. Thus, imports, whether of genuine or non-genuine goods would amount to infringement if not effected by the consent of the registered proprietor of the Trade Mark or the permissive right holder of the Trade Mark. (Refer paragraphs 28 and 30 of the impugned decision.) (N.B.: In paragraph 35 of the impugned decision, the learned Single Judge has stated the conclusion i.e. reached a port mid-journey with reference to the three lighthouses afore-identified.) 9 (iv). In paragraph 38 that the learned Single Judge has clarified that he understood the beams of the light from the three lighthouses to mean the beam of import in the course of trade and not for personal use. 9 (v). Sec....
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.... Section 30(3) and Section 30(4) operate in the domestic market i.e. goods are placed in domestic market by the registered proprietor of the Trade Mark and further dealing with the goods takes place by way of sale in the domestic market. (Refer paragraphs 88 to 96 of the impugned decision.) (N.B. : In paragraph 94 of the impugned decision, the learned Single Judge has clarified that the foreign judgments on the subject of legitimate reasons to oppose further dealings, would thus not be relevant in the context of import, but would certainly be relevant for the purposes of gauging further dealing of the goods by a purchaser thereof in the domestic market and further sale in the domestic market.) 10. While understanding the direction in which the ship has to be steered, on seeing the lighthouses, the learned Single Judge has while discussing the rules of navigation held that Statements of Objects and Reasons in the bill which is introduced and ultimately finds expressed as an Act can only be invoked if there is an ambiguity in the language of the statute; and finding none, has held that no external aid could be taken from the Statement of Objects and Reasons to The Trade Marks B....
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....he sale in India is with the consent and permission of the respondents. The reason for the opinion being that the import of Samsung products for sale in the Indian market being without the consent of the respondents amounted to an infringement of the respondents' Trade Mark. 15. This in brief, is an analysis of the impugned order dated February 17, 2012, passed by the learned Single Judge with reference to the chartered journey and reaching the port of destination, resulting in dismissal of IA No. 10124/2011 filed by the appellants under Order XXXIX Rule 4 of the Code of Civil Procedure praying that the ex-parte ad-interim injunction granted be vacated and allowing IA No. 7774/2011 filed by the respondents praying that during pendency of the suit, appellants be restrained from importing and selling printers and their ink cartridges/toners bearing the Trade Mark 'Samsung' as also restraining appellants from using the Trade Mark 'Samsung' in respect of promotional activities including website. The journey re-chartered: 16. The re-chartered journey, and especially where the grievance is that the original voyage has reached the wrong port of destination, ha....
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....what is called by the learned Single Judge a plain and contextual interpretation of Section 30(3) and 30(4) of the Trade Marks Act 1999. And a conclusion is arrived that 'the market' envisaged by the said Section has to be only one market i.e. where the buyer and the seller of the goods co-exist. The discussion concludes in paragraph 17 and thereafter the learned Single Judge has referred to the U.K. Trade Mark Act to draw a distinction between the law there and India. Thereafter, from paragraph 86 onward the learned Single Judge has again discussed Section 30(4) of the Trade Marks Act 1999 in its textual setting to reach a conclusion that said Section does not negate the interpretation put by the learned Single Judge to sub-section (3) of Section 30 of the Trade Marks Act. Thereafter, as noted in paragraph 10 above, from paragraphs 123 onwards the learned Single Judge has discussed the issue pertaining to an alleged admission in the pleadings of the respondents i.e. in the replication filed. 20. We proceed to analyze the reasoning of the impugned decision, in the same sequence and at the outset record our agreement with the analysis of Section 29 of the Trade Marks Act,....
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.... the trade mark in question. As per sub clause (b) of sub Section 2 of Section 30 if a trade mark is registered subject to any condition or limitations, the use of the trade mark in relation to goods to be sold or traded in any place and in relation to goods to be exported to any market would not constitute an infringement. 23. We have reasoned here-in-after in para 53, as to what would be the use of the adverb 'any' before the noun 'market' in clause (b) of sub Section 2 of Section 30 to bring home the point of the contextual usage requiring the pronoun 'any' to be a determiner and thus 'any market' in the context of 'goods to be exported' meaning the global market. 24. But since various sub Sections of Section 30 contemplate different situations where, not withstanding Section 29, the proprietor of the registered trade mark cannot prevent the use of the registered mark by other persons, various sub Sections of Section 30 have to be construed with reference to the situation contemplated with respect to the use of the registered trade mark and said use not being capable of being prevented by the registered proprietor of the trade mark. ....
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....tion 30 of the Trade Marks Act, 1999. It reads:- (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. 31. We may highlight that there is an apparent printing error in subsection (3), even the Gazette Notification issued by the Central Government contains the same. 'Not infringement of a trade by reason only of' should read 'Not infringement of a trade mark by reason only of'. The reason is obvious. After being lawfully acquired by a person of goods bearing a registered trade mark, the further sale may be debatable as infringement of a trade mark, but there can be no further debate whether there is an infringement of a trade. 32. Be that as it may, and hoping that the legislature would r....
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....se. 35. The further reasoning of the learned Single Judge in paragraphs 56 to 58 is an extension of the error afore noted. We quote:- 56. The wordings in sub clause (a) "the registered trademark has been assigned by the registered proprietor to another person after acquisition of the said goods" controls the language of the opening words "where the goods under the registered trade mark are lawfully acquired by the person". Reading of same along with the opening words makes it clear said lawful acquisition presupposes the existence of three persons, a person acquiring the goods, a person selling the goods which is the registered proprietor and third person to which the trademark has been assigned at the same place. 57. Thus, the said acquisition for the purposes of the sub clause (a) must arise within the same market wherein there are three persons present, person acquiring the goods, registered proprietor and the assignee of the trade mark. This the reason why the said Section 30(3) (a) also says that the registered trademark having been assigned after the acquisition of those goods which means that the acquisition must emanate from the registered proprietor where the regi....
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....ame to some other company for Indian territory. The learned Single Judge has opined that havoc would be created because the assignee would not be in a position to control the inflow of the goods. But where is the havoc? Merely because the assignee of a trade mark cannot prevent the further sale of goods which were lawfully acquired prior to the assignment, is not a situation of a havoc. The reason is that it would be presumed that the assignee knew that the assignor has already placed, under the trade mark, certain goods in the market and that the right of the assignee would not be to prevent further dealing in the goods already placed on the market. Thus, whether the goods are placed in the international market or in the domestic market and thereafter the assignment takes place is not a relevant consideration while interpreting sub-section (3) of Section 30 with reference to sub-para (a) and sub-para (b) thereof. 40. We highlight that in paragraph 68(d), the learned Single Judge has recognized, and we quote: 'The opening words "where the goods bearing a registered trade mark are lawfully acquired by a person" are merely if at all silent about the lawful acquisition although....
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....) the acquirer of the goods in the same market, is incorrect. 43. The learned Single Judge has recognized that the Statement of Objects and Reasons to a Bill which becomes Law can be used to interpret the law, as an external aid of construction. But has not used the same inasmuch as he has found that a plain reading of the provisions makes it clear that 'the market' contemplated by the statute is domestic market i.e. Section 30(3) contemplates lawful acquisition in the domestic market. We shall discuss this aspect a little later, but now note the reasoning of the learned Single Judge, on comparative analysis of the U.K. Trade Marks Act 1994. 44. Let us note the language used by the legislature in foreign countries:- (A) European Union. Article 7 of the EU Directive on Trademarks: 1. The trademark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the community under that trademark by the proprietor or with his consent. 2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods in ....
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....is express or implied consent (conditional or otherwise). (G) Hong Kong. Section 20(1) of the Hong Kong Trade Mark Ordinance, 2003: Notwithstanding Section 18 (infringement of registered trademark), a registered trademark is not infringed by the use of the trademark in relation to goods which have been put on the market anywhere in the world under that trademark by the owner or with his consent (whether express or implied or conditional or unconditional). 45. With reference to the seven statutory provisions, it would be relevant to note that the legislature in said seven jurisdictions abroad has clearly indicated the legislative intent to either follow the Principle of International Exhaustion or National Exhaustion. For example, Brazil and Turkey, which have incorporated the Principle of National Exhaustion, have used the clear expressions : 'products placed on the internal market' and 'the product has been put on the market in Turkey' respectively. The European Union and United Kingdom have used the clear expression 'market in the community' and 'market in the European Economic Area' respectively to define the market as neither domestic no....
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....elevant and no distinction can be made with reference to the right in relation to the nature of the market. The reason is that if the condition of the goods is changed or the goods are impaired, they may diminish the value of the trade mark, causing injury to the registered proprietor of the trade mark. 50. We have noted herein above that the learned Single Judge, though has opined that his conclusion is based on a plain reading of the statute, but actually is the result of a laborious decision which spans 156 pages. Surely, it would be a contradiction in terms to write 156 pages on a subject of interpretation of a statute and simultaneously maintain that a plain reading of the statute is being done. We have noted herein above that the learned Single Judge has recognized a silence in the statute (Refer paragraph 68(d) of the impugned decision which has been extracted by us in paragraph 41 above) with reference to whether 'the market' is the domestic market or the international market. 51. At the core of the matter, as indeed it has to be when a statute is interpreted, is the plain language of the statute, and we have already reproduced the same i.e. Section 29 and Sec....
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....e provision will not apply. 57. The expression 'in any geographical area', in the Statement of Objects and Reasons to the Trade Mark Bill 1999 clearly envisage 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. But the argument was that it hardly matters if the blacksmith proclaims that he has fabricated a spade, if one can visually see that the tool fabricated has a long handle with a thin metal blade i.e. a hoe. The fabricated implement has to be called a hoe. 58. We can see no hoe and thus the logic of the argument is wanting. If the fabricated implement does not clearly define its features and there is a reasonable ground to dispute whether it is a spade or a hoe, the claim of the blacksmith has to be taken into account. 59. On the subject of an external aid to interpret a statute, suffice would it be to state that whereas debates in the legislature, being the reasons of the speakers, may be at a lower pedestal the Statement of Objects and Reasons of the Bill would stand on a much higher pedestal, and es....
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....lders if the Principle of National Exhaustion or the Principle of International Exhaustion was adopted; and had highlighted that the gains from the adoption of the Principle of National Exhaustion far outweighed the gains to the consumer from the adoption of the Principle of International Exhaustion. Learned counsel had highlighted that from an economic point of view, the Principle of National Exhaustion was more favourable. Tabulated in a chart, keeping in view the stakeholder : consumer, right holder and importer the gain and the loss would be:- S. No. Perspective National Exhaustion International Exhaustion 1. Consumer Uniform price (LOSS) Comparatively lower prices (GAIN) Assurance of quality (GAIN) No assurance of quality (LOSS) Consumer not harmed. Additionally, the consumer is always protected under the Consumer Protection Act. (GAIN) There is a high likelihood that the consumer may be harmed or deceived. (LOSS) Creation or loss of goodwill in the eyes of the consumer is purely through the action of the Right Holder. (GAIN) The consumer may lose faith in the product thereby ....
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....sure fair prices to the consumer due to competition amongst the various players. 64. This is a matter of policy, and it is for the legislature to take a call. A statute cannot be interpreted on the reasoning aforesaid. It may be true that in a poorly developed country, with hardly any infrastructure, import of goods from the foreign shores may be the only way out and for developed countries, industrialization may be the only way forward. However, for developing economies like India, neither situation would be a win-win situation; and thus the need for the legislature to decide as to on which side of the fence should the playing field be laid. 65. But we must note that the adoption of the Principle of National Exhaustion may not necessarily encourage industry to be set up in that country, as in the instant case, a manufacturer abroad may simply get its trade mark registered in a country and import goods manufactured by it in a foreign country. Dual pricing may cause injury to the consumer, and for which we highlight the following table pertaining to the printers sold abroad by the respondents which are imported into India by the appellants and then sold in the market, and the ....
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....d as 982 F.2d 633 (1992) Societe Des Produits Nestle v. Casa Helvetia. (v) Differences in language of the literature provided with the product as held in the decisions reported as 423 F.3d 1037 (2005) SKF USA v International Trade Commission & Ors.; 70F.Supp 2d 1057 PepsiCo Inc v Reyes; 816 F.2d 68, 76 (2nd Cir. 1987) Original Appalachian Artworks Inc. v. Granada Electronics Inc. 68. Now, as we see it, this can only happen in case where goods have to be imported from a country of manufacture or a country where they are put on the market thereof, and then imported into India. Only then would there be a difference in the language of the literature provided with the product; difference in services and warranties in the country from where the goods are imported by the seller and the country of import i.e. the manufacturer's warranties not being available in the country of import; difference in quality control, pricing and presentation as also differences in advertising and promotional efforts. 69. This is also an indication of India adopting the Principle of International Exhaustion of Rights in the field of the Trade Mark Law. 70. We accordingly conclude that 'the mar....