Addressing Trademark Infringement under the First Sale Doctrine
A trademark is a distinctive sign or symbol used in connection with goods or services to signify a commercial relationship between the goods or services and the entity possessing the proprietary rights to the mark. In India, the legal framework governing trademarks is established under the Trade Marks Act, 1999[1]. This legislation provides for the registration and protection of trademarks, ensuring that they are shielded from unauthorized or fraudulent use, including the use of counterfeit marks. The registration of a trademark confers upon the proprietor an exclusive right to the use of the mark, allowing the owner, or a licensed party, to exploit the trademark for commercial gain. The registration ensures that only the authorized party can use the mark in a manner that identifies the source of the goods or services, thereby securing exclusive rights to its use in trade.
The primary purpose of trademark law is to prevent sellers from causing confusion among consumers about the true origin and authenticity of products. This protection is essential for fostering consumer trust, ensuring that they can rely on the genuine quality and source of the goods they purchase.
DOCTRINE OF FIRST SALE
Section 30(3) of the Trade Marks Act, 1999 delineates a crucial provision in trademark law, stating that when a person lawfully acquires goods bearing a registered trademark, any subsequent sale or distribution of such goods—whether by the original purchaser or a third party acting on their behalf—does not amount to trademark infringement. This holds true even if the registered trademark has been transferred to a new proprietor, provided the goods were initially placed on the market under that trademark by the original proprietor or with their consent. However, Section 30(4) further stipulates that this protection does not extend where there are valid grounds for the trademark owner to prevent further commercial dealings with the goods, particularly in cases where the condition of the goods has been altered or damaged after the initial sale.
Section 30 establishes the "Doctrine of First Sale," a key concept in trademark law that limits the scope of a trademark owner’s rights once their goods have been sold. This doctrine permits the resale of trademarked products, such as those featuring a brand logo, as long as the goods remain in their original, unaltered condition. It safeguards the resale of genuine products, ensuring that their authenticity and origin are clearly preserved. Once a trademarked product is lawfully sold by the owner or with their authorization, the trademark owner’s control over subsequent resale is extinguished. As a result, further sales of the product do not amount to trademark infringement, since the origin of the goods is not in question.
MODIFYING GOODS: IS IT CONTRARY TO THE FIRST SALE DOCTRINE?
The issue that arises is whether a reseller's alteration or tampering with a genuine product—such as modifying the product’s expiration date—could lead to consumer confusion regarding the product's origin or quality. In such cases, would this constitute an exception to the Doctrine of First Sale due to the potential for misleading the consumer?
In Kapil Wadhwa & Ors v. Samsung Electronics Co. Ltd & Anr[2], it was held:-
“67. With reference to sub-section 4 of Section 30 of the Trade Marks Act 1999 it would be relevant to note that further dealing in the goods placed in the market under a trade mark can be opposed where legitimate reasons exist to oppose further dealing and in particular where the condition of the goods has been changed or impaired. With respect to physical condition being changed or impaired, even in the absence of a statutory provision, the registered proprietor of a trade mark would have the right to oppose further dealing in those goods inasmuch as they would be the same goods improperly so called, or to put it differently, if a physical condition of goods is changed, it would no longer be the same goods. But, sub-section 4 of Section 30 is not restricted to only when the conditions of the goods has been changed or impaired after they have been put on the market. The section embraces all legitimate reasons to oppose further dealings in the goods. Thus, changing condition or impairment is only a specie of the genus legitimate reasons, which genus embraces other species as well....”
Again, in Hershey Company v. Atul Jalan Trading as Akshat Online Traders[3], the High Court of Delhi, held as follows:-
“The issue in the present suit relates only to Hershey's products. However, the scale of the Defendant's operations is bigger. From the events which have transpired, there appears to be a coordinated and a systematic manner in which expired products are being re-packaged or rebranded with new expiry dates, and are being introduced into the markets. From the statements made by the Defendant's representatives before the Court, it appears that a large quantity of goods especially on e-commerce platforms, which achieve expiry dates, are somehow purchased by unscrupulous persons, the manufacturing and expiry dates are changed and re-introduced into the stream of commerce. Moreover, it appears that the FSSAI is not fully able to file complaints and take action on an urgent basis in such cases. The matter requires urgent consideration and is beyond the scope of the present commercial suit.
This Court is convinced that the Plaintiff has made out a prima facie case for grant of an ex-parte ad-interim injunction. In light of the above stated it is also clear that balance of convenience lies in favour of the Plaintiff considering that the counterfeit packaging is used for expired confectionary products, which will be sold and consumed in bulk in this festive season of Diwali. This will cause irreparable loss/harm not only to the Plaintiffs business and reputation but also to the public at large.”
Therefore, tampering with or altering a genuine product can mislead consumers by materially changing the product, thereby falling outside the scope of the Doctrine of First Sale. Such actions constitute trademark infringement as they distort the original nature of the product.
Link to Judgments:
Author: Robin Singh, Associate with Pratap & Co.
[1] Act 47 of 1999
[2] 2012 SCC OnLine Del 5172
[3] 2023 SCC OnLine Del 8163