TaxTMI 
TaxTMI 
2024 (5) TMI 1573
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....hhabra, Ms. Saloni Kasliwal and Mr. Rahul Choudhary, Advocates for Amicus. Ms. Rashi Bansal, Mr. Saurabh Lal, Ms. Kriti Garg and Ms. Tesu Gupta, Advocates, Mr. Dushyant K. Mahant and Mr. Vimlesh Kumar, Advocates for D-1, Mr. Hemant Singh, Ms. Mamta Rani Jha, Mr. Manish Kumar Mishra, Mr. Anubhav Chhabra, Ms. Saloni Kasliwal and Mr. Rahul Choudhary, Advocates for Amicus, Mr. Dushyant K. Mahant and Mr. Vimlesh Kumar, Advocates for D-1. JUDGMENT ANISH DAYAL, J. I.A. 1790/2024 (application under Order XXXIX Rules 1 and 2 CPC) & I.A. 7986/2024 (application under Order XXXIX Rule 4 CPC) in CS(COMM) 67/2024; I.A. 2803/2024 (application under Order XXXIX Rules 1 and 2 CPC) in CS(COMM) 114/2024; I.A. 4404/2024 (application under Order XXXIX Rules 1 and 2 CPC) & I.A. 7392/2024 (application under Order XXXIX Rule 4 CPC) in CS(COMM) 168/2024; I.A. 5124/2024 (application under Order XXXIX Rules 1 and 2 CPC) in CS(COMM) 191/2024; I.A. 5160/2024 (application under Order XXXIX Rules 1 and 2 CPC) in CS(COMM) 192/2024 1. These suits have been filed by Seagate Technology LLC ("Seagate") and Western Digital Technologies Inc. ("WD") against the following parties: Daichi International ("Daichi"),....
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....bsequently clubbed together to be heard by this Bench. Two sets of orders were passed by the Coordinate Benches initially: (i) in some matters, ad interim injunction was passed restraining the defendants from selling or dealing with the refurbished HDDs; and (ii) in others, while the dealing was allowed, it had to be done with a disclaimer on the product packaging in a legible and discernible manner, to the effect that the goods in question were "used and refurbished goods". While the initial set of matters were being heard, couple of other proceedings were filed, in which injunctions had not been passed and they were kept for determination along with these connected matters viz. CS(COMM) 335/2024 filed by Seagate against Cubicor which was an importer of these HDDs. 9. Tabular representation of various suits and the relevant applications which are being considered by this judgment are as under: CS(COMM) 67/2024 Seagate Technology LLC Daichi International I.A. No. 1790/2024 (under Order 39 Rules 1 and 2, CPC): By Order dated 24.01.2024 an ex parte ad interim injunction was granted. I.A. 7986/2024 (under Order 39 Rule 4, CPC) CS(COMM) 114/2024 Seagate Technology LLC Consiste....
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....r different, distinct heads. For this purpose, a diagrammatic representation of the chain of transactions in question, is presented as under: Manufacture and End of Life: 13. It is an admitted position that these refurbished HDDs sold by the defendants were originally manufactured by either Seagate or WD. Plaintiffs (Seagate and WD) submitted that they had sold their products to OEMs, and these products became end-of-life when the warranty expired. A product becoming end-of-life had nothing to do with the state and functionality of the device. It was submitted that end-of-life signified that the product could be used for a prescribed time period and ought not to be used thereafter. 14. Plaintiffs' counsel also stated that their products had unique features, in that the silver plates on the HDDs were differently shaped as also the color of the Printed Circuit Board ("PCB") was distinct and, therefore, it was easy for a person in the industry to identify the manufacturer of the HDDs, even if the manufacturer's label was not present on it. Importation and Sale: 15. In response to a query by the Court regarding prohibition on importation, if any, of end-of-life HDDs in Ind....
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....uld amount to a requirement that the refurbished goods had to be re-exported back. Furthermore, Mr. Narula submits that customs law had to be read in conjunction with intellectual property law, in that, if importation was not permitted under intellectual property jurisprudence in respect of trademarks, the customs law itself would have to be interpreted in that light. 17. Mr. Narula, Counsel for Seagate, further argued that the identity of the manufacturer i.e. the plaintiffs could not be completely obliterated, considering that the design of the HDDs included certain distinctive features like silver plates and PCBs and each of these manufacturers, namely, Seagate, WD and Toshiba used different shapes for the silver plate and different colors of PCBs, thereby giving a clear indication, to a technically aware user, that the said product was manufactured by either of these companies. 18. However, counsel for the defendants contend that this policy may not necessarily apply, considering that the goods were simply being imported into India as is, and then being used by various vendors for the purposes of refurbishment and sold as refurbished devices. 19. It was argued by counsel for....
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....ized agents; 5. Both parties agree to bear their respective cost; 6. The present suit may be disposed off in view of the above terms." 22. He, therefore, stated that due to the fact that Seagate itself had entered into a full settlement with an importer, they cannot canvass that they were not aware that their HDDs were being imported and refurbished in India. Having allowed the importer to do so, in terms which form part of a decree before a court of law, they were precluded and estopped from maintaining the suit against either importers or refurbishers. He pressed hard on the point that Seagate ought to have disclosed this as part of their pleadings. 23. Mr. Narula, Counsel for Seagate, did not deny the factum of settlement but stated that the estoppel, if any, against Seagate can only be inter se parties and cannot serve as res judicata, particularly when the settlement is under Order XXIII, Rule 3 of the Code of Civil Procedure, 1908 and principles enunciated in Pankaj Goel vs. Dabur India Ltd., 2008 SCC OnLine Del 1744, apply. He contended that the act of removing the labels, effacing the plaintiffs' trademark, refurbishing, reformatting, removing the plaintiffs' ....
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....ed to changing the "condition of the goods" or "impairment" after they had been "put on the market". This permitted the plaintiffs, who were the registered proprietors of the trademarks, to oppose these dealings in consonance with Section 30(4) of the Trade Marks Act. Aside from this, it was also submitted that the defendants would not get any insulation under Section 30(3), considering that these goods were not "lawfully acquired" before sale in the market or before dealing with them. 30. Further, Mr. Narula, Counsel for Seagate, submits that the defendants were misrepresenting that the refurbished HDDs were brand new, manufactured/imported by them, unused, and under their trademark, and this amounted to passing off old and used HDDs of the plaintiffs as new and unused, and reverse passing off of the plaintiffs' HDDs as the defendants. 31. Mr. Anand submitted that the misrepresentation was on various levels, inter alia, that the HDDs were manufactured by the defendants; that they were claimed to be '20% faster' but no comparative was provided as in "faster than what"; the HDDs did not disclose that they are used; certain aspects of technology were represented as bein....
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....y an intelligent and technically qualified user. 35. Mr. Dushyant Mahant, Counsel for Consistent, contended that there was no functional impairment which the defendants were causing to the product. On the contrary, the plaintiffs had no use of the product since according to them it was 'end-of-life' and they had "washed their hands of the HDDs". The original warranty supplied by the manufacturer was exhausted. In any event, it was the defendants who were giving a fresh life to the products by repairing/refurbishing them and providing a warranty of two years with a call- back facility, as well as servicing facility. The defendants would check the drives and if they were defective, they were returned to the supplier, and if the HDDs worked, software was erased and they were reformatted. 36. As per him, only 5% of the refurbished HDDs sold by them, had been returned and replaced, which bears out that the refurbished product was successfully functioning. 37. He argued that refurbishment was, in any, case a regular industry practice worldwide and adverted to a website reconext.com, which highlights the objective of extending "the lifespan of returned equipment and have the ab....
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.... specific term for resale in their contracts. Plaintiffs failed to advert to any action that had been taken against such OEMs for violations of terms of contract. Furthermore, Ms. Bansal submitted that no communication with the OEMs has been referred to by plaintiffs in this regard. 43. As regards balance of convenience, she stated that it was clear that refurbishment was not illegal and that refurbishment makes an otherwise end- of-life product reusable. She submitted that a refurbished product presents the consumer with a choice. 44. As regards irreversible loss, she pleaded that any injunction would completely shut the business of the defendants, whereas if the plaintiffs would succeed, they could always be compensated in damages. Regards application of Section 30(4) of the Trade Marks Act, she stated that it was not applicable since the sale was not of goods under plaintiffs' mark and it was only in the remote possibility of a technical analysis, that one could possibly ascertain who the original manufacturer was. Regards impairment, she contended that they were not diminishing the product, the change was not injurious in any way but rather they were adding value to the l....
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....rd, that even if there was lawful acquisition and exhaustion, could the plaintiff have a right to challenge dealing in goods under Section 30(4) of the Trade Marks Act. 49. On the first issue, he stated that dealing was with goods which had been de-branded. De-branding could occur in two situations, first, where the brand was not visible at all like in the case of Seagate HDDs, and the other where it would be visible when it is activated as in the case of WD HDDs. According to him, Section 29(1) pre-supposes that there must be use of the mark 'in the course of trade'. As long as there was a trade happening under the registered trademark of the plaintiffs there would be an infringement. But when the brand has been removed, and there is nothing on the product which identifies as the source of the brand owner, whether there could be an infringement or not cannot be stated definitively. 50. The second issue, on exhaustion, invites a question that when the product is being imported, would it fall within the defence of Section 30(3)? This would depend on goods not being lawfully acquired and, if so, the Section 30(3) defence would be vitiated. Lawful imports are those where rig....
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....ithin the realm of passing off. Sufficient declaration and disclosure would ensure that there is no damage to the brand in terms of the primary two functions of source and quality. 55. Ld. Amicus later submitted that removal of the brand cannot ipso facto give immunity to the defendants, as it could amount to infringement. He referred to Champion Spark (supra) wherein it was observed that "cases may be imagined" where the recondition and repair would be extensive; if refurbishment involves a compete breaking down of the product it would be a completely new product, but a simple removal of the brand as in the European Chamber Case of Portakabin Ltd., Portakabin BV vs. Primakabin BV, Case C-558/08, ECLI:EU:C:2010:416, was considered a legitimate reason to injunct them. 56. As regards Section 30(3) of the Trade Marks Act, he submitted that as per the language of the provision, the goods put into the market have to be the same as the goods which bear the registered mark, and if it were not so, the defence under Section 30(3) would not apply. 57. Ld. Amicus submitted that if the product bears the original brand, there ought to be sufficient disclosure post refurbishment so that nothi....
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....ing listed along with the same manufacturer and that India had become a dumping ground for imported discarded products. The 'dumping ground' contention was not supported by Mr. Anand, Counsel for WD. 61. Mr. Dushyant Mahant, Counsel for Consistent, stated that they had no difficulty in disclosing the name of the manufacturer, if that be the decision arrived at. Relevant Judicial Precedents 62. Counsel for parties primarily relied upon three decisions to buttress their arguments. The overarching decision relied upon by counsel for parties is Kapil Wadhwa (supra). In Kapil Wadhwa (supra), the respondents, Samsung Electronics Company Ltd. and Samsung India Electronics Pvt. Ltd., manufactured and traded in electronic goods such as color televisions, home appliances, washing machines, microwaves, air-conditioners, printers etc. under the mark "SAMSUNG/Samsung". The grievance of the respondents was that the appellants were importing printers under the mark "SAMSUNG/Samsung" manufactured and sold by respondents in the foreign market, and selling these printers in the Indian market under the mark "SAMSUNG/Samsung". Respondents alleged that such reselling without their permission....
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.... context in which the learned Single Judge has discussed in paragraph 68(d). .... 68. With reference to sub-section 4 of Section 30 of the Trade Marks Act 1999 it would be relevant to note that further dealing in the goods placed in the market under a trade mark can be opposed where legitimate reasons exist to oppose further dealing and in particular where the condition of the goods has been changed or impaired. With respect to physical condition being changed or impaired, even in the absence of a statutory provision, the registered proprietor of a trade mark would have the right to oppose further dealing in those goods inasmuch as they would be the same goods improperly so called, or to put it differently, if a physical condition of goods is changed, it would no longer be the same goods. But, sub-section 4 of Section 30 is not restricted to only when the conditions of the goods has been changed or impaired after they have been put on the market. The section embraces all legitimate reasons to oppose further dealings in the goods. Thus, changing condition or impairment is only a specie of the genus legitimate reasons, which genus embraces other species as well. What are these sp....
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....eign market by respondent No. 1 or its subsidiary companies abroad. What is pleaded is that the physical features of the printers sold abroad are different from the features of the printers sold in India. But this is irrelevant as long as the goods placed in the international market are not impaired or condition changed. It is pleaded that the respondents have no control pertaining to the sale, distribution and after sales services of its goods which are imported by the appellants and sold in India Now, the Principle of International Exhaustion of Rights itself takes away the right of the respondents to control the further sale and further distribution of the goods. With respect to after sales services, since the respondents do not warranty anything regarding their goods sold abroad, but imported into India and further sold, they not being responsible for the warranty of those goods, nothing turns thereon, as regards said plea. There may be some merit that the ordinary consumer, who is provided with warranties and after sales by the appellants, on not receiving satisfactory after sales service, may form a bad impression of the product of the respondents and thus to said extent one ....
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....ditioned plug. Consequently, the petitioner sued the respondent for infringement of trademark and unfair competition. The District Court found that respondents had infringed the petitioner's "Champion" trademark, and enjoined them from selling or offering for sale any of the petitioner's plugs which had been repaired or reconditioned unless a) the trademark and type and style of marks were removed; b) the plugs were repainted with a durable grey, brown, orange, or green paint; c) the word "repaired" was stamped into the plug in letters of such size and depth as to retain in a white paint to display distinctly each letter of the word; d) the cartons in which the plugs were packed carried a legend indicating that they contained used spark plugs originally made by petitioner and repaired, and made fit for use up to ten thousand miles by the respondent company. 66. The Circuit Court of Appeals held that respondents had not only infringed petitioner's trademark but were also guilty of unfair competition. However, it modified the decree granted in following aspects: (a) it eliminated the provision requiring the trademark and type and style marks to be removed from the repair....
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.... the truth. Mr. Justice Holmes stated, 'A trade- mark only gives the right to prohibit the use of it so far as to protect the owner's good will against the sale of another's product as his.* * *When the mark is used in a way that does not deceive the public we see no such sanctity in the word as to prevent its being used to tell the truth. It is not taboo.' 264 U.S. at page 368, 44 S.Ct. at page 351, 68 L.Ed. 731. 7. Cases may be imagined where the reconditioning or repair would be so extensive or so basic that it would be a misnomer to call the article by its original name, even though the words 'used' or 'repaired' were added. Cf. Ingersoll v. Doyle, D.C., 247 F. 620. But no such practice is involved here.The repair or reconditioning of the plugs does not give them a new design. It is no more than a restoration, so far as possible, of their original condition. The type marks attached by the manufacturer are determined by the use to which the plug is to be put. But the thread size and size of the cylinder hole into which the plug is fitted are not affected by the reconditioning. The heat range also has relevance to the type marks. And there is evi....
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....t 386 (holding that the similarity of products factor is not to be analyzed in isolation, but instead includes a consideration of "the context in which" the trademark is found (internal quotation marks and citation omitted)); Estee Lauder Inc., 108 F.3d at 1511 (finding that although the defendant used the plaintiff's trademark on similar products, this factor did not weigh toward confusion because "each product [was] labelled to show which company is its source"). Nor do we find any error in the District Court's analysis of the "proximity of the products" factor. Hamilton argues that it competes in the same marketplace as Vortic, i.e., the watch market, and the District Court therefore should have found this factor to militate in favor of a likelihood of confusion. The District Court found, however, that the relevant market was one for antique or refurbished watches. This finding was supported by Custer's testimony that Vortic catered to consumers interested in antiques related to American history, and Hamilton failed to provide any evidence that it sold similar types of watches or that both companies sold their products in the same channels of commerce. See Cadbury ....
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....to cover situations involving the common law `palming off' of the defendants' products by the use of the plaintiffs' photographs, it is also comprehensive enough to include other forms of misrepresentation and unfair competition not involving `palming off.'") (citations omitted). The district court's ruling was entirely consistent with the vast majority of section 43(a) cases, however, to the extent that it indicated that a section 43(a) claim may be based on economic practices or conduct "economically equivalent" to palming off. Such practices would include "reverse passing off," which occurs when a person removes or obliterates the original trademark, without authorization, before reselling goods produced by someone else. See Borchard, Reverse Passing Off is accomplished "expressly" when the wrongdoer removes the name or trademark on another party's product and sells that product under a name chosen by the wrongdoer. See 1 R. Callman, supra, § 18.2(b)(1). "Implied" reverse passing off occurs when the wrongdoer simply removes or otherwise obliterates the name of the manufacturer or source and sells the product in an unbranded state. Id. In the instant ....
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....n India through illegal channels, or that there is a policy which prohibits, restricts or discourages such imports. 75. Mr. Ranjan Narula, Counsel, adverted to one single document as part of the Foreign Trade Policy, 2023 published by the Ministry of Commerce and Industry in March 2023, which would not be determinative of a prohibition. 76. No restrictive or prohibitive import policy or circular had been presented by the Ld. Amicus which could lead to a conclusion that the importation of these end-of-life HDDs in any manner whatsoever was prohibited in India. 77. On the material available before the Court, it cannot be concluded that the importation of such end-of-life HDDs manufactured by Seagate or WD is prima facie or patently illegal. As stated above, no agreement or term was pointed out by Seagate or WD with their OEMs which prohibited the detachment of the HDDs from the equipment and prevented further disposal, inter alia, through export to other countries. Furthermore, no material has been supplied by the plaintiffs to indicate that the import was illegal or any complaint in this regard had been initiated by the plaintiffs with the customs authorities or the appropriate g....
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....her. The important sectors for the initial focus of the framework are farming equipment, mobile phones & tablets, consumer durables, automobiles & automobile equipment. Under this framework, it would be mandatory for manufacturers to share their product details with customers so that they can either repair them by self or by third parties, rather than only depending on original manufacturers. The framework also aims to help harmonize the trade between the Original Equipment Manufacturers (OEMs), third- party buyers and sellers - thus also creating new jobs. It will help reduce the vast mountain of electrical waste (e-waste) that piles up each year on the continent and boost business for small repair shops, which are an important part of local economies. It will save consumers' money and contribute to circular economy objectives by improving the life span, maintenance, re-use, upgrade, recyclability, and waste handling of appliances." (emphasis added) 82. A "Right to Repair" portal has also been formulated, to serve as a single platform to provide necessary information on repair and maintenance of products to consumers. The portal is stated to have come up for four secto....
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....he rights of a registered trademark proprietor. Section 30(3) is premised on three conditions: first, that the goods in question bear a registered trademark; second, that these goods are lawfully acquired by a person; and third, sale of these goods in the market or otherwise dealing those goods by that person. If these three conditions are satisfied then the trademark will not be deemed to be infringed in two prescribed situations: first, if the registered trademark is assigned by the registered proprietor to some other person, after the acquisition by a person of those goods, essentially that the registered proprietor has lost or given up its rights on the trademark; and second, the registered proprietor itself has put goods on the market or they have been put out with its consent. 86. Naturally, to support a plea of non-infringement, the defendant has to prove that it falls within this rubric. In this case, the plaintiffs assert that; (i) the goods, when they were imported into India and till they came into the refurbisher's hands, did bear the plaintiffs' registered trademark; (ii) there was no lawful acquisition by the defendants, in that, they were imported and sold i....
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....ince its condition has been changed or impaired, which would include the removal of the original trademarks, Section 30(3) could not apply. This interpretation of the third pre-condition of Section 30(3) and the express provision under Section 30(4), excepting out goods which are changed or impaired, settles into a sensible and logical construct. 90. This interpretation is also informed by the decision of the Division Bench of this Court in Kapil Wadhwa (supra). Without adverting to the facts of this case, which is extracted in detail in para 62-64 above, the Division Bench discussed the import of the word "market" in Section 30(3), as well as "lawfully acquired", and "impairment" as provided in Section 30(4). On "market", the Division Bench held that it includes international market (para 71 of the said decision). On "lawfully acquired", the Division Bench stated that the law in question would be where the sale and purchase is happening and not only of the country where the trademark is registered. The regulation in this case of the sale and purchase would, therefore, have to be seen under Indian Law (para 42 of the said decision). 91. On "impairment", the Division Bench, in the....
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....price. 95. Even though in Champion Spark Plug (supra), the issue was not of removal of the trademarks on the original goods but of merely reselling them in a refurbished condition, the US Supreme Court was categorical that selling second-hand goods legitimately would involve the inclusion of the mark. Notably, the District Court in Champion Spark Plug (supra), directed that the trademarks be removed, which condition had been set aside by Circuit Court of Appeals; the US Supreme Court chose to affirm the Circuit Court of Appeals on this issue. It observed that the sale of second-hand products is permissible, so long as the manufacturer is not identified with the inferior qualities of the product resulting from reconditioning. 96. Retaining the manufacturer's trademarks would also obviate the argument of the plaintiffs on reverse passing off. Counsel for the plaintiffs had relied on Smith v. Montoro (supra) of the United States Court of Appeal, 9th Circuit, submitting that in removing references to the manufacturer's mark on the HDDs and selling the refurbished product as their own, defendants were indulging in an act of reverse passing off. The customer would eventually fi....
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.... and in particular the "double identity clause" under Article 9(2)(a). In order to find for infringement, the author states "it needs to be assessed whether the allegedly infringing conduct jeopardizes or risks jeopardizing in particular the essential function of guaranteeing origin, or other protected functions, such as the quality, advertisement, investment or communication functions". 103. In discussing a case, being Viking Gas v Kosan, Case C-46/10, ECLI:EU:C:2011:485, which involved refilling of branded containers of liquids, gases, the author states as under: "The only legally relevant question in this context is whether the person undertaking the refilling can be held liable for infringement. The CJEU had to deal with this situation in Viking Gas v Kosan. The plaintiff held an exclusive license in the shape of composite gas bottles registered as a trade mark. The defendant refilled empty gas bottles originally filled by the plaintiff and delivered them to independent dealers, with additional labels bearing his name as well as additional information. Being asked whether this amounts to infringement, the CJEU responded that a balance must be struck between the legitimate in....
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....ing the mark affixed to them and replacing it with its own trade mark 'Primakabin'. In Mitsubishi the defendants removed the trade mark from Mitsubishi's fork lift trucks, replacing it with their own mark, in the course of customs warehouse procedures preceding importation of the products into the EEA. In Portakabin the CJEU found that using the mark 'Portakabin' in advertisements for the products now sold under the trade mark 'Primakabin' amounted to an encroachment of the origin function. The same was held in Mitsubishi, even though in that case the allegedly infringed trade mark had not been used in relation to the actual products within in the EEA. In addition, the CJEU found in Mitsubishi that the advertising and investment functions were put in jeopardy. The cases appear to signal that once a product has been put on the market under a trade mark - within or outside the EEA - anyone removing that mark and replacing it with their own sign commits an infringement when the product is subsequently commercialised in the EU. Thus, the right pertaining to the use of trade marks for indicating commercial origin is transformed into a right governing the co....
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....ape no longer originates from the trade mark proprietor, but rather from the person transforming it. Likewise, regarding the additional trade mark functions, the fact that removing the mark interferes with the trade mark holder's commercial strategies cannot be considered as detrimental if and because the proprietor would not want to be associated with the products in their actual condition." (emphasis added) 106. The author then seems to recommend that removing the mark is a drastic measure, and it is preferable to employ less intrusive means. In some cases, the trade mark cannot be removed for physical or technical reasons, particularly for electronic items where display of the mark is engrained in the operating system or the mark is embossed on the product of the body, or burnt into its surface, or when the shape of the product is its own trade mark. 107. The reseller as well as customers may have an interest to give and receive information about the identity of the original brand, which deserves at least some consideration, she notes. 108. The author, therefore, recommends as under: "A middle solution is possible if, by additional labelling or accompanying product inf....
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....i.e. manufacturer/ OEM/ wholesaler/ distributor/ retailer in the chain would be liable for any repair or servicing. Of course, if the retailer for purposes of promoting its sale, decides to give an additional warranty over and above the manufacturer's warranty or the OEM's warranty, that will only be a sales incentive. 112. Post exhaustion of warranty, none of these entities i.e. manufacture/OEM/ wholesaler/ distributor/ retailer have any liability or responsibility of the state of those goods, unless of course, there is a mandate under any law, regulation or policy of managing their disposal. In a situation where such policy or regulation does not exist, or even if it exists but does not impose conditions on the manufacturer, the umbilical cord is cut and the goods are in an untethered space. This is exactly where the principle of exhaustion comes into play; therefore, under Section 30(3)(b), the registered owner/manufacturer has no right to object to any dealing. 113. The only caveat is in Section 30(4) where, if the marks are removed from the original product or it is disfigured or changed in a manner that possibly amounts to 'change' or 'impairment', a....