Most trade mark owners get frustrated when, legally, it is not possible to stop a parallel importer from importing and selling genuine goods in Singapore. Parallel importers are protected by the defence of exhaustion of rights under section 29(1) of the Trade Marks Act (“TMA”). Earlier this year, a case dealing with this very issue was brought before the Singapore High Court and in that case, the parallel importer was found to have infringed a registered trade mark, giving the trade mark owner relief rather than grief. The case in question is Samsonite IP Holdings Sarl v An Sheng Trading Pte Ltd [2017] SGHC 18 wherein the High Court had to consider the scope and effect of the defence of exhaustion of rights in Singapore.
Section 29(1) of the TMA states that “a registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market, whether in Singapore or outside Singapore, under that trade mark by the proprietor of the registered trade mark or with his express or implied consent (conditional or otherwise)”. This defence, however, does not apply where:
- the condition of the goods has been changed or impaired after they have been put on the market; and
- the use of the registered trade mark in relation to those goods has caused dilution in an unfair manner of the distinctive character of the registered trade mark.
In this case, Samsonite, as plaintiff and owner of the SAMSONITE marks in Singapore and globally, brought a claim of trade mark infringement under section 27 of the TMA against An Sheng Trading who was a parallel importer. An Sheng imported a shipment of backpacks, which were detained at the Singapore Customs, bearing Samsonite’s trade mark into Singapore. As part of its IP policy, Samsonite allowed its subsidiaries in a specific country to use the SAMSONITE mark in that country. In this instance, Samsonite in China was granted a licence to use the SAMSONITE mark in a co-branding agreement between Samsonite China and Lenovo PC HK Ltd.
The salient terms of the co-branding agreement are:
- Computer cases and backpacks (“Samsonite’s goods”) were to be manufactured and supplied to Lenovo by Samsonite in China;
- Samsonite’s goods would bear the SAMSONITE and LENOVO trade marks (“co-branded goods”).
- Lenovo would give away the co-branded goods for free with the sale of certain models of LENOVO laptops exclusively in China.
- Lenovo, its retailers and distributors were not allowed to sell or otherwise dispose of the co-branded goods independently from the sale of the LENOVO laptop in China
- Lenovo had the responsibility of ensuring that its China-based distributors and retailers complied with the terms of the co-branding agreement.
Pursuant to the co-branding agreement, Lenovo provided the co-branded goods to their authorised distributors and retailers to be given away for free in conjunction with the sale of LENOVO laptops. Some of Lenovo’s authorised dealers decided to sell Samsonite’s goods separately and without the LENOVO laptops to unauthorised dealers. Those unauthorized dealers then in turn sold Samsonite’s goods to An Sheng, a parallel importer.
Samsonite, together with Samsonite in China, commenced proceedings against An Sheng for trade mark infringement under the TMA, alleging that An Sheng had used its SAMSONITE mark in relation to identical goods and that such use was without consent. Samsonite sought injunctive relief against An Sheng as well as asked An Sheng to deliver up Samsonite’s goods detained at Singapore Custom, damages and an account of profits. An Sheng raised the defence of exhaustion of rights under section 29(1) of the TMA. In doing so, An Sheng claims that Samsonite’s goods were genuine goods and were parallel imported, then sold into Singapore with Samsonite’s implied consent.
Samsonite sought for summary judgement in this case. Besides this issue, the High court had to decide whether An Sheng’s defence holds up, i.e. whether Samsonite’s goods were ‘put on the market’ as indicated in section 29(1).
The rationale of the exhaustion of rights defence is that once a trade mark owner puts its goods on the market, whether in Singapore or outside Singapore, that trade mark owner loses all rights to object to further exploitation and dealing of those goods, i.e. the trade mark owner’s rights are deemed to be “exhausted” in respect of those goods. Other traders, for example parallel importers, are free to sell those genuine goods, with implied consent.
Having reviewed the facts of the case and evidences presented, the High Court held that An Sheng did infringe Samsonite’s trade mark for the following reasons:
- the wording ‘put on the market’ refers to the realisation of the economic or commercial value of the trade mark, which in this case is the penetration of the Chinese consumer market and the boosting of the reputation or awareness of the SAMSONITE Marks by association with LENOVO laptops. This is essential because the doctrine of exhaustion of rights is premised on allowing the proprietor to receive “fair reward for the exploitation of his property right”.
- Samsonite has never consented to Samsonite’s goods being diverted by some of the authorised dealers into the hands of unathorised dealers, including An Sheng.
- it is clear that the only consent that Samsonite gave under the co-branding agreement was in relation to acts leading to the putting of the co-branded goods on the market, namely for Samsonite in China, its licensee, to manufacture the co-branded goods and apply the SAMSONITE Marks on them, Samsonite in China to supply the co-branded goods to Lenovo and Lenovo to pass the co-branded goods to its authorised distributors and retailers to give away in conjunction with the sale of certain models of LENOVO laptopsto end users in China only.
- In the present case, the goods manufactured by Samsonite China were the co-branded goods. The laptops were made by Lenovo. The co-branded goods and the LENOVO laptops were intended to be provided as a bundled item to consumers in China. The commercial concept was to develop the brand awareness of Samsonite in China through the association with Lenovo. Since the co-branded goods, in particular Samsonite’s goods, were separately sold to unathorised dealers, including An Sheng, this was in breach of the co-branding agreement, the exhaustion of rights defence failed.
Accordingly, Samsonite succeeded in its summary judgement against An Sheng, granting Samsonite an injunction to restrain An Sheng and its officers, servants and agents from infringing the SAMSONITE Mark, a delivery up of the detained goods, and an inquiry as to damages or an account of profits.
This case is important because it is one of the few cases whereby a parallel importer got into trouble for importing and selling genuine goods thinking that there was implied consent under the exhaustion of rights principle when in fact there was unauthorized use of a trade mark. It is noteworthy because a proprietor actually managed to stop a parallel importer from selling genuine goods which are otherwise allowed to be sold in Singapore considering the stance of the Singapore Parliament is generally in favour of parallel imports and that Singapore has, by legislation, adopted an international exhaustion of rights principle.
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This article is written by Kiran Dharsan Seiter from Seiter IP Consultants LLP.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article
