A Grey
market is also spelled as ‘The Gray
Market’. Grey market is also known as Parallel
Market. The reason behind calling a Grey Market a Parallel market is
because the products or goods have been manufactured with the consent of the
brand owner but are sold outside through distribution channels that are not
authorized by the original manufacturer or trade mark proprietor. Grey market
goods are products traded outside the authorized manufacturer’s channel before
they are issued in an initial public offering (IPO) or bond issue.
Mainly, there are three types of grey markets:
Firstly, A
‘Parallel Importation’ in which a
product is priced lower in the home market than in the foreign market, and if
the cost of arbitrage is less than the price difference, that becomes an advantage
for a gray marketer and parallel importing can be done from the country of
production to the export market.
Secondly, ‘Reimportation’ this can be defined as
if a product in the foreign market is cheaper than in the home market, and if
the cost of arbitrage is less than the price difference, then for a gray
marketer reimportation is profitable.
Thirdly, ‘Lateral Importation’ in this form if
the price of a product differs between two countries, and the product is not
produced in either one, the product from one country is sold to the other
through unauthorized channels. Example 35mm cameras of any Japanese
manufacturer imported from Hong Kong to Europe and Kodak film made in the
United States, from Taiwan to Germany.
There are
many grey market investigation companies in India such as India mart, Greves group,
Ascon detectives and Authentic Investigation and Detective Private Limited
situated in Delhi, India.
Role of the Investigators
Investigators
deliver an extensive range of services and advice on brand protection and tell
the companies that vital IP matters which can decrease the level of grey market
of your product. Investigators can also obtain concrete evidence, to identify
sellers/ resellers, and to undertake the critical issues.
They also
locate witnesses and set up undercover operations wherever required to get into
the nerves of the supply and manufacturing chain.
Indian Law Involved
In India,
parallel importation is complicatedly linked to the principle of exhaustion of
rights under the Trademarks act, 1999. The principle of exhaustion of rights is
included under Article 6 of the Agreement on Trade-related Aspects of
Intellectual Property Rights (TRIPs), which clearly states that “nothing in
this agreement shall be used to address the issue of exhaustion of intellectual
property rights”. Hence each state is entitled either to prohibit or to allow
parallel imports within its own legal framework.
Basically
two major issues are involved in the context of parallel importation and
trademarks in India:
1. Whether parallel importation constitutes infringement under
Section 29 of the Trademarks Act.
2. Whether India recognizes the principle of international exhaustion
of rights under Section 30 of the Trademarks Act.
Answer to
both the above questions will be given in a combined form below:
Section 30 of
Trademark Act, deals with the limits on the effect of a registered trademark.
Subclause 3 prevents the trademark owner from prohibiting the sale of goods in
any geographical area on grounds of trademark right. Further Subsection 4
states that subsection 3 shall not apply when the condition of goods is changed
or impaired after they have been put on the market.
The new
provisions give right to the proprietor of a registered trademark to oppose
further dealings in the goods if legitimate or legal laws/reasons exist. The
new subclauses 3 & 4 recognize the principle of ‘Exhaustion of rights’ of
the trademark owner.
The point
to be noted that Sec. 30 sub-cl. (3) & (4) of the Indian Trademarks Act,
1999 deals with the exhaustion of rights after the first sale of goods.
There is a
famous case – Kapil Wadhwa v. Samsung
Electronics:
The issue
in this case is whether the Indian Trade Marks Act, 1999, embodies the
International or National Exhaustion principal when the Registered Proprietor
of Trade Mark places the goods in the market under the Registered Trade Mark.
Here in
this case the defendant dealer of Samsung printers, not sold the goods as per
the norms including affixing an MRP, no manufacturer guarantee and the most
interesting, “not earmarked to be sold in the Indian market”. Further grievance
was that the defendant was operating a website whereby the imported Samsung
printers were offered at a price much lower than that of the plaintiffs. The
learned single judge passed the order but the defendant is not satisfied as applied
for an appeal to a higher court.
The Higher Court hereby, after listening to
all the facts of the case and taking into consideration all the evidence
directed the defendant to follow International Exhaustion of rights.
Conclusion
Grey market
is a market where goods are sold through distribution channels without the
authorization of by original manufacturer. To overcome the problem of grey
market a company or person should appoint investigators or should take proper
legal measures to overcome their loss and solve the problem of grey marketing.
(The
content of this article is intended to provide a general guide to the subject
matter).
