Clarification on Parallel Imports by Indian Customs

22 August 2012

There has been considerable debate over whether action could be taken against parallel imports at India’s borders and several representations were received by the Indian Customs authority from members of trade and its field units seeking clarity on the said issue. Consequently, the Customs authority has issued a clarification vide its Circular No. 13/2012 dated May 8, 2012, after having referred the question to the Department of Industrial Policy and Promotion (DIPP), which is the nodal authority for the implementation of the Trade Marks Act, 1999, Patents Act, 1970 and Designs Act, 2000.

The Customs Authority has referred to ‘parallel imports’ in the said circular as being an import of original/genuine products (not counterfeit or pirated) which are sold/acquired legally abroad and imported into the country by persons other than the intellectual property right holder without permission or authorization of the right holder.

The circular states that the DIPP has drawn the attention of the Customs authority to the following relevant provisions of the various statutes:

i) Section 107A (b) of the Patents Act, 1970, which provides that 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 shall not be considered as an infringement of patent rights. Hence, in so far as patents are concerned, Section 107A (b) provides for parallel imports.

ii) Section 30(3)(b) of the Trade Marks Act, 1999, which provides that where the goods bearing a registered trademark are lawfully acquired, further sale or other dealing in such goods by purchaser or by a person claiming to represent him is not considered an infringement by reason only of the goods having been put on the market under the registered trademark by the proprietor or with his consent. However, such goods should not have been materially altered or impaired after they were put in the market.

iii) Insofar as designs are concerned, it has been clarified that parallel imports are not allowed as indicated by Section 22 (1)(b) of the Designs Act, 2000.

iv) As regards geographical indications, it is stated that there are no identical or similar provisions on parallel imports under the Geographical Indications of Goods (Registration and Protection) Act, 1999. The act does not address the issue of parallel import at all. Hence, parallel imports are not covered under this act.

With regard to the provisions of the Copyright Act, 1957, the circular states that the Customs authority awaits the clarification of the Department of Higher Education, which is the nodal government authority for implementing the said Act.

The Customs authority has, through its aforesaid circular, directed its officers to decide cases on parallel imports on the basis of the aforesaid legal provisions cited by the DIPP, its earlier circular setting forth the applicability of the provisions of the Trade Marks Act 1999 and other laws governing intellectual property to imported goods.

Incidentally, before issuing the above clarification, the Customs authority, in or around March 2012, had issued an order allowing parallel imports by certain importers of the goods of Dell India into India. Both parties argued the matter and cited provisions of the Indian Trade Marks Act, 1999 and previous decisions of Indian and foreign courts in support of their arguments. On hearing both the parties and reviewing the submissions made by them, the Deputy Commissioner of Customs, basing his findings on Section 30(3) of the Trade Marks Act, 1999, held that the principle of exhaustion is recognized by the act. However, the order did not appear to analyze the difference between national and international exhaustion.

The Deputy Commissioner further relied on the provisions of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 and the notification dated May 8, 2010, issued under the rules. The provisions stated, inter alia, that only those goods to which a false trademark as defined in the Trade Marks Act and goods to which a false trade description as defined under the said act have been applied are prohibited goods under the Customs Act, 1962. Applying the aforesaid provisions, the Deputy Commissioner held that the imported goods being subject matter of the said order were genuine and not prohibited by the aforesaid notification dated May 8, 2010.

However, the Indian Courts have held views contrary to that expressed in the aforesaid order on the issue

of parallel imports. The order of the Deputy Commissioner of Customs has been appealed by Dell India; it remains to be seen whether the said order can pass the scrutiny of an appeal.

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