Understanding the Parallel Importation in India

With the rise in trade and commerce across the world, countries are more and more looking forward towards a trade barrier free world, where imports and exports can help every possible nation to grow with revenue and resources. Analysing the present issue, Adam Smith, the father of modern economics, emphasized the importance of free trade and stated that if countries remove the trade barriers and allowed free flow of goods from one nation to another that would invite greater prosperity to the countries and fulfil the interest of its citizens.[1]

But, free flow of goods can somewhere down the line infringe the rights of owner of an original product, as counterfeiting and forgery of the products are the unwanted evils that haunt the idea of free trade and commerce. Thus, rights of the owner of a product needs to be protected to ensure that the products are not counterfeited and thereby sold, harming the rights and revenue of the owner, and putting a threat to new and noble ideas.

The process of selling a product across borders via registered or unregistered trade channels, but without the consent of the owner of the product is known as parallel importation. For instance, a book shall be sold for say Rs. 500 only in India as per the wish and fancy of the owner of the book. But, the author wants the same book to be sold in Bangladesh at a relatively lower price of Rs. 250.

Now, the book sold in Bangladesh can be easily bought and imported in India by traders and as a result sold for price relatively lesser than 500. Thus, the following can infringe the rights of the author as though the books were same, but they were meant to be sold in two different jurisdictions. But, due to parallel importation of goods, the traders can create a grey market which results in infringing the intellectual property rights of the owners and denting massive revenues from them.

But, the owner cannot enjoy absolute autonomy over its rights as this would again be detrimental to trade and business. As for instance, a car manufacturing company exhausts its rights over its product immediately after the car is sold from the factory. Later, it cannot claim rights and revenue after every sale of the car in the market. Thus, after being sold from the factory, the car may be sold to the retailer, then to the customer, who may thereby use it for some years and then sell to another person, but the company cannot claim infringement of rights after every sale, as the rights get exhausted after the first sale.

Following from above, there are majorly three kinds of exhaustion of rights, i.e. Regional Exhaustion wherein the following system restricts the circulation of a product to a specific region or area. If the owner circumscribes the circulation and sale of its product within the territory of a particular nation, restricting imports and exports of the product, then the following system is known as National Exhaustion. Lastly, in International Exhaustion the owner cannot restrict the trade and sale of its goods once it is circulated or introduced anywhere across the world.

Regional system of exhaustion follows the most restrictive approach, whereas international exhaustion system follows the least restrictive measures. Different countries across the world follow different pattern while dealing with the present issue. Several African countries such as Ghana, Liberia and Tunisia, while Philippines in Asia, follow the system of National Exhaustion of Rights. It is only the European Union that follows the Regional Exhaustion of Rights prominently while countries such as China, India and Malaysia follow a system of International Exhaustion.[2]

In India, Section 29(1) of the Trademark states that-“A registered trademark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in course of trade, a mark which is identical with, or deceptively similar to, the trademark in relation to goods or services in respect of which the trade mark is registered and in such manner as to render the use of mark likely to be taken as being used as a trademark.” Further, a person uses a registered mark if:-

1. –
2. –
3. Imports or exports goods under the mark;

So, importation and exportation of trademark is considered as use of a mark. Now, this use is done by any person authorized or unauthorized, i.e. if a person imports or exports goods which are similar to the trademark without prior consent of owner, it shall be considered as infringement of trademark as per Section 29(1) read with Section 29(6)(c). For instance, A in Bangladesh sells printers at a price of Rs. 2,000. B, a trader in India, buys the printer and sells it in India at Rs. 5,000. In the present situation there is no infringement of trademark, but, if the printer is solely for sale in Bangladesh, then the same is infringement of trademark.[3]

Section 30(3) on the other hand mentions about exception to infringement of trademark. It states that “where the goods bearing a registered trademark 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 if:-

1. –
2. The goods having been put on the market under the registered trademark by the proprietor or with his consent.”

Thus, there shall be no infringement of the trademark, if by prior consent of the owner the goods are circulated in the market and thereafter the goods are sold further to another person. For instance, a company certifies A as the proprietor of goods in the market. Now, A sells it to a retailer B who thereby sells the product to the customer. Now, B shall cannot be sued by the company for infringement of trademark as the rights of the company got exhausted the moment it sold its product to A.[4]

The position of the present situation has been simplified in India through case laws such as Kapil Wadhwa v Samsung Electronics[5], and Western Digital Technologies v Ashish Kumar, wherein the Court stated that after analyzing the communication of India in the Uruguay rounds of WTO in 1985, and report of the Standing Committee on the Copyright (Amendment) Bill, 2010, it is explicit that India follows the concept of International Exhaustion of Rights. Further, the Court stated that it cannot prohibit parallel importation in the country, as firstly it follows the system of international exhaustion of rights, and secondly, parallel importation would help in creating a competitive market which ultimately would benefit the consumer.

But, while doing so the trader should provide a message while selling the product that the owner of the product shall not be liable for any discrepancy in the product. For instance, if Samsung printers are being sold through parallel importation, then the seller shall provide a message while selling the printer that in case of any discrepancy in the product, Samsung shall not be liable for the faulty product. This, shall withhold the reputation of the owner of the product, and shall further absolve them of any liability which might arise during sale through parallel importation.

Though the stand of judiciary is crystal clear in the present situation but the government should introduce more regulations and policies which could deter the import of counterfeited products in the market. Strengthening the custom security and tracking of counterfeited product should be undertaken to protect the rights of the innocent and diligent companies.    

[1] Adam Smith, “The Wealth of Nations”, Oxford, England, 2002.

[2] Christopher Heath, “Parallel Imports and International Trades”, WIPO Journal,

[3] Shyamolima Sengupta and N V Saisunder, “Concept of Parallel Imports and the Principle of Territorial Exhaustion of Rights under the Indian Trademarks Act, 1999”, Lexology, March 30, 2020.

[4] “Legality of Parallel Imports vis-a-vis Trade Marks Law”, August 21, 2018.

[5] 2013 (53) PTC 112 (Del) (DB).