2 May, 2017
INTRODUCTION
Parallel imports are genuine goods that are put on the market by a trade mark proprietor in one country, and subsequently purchased and brought to a different country for resale by another party. Parallel imports are often sold more cheaply than goods sold directly by the trade mark proprietor since parallel importers do not need to incur marketing and promotion costs – they simply ride on the goodwill generated from the trade mark proprietor’s promotion and marketing efforts.
In deciding how to deal with parallel imports, the public interest in the free movement of goods must be balanced against the private interests of trade mark proprietors. Singapore has thus far taken a largely favourable stance towards parallel importers. One way this is demonstrated is through section 29 of the Trade Marks Act (“TMA”)
which provides parallel importers with the “exhaustion of rights defence” against trade mark proprietors seeking to enforce their rights. This section provides that where goods have been “put on the market” by or with the express or implied consent (conditional or otherwise) of the trade mark proprietor, whether in Singapore or overseas, then such
trade mark is not infringed by the subsequent resale of the goods in Singapore by another party.
In discussing the above policies, the Singapore High Court (“HC”) recently interpreted the scope of the requirements of the exhaustion of rights defence in Samsonite IP Holdings Sarl v An Sheng Trading Pte Ltd [2017] SGHC 18.
BRIEF FACTS
The plaintiff, Samsonite IP Holdings Sarl (“Samsonite”) is the registered proprietor of various trademarks relating to the Samsonite brand (the “Samsonite marks”) in Singapore and China. The Samsonite marks are registered for a wide range of goods, including bags, backpacks, luggage and travel accessories. The defendant, An Sheng Trading Pte Ltd (“An Sheng”) is a parallel importer who imported 2,328 backpacks bearing the Samsonite marks (“Backpacks”) into Singapore, which were subsequently detained by the Singapore Customs.
The Backpacks were produced by Samsonite’s subsidiary in China (“Samsonite China”) which had been granted a licence to use the Samsonite marks only in China. Under a co-branding agreement between Samsonite China and Lenovo PC HK Ltd (“Lenovo”), each Backpack also bore the Lenovo trade mark. The Backpacks were distributed by Samsonite China to Lenovo to be given away for free by Lenovo or its authorised dealers to customers solely in conjunction with the sale of certain models of Lenovo laptops in China. Lenovo and its authorised dealers were expressly prohibited from selling or disposing of the Backpacks independently of the Lenovo laptops.
However, some authorised dealers unbundled the Backpacks from the laptops and sold only the Backpacks to unauthorised dealers. The unauthorised dealers thereafter sold the unbundled Backpacks to parallel importers including An Sheng, which in turn imported them into Singapore.
Samsonite commenced proceedings against An Sheng, and sought a summary judgment for trade mark infringement under section 27(1) of the TMA on the grounds that An Sheng had used signs identical to the Samsonite marks in relation to goods identical to those for which the Samsonite marks are registered. Samsonite also sought a summary
determination on a point of law, namely, that the Backpacks, “which are designed and manufactured under licence from [Samsonite] for the sole purpose of being given away free with the sale of specific laptops to consumers, and which are distributed to an authorised distributor or retailer for those purposes, have not been ‘put on the market’ for the purposes of s 29(1) of the TMA” (“the Question”).
The key defence raised by An Sheng was the exhaustion of rights defence under section 29 of the TMA.
SUMMARY OF DECISION
The HC decided the Question in favour of Samsonite, holding that An Sheng had failed to show any triable issues relating to the exhaustion of rights defence under section 29 of the TMA.
Firstly, the HC found there was a prima facie infringing use of the Samsonite marks in relation to the Backpacks. Consequently, to determine whether An Sheng’s defence under section 29 of the TMA applied to the facts, the HC considered two questions:
(1) Were the goods “put on the market”?
(2) If the goods were “put on the market”, was this done (a) by the proprietor of the trade mark, or (b) with his express or implied consent (conditional or otherwise)?
WERE THE GOODS "PUT ON THE MARKET"?
On the first question, the HC held that the Backpacks had not been "put on the market”. The HC explained that the expression ‘put on the market’ “must involve the realisation of the commercial and economic value of the trade mark”.1
In particular, this referred to “a situation where an independent third party has acquired the right of disposal of the goods bearing the trade mark”.2
The acting of putting the goods on the market “includes, but is not limited to, a sale of the goods by the proprietor by the third party”, but does not include “preparatory acts such as offers for sale”.3
The underlying rationale for this requirement was due to the fact that the exhaustion of rights doctrine “is premised on allowing the proprietor to receive ‘fair reward for the exploitation of his property right’”.4
In this case, the commercial value that Samsonite sought to realise from the bundled Backpacks was the penetration of the Chinese consumer market and the increased awareness of the Samsonite brand in China. This value would only be realised if the purchaser of a Lenovo laptop also received the Backpack with the Lenovo laptop. Since the Backpacks were unbundled from the laptops and subsequently sold by the unauthorised dealers to An Sheng, this value was never realised and thus the Backpacks were not “put on the market”.
Furthermore, Samsonite could not be said to have received a fair reward from the sale of the unbundled Backpacks to or by the unauthorised dealers since those profits were never passed on to Samsonite either directly or through its licensee Samsonite China.
EXPRESS AND IMPLIED CONSENT (CONDITIONAL OR OTHERWISE)
As the HC found the goods were not “put on the market” by Samsonite, there was no need to address the second question. Nevertheless, as the Question impliedly raised issues as to the consent from the proprietor, the HC proceeded to provide some useful comments on this issue.
Firstly, on express consent, the HC observed that this was generally uncontroversial and must be “explicitly, clearly and unmistakably given, either verbally, in writing or by clear conduct (such as an unmistakeable nod)”.5
Secondly, the HC characterised implied consent as “consent which is not expressly granted by the proprietor, but rather inferred from his actions and/or the facts and circumstances of a particular situation”.6
The HC remarked that while implied consent for the purposes of section 29(1) of the TMA must not be ambiguous, taking an overly narrow approach to a finding of implied consent (such as by not allowing consent to be inferred from the conduct of the registered proprietor) would be inconsistent with Parliament’s pro-parallel imports position.
Lastly, the HC stressed that the phrase “conditional or otherwise” in section 29(1) of the TMA meant that “even if the trade mark proprietor’s consent to the first putting on the market was conditional and not unqualified, it will still be treated as valid consent under s 29(1) TMA”.7
Taken together, these observations reinforce the overall position in favour of parallel imports in Singapore. They underscore the fact that once a proprietor has consented to the first placement of goods bearing his trade mark on the market, he is prevented from controlling subsequent exploitation of his goods.
Although there was no need for a determination on this point, the HC observed that there was no consent from Samsonite to the Backpacks being unbundled and sold to parallel importers including An Sheng.
Samsonite had only consented to the manufacture of the Backpacks and to the Backpacks being sold bundled with the Lenovo laptops in China only.
CONCLUSION
Singapore has taken a largely favourable position towards parallel importers. While this case does not represent a significant departure from this position, it does demonstrate that in certain limited situations based on how the parallel importer has obtained the goods, the trade mark proprietor will be able to succeed in enforcing his intellectual property
rights against parallel importers.
This case also provides greater clarity on section 29 of the TMA, a provision which has otherwise received fairly little attention in the Singapore courts. The HC’s comments on when goods are considered to be “put on the market” by the trade mark proprietor and on express and implied consent will undoubtedly be useful to subsequent trade mark proprietors seeking to enforce their rights against parallel importers.
1 [2017] SGHC 18 at [94].
2 [2017] SGHC 18 at [100].
3 [2017] SGHC 18 at [100].
4 [2017] SGHC 18 at [94].
5 [2017] SGHC 18 at [112].
6 [2017] SGHC 18 at [113].
7 [2017] SGHC 18 at [140]
