Patents, Parallel Imports

and Exhaustion: A Primer

Submitted by Group #9:

1.
2.
3.
4.
5.
6.
7.

Shubham Bawa:15pgp049.shubham@iimraipur.ac.in
Mukund Khatod:15pgp142.mukund@iimraipur.ac.in
Aadit Pattnik:15pgp001.aadit@iimraipur.ac.in
Taneha Verma:15pgp121.taneha@iimraipur.ac.in
Navin J Kumar:15pgp019.navin@iimraipur.ac.in
Lakshmi Prasanna:15pgp059.lakshmi@iimraipur.ac.in
Ravi Shankar Prajapati:15pgp122.ravi@iimraipur.ac.in

Abstract
Indias amendments to her patent laws in 2005, of introducing medical product patents
attracted undivided attention, both nationally as well as on the worldwide scale. While big
giants in this field were worried that this changes in the act will take away their dominance
and privileged rights, people working for development of civil society as a whole decried this
these new amendments, being afraid of the fact that it will take prices of important lifesaving
medicines to an awfully high level. These changes in patent laws have produced some really
unexpected results, the most recent one being the case of Delhi High Court that denied an
injunction to an MNC patentee because it sold highly expensive drug than infringing
manufacturer.
Given that some provisions like Section 3(d) continue to gain a lot of attention, other have
been completely lost in legality of their implications. One of those provisions is Section
107A(b) dealing with parallel imports, which if read in strict and proper manner can cause far
reaching impacts for the exclusivity of patentee. The following report showcases this
particular provision, which has till now not got the required attention it deserves. It identifies
the uncertainties present in this section and talks about the gaps in the Indian legal system
relating to exhaustion and parallel imports. Last but not the least, the report suggests certain
legal changes in order to rectify hideousness inherited in the section and widen the scope of
finishing out invested therein, while at the same time remaining TRIPS complaint.
The entire report discusses about following topics in detail in various sections. One topic is
related to concept of finishing out/parallel importation in relation to patents. Another topic
examines the uncertainties present in section 107A(b). This topic also explores the backdrops
in the law relating to exhaustion in India and assessing the TRIPS compatibility of current
regulations. Then there is a separate topic which recommends the creative way of analysing
and understanding the present legal provision so as to do away with uncertainties, and equal
out the rights of patentees and parallel importers in an optimized manner without going
against any provisions of TRIPS agreement. A final topic recommends legal changes to
Section 107A(b).

Introduction
A patent is a combination of rights given to an inventor whose invention complies with
certain prerequisites like novelty, no obviousness and additional utilities. These exclusive
rights include the legal right to manufacture, use, sell and control imports and exports of such
patented goods.
The Doctrine of exhaustion puts limitations on above mentioned rights. As per doctrine, A
patented items starting authorised sale terminates all patent rights to that item. In different
words, theperson who inventedjust cant resale, redistribute the good already been sold once.
If exhaustion rights had not been there, a purchaser of any article, that is patented, can be
prevented from distributing it further or even utilising it for any random purposes since it
implicates exclusive right of patenting.
For Example, Suppose a person buys a washing machine which is patented. In the realistic
world the person is free to use the machine in any sense he or she wants or even resale it
without fear of being sued for patent infringement. The logic behind this theory of exhaustion
and doctrine of first sale can be stated as follows:
The patentee has already been rewarded with the right of first sale and should not be allowed
to profit repeatedly on the same good by controlling its utilisation, reselling or varied
distribution.
However, the doctrine of exhaustion is controlled by certain factors, like:

Exhaustion starts only if first sale is made by or after the authorization of patentee.
Exhaustion in relation to a particular patent does not affect exclusive rights of the patentee
regarding to remaining patented articles.
Legal parallel imports is nothing else but a corollary of the doctrine of exhaustion and
implies:
An export of a patented good, say from a country A (such as China)
Import of above stated patented good into country B(such as India)
A parallel importer basically engages in price alteration and exploitation of price differences
existing between countries A and B, mentioned above. Hence countries encourage such
imports to guarantee patented goods at lower price for their customers.
It should be noted that third parties who may not be necessarily related to patentee, are the
ones that eventually lead to parallel imports. Whether or not the import of such goods into
importing country (like India) can be stopped by the patentee by the recourse to the importing
country court of law will depend on the laws of the importing country. For example, since the
laws of India have provisions for International Exhaustion, such imports in India are legally
justified. Comparing this with US and EU who dont have any provision for international
exhaustion: any import of patented goods from countries like China or Bangladesh to US or
any EU countries, therefore can be prevented by the patentee, even if the patentee place the
goods in China/ Bangladesh market.
The description given in the following text, relates to various kinds of exhaustion. We should
keep in mind that the area of exhaustion depends on kind of IPR in question that is the rules
and laws relating to Exhaustion in consideration to patents are remarkably different from
those mentioned in copyrights and trademarks.

Methodology/Hypothetical Scenario
National, Regional and International Exhaustion:
Take the following hypothetically modified recent case which took place in India. Roche, a
Swiss multinational corporation owns a patent over an anti-cancer drug, tarceva in India. It
sued Cipla for introducing a generic version of this drug and requested Delhi High Court for
injunction against Cipla. The court decided in favour of Cipla on the grounds of public
interest i.e. Cipla sold a cheaper affordable version of tarceva. Till this point the hypothetical
showcase the actual case itself that is currently pending before Delhi high court, due to
further complications.
Let us assume that Cipla in injuncted (at final stage) by Delhi high court and is not allowed to
sell generic versions of tarceva in India. Also let us assume that Roche has patents covering
this drug in remaining neighbouring countries of India like Bangladesh and Pakistan.
However, since price differential is there, with highest price in India and lowest in
Bangladesh, the following questions arise:
Can Cipla import drugs from Bangladesh to India and avail advantages of differential
pricing?
Can Cipla purchasemedicines from Roche in Bangladesh and sell back within Bangladesh
borders, particularly to those areas which are not serviced by Roche or its distributers or
agents?
Can Cipla import the drugs from Bangladesh to Pakistan and take benefits of differential
pricing strategy?
The answers to above stated question depend on different Exhaustion and Parallel Import
laws present in south EastAsian countries like India, Bangladesh and Pakistan. Assume for
the purpose of hypothetical situation that Bangladesh and Pakistan are following domestic

exhaustion, and India follows international exhaustion. Let us further assume that Pakistan
and Bangladesh are members of a regional BLOC and follow Regional Exhaustion as well.
National Exhaustion- Bangladesh:
In the above mentioned hypothetical, Cipla can buy Tarceva capsules from Roche in
Bangladesh and re-sell them or redistribute them anywhere in Bangladesh especially in those
areas which are not covered by Roche. Understandably, it will do so only after ascertaining
that it can enter in price alterations, meaning that Cipla is capable of selling the drug at higher
prices in the areas especially those which are not covered by Roche. Here again, since Roche
has already sold the drug at the start, it cannot control the re-selling or re-distribution within
the geographical territory of Bangladesh. It should be taken care that within concept of
domestic exhaustion, the purchase of any article which is patent and its corresponding resale or re-distribution is to be limited within the geographical borders of Bangladesh
International Exhaustion:
The Hypothetical mentioned above explicitly specifies that Indian patent laws follows
principle of international exhaustion i.e. once Roche sells Tarceva capsules in
Bangladesh/China, either itself or through an authorised seller, its rights stands exhausted
related to that product. Cipla is free to bring the same capsules to India and it can sell those
capsules at pretty expensive price. While on one hand countries like India, Japan, Australia
and New Zealand have legalised the principle of International Exhaustion, several countries
like US, EU, Brazil and China have not given legal recognition to principle of international
exhaustion.
Regional Exhaustion- Pakistan and Bangladesh:
Certain countries allow parallel importing of goods to a certain regional bloc, so long as the
starting sale is legally made by the person holding patent or any person authorized by him
within the country, in that bloc. European Union is a good example of this, where patented
goods have been exposed to starting sale anywhere in the community can be sold and
imported to any other EU country without the permission of person holding patent, provided
that the starting sale is made by authorisation of person holding patent. Given that Pakistan
and Bangladesh are members of regional bloc in the above stated hypothetical, a sale in
Bangladesh will exhaust the rights of person holding patent in entire bloc. And so goods can
cross over to Pakistan without prior permission of patentee.

Section 107A
A collection of exclusive rights granted to any inventor whose invention satisfies certain
conditions like non-obviousness, utility and novelty is called as Patent. These exclusive rights
include right to make, use, sell and import patented goods into a country. The resale or
redistribution of particular items already sold once cannot be controlled by the patentee.
It is not considered as an infringement if a person imports patented goods from a person duly
authorized under the law to produce and sell/distribute the product.
This authorization under the law is for purposes of production and sale/ distribution in
India, and not to authorize an export from a foreign country or import into our country. Also,
Indian law cannot authorize production and sale/distribution outside India; it can only
authorize these acts within India. Likewise, foreign law cannot authorize production and sale/
distribution in India, it can speak only of acts within its territory.

Ambiguities in Section 107A(b)

The loophole is actually a provisionSection 107A(b) of the Indian patent law amended in
2005that allows local companies to import copycat or generic drugs manufactured in least
developed countries such as Bangladesh, Nepal and several African nations, without the
authorization of the patent holder.
Here is a hypothetical situation as follows:
1. X has a patent on A in India
2. Notwithstanding Xs patent on A, Y has been duly authorized under an Indian legislation to
produce and sell/distribute the patented product A in India (This could happen even under the
Patents Act, if Y is granted a compulsory license on Xs patent on A under Section 84 in
India.)
3. Y also has a manufacturing base in Bangladesh, which manufactures A (the product is
patented only in India) in Bangladesh
4. Z may import the patented product A from Y from Bangladesh into India, and such
importation would not be deemed as infringing Xs patent on A.
Simply put, since Y is a person/entity who has due authorization under Indian law to produce
and sell/distribute the product in India, importation into India of the patented product
(product protected by an Indian patent only) from Y by any person Z in India does not
constitute infringement of the Indian patent.
This means companies here can import drugs from a country where pharma patents are not in
effect if the local law in that country authorizes the manufacture of those medicines. In the
earlier version of the law, an authorization by the patent holder was a compulsory
requirement.
Indian drug makers have rushed to take advantage of this, and several of them have even
started working on building manufacturing plants in these countries. The new provision may
not be in complete compliance with the international trade rules of WTO. However, a smart
judiciary interpretation could make it possible for generic drug companies such as Cipla Ltd,
Ranbaxy, Sun Pharmaceutical Industries Ltd, Dr Reddys Laboratories Ltd and Natco Pharma
Ltd to set up manufacturing facilities in least developed countries, according to patent law
experts.
A literal reading of Section 107A(b) would seem to suggest that Cipla or Ranbaxy, for
instance, could set up shop in a country with no pharma patents such as Bangladesh and then
export (say) Roches (F Hoffman La Roche Ltd) patented drugs to India
Section 107A(b) earlier insisted that a company could import such drugs only if it purchased
them from a person who was duly authorized by the patentee to sell those drugs in
Bangladesh. The provision was amended in 2005 to say that it was not necessary for the
exporter in Bangladesh to be authorized by the patentee. As a result, if the exporter is
authorized by the law in Bangladesh to produce and sell the product, a drug maker such as
Cipla can import that product legally under Section 107A(b).
Thus, Ciplas recent decision to set up joint venture companies in African countries such as
Uganda and Morocco with local partners will help the company do this. And Mumbai-based
Sun Pharma, which has a manufacturing plant in Bangladesh, can explore this option.
Ranbaxy Laboratories Ltd, the countrys largest drug maker, already has manufacturing
facilities in least developed countries including in Africa.
Still, Indian drug makers are being discreet about their plans.

The only hurdle is with the interpretation of certain sections of the law as companies that
choose to import patented drugs from least developed countries might run a serious risk of
violating the exclusive right to import guaranteed under Trade Related Aspects of Intellectual
Property Rights, or TRIPS.
It remains to be seen if approached, whether an Indian court will interpret Section 107A(b) in
accordance with what it believes to be the correct TRIPS interpretation.
The import restriction notified in the countrys customs regulations for patented products also
matters a lot to conclude whether such imports will be easy.
There is also a direct threat from patent holders, who could persuade their respective home
governments to drag India to WTO for violating TRIPS agreement, because it is still not clear
if the provision (Section 107A(b)) is in compliance with it, according to another patent law
expert who did not wish to be identified.
Selling copycat drugs in India manufactured in least developed countries violates TRIPS
norms as there is no first sale of the patented drug by the patentee as required in TRIPS.
The very essence of an exclusive right to import mandated under Article 28 of TRIPS is
affected. Consequently, the parallel import provision in IndiaSection 107A(b) will be
seen to violate Article 28 of TRIPS.
Section 48 of the Indian Patent Act requires that a patentees exclusive right to import be
protected. Section 107A(b) hits at the very essence of this right.
The amendment to Section 107A redundant, and revert to the earlier provision, which said it
is not an infringement to import a patented product only if the import was from an exporter
duly authorised by the patentee.

Exclusive Right to Import Under Section 48

By permitting the import of goods manufactured in Bangladesh and other countries (where
there are no patents and where the goods are not placed in the market by the patentee), the
very essence of the exclusive right to import is eviscerated. The other exclusive rights
guaranteed under section 48, such as the right to sell and distribute are not covered by the
section 107A(b) exemption. If therefore, after importing, the good is distributed or sold in
India, this could be prevented by the patentee. Such interpretation gains credence when one
compares the Patents Act with the Trademarks Act, which endorses the right to sell by the
parallel importer, once the rights have been exhausted internationally. However, given the
legislative history of section 107A(b)40 (that makes it clear that the section was introduced
with a view to introduce parallel imports of patented products and to ensure availability of the
patented product in the Indian market at minimum international market price.

TRIPS Compatibility
Article 28 of TRIPS mandates that every patentee shall have the exclusive right to make, use,
offer for sale, sell, or import the patented product or process in question. However, footnote
(6) to Article 28 adds a small caveat to the exclusive right to import, by clarifying that This
right [i.e. the right of importation], like all other rights conferred under this Agreement in
respect of the use, sale, importation or other distribution of goods, is subject to the provisions
of Article 6. Article 6 in turn states that nothing in this Agreement shall be used to address
the issue of the exhaustion of intellectual property rights.

Creatively Interpreting Section 107A(B)

It is evident that a plain literal reading of section 107A(b) detrimentally impacts a patentees
exclusive rights under section 48 and also runs the risk of violating TRIPS. Now we will
discuss two ways in which law can be interpreted without violating the TRIP's agreement and
at the same time achieving our objective.
One way is to interpret the law as Indian law. To recapitulate, section 107(A)(b) states that
any importation of a patented product from a person who is duly authorized under the law to
produce and sell or distribute the product is legal. Such interpretation leads to logical
inconsistencies. A parallel import involves an exporting country (say Bangladesh) and an
importing country (India). The producer of the good or the seller/distributor as referenced
in section 107A(b) is more likely to be based in Bangladesh and the importer (e.g. Cipla) is
more likely to be based in India. The legality of sale, production or distribution in
Bangladesh to Indian law appears incongruous. If we interpret it as Indian law, we face an
absurd question: Under Indian law, can patentee produce and distribute the drug in
Bangladesh? Therefore, any reasonable construction of section 107A(b) would suggest that
law as used in the section has to mean Bangladeshi law.

Expanding the Locus of Patent

A better alternative would be to argue that in order to harmoniously construe section 107A(b)
with section 48, the term patented product could be interpreted to mean a product patented
in both the exporting country (Bangladesh in our hypothetical) and the importing country
(India).
To recapitulate section 107A(b), it exempts from infringement an importation of patented
products by any person from a person who is duly authorized under the law to produce and
sell or distribute the product.
"Patented product" envisages a patent in India that covers such product- if this isn't so, than
importer does not need to plead under section 107(A)(b). Rather, as there is no patent in
India, the company is free to import or for that matter manufacture and sale in India.
"Patented product" could also be understood as to envisage a patent over the imported
product in Bangladesh. As the Parallel import envisages both the importing and exporting
country, it would be logical to assume that the patent status of a product that is subjected to
such parallel import has to be measured from both, the place of export and the place of
import.
Thus, the section would exclude any generic versions of Tarceva manufactured in
Bangladesh, where there is no patent. In other words, Cipla cannot avail of section 107A(b)
to import generic versions of Tarceva manufactured by patentee.
Thus the above interpretation complies with section 48, TRIPs and fits in overall framework.
Thus to permit international exhaustion and the buying of low priced patented goods, once
the patentee has already sold them anywhere else in the world. Thus the word "patented
product" means the product patented in exporting country.
In Novartis case, the judge refused to entertain a TRIPS challenge to section 3(d) of the
Patents Act on the ground that it had no jurisdiction.

In a British case, Salomon v. Commissioner of Customs,48 where Lord Diplock had held
that: if the terms of a legislation are not clear, and are reasonably capable of more than one
meaning, the terms of international treaties to which the government is signatory, become
relevant.. There is a prima facie presumption that Parliament does not intend to act in
breach of International Law, including therein specific treaty obligations; and if one of the
meanings which can reasonably be ascribed to the legislation is consonant with the treaty
obligation and another or others are not, the meaning which is consonant is to be preferred.
Therefore, if the terms of statute are unclear, it is likely that the courts will interpret the
section in a manner consistent with TRIPS.
In spite of the above interpretation, there will continue to be a gap between exhaustion and
parallel imports. Firstly, it is unclear whether the buyer of patented goods has the right to
reconstruct or repair the product. Secondly, import of goods from foreign jurisdiction would
be illegal even when the patentee willingly places goods in the market and there is no patent
protection available. Thus due to all this loopholes in the law, we recommend following
recommendation to section 107(A)(b).

Amending Section 107A(b)

The amending of the section 107A(b) is done to make it broader and clearer in its scope and
to make it TRIPs compliant. Before suggesting, we need to look at court decisions in other
countries for determining how the Indian parallel imports provision can be made even more
forward looking and comprehensive.
Expanding the scope of Exhaustion: Method/Process Patents
The United States Supreme Court recently dealt with principles of national exhaustion in
Quanta v. LGE. This case involved a licensing arrangement between LGE, the patentee, and
Intel in relation to chipsets. The key issue was whether or not LGEs patent rights had been
exhausted after the sale by Intel (the licensee) to Quanta (one of Intels customers), leaving
Quanta free to do what it wished with the chipsets. Intel was required under one of the
contracts with LGE to give notice to customers that they could not combine the chipsets with
devices by other manufacturers. For the purpose of this paper, we limit our discussion to the
patent issue (as to whether or not there was exhaustion) and exclude the contractual issue
(as to whether or not there had been a breach of contract).
The Supreme Court held in favor of Quantas right to deal with the product as it wished i.e.
Quanta could combine the Intel chipset with other products. Specifically, it disagreed with
LGE that exhaustion applied only to product patents. It categorically held that it applied to
process patents or method patents as well.
It is interesting to note here that section 107A (b) is limited to patented products. The
narrow definition of patented article, a term used interchangeably with patented products,
may mean that one cannot widely construe such terms to include patented processes as well.
One might argue that a judge could, in the light of the section 2 phraseology unless the
context otherwise requires also interpret patented article to mean a patented process in the
context of section 107A (b).
Conditional Sales:
The Quanta decision is notable for another reason: it leaves open the question of
whether or not a conditional sale precludes exhaustion. In other words, if the patentee or
her licensee imposes a condition on the sale, such as the fact that the product can be used
only once, can it be said that the rights in the patented good are still exhausted and a buyer
is free to ignore the condition? There is a distinction between a suit for patent infringement
and a suit for breach of contract. US case law is almost unanimous in accepting that there
could be a breach of contract claim in such cases. However, the court in Quanta did not

explicitly decide as to whether the breach of such a condition would constitute a patent
infringement as well.
The court simply stated that in this particular case, the sale was an unconditional
one. Therefore under US law, it may well be possible to introduce conditions to accompany
sales and thereby erode the principle of exhaustion. Indian law ought to prevent against
such a possibility by expressly indicating that exhaustion will prevail, notwithstanding any
condition attached to the sale.
Reconstruction:
The courts of many countries draw a distinction between repair and
reconstitution/reconstruction when determining the applicability of the doctrine of
exhaustion. Specifically, most countries laws provide that the doctrine of exhaustion permits
the buyer of patented goods to repair them, but not to reconstitute/reconstruct them. The
rationale for this distinction seems to be that while a repair may be necessary even for a
single use of the article in the manner intended by the patentee, a reconstitution would
potentially permit more than a single use even though the patentee would have obtained
remuneration only for a single item and not for use of this single item multiple times. We
recommend that Indian law also strike this distinction between reconstitution and repair, and
permit repairs.
Proposed Amendment to Section 107A(b)
We propose amending section 107A(b) to remove the ambiguities discussed above. Our
amendments seek to fill the following gaps:
1. A literal interpretation of section 107A(b) appears to preclude national exhaustion;
2. Section 107A(b) does not appear to envisage process patents or method patents;
3. Section 107A(b) does not preclude the possibility of introducing conditional sales to
thwart the scope of exhaustion and consequent resale/redistribution.
We therefore propose the following amendment: 107B. Exhaustion of Rights
For the purposes of this Act, the rights of a patentee or anyone claiming through such
patentee shall be exhausted after a patented article has been sold once anywhere in the world
(including within India), by or with the authorization of such patentee.
The provisions of section 107B(1) shall apply in case of sale of any patented article,
notwithstanding: any contractual stipulation to the contrary by the patentee or her authorized
representatives.
The specific form of transaction between the patentee and her authorized representative and
the buyer. In particular, any attempt to classify what is in essence a sale of an article as a
licence shall be ignored for the purposes of this section.
Any notice in relation to the article placed by the patentee or her authorised representatives or
any other party selling the patented article; unless such notice is essential to ensure public
health or safety.
Explanation 1:
The term exhaustion (and all its cognates), in relation to a patented article shall
encompass all situations where the exclusive rights of the patentee and any/all her authorized
representatives (under section 48) vis--vis such article stand terminated after the first sale of
such article anywhere in the world, provided that such first sale is made by or with the
authorization of the patentee.
Any first sale of a patented article shall also exhaust rights associated with any other patent(s)
owned by the patentee, provided that the predominant use of the article in question is likely
to implicate any of the rights associated with such other patents.
Provided that the exhausted rights envisaged under this section include the right to repair a
patented article but not the right to reconstitute such article.
Explanation 2:

The term patented article as used in this section, includes, without limitation, any article
that implicates one or more patents granted in India, including product, process or method
patents.
Explanation 3:
The term authorized representatives, as used in this section, shall include any person selling
the patented article with the consent of the patentee, whether express or implied.
Explanation 4:
This section and the various terms used therein shall be construed solely in accordance with
Indian law. In particular, Indian law shall exclusively govern any choice of law issues that
arise in relation to this section.

Verdicts
Samsung Electronics Co. Ltd. v. Kapil Wadhwa & Ors.
Case:
In Samsung Electronics Co. Ltd. v. Kapil Wadhwa & Ors., the Supreme Court will consider
whether the High Court of Delhi at New Delhi was correct in ruling that Kapil Wadhwa
(Kapil) should be allowed to purchase In Samsung Electronics Co. Ltd. v. Kapil Wadhwa &
Ors., the Supreme Court will consider whether the High Court of Delhi at New Delhi was
correct in ruling that Kapil Wadhwa (Kapil) should be allowed to purchase Samsung printers
from abroad and then import and sell them in India using the SAMSUNG trademark. Kapil
argued that the doctrine of trademark exhaustionwhich holds that a trademark owners
right to control the goods bearing its mark becomes exhausted upon first sale of the goods
should apply. But Samsung countered that Kapil was infringing its trademarks because Kapil
was reselling the products in another market without Samsungs permission and because the
printers sold by Samsung in India were materially different from those sold in other markets.
The Appellate Bench of the High Court of Delhi ruled largely in Kapils favor. (Kapil
Wadhwa & Ors. v. Samsung Electronics Co. Ltd. & Anr., FAO(OS) 93/2012 (Del. A.B. Sept.
7, 2012).) Samsung then appealed to the Supreme Court.
printers from abroad and then import and sell them in India using the SAMSUNG trademark.
Kapil argued that the doctrine of trademark exhaustionwhich holds that a trademark
owners right to control the goods bearing its mark becomes exhausted upon first sale of the
goodsshould apply. But Samsung countered that Kapil was infringing its trademarks
because Kapil was reselling the products in another market without Samsungs permission
and because the printers sold by Samsung in India were materially different from those sold
in other markets. The Appellate Bench of the High Court of Delhi ruled largely in Kapils
favor. (Kapil Wadhwa & Ors. v. Samsung Electronics Co. Ltd. & Anr., FAO(OS) 93/2012
(Del. A.B. Sept. 7, 2012).) Samsung then appealed to the Supreme Court.
Verdict:
It is submitted that even when the defendant No. 3 was the plaintiffs authorized outlet, it was
importingand selling openly on its premises, parallel imported products that were not
purchased from plaintiffs No. 2 or Indian distributors and the same were stocked with the
defendant No. 3s premises and the consumers had the option of buying either of them. The

only difference was price differentiation and warranty which is emanated from Indian entity
of the plaintiffs.
It is argued that even when defendant No. 3 was the plaintiff No. 2 s authorized outlet, it was
importing and selling openly on its premises, parallel imported products that were not
purchased from the plaintiff No. 2 or its distribution channels. Thus, it is not newly that the
defendants have started this business but it was within the knowledge of the plaintiffs at the
earlier occasions too. Thus, the plaintiffs are guilty of misrepresentation and thus the interim
order ought to vacate on account of misrepresentations.
Thirteenth, the submissions of the defendants that there are misrepresentation in the suit and
thus the injunction application is liable to be dismissed is also rejected. The reasons for the
rejection of the submissions are enlisted as under: The defendantscontention that there is a
misrepresentation due to some past relations between the plaintiffs and defendants as the
defendants acted as an outlet for the plaintiffs product, the same does not aid the case of the
plaintiff, the same rather shows that the defendants who were earlier selling products under
the permission of the plaintiffs have also started selling parallel imported products later. The
plaintiff in any case refutes this contention by urging that it is only when the defendants
started selling such low costs printers imported from foreign countries to the detriment of the
plaintiffs, the suit has been filed and thus the prior relation is immaterial. I am convinced with
the said submission as the case of the plaintiff is confined to the parallel importation of the
printers and the same cannot be allowed to divert by showing past legal relations and rather it
reflects upon the conduct of the defendants. The agreement dated 1 stJanuary 2001 relied upon
by the defendants to show relation also shows that the defendants agreement was relating to
PC Camera and further in the said agreement also contains the clause relating to market
channels conflicts and to avoid such conflicts. The effect of such an agreement is rather that
the defendants have subjected to such market conflicting restrictions. It is doubtful as to how
the defendants if intend to use this agreement against the plaintiff can at all raise the point of
exhaustion against the plaintiff if they want to rely this agreement as a past relation as they
have by way of covenant subjected themselves to such market conflict minimization
conditions. Thus, the past relation cannot be operated against the plaintiffs or in favor of the
defendants and this has to be examined in trial.
The defendants contention that there is misrepresentation due to the reason that the plaintiffs
have not disclosed that the defendants were already acting as parallel importers at the time
when the plaintiff was doing business with them. The defendant say this as general statement
but does not talk about the plaintiffs products in specific along with the documents as to the
fact that the defendant so called products which are subject matter of the proceedings like
printers etc are also available by way of parallel importation within the knowledge of the
plaintiff since the time both are engaged with the business. If that is not so clearing coming
out, then the contention of the defendants deserves to be rejected. Rather if one sees the
document of engagement with the defendants, the agreement clearly spells out that there
should be a market conflict minimization which means that the plaintiff has been always been
conscious about such parallel importation with the defendant. Thus, the knowledge element
cannot be ascribed to the plaintiffs. In fact, the plaintiff again disputes the same which
becomes a matter of trial again. The defendants contention that there is a misrepresentation
due to the fact that the plaintiffs themselves are importing goods from the other countries.
Again, there is no parallel which can be drawn with the situation of the plaintiff No. 2 with
that of the defendants. The plaintiff No. 2 is the authorized user and rather on affidavit stated
to be exclusive licensee of the plaintiff No. 1 which can clearly escape the case of the
plaintiff No. 2 from Section 29 as against the defendants who are clearly dealing with the
products without the consent or authorization and are guilty of infringement under Section
29.

Warner Bros. Entertainment Inc. vs Mr. Santosh V.G.

Case:
Mr.Santosh V.G carried on the business of film production. The films in which they claimed
copyright were first published in the United States. Under the International Copyright Order,
1991 read with the Copyright Act, 1991, the Mr. Santosh V.G therefore claimed copyright in
the films even in India. The Defendant was a movie club / video library based in India; in
the business of hiring out DVDs of popular and critically acclaimed films on rent to Indian
customers. Mr. Santosh V.G had not released some of their films in India, but the films had
been released in the United States in DVD format. The DVDs were coded according to
specific geographic zones. The Defendant legally bought these DVDs in the United States,
and imported them into India. They then made available the particular DVDs (which had
been legally bought by them) to their Indian customers.
Mr. Santosh V.G alleged that these acts of import and hiring out amounted to an infringement
of their copyright. The Defendant stated that the DVDs were bought legally there was no
copy of those particular DVDs. That being the case, it was contended that no infringing copy
had been made. Further, relying on the first-sale doctrine, the Defendant argued that once a
DVD has been legally sold to them by Mr.Santosh V.G, Mr.Santosh V.G rights in that
particular DVD were exhausted. Accordingly, Mr.Santosh V.G could not exercise control over
the particular DVDs after the first sale had been completed.
Verdict:
Parallel importation market in copyright protected goods of the same description, for then
reasonable traders will expect to be able to do likewise who wishes to
exclude parallel imports should give timely and adequate notice, e.g. by labeling or general
warning to the trade, to prevent traders being taken unawares. If he fails to take this
precaution he may not be able to oppose parallel imports...."
It would be apparent that there is, inevitably, a certain element of overlapping in the
discussion on this issue, with the discussion in the previous two issues. This issue, however,
is specific to the question of importation; the defendants' argument was that goods- in the
present case, DVDs and VCDs procured legally, and meant for rentals, could be imported. It
was urged that India permits "parallel importation".
The defendant's argument that the plaintiffs lost the power to deal with the copy, once placed
in the market place, in the United States, is also unsupportable as too broad a proposition. In
the context of the Act, the argument is more hopeful, than CS (OS) 1682/2006 Page 56
convincing. Even in the United States, it has been held (United States v. Wise, 550 F.2d 1180,
1187 (9th Cir. 1977)) that though, after "first sale," a vendee "is not restricted by statute from
further transfers of that copy", yet a first sale does not, however, exhaust other rights, such as
the copyright holder's right to prohibit copying of the copy he sells. The Federal Appellate
court noted that "other copyright rights (reprinting, copying, etc.) remain unimpaired". It is
clear therefore that the copies in question are infringing copies. Therefore, their importation,
and more importantly, use for any of the purposes under Section 51, other than the one spelt
out in it the proviso is in contravention of the Act. The question, however, is whether the
action of the Defendants amounts to infringement of the copyright of the Plaintiffs. This must
be answered independently of the question of whether parallel importation of copyrighted
goods is permissible under Indian copyright law.