Delhi High Court cracks down on grey market imports

The Delhi High Court has granted Samsung India Electronics Pvt Ltd and its parent company Samsung Electronics Company Ltd ex parte injunctive relief against seven dealers in various cities across India (Case 1603/2006, September 6 2006). The court enjoined them from dealing in any manner with grey market products bearing marks held by Samsung.

After receiving complaints from customers that their SAMSUNG-marked toners were faulty, Samsung initiated a legal action in the Delhi High Court in August under the Trademarks Act 1999 against distributors and sellers of grey market importers of its toner ink cartridges. Samsung presented to the court evidence that:

• the cartridges were being illegally imported into India;
  
  
• they were not authorized to be marketed and sold on the Indian market;
  
  
• they did not conform to Indian labelling laws and regulations, which is an offence under the Standard of Weights and Measures Act 1976; and
  
  
• they were not supported by company warranties and replacement policies, thus creating deception among and losses to unsuspecting consumers.

The court accepted Samsung's submission that (i) not conforming to the labelling requirements, and (ii) importing goods that are not supported by guarantees amounted to trademark infringement. Under the Trademarks Act, a proprietor can institute an action for trademark infringement against an importer of grey market goods or any other person dealing in such goods, where the condition of genuine goods have been materially altered without the proprietor's consent after they have been put on the market. Accordingly, the court enjoined the dealers from importing, exporting, distributing, selling, advertising, directly or indirectly dealing in grey market ink cartridges/toners or any other SAMSUNG-marked products, or under any other mark that may be deceptively similar to the plaintiffs'.

The court also appointed court commissioners to visit the premises of the defendants to inspect, seize and seal ink cartridges and toners, and any other grey market products of the plaintiffs. The commissioners carried out surprise raids in Delhi, Indore, Kolkata and Bangalore.

Sanjay Sharma, Samsung India's vice president for IT business, declared:

"This … is the first judgment acknowledging the menace of parallel imports …This judgment gives us a tool to ensure that the toners our customers get from dealers carry the appropriate warranties, being issued by SIEL. We will continue with our system of checks to ensure that this menace of grey market imports is countered as far as possible."

India has witnessed an increasing influx of grey market goods, which pose a serious threat to brand owners. Grey market goods usually enter the Indian market from China, Thailand, Singapore and the Middle East. This form of unauthorized trading not only undermines the legitimate differential pricing structures of companies, but also compromises their established distribution standards with vendors and, of course, their reputation among customers. Various issues relating to compliance with local regulations, warranties, safety and product liability further compound the problem.

The above orders have come as a boost for brand owners, while indirectly protecting unsuspecting consumers who are lured into purchasing grey market goods at a low price, not realizing that they are without warranties or after sales service and represent a serious risk regarding product safety.

Pravin Anand, Anand And Anand, New Delhi