Case Law on Patanjali Ayurved Limited vs. Masala King Exports Trading PVT. Ltd. & Ors
Exception to Doctrine of First Sale IN TRADEMARK
A trademark is the sign, logo, or signature of a product. In simple terms, a trademark is a brand’s mark.
Thus, where a trademark is registered, the law prohibits persons from using such trademark on their goods either for the purpose of retail, resale, distribution or any other dealings, without first obtaining the consent of the trademark owner.
But, where a trademark owner sells goods bearing his trademark, in the general market, any person who buys such branded goods can proceed to sell the goods to other persons without needing to obtain the consent of the owner of the trademark.
The resale of the trademarked goods must be done in the same condition as it was when the trademark owner first sold the goods.
This exception to the rights of a trademark owner is what is enunciated under the doctrine of first sale. Trademarked products, which are in the open market, can always be resold, retailed or redistributed, without the consent of the owner of such product, being first had or obtained.
Example, Coca Cola’s products bear Coca Cola’s trademark. No person is authorized to use Coca Cola’s trade mark on a non-Coca Cola drink, without first obtaining the consent of Coca-Cola.
However, when Coca Cola releases its drink into the market, retailers can always sell Coca Cola’s product without first obtaining the consent of Coca-Cola. But such resale must be in the original form Coca Cola was sold.
Even though a trademark owner cannot regulate the resale of his genuine trademarked goods, the law still creates exceptions to the doctrine of first sale. This doctrine affords a trademark owner the opportunity to sue a person who sells products bearing his trademark.
One of such exceptions is reflected in the case of Pantajali Ayurved Limited vs. Masala King Exports Trading PVT. Ltd. & Ors.
Facts of the Case
In this case, the plaintiff, Pantajali Ayurved Limited, was established in 2006 and is a leading manufacturer and marketer of herbal products and medicine. It registered its trade mark ‘PATANJALI’, and all its FMCG products are sold under this trademark.
The plaintiff’s products are sold both domestically, in India, and internationally, and it has a distribution network of over 47,000 retail counters, 3500 distributors in 18 States.
The plaintiff’s products are branded and sold in two classes – those sold in India, and those branded and sold internationally. These two classes bear certain differences in their contents and branding.
The plaintiff’s trademark ‘PATANJALI’ has been granted protection in several countries and according to the plaintiff, the trademark enjoys transborder reputation and goodwill.
The plaintiff contended that it does not have authorized channels through which its exports its products. All exports are carried out solely by the plaintiff. Also, the plaintiff ensures that products it intends to export are made to comply with metrological standards of the country to which the products are to be exported to.
The packaging of the products for export are completely different from that meant for domestic sale. Example, the products which are meant for domestic sale are worded “intended for sale in Indian subcontinent only”, on the packaging; while that meant for export are worded “export only”, on the package. The exported products also have a detailed list of ingredients on their package.
It came to the plaintiff’s knowledge that the defendants were in the business of purchasing the plaintiff’s products which are meant exclusively for sale in the domestic market. Without the plaintiff’s authority, the defendants illegally export the said domestic products bearing the plaintiff’s trademark, to the international market.
In the cause of this illegal exportation, the defendants tampered and altered some of the goods. The defendants materially altered the plaintiff’s products by affixing stickers on the products which bore false information on the contents of the goods. For example, on the original packet of the ‘Atta’ product, it is stated that the product lasts for four months; but on the affixed stickers made by the defendants, it is stated that the products last for nine months.
Also, because the products which the plaintiff exports to the international market have different packaging, and detailed ingredients lists, different from those sold domestically, the domestic products illegally exported by the defendants were materially different from the goods at the international market.
According to the plaintiff, several persons who had purchased its products from shops in Illinois and USA, submitted queries to it. These queries alerted the plaintiff to the fact that its goods intended for domestic sale, were being exported through unauthorized channels.
The plaintiff applied to the Customs agency to stop the illegal export of its domestic products, but the application yielded no result. Hence, the institution of the suit at the High Court.
The court, in a seasoned analysis, noted that the case of Kapil Wadhwa & Ors. v. Samsung Electronics Co. Ltd. & Anr. 2012 SCC Online Del 5172 cannot apply to the circumstances of this case. According to the court, the case of Kapil Wadhwa, which dealt with section 30(4) of the Trade Marks Act, 1999 (i.e. on the doctrine of first sale) did not involve the impairment of the products. The circumstances of the case were entirely different from that in the present case.
The court observed that the affixation of sticker on the product which altered the expiry date, amounted to impairing or changing the condition of the goods. Also, the fact that the exported goods were goods meant for domestic sale, and the entire ingredient lists were affected by the defendant’s act, also amount to alteration of the products. This would put the image of the company in peril.
It was also noted that the ratio in Philip Morris Products S.A. v. Sameer & Ors, were similar to the present case because the former case dealt with a situation where the defendants acquired good from unauthorized channels/sources. Thus, the act of the defendants in the present case in exporting the plaintiff’s goods without authorization conflicted with the rights of the plaintiff and is prima facie an infringement under section 29(1) & (6) of the Act.
The court also observed that the doctrine of first sale which cuts off trade mark owner’s rights after its products are first sold would be limited to selling the branded item in the same condition when it was first sold. The acts of the defendants amounted to ‘materially’ changing the product made by the trademark owner, and they contravene the provision of section 30(4) of the Trade Mark Act, 1999.
The court held that plaintiff succeeded in establishing a prima facie case against the defendants. Balance of convenience was in favour of the plaintiff, and if the defendants were not restrained from continuing the illegal export, irreparable harm would be caused to the plaintiff in the international market.
The defendants were restrained from continuing the exports (online/offline/directly or indirectly). However, the court allowed the defendants to continue to sell the plaintiff’s product in the domestic market.
From the facts and analysis of this case, it is obvious that the doctrine of first sale will not apply:
- Where trademarked goods are sold in a way that will defeat the manner in which the trademark owner intended the goods to be sold. Goods meant solely for domestic sale cannot be exported.
- Where the changes to the trademarked good involves impairment or fraudulent changes.
This exception is to ensure that the interest of the trademark owner is protected and the repute or goodwill enjoyed by the trademark products in the open market are not damaged by the act of a retailer.