TaxTMI 
TaxTMI 
2012 (10) TMI 1246
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....rong 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. 1. Samsung 7 591127 2. SAMSUNG 7 105....
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....uct 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, uses in the course of trade, a mark which is identical with, or deceptively similar to the trade mark in relation....
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....istered 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 section 29 shall be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprie....
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...., 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 after they have been put on the market. 7. It needs to be clearly stated that the discussion by the learned Single Judge is with respect to an action brought by a registered proprietor/use....
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....uch 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). Section 30(3) of the Trade Mark Act 1999 serves merely as an exception, by limiting some of the rights conferred upon the registered proprietor. It could not be read as giving an additional right to some other....
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....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 Bill 1999; nor could any reference be made to articles showcasing the viewpoints, (probably lobbies exist), as can be gathered from the discussion by the learned Single Judge in paragraphs 104 and 108 to 113 of the impu....
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....o 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, having two Captains : Shri Pravin Anand, Advocate, ably assisted by his Boatswain Shri Nischal Anand, Advocate, and Shri Saikrishna Rajagopal, Advocate and his Boatswain Ms. Shwetasree Majumdar, Advocate; each steering the ship toward....
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....e 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, 1999 by the learned Single Judge but not the reference by the learned Single Judge, in para 36 to the commentary by Morcom, Roughton and Nalynicz : 'Modern Law on Trade Marks, 3rd Edition (2008)', for the reason the commentary pert....
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....ation 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. And this takes us to an analysis of sub Section 3, which is the core Section on which the issue would be resolved. 25. As noted above the learned Single Judge has discussed this provision from paragraph 40 onwards till paragraph 69 and the discuss....
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....ough 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 rectify itself, but noting that patent printing errors can always be rectified and this would not be legislation by the Court, we revisit sub section (3). It can be broken into three segments; (i) goods bearing a registered trade mark are lawfully acquired by a person; (....
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....sition 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 registered proprietor has the knowledge about the said acquisition and he assigns the trademark after the said acquisition. A clear and workable example of the said proposition mentioned in clause (a) would be that proprietor after selling the goods to the market or ....
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....nnot 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 it becomes clear if one reads the same plainly in view of point No. (c) above, must bear the registered trade mark and therefore originate from the domestic market. At the best, it can be said that they are silent about the lawful acquisition.' The lear....
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....d 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 changed or impaired after they have been put on the market. (B) United Kingdom. Section 12 of the Trademarks Act, 1994: (1) A registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market in the European Econo....
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....een 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 nor international but expanded/confined to the entire European community. Similarly the legislation in Singapore and Hong Kong uses well defined expressions 'goods which have been put on the market, whether in Singapore or outside Singapore' and 'put on the market anywhere in the world'. 46. ....
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....e 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 Section 30 of the Trade Marks Act 1999, in paragraph 7 herein above. The word 'market' finds a mention five times in Section 29 and Section 30: (i) Section 29(6)(b) - 'on the market'; (ii) Section 30(2)(b) - 'any market'; (iii) Section 30(3) - 'in the market'; (iv) Section 30(3)(b) - 'o....
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....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 especially when the Statement of Objects and Reasons clearly states that the proposed law is based on the principle of international exhaustion of rights; it would be difficult in such a situation to ignore such a strongly expressed statement while considering the statute. 60. Undisputedly, preceding the TRIPS Agreement, when the interna....
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.... 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 leading to loss of goodwill and reputation in the market. Such loss of faith would be purely because of the actions of a 3rd party. (LOSS) 2. Right holder Common control in quality and pricing. (GAIN) May have to deal with products with differences in price and quality. (LOSS) The right holder would be bound to take responsibility for all the goods and services under the mark. (GAIN) The right holder may be unable to redress....
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....re 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 printers imported from abroad by the respondents and sold in the Indian market:- S. No. Model No./Price at which appellants import and sell. Model No./Price at which respondents import and sell. 1. ML-1660/XSG : ₹ 3300/- ML-1666/XIP : ₹ 6290/- 2. SCX-3200-XSG : ₹ 6500/- SCX-3201/XIP : ₹ 8999/- 3. SCX-4623F/XSA : ₹ 9500/- SCX-3201FN/XIP : ₹ 18999/- 66. We may clarify that it is not in dispute that the products are not identical but are similar; of course, the cheaper versions have lesser memory and lesser printing capacity....
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.... 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 market' contemplated by Section 30(3) of the Trade Marks Act 1999 is the international market i.e. that the legislation in India adopts the Principle of International Exhaustion of Rights. 71. That leaves the last submission of the respondents, that in view of Section 30(4) they are entitled to oppose further dealings by importers of their printers to India. 72. It is not the case of the respondents that the appellants are changing the condition of the goods or impairing the goods which are put in the foreign market by respondent No. 1 or its subsidiary companies abroad. What is pleaded i....