Authorisation of parallel imports as held by the Division Bench of Delhi High Court in the recent judgement of Samsung Electronics Co. Ltd. v. Champion Computers has begun the process of ‘editing and altering’ the shape of trademark law in India. The Indian courts are now in a problematic situation in which they have to strike a balance between the conflicting interests of the parties in question. On the other hand, for the developing countries like India, parallel imports are not less than a boon for the distributors and consumers. However, in this due process, the trademark law in India is trying to find its true preamble.
The Indian trademark law has witnessed notable changes over the past decade. The recent Samsung Case, which was judged by the division bench of Hon’ble Delhi High Court, has flashed some more changes in the trademark law. The bench overruled the findings of a single bench, which clearly stated that parallel imports are not authorised under the Indian trademark law.
Parallel imports in general terms signify the importation of a non-counterfeit product from another country without the permission of the owner, who owns the intellectual property attached with it.
The division bench has clearly upheld that parallel importation is permitted under the Trademarks Act, 1999 and it does not violate the rights of the proprietor. The division bench has highlighted that Champion Computers has been rightful enough to import the original Samsung printers through a parallel chain. The core concerns, which arose in this case, may be highlighted as under.
The first issue which came up was whether it is entirely justified to buy genuine products from the so called grey markets or places where such products are available at cheaper rates. From consumer’s view point it’s a heartening scenario but for a manufacturer/producer view point is taken, it is a discouraging prospect. As discussed by division bench, the preamble of trademark law does not guarantee any regulation on sale of goods; it simply highlights how the registered trademarks can be used.
The division bench clearly stated that Section 30 (3) of the Act does not guarantee any monopoly right to the proprietor on the notion that he can claim infringement if some other person, within the same market segment, acquires the goods legally (becomes the owner of the said goods by buying them) and sells them. This section recognises only national exhaustion and hence, restricts the registered proprietor to control the commercial exploitation of goods put on the domestic market.
As Champion Computers won the case against Samsung, the judgment was well supported by the All Delhi Computer Traders Association or ADCTA. The legitimacy behind the parallel imports has disturbed the international companies such as Samsung Electronics Co. Ltd. not only on the lines of trademark infringement, but also due to high evasion of the product surplus.
Product surplus, as per the economic terms, means the surplus which the manufacturer or producer acquires on the selling and distribution of goods through the authorised route. The mechanism of product surplus is worked out by the owner in a way where he increases or decreases the price per product as per the expected consumer participation for products so launched. The surplus is created on the foothold of a highly demanded consumer segment that is willing to pay more for the genuine and gorgeous gadgets. The prices in Africa will be higher as compared to the product pricing in countries like India due to the hyper-active participation of consumers.
However, when parallel imports are authorised, the market is flooded by two types of distribution chains, legally – the registered proprietor distribution chain and the parallel imports chain. When the parallel imports chain runs, it distributes the authentic products of the registered proprietor at a cheaper rate and so the very process of acquiring a high amount of product surplus is evaded. It could be thus analysed that the economic impact of legalising the parallel imports has a deterrent effect over the registered proprietor‘s sales and distributions. A consumer, who is well aware of such imports chain, becomes highly active on buying the goods through this cheaper route.
One of the added advantages of being a consumer of the parallel imports chain is that despite being low in value as compared to the original chain, it is also non – counterfeiting in nature.
Parallel imports are having entirely opposite impacts on two ends of the business – the consumer and the owner.
As per the United States Trademark jurisprudence, the true significance of trademark law is to signify the goodwill of the local business of the domestic owner. The trademark law does not act upon stating the origin of the manufacturing of the goods or services so involved in the process. In case of Indian trademark law jurisprudence, one of the important cases in the regard was Bose Corporation v. S Mehta (CS (OS) No. 337 of 2006) where the defendants were restrained from selling the digital audio music systems of the plaintiff. At the earliest, parallel imports were held unauthorised and it was assumed that the Indian trademark law had a perfect picture. However, as the cases went, recent one being the multiple trademark infringement suits by Samsung initiated the process of ‘editing and altering’ the shape of trademark law in India.
It could be seen that the Indian courts are finding difficulties in making a striking balance between the interest of the trademark owners and the consumers. The core concern in this issue is that with a developing economy like India, parallel imports tend to be favoured on the notion of ‘best suit’ for the nation’s interest – since it reduces the buying price per product per consumer. On the other hand, if the disadvantages or deterrent effects of parallel imports are taken, they cause consumer confusion with regard to the trademark so associated with the goods in the chain.
It could be effectively concluded that the trademark law in India will be shaping itself through the turns of the cases as come by. Samsung case against Champion Computers is another witness in the regard. The Indian courts are now responsible to view trademark law on the notion of striking a balance between the interests of the parties, which are involved in such cases.
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