Parallel Imports and Grey Market Goods

In one line

Grey market goods are genuine goods sold outside the proprietor's chosen channel, and whether he can stop them turns on section 30(3), on whether India's exhaustion is national or international, and on the limit in section 30(4).

What the words mean

PARALLEL IMPORT. Genuine goods, put on the market abroad by the proprietor or with his consent, imported into India by somebody other than his authorised importer.

GREY MARKET. The trade in such goods. Grey, because they are neither black, being genuine, nor white, being outside the authorised channel.

EXHAUSTION. The principle that once goods have been put on the market by the proprietor or with his consent, his rights in respect of those goods are spent, and he cannot control their further movement.

NATIONAL exhaustion. Rights are exhausted only by a first sale in India. Goods first sold abroad may be stopped at the border.

INTERNATIONAL exhaustion. Rights are exhausted by a first sale anywhere in the world. Goods first sold abroad may be imported freely.

The whole topic is which of those two India follows.

The provision

Section 30(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 mark 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."

Section 30(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."

The interpretive question

Section 30(3)(b) speaks of goods "put on the market" without saying WHICH market.

The international exhaustion reading. "The market" is unqualified, so a first sale anywhere exhausts. On this view a parallel importer of genuine goods commits no infringement, and the proprietor's remedy, if any, lies in contract against his foreign distributor.

The national exhaustion reading. The Act is Indian and speaks of the Indian market, so only a first sale in India exhausts. On this view section 29(6)(c), which makes importing goods under the mark a use, gives the proprietor a right to stop the import.

The two provisions pull against each other. Section 29(6)(c) says importing is use; section 30(3)(b) says dealing in goods put on the market with consent is not infringement. Which prevails depends on the reading of "the market".