Introduction:

Many of us have bought smartphones or laptops which were purchased by the seller in countries like USA and UAE and sold in India in the so-called ‘Grey Markets’. While doing this we are usually aware of the technical nuances like the fact that the warranty is not valid outside the country of sale. However, what we are usually not aware of are the legal nuances associated with this practice.

Parallel Importation and Doctrine of Exhaustion:

The situation relating to importation of goods into one country after purchasing it in another come under the ambit of Parallel Importation.[1] Generally, the simple act of purchasing the product in one country and importing it into another is legally allowed. However, legal concerns arise when the purchaser goes on to make a subsequent sale of that product in the country of importation. The legality of such practice in a country is decided by the Doctrine of Exhaustion adopted by that country. Doctrine of Exhaustion refers to the depletion of the trademark owner’s rights over a particular piece of his/her product once that piece is bought by the buyer legitimately in the market where the trademark owner or any party authorised by him has introduced his/her goods for sale. The area in which the trademark owner loses or exhausts his rights upon sale depends on the doctrine of exhaustion followed by the concerned country.

Kinds of Doctrine of Exhaustion:

The TRIPS Agreement, by virtue of Article 6 has allowed the participating countries to adopt their own doctrine of exhaustion. As a result of that, essentially 3 different kinds of doctrine of exhaustion are followed and recognised internationally:

1. Doctrine of International Exhaustion: This Doctrine expounds that once trademark goods are sold in a market with the consent of the trademark owner he cannot enforce those rights anywhere in the world. This Doctrine is generally followed by the least developed countries as it enables them to import technologies and innovations found in the developed nations at a reasonable prices.
2. Doctrine of Regional Exhaustion: As per this Doctrine, trademark owner cannot enforce his rights to resale in the countries which belong to a particular region once the goods are sold in a country belonging to that region. However, rights to resale can be enforced if the subsequent sale is made without a prior sale by the owner in any of the countries within the region.
3. Doctrine of National Exhaustion: This doctrine maintains that trademark owner cannot prevent subsequent sale in the national market if the first sale was made by the trademark owner in the same national market. However, if the trademark owner had not introduced and sold the goods in the national market then he can prevent subsequent sale by other individuals.

Thus, the legality of sale in the country of import after parallel importation and the enforceability of the rights of the trademark owner to prevent the subsequent sale in that country depends on the kind doctrine of exhaustion followed in the country.

BY

TANVEER MALNAS

B.A.L.L.B – 4th Year

ILS LAW COLLEGE, Pune

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[1] Shrabani Raut, “Parallel Imports and International Exhaustion”, Intellectual Property and Technology Law Update, Page 3 (2018).