Delhi District Court
Corporate Office At vs Hiveloop Technology Private Ltd on 1 December, 2021
IN THE COURT OF SHRI MAN MOHAN SHARMA,
DISTRICT JUDGE (COMMERCIAL COURT)-06,
CENTRAL DISTRICT
TIS HAZARI COURTS, DELHI
IN THE MATTER OF :-
CS (Commercial) No. 2480/2019
TTK Registered Ltd.
Having its registered office at:
Plot No.38, SIPCOT Industrial Complex
Hosur, Tamil Nadu-635126
India
Corporate Office at:-
11th Floor, Brigade Towers,
135, Brigade Road, Bangalore-560025,
Karnataka India
Email: [email protected] .....Plaintiff
VERSUS
Hiveloop Technology Private Ltd.
1090 G, 18th Cross, 14th Main Sector 3,
HSR Layout, Bangalore-560102
[email protected]
[email protected]
[email protected]
Also at:-
Hastsal Janata Flat near Mother dairy,
Hastsal Rd, Uttam Nagar, New Delhi,
Delhi-11005 .....Defendant No. 1
Hiveloop Logistics Private Limited
No. 1090 O, Municipal No.1580/1090/O
17th Main Sector-3, HSR Layout
Bangalore-560 102 .....Defendant No. 2
[email protected]
CS (Comm.) No. 2480/2019 Page No. 1 of 64
Date of Institution : 14.10.2019
Date of Reserve of Judgment : 30.10.2021
Date of Judgment : 01.12.2021
SUMMARY JUDGMENT
(Under Order XIIIA of the Code of Civil Procedure)
1. In this suit for trademark infringement, trade name,
dilution, passing off, rendition of accounts etc. the defendant no.
1 has filed an application for Summary Judgment under Order
XIIIA of the Code of Civil Procedure (hereinafter 'the Code').
2. All the parties have caused their appearance in the case,
pleadings are complete but the issues are yet to be framed.
Summary Judgment mooted by Defendant No. 1
3. The defendant no. 1 has sought a summary judgment not in
respect of all the matters in the suit but only with respect to one
of the claims in the suit pertaining to the sale of goods
originating from the plaintiff and which are being sold on
defendant no. 1's platform without the plaintiff's authority.
Description of the Parties
4. As per the pleadings the plaintiff, TTK Prestige Ltd, is
engaged in the business of manufacturing, marketing and sale of
kitchen appliances like pressure cookers (both electric and non-
electric) and various other similar goods under the trademark
PRESTIGE.
5. The defendant no. 1, M/S Hiveloop Technology Private
Limited, is an online selling platform operating through its
website www.udaan.com.
CS (Comm.) No. 2480/2019 Page No. 2 of 64
6. The defendant no. 2, M/S Hiveloop Logistic Private
Limited, is the logistic arm of the defendant no. 1.
Brief Facts of the Case
7. In brief, the cause of action of the plaintiff, has its genesis
in the averments that it enters into an agreement/contract with its
respective dealers and distributors, which restricts the
dealers/distributors concerned from offering or selling the
plaintiff's products through any online/e-commerce mode
without the prior written consent of the plaintiff. An accusing
finger has been raised against the defendant no. 1 vis-à-vis the
sale of the plaintiff's products on its online platform without the
plaintiff's consent resulting in trademark infringement and
passing off. The categorical stand of the plaintiff is that any
online sale of plaintiff's products, under the trade mark
PRESTIGE and its logo, without the authorization from the
plaintiff is completely illegal, unlawful and in breach of such
contract. It is the case of plaintiff that the products sold or offered
for sale under the plaintiff's said trademark and its logo without
its consent is unlawful amounting to infringement of plaintiff's
registered trade mark apart from committing an act of passing
off.
8. In the Written Statement of the defendant no. 1, amongst
others, it's stand is that such online sales and offers for sale do
not constitute a valid cause of action against it for the reason that
there is no privity-of- contract between the plaintiff and
defendant no. 1. The position is that when the plaintiff puts its
products in the distribution chain, the title of the products under
the trademark PRESTIGE and its logo passes immediately upon
CS (Comm.) No. 2480/2019 Page No. 3 of 64
the sales by the plaintiff to the distributors/dealers. Further the
contract between the plaintiff and its distributors/dealers
demonstrates that the breach of this condition merely provides
remedies such as costs and damages against the defaulting
distributors/dealers and entitles termination of the agreement
with such dealers/distributors. There is no room for fastening of
any liability upon any third party, in the present case, the
defendants herein.
Grounds pleaded for a Summary Judgment
9. The moot question which has been raised by the defendant
no. 1 is whether the resale of genuine products of plaintiff on
defendant no. 1's platform without the plaintiff's consent
constitutes trademark infringement and/or passing off. The
grounds pressed into service by the defendant no. 1 are as under:-
(i). Doctrine of Exhaustion:- It has been pleaded that
as per the section 30(3) of the Trademarks Act, 1999
and binding precedents, once the goods have been
lawfully acquired there are no holds barred. If such
goods are put into market and further sold, there
would be no infringement of the trademark
irrespective of the fact whether such a market is an
international market or a domestic market. A strong
exception has been taken to alleged division between
the offline market and the online market and the
plaintiff's claim on an exhaustion of rights only in
the offline market, terming such sub-division of the
market, especially by means of a contract, contrary
to the settled legal position in the context of
CS (Comm.) No. 2480/2019 Page No. 4 of 64
domestic market and international market.
Defendant No. 1's stand is that once the plaintiff has
sold its goods to its dealers and distributors, any
further offer to sell or sale of its goods does not
amount to trademark infringement.
(ii). Ingredients of Passing-off not made out:- The
defendant no. 1 has also challenged the claim of
passing-off as pressed into service by the plaintiff
stating that the most basic elements of passing off
including misrepresentation and damage are
conspicuous by absence. The entire basis of the tort
of passing off is that the law does not permit any one
to carry on his business in such a way as would
persuade the customers or clients in believing that
the goods or services belonging to someone else are
his or are associated therewith. However, when
sellers sell genuine goods originating from the
plaintiff on defendant no. 1's platform, this most
basic ingredient of the tort is not satisfied.
(iii). No Privity of Contract:-Section 19 of the Sale
of Goods Act, 1930 has been invoked to bring home
the fact that upon a contract for sale of a specific
property, the property is transferred to the buyer and
no further condition can be imposed upon the buyer.
Even if a binding contract exists between the
plaintiff and its dealer and/or distributor, this
condition cannot be enforced against defendant no. 1
since there is no privity of contract between the
plaintiff and defendant no. 1. The contracts on which
CS (Comm.) No. 2480/2019 Page No. 5 of 64
the plaintiff places reliance itself identifies the
remedies which are available to the plaintiff in the
event of a breach of the condition relating to
restriction on selling through e-commerce platforms.
The remedies identified by the contract are costs and
damages against the defaulting distributors/dealers
and such breach also entitles the plaintiff to
terminate the agreement with the dealer/ distributor.
(iv). No illegality:- The plaintiff has not alleged, let
alone demonstrated, that any of its distributors or
dealers are selling on defendant no. 1's platform.
The condition as stipulated in the plaintiff's
agreements with its dealers and distributors is not
passed on to subsequent purchasers and, in any
event, the plaintiff has no privity of contract with
such subsequent purchasers. Thus, even the
allegation that there is any breach of contract is
extremely tenuous since the plaintiff has not alleged
or produced any document/ proof whatsoever to
show that the persons to whom the conditions under
its contract applied have sold on defendant no. 1's
platform. The plaintiff has not identified a single
distributor or dealer which has breached the alleged
condition. At the very least, in order to make out a
breach of contract, it was incumbent upon the
plaintiff to firstly identify the relevant party with
whom the contract exists, and which breached the
condition; secondly, it ought to have impleaded the
said party; and, thirdly, it ought to have pleaded and
CS (Comm.) No. 2480/2019 Page No. 6 of 64
produced the contract that the plaintiff has with the
said party. The plaintiff has taken none of these
crucial steps. Instead, the plaintiff alleges that "any
online sale of plaintiff's products under the trade
mark PRESTIGE and its logo without the
authorization from the plaintiff is completely illegal,
unlawful and in breach of such contract". This
contention is ex-facie misconceived in law.
10. The defendant no. 1 raised the following questions of law
for consideration in the application:
(a). Whether the offer to sell or sale of goods
originating from the trademark proprietor amounts to
trademark infringement, where the trademark owner
has sold the goods to its distributors/ dealers with the
condition that they will not sell the products through
the e-commerce mode without its consent?
(b). Whether by restricting the downstream distribution
of goods the plaintiff is seeking to impermissibly create
a perpetual monopoly and if so, to what effect?
(c). Whether such restrictions between the plaintiff, its
dealers and distributors can be enforced by a Court in a
suit for trademark infringement or passing against
defendant no. 1, with whom there is no privity of
contract?
(d). Whether a suit for inducement to breach of contract
is maintainable where the parties to the contract are not
identified, not impleaded as a party to the suit and the
CS (Comm.) No. 2480/2019 Page No. 7 of 64
contract which is alleged to be breached is not
produced before the Court?
11.The defendant no. 1 accordingly prayed for a summary
judgment seeking dismissal of the plaintiff's claims which
relate to sale of goods originating from the plaintiff and which
are being sold on defendant no. 1's platform without the
plaintiff's authority; award of the costs incurred by it and any
other order as deemed fit in the interests of equity and justice.
Arguments of Parties
12. I have heard Shri Rajshekhar Rao, Sh. Aditya Gupta, Sh.
Raghav Kacker and Ms. Krutika Vijay along with their
associate learned Counsel on behalf of the applicant/defendant
no. 1.
13. On behalf of the plaintiff/non-applicant, Ld. Counsel
ShriManish Kumar Mishra with Ms. Akansha, has addressed
the arguments.
14.Shri Nischal Anand, ld. Counsel has made a brief address on
behalf of defendant no. 2.
15. In the course of the arguments Ld. Counsel for the parties
have invariably referred to the pleadings and documents on
record. Case law has also been cited in copious measures.
Written arguments have been filed by all the parties.
(i). Maintainability of Summary Judgment Application
16.The very application for summary judgment has been
challenged by the plaintiff.
17.Ld. Counsel for the plaintiff has argued that the application
for summary judgment is not maintainable either in law or on
CS (Comm.) No. 2480/2019 Page No. 8 of 64
facts. It has been submitted that the limited issue on which the
defendant no. 1 has been seeking summary judgment is the
subject matter of the appeal being FAO (COMM) 519/2019.
The defendant no. 1 has also challenged the order dated
25.10.2019 passed by this Court granting limited injunction
to the plaintiff with prima facie view taken in its favour. This
Court, at two occasions, has taken a prima facie view in
favour of the plaintiff by way of ex-parte injunction dt.
15.10.2019 and bi-parte injunction dated 25.10.2019.
Therefore, the plaintiff's chances of succeeding in the suit is
reasonably good and it cannot be deprived of its right to prove
its case in trial.
18. The next limb of the argument on maintainability as put
forward by the plaintiff is that the issue whether the goods
sold on the platform of defendant no. 1 have been lawfully
acquired and the same are without the consent of the plaintiff
is a mixed question of fact as well as law which can only be
proved in trial and not at this stage. This requires summoning
of witnesses from both the sides including the sellers,
distributors and dealers who have sold the goods to the
defendant no. 1 to prove the inter se relationship of the
defendant no. 1 and these parties, business arrangement in
acquiring the goods in question and whether the goods are
genuine and with consent of the plaintiff etc. Therefore, oral
evidence cannot be dispensed with.
19. Another aspect of challenge to the maintainability of this
application is the issue of defendant no. 1 being an
intermediary. It is submitted that the Hon'ble Division Bench
of High Court of Delhi has already held that that the said issue
CS (Comm.) No. 2480/2019 Page No. 9 of 64
has to be decided only in trial. Reliance has been placed upon
Amazon Seller Services Pvt. Ltd. vs. Amway India Pvt. Ltd.
and Ors. (2020 SCC OnLine Del 454) citing Paras 141 and
145 of the judgment.
20.Responding to the above, Ld. Counsel for the defendant no. 1
has submitted that Order XIIIA of the Code has been inserted
by way of the Commercial Courts Act, 2015 and empowers a
Court deciding a commercial suit to decide a claim without
recording oral evidence. Despite the existence of provisions
such as rejection of a plaint under Order VII Rule 11 and
judgment on admissions under Order XII Rule 6, the
Legislature had felt the necessity to introduce Order XIIIA in
the Code to obviate the need for trial in each and every case.
21. Carrying his argument forward, Ld. Counsel for the
defendant no. 1 submitted that it is now well-settled by the
Hon'ble High Court of Delhi that the threshold for deciding
an application for summary judgment under Order XIIIA of
the CPC, a "real prospect of succeeding" is one that is
"realistic" as opposed to merely being "fanciful", and which
carries some degree of conviction as opposed to merely being
arguable. The Court may take into account the evidence that is
placed before it on the application for summary judgment and
the evidence that can reasonably be expected to be available
at trial. When a summary judgment application allows the
Court to find the necessary facts and resolve the dispute,
proceeding to trial would generally not be proportionate,
timely or cost effective. The standard for fairness is not
whether the procedure is as exhaustive as a trial, but whether
CS (Comm.) No. 2480/2019 Page No. 10 of 64
it gives the Court the confidence that it can find the necessary
facts and apply the relevant legal principles so as to resolve
the dispute. The judgment of Kamdhenu Limited vs. Aashiana
Rolling Mills Ltd., 2021 SCC OnLine Del 2426 has been
cited on this aspect with emphasis on para 35 of the
Judgment. It is submitted that the thread running through the
judgment of the Hon'ble High Court of Delhi is that trial of a
commercial dispute is no longer the norm when the conditions
for summary judgment, as elucidated above, are met.
22.In further continuation, Ld. Counsel for the defendant no. 1
submitted that Order XIIIA Rule 1(2) of the Code makes it
clear that a summary judgment may be delivered by the Court
on a claim, or a part of a claim, or a question of law on which
the claim (in whole or in part) depends. There is therefore no
bar on a part of a claim or a question of law being decided by
the Court by way of a summary judgment. In all cases, the
aim of providing such an option to the Court is to narrow the
scope of the dispute which is to be tried, and to provide as
much certainty to parties as possible prior to the trial.
23. Ld. Counsel for the defendant no. 2 supported the proposition
of law as advanced by the defendant no. 1.
(ii). Merits of the Case
24. Detailed arguments have been held on the merits of the case
by the respective parties.
(A) Defendant No. 1's Arguments on Merits
25.On merits, the Ld. Counsel for the defendant no. 1 argued that
defendant runs a B2B (business to business) e-commerce
CS (Comm.) No. 2480/2019 Page No. 11 of 64
platform which enables sellers to list their products on the
defendant's platform for purchase by buyers. The defendant
does not determine the content of the listings by third-party
sellers, each element of which is determined by the sellers
themselves, including the product name, product description,
price, product guarantees and warranties, discounts to be
offered and return criteria.
26.The plaintiff claims to be owner of the trademark PRESTIGE
with respect to kitchen appliances. The plaintiff has averred
that it enters into agreements with its dealers and distributors,
which according to the plaintiff restricts such
dealers/distributors from offering for sale or selling the
plaintiff's products through any online/e-commerce mode
without the consent of the plaintiff. As per the plaintiff's, the
sale of the plaintiff's products on defendant no. 1's platform
without the Plaintiff's consent amounts to trademark
infringement and passing off.
27.An ex-parte interim injunction has been granted by the
Learned Additional District Judge on 15.10.2019, restraining
the defendants from using any platform for sale of goods of
the plaintiff and from selling them on any online platform
including www.udaan.com. The ex-parte interim injunction
has been modified by order dated 25.10.2019 pursuant to an
application filed by defendant no. 1 under Order XXXIX Rule
4 of the CPC, whereby it was inter alia directed that upon
being notified by the plaintiff of a counterfeit product being
sold on its platform, defendant no. 1 was to notify the seller
and take down such listing from its platform in the absence of
CS (Comm.) No. 2480/2019 Page No. 12 of 64
any evidence of genuineness of the product from the seller. It
is pertinent to note that there was no direction passed
prohibiting the listing of genuine products of the plaintiff on
the platform of defendant no. 1.
28.Upon an appeal filed by the plaintiff and cross-objections
filed by the defendant no. 1, the Hon'ble High Court of Delhi
has been pleased to pass an order on 24.01.2020, staying the
directions contained in paragraph 1 of the order dated
2510.2019 which directed defendant no. 1 to disclose the
complete details, addresses and contact details of its sellers on
its website and further staying the directions in paragraph 6 of
the said order which required defendant no. 1 to verify the
guarantee and warranties of products listed on its platform.
The order dated 24.01.2020 also stated that the defendant had
to provide complete details of sellers to the plaintiff upon
request. These details of sellers who had listed PRESTIGE
branded products on the defendant's platform had already
been provided by the defendant to the plaintiff by a letter
dated 06.11. 2019 and no further request for seller's details
has been received by the defendant since the order dated
24.01.2020.
29.A significant part of the plaintiff's claim relates to sale of
goods originating from the plaintiff which are being sold on
defendant no. 1's platform without the plaintiff's authority.
The plaintiff's own case demonstrates that a part of its claim,
and in fact a significant part, relates to the sale of goods on
defendant no. 1's platform which are genuine, i.e. which
originate from the plaintiff itself, but are merely being sold
CS (Comm.) No. 2480/2019 Page No. 13 of 64
without "authorization" from the plaintiff. Such goods are
hereinafter referred to as "genuine goods". This is evident
from various pleadings/documents of the plaintiff.
30. In para 14 of the plaint the plaintiff has stated that "the
defendants are not only causing to sell/selling/offering for sale
plaintiff's products bearing the trade mark PRESTIGE and its
logo without any authorization from the plaintiff but are also
knowingly involved along with third parties in selling/offering
for sale counterfeit products bearing the trademark
PRESTIGE and its logo and deceiving the public at large." It
is evident from this averment that the plaintiff refers to two
distinct types of listings on defendant No. 1's platform - those
that are the Plaintiff's products but being offered for sale
without authorization, and those that are allegedly counterfeit.
31.The plaintiff has itself categorized the listings on the
defendant no. 1's platform into various categories and the
listings which the plaintiff claims are "unauthorized" are
separately mentioned and contra-distinguished from listings
of "fake products", "products falsely applying false
trademarks", "Products with no warranty", "products with
tampered warranty", "listing wrong brands under Prestige".
Illustrative screenshots annexed by the plaintiff of listings of
the plaintiff's product under the trademark PRESTIGE on
defendant no. 1's platform, have been cited on pages 23 and
31 of the plaint, and complete set of screenshots of product
listings on defendant no. 1's platform marked as
"Unauthorized Listings" by the plaintiff, which screenshots
are at page 233-485 of the documents filed with the plaint and
CS (Comm.) No. 2480/2019 Page No. 14 of 64
the same have also been placed as Annexure-C of the instant
application.
32.The legal notice dated October 1, 2019, addressed by the
plaintiff to defendant no. 1 did not make any mention,
whatsoever, of any counterfeit/ fake products or products with
tampered warranty. The only allegation in the legal notice was
that the plaintiff's own products are being sold on defendant
no. 1's platform without the former's consent.
33.As such there is a clear admission that part of the plaintiff's
claim relates to "unauthorized" sale of the "plaintiff's
products" on the platform of defendant no. 1, which is
demonstrated by para 16 and 18-19 of the plaint. The
defendant no. 1 has made clear in prayer (a) of the present
application, it is seeking a summary judgment only with
respect to such of the plaintiff's claims which relate to sale of
goods originating from the plaintiff and which are being sold
on defendant no. 1's platform without the plaintiff's authority.
34.In this context, the undisputed position of law is that the offer
to sell or sale of goods originating from the trademark
proprietor without the trademark proprietor's consent does not
amount to trademark infringement or passing off, even if the
trademark owner has sold the goods to its distributors/ dealers
with the condition that they will not sell the products through
the e-commerce mode without its consent. The plaintiff's own
case as stated in the plaint, more specifically para 11 of the
plaint, is that it sells the plaintiff's products manufactured by
it through dealers and distributors,. The plaintiff has
categorically admitted that the title of products under the trade
CS (Comm.) No. 2480/2019 Page No. 15 of 64
mark and logo PRESTIGE passes immediately upon sale by
the plaintiff to its distributors/sellers, which is demonstrated
by page 39 of the plaint; Clause 3.7 and Clause 4.5 of the
Distributorship Agreement from page 191 onwards. Thus, the
plaintiff itself releases the genuine goods into the chain of
commerce, and the title in these genuine goods is passed on to
the buyer i.e., the plaintiff's distributor or dealer.
35.The position of law, both in terms of Section 30(3) of the
Trademarks Act, 1999 and binding precedent interpreting the
Trademarks Act, is crystal clear on the doctrine of
"exhaustion" of trademark rights. Once goods bearing a
registered trademark are lawfully acquired by a person, the
further sale of those goods in the market is not infringement
of trade mark merely because the goods had initially been put
on the market under the registered trademark by the
proprietor.
36.The Statement of Objects and Reasons of the Trademarks Bill,
1999 states as under in the context of Section 30 of
Trademarks Bill, 1999:-
"Sub-clauses (3) and (4) recognize the principle of
'exhaustion of rights' by preventing the trade mark
owner from prohibiting on the ground of trade mark
rights, the marketing of goods in any geographical
area, once the goods under the registered trademark
are lawfully acquired by a person. However, when
the conditions of goods are changed or impaired
after they have been put on a market, the provision
will not apply."
37. The judgment of Kapil Wadhwa v Samsung Electronics, 2012
SCC Online Del 5172 is cited on this aspect.
CS (Comm.) No. 2480/2019 Page No. 16 of 64
38.Given that the plaintiff has admitted that with respect to
genuine goods, the title of products under the trade mark
PRESTIGE passes immediately upon the original sale by the
plaintiff to its distributors/dealers, it is clear that such goods
are "lawfully acquired" goods for the purposes of section
30(3) TM Act. Therefore, as per the mandate of section 30(3),
further sale of such lawfully acquired genuine goods on the
platform of defendant no. 1 by any person does not amount to
trademark infringement.
39.Once sold, the trademark proprietor cannot control the chain
of supply and the downstream distribution of goods, and
certainly cannot do so under the trademark law. This is the
entire objective of the doctrine of "first sale" or the "doctrine
of exhaustion" statutorily incorporated in Section 30(3) of the
TM Act. The law recognizes that once a product is sold by the
trademark proprietor, the trademark rights in that product are
"exhausted" and can no longer be exercised against
downstream purchasers.
40.The doctrine of exhaustion under Section 30(3) of the TM Act
has been recognized by two separate Division Bench
decisions of the Hon'ble High Court of Delhi.
41. The Court in Kapil Wadhwa v Samsung Electronics, 2012
SCC Online Del 5172 has held as under:
"Where goods bearing a registered trade mark are
put on the market and are lawfully acquired by a
person, the sale of the goods in the market by that
person is not infringement of the trade mark by
reason only of further sale in the market". And the
Principle of International Exhaustion of Rights itself
takes away the right of the respondents to control
CS (Comm.) No. 2480/2019 Page No. 17 of 64
the further sale and further distribution of the
goods."
42.This decision in Kapil Wadhwa v Samsung Electronics(supra)
has been applied by another Division Bench decision of the
Hon'ble Delhi High Court in the context of sale of genuine
products on e-commerce websites. In Amazon Seller Services
Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd the Court held
as under:_
"There is merit in the contention of Amazon that by
permitting private entities like Amway to restrict
downstream distribution of genuine goods, by
enforcing contractual stipulations against third
parties, the judgment of the learned Single Judge
recognizes a monopoly that can be exercised in
perpetuity. There is also force in the contention that
this runs contrary to the legal position explained in
Kapil Wadhwa v. Samsung Electronics (supra)
43.The rationale behind the doctrine of exhaustion of trademark
rights is encapsulated in the authoritative commentary J.
Thomas McCarthy on 'Trademarks and Unfair Competition',
5th Edition (June 2021), Chapter 25:41, which states as
follows:
"The overarching policy is that once an IP owner
sells a product, certain IP rights are "exhausted" as
to that particular sold product. The Supreme Court
said that the basic principle is that "when an item
passes into commerce, it should not be shaded by a
legal cloud on title as it moves through the
marketplace."
...............................................................
The logical inference to draw from the Supreme Court's COTY and CHAMPION cases discussed previously is the general rule that a distributor who resells branded goods without change is not an CS (Comm.) No. 2480/2019 Page No. 18 of 64 "infringer" and thus needs no "license." As the Second Circuit observed:
As a general rule, trademark law does not reach the sale of genuine goods bearing a true mark even though the sale is not authorized by the mark owner. ... Thus, a distributor who resells trademarked goods without change is not liable for trademark infringement.
...............................................................
The same right extends to a retailer's use of a mark in cyberspace. A retailer can use a brand name on Web site ads selling that branded product without a license from the trademark owner.
............................................................
The Ninth Circuit has repeated the "exhaustion" or "first sale" rule in the following terms:
The right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product. Resale by the first purchaser of the original article under the Producer's trademark is neither trademark infringement nor unfair competition.
............................................................
The Eleventh Circuit recited the "exhaustion" rule in somewhat different language, emphasizing that the rule applies only where the goods have not been altered or changed:
The resale of genuine trademarked goods generally does not constitute infringement.... Under what has sometimes been called the "first sale" or "exhaustion" doctrine, the trademark protections of the Lanham act are exhausted after the trademark owner's first authorized sale. ... Therefore, even though a subsequent sale is without an trademark owner's consent, the resale of a genuine good does not violate the [Lanham] Act... This doctrine does not hold true, however, when an alleged infringer CS (Comm.) No. 2480/2019 Page No. 19 of 64 sells trademarked goods that are materially different than those sold by the trademark owner."
44.This rationale of exhaustion also finds international support in the decision of the Chancery Division of the United Kingdom in Zino Davidoff SA v. A & G Imports Ltd., (1999) 3 All ER 711 which held that:-
"As the parties agree, it is well established that the principle of exhaustion applies to all intellectual property rights. So if an article made in accordance with a patent is put upon the market in one member state by or with the consent of the owner of the patent rights, that owner cannot use those rights to prevent or hinder the importation of the goods into a second member state or to prevent their sale there. The expression 'exhaustion of rights' accurately encapsulates the principle involved. The proprietary rights have been used up. The owner of them has nothing left to deploy against further exploitation of the goods. This principle applies not only to patents and copyright, but to trade marks as well. So, once the rights holder has put protected products on the market or has consented to such marketing, he loses all rights to object to further exploitation. This effect is indefeasible. The rights owner cannot override it by contract. The member states cannot override it by national legislation."
45.Along the same lines, in the context of patent rights, the U.S Supreme Court decision dated May 30, 2017 in Impression Products v. Lexmark International holds that:-
"When a patentee chooses to sell an item, that product "is no longer within the limits of the monopoly" and instead becomes the "private, individual property" of the purchaser, with the rights and benefits that come along with ownership. ... A patentee is free to set the price and negotiate contracts with purchasers, but may not, "by virtue of his patent, control the use or disposition" of the CS (Comm.) No. 2480/2019 Page No. 20 of 64 product after ownership passes to the purchaser. ... We have explained in the context of copyright law that exhaustion has "an impeccable historic pedigree," tracing its lineage back to the "common law's refusal to permit restraints on the alienation of chattels."
46. The next limb of the argument of the Ld. Counsel for the defendant no. 1 is that contractual stipulations cannot defeat the doctrine of exhaustion. It is submitted that the plaintiff's sole ground for alleging that its genuine goods which are being sold on the platform of defendant no. 1 have not been "lawfully acquired" and are therefore not covered by Section 30(3) of the TM Act, is that the plaintiff has contractually restricted its dealers/distributors from selling such genuine goods via e-commerce. However, the doctrine of exhaustion of trademark rights as established in common law and explicitly laid out in Section 30(3) of the TM Act, cannot be defeated by mere contractual stipulations.
47. To expound the above further, Ld. Counsel for the defendant no. 1 submitted that the rationale behind the doctrine of exhaustion and Section 30(3) is to maintain the purity of the chain of commerce and prevent trademark owners from exercising a perpetual monopoly over their products even after such products have been lawfully acquired from the trademark proprietor. Allowing contractual stipulations that attempt to exercise exactly such a monopoly would negate the very rationale behind the doctrine and section 30(3) TM Act. Importantly, the language of Section 30(3) not only comes to the aid of a person who lawfully acquires a product, but all those "claiming under or through him". Therefore, all CS (Comm.) No. 2480/2019 Page No. 21 of 64 subsequent purchasers of a lawfully acquired product are also entitled to avail the doctrine of exhaustion. This is the reason why the doctrine is also often referred to as the 'first sale' doctrine i.e., the proprietor cannot exercise trademark rights beyond the first sale of its products and the first sale exhausts all trademark rights in a product.
48. To bring home this point, it has further been submitted by Ld. Counsel for the defendant no. 1 that pertinently, several provisions of the TM Act have been made "subject to any agreement subsisting between the parties". An example of this is section 52 which deals with the rights of registered users and starts with the language "Subject to any agreement subsisting between the parties, a registered user may institute proceedings..." However, such phrasing is conspicuous by its absence in Section 30(3) of the TM Act, which clearly indicates the Legislature's intention to ensure that parties cannot override the public policy goal of section 30(3) by contract.
49. Not stopping at that, Ld. Counsel for the defendant no. 1 further expounded the concept by submitting that the overriding nature of section 30(3) over any contract between the trademark proprietor and the first purchaser of any products originating from the trademark proprietor also extends to all subsequent downstream dealings in those products. This is evident from the language of Section 30(3), which explicitly permits "dealing in those goods by that person or by a person claiming under or through him", where "that person" refers to the first person who lawfully acquired the goods from the trademark proprietor. The provision CS (Comm.) No. 2480/2019 Page No. 22 of 64 extends the benefit of the doctrine of exhaustion to persons claiming "under or through" such person, including all downstream purchasers of the products. Therefore, the sale of genuine products on the platform of defendant no. 1, whether or not the plaintiff has consented to such sale, is permissible under Section 30(3) TM Act.
50. Since the sale of genuine products on the platform of defendant no. 1 is permissible under Section 30(3), it is a logical corollary that such sale does not amount to infringement of trademark. The plaintiff therefore has no cause of action whatsoever against any entity for trademark infringement due to sale of genuine goods, let alone against defendant no. 1. In fact, the sample contracts between the plaintiff and its authorised distributors/dealers, provide for a specific remedy against such dealers/distributors for selling the Plaintiff's products via e-commerce in breach of the contract under Clause 3.10 of the Distributorship Agreement and Clause 4.8 of the Authorized Dealer Agreement. It is clear that even the plaintiff merely contemplates a contractual remedy in the event that its genuine products are sold via e- commerce by its dealers/distributors.
51. The next limb of the argument of defendant no. 1 is that the plaintiff's contention that invocation of Section 30(3) TM Act requires "consent" of the trademark proprietor is entirely misconceived. It is submitted that the Plaintiff has sought to argue that defendant no. 1 cannot take the benefit of Section 30(3) of the TM Act, 1999, since the invocation of Section 30(3) also requires consent of the trademark proprietor. This argument is completely misconceived. Firstly, section 30 TM CS (Comm.) No. 2480/2019 Page No. 23 of 64 Act deals with the limits on the effect of a registered trademark and section 30(3) operates as an exception to infringement of a trademark i.e., even if an act were to amount to infringement under Section 29, it would not be infringement by virtue of Section 30. Section 29 deals with infringement of registered trademarks and deems certain acts to be infringement only if the trademark is used in the course of trade by a person not using by way of permitted use. Any use of a trademark with the consent of the trademark proprietor, as suggested by the plaintiff, would not amount to infringement under Section 29 in the first instance, as it would be "permitted use" as defined by section 2(1)(r) of the Trade Marks Act.
52. The acceptance of the plaintiff's contention would make section 30(3) TM Act redundant, as there would be no need to have an exception for infringement for an activity that would not amount to infringement under section 29 at all. It is well- settled position that a statutory provision cannot be interpreted in a manner that would render it redundant.
53. The next aspect of the argument of the defendant no. 1 is that there is no cause of action for passing off. It is submitted that the plaintiff claims that the sale of genuine goods on the platform of defendant no. 1 amounts to the tort of "passing off". This claim is completely meritless, for various reasons. It is submitted that the basis of the tort of passing off is that no person can carry on business so as to "pass off" his goods or services as those belonging to someone else and thus take advantage of the reputation of such other person. Consumers should not be deceived into thinking that goods which in fact CS (Comm.) No. 2480/2019 Page No. 24 of 64 originate from Person 'A', originate from Person 'B'. However, the position is the present case is different. The instant application for summary judgment is limited to genuine goods of the plaintiff, i.e. goods which originate from the plaintiff and are marketed on the platform of defendant no. 1 as originating from the plaintiff. Since there is absolutely no deception taking place, the most basic ingredient of the tort of passing off is not satisfied.
54. The next argument put forward by the defendant no. 1 is that no cause of action for inducement of breach of contract by defendant no. 1 is there in the suit albeit the plaintiff has claimed that defendant no. 1's actions amount to inducement of breach of contract, by interfering in the performance of the contractual obligations of the plaintiff's authorized distributors/dealers. However, the plaintiff has categorically admitted in its reply to the present application in para F.2 at page 10 that it has not even impleaded the sellers who are responsible for selling the plaintiff's products on the platform of defendant no. 1. Moreover, apart from one "sample contract" each with a distributor and dealer, the plaintiff has not even placed on record the actual contract which it alleges has been breached, whether by inducement by defendant no. 1 or otherwise. It is submitted that there can be no finding of breach of contract or inducement of breach of contract unless, at the very least, the party which has breached the contract is impleaded in the suit and the contract of which breach is alleged is on record.
55.It is submitted in continuation of the above argument that the plaintiff's reply to this allegation is noteworthy and shows the CS (Comm.) No. 2480/2019 Page No. 25 of 64 absurdity of the plaintiff's case. Para 12 of the plaintiff's reply to application for summary judgment, is pertinent to note, where it is said that, "It is highly misconceived being contrary to law that the plaintiff was required to identify the relevant party with whom the plaintiff has contractual relations and with respect to whom interference or inducement of breach is alleged impleaded the said party and also filed the relevant contract."
(B). Arguments of Defendant no. 2 on Merits
56.Ld. Counsel for the defendant no. 2 adopted the arguments addressed on behalf of the defendant no. 1 stating that the defendant no. 2 is a logistics company and does not partake in the sale or purchase of the products in question in the present suit. The same is also apparent from the plaintiff's own pleadings, wherein the only averment made with respect to the defendant no. 2 is at Para 13 of the Plaint stating that the defendant no. 2 provides "logistics and payment services including delivery of the product and receiving payment on behalf of the sellers."
57.It is therefore submitted on behalf of the defendant no. 2 that as per the plaintiff's own assertions, the activities of the defendant no. 2, as on the date of filing of the suit, were limited to the following services:
a. Packaging of products;
b. Transportation of products;
c. Delivery of products; and CS (Comm.) No. 2480/2019 Page No. 26 of 64 d. Collecting payments for delivery of products.
58. Ld. Counsel for the defendant no. 2 further submitted that it is pertinent to mention that none of the activities stated above fall within the ambit of 'use of a mark in the course of trade' in accordance with Section 29(1) and Section 29(6) of the TM Act, 1999. In view of the above and as per the plaintiff's own pleadings, there is no cause of action that has arisen against the defendant no. 2.
(C). Arguments of Plaintiff on Merits
59. Ld. Counsel for the plaintiff has vehemently opposed the application of the defendant no. 1.
60.At the outset, it is submitted that the defendant no. 1 cannot take the defense of Section 30 (3) of the Act since the Defendant as per its own defense is not selling the goods on its platform by itself. The defendant no. 1 claims to be a B2B (Business to Business) platform and an intermediary under the Information Technology Act, 2000, though such claims are denied by the plaintiff.
61.It is submitted on behalf of the plaintiff that section 29 of the Act lays down the situations when the acts of a party are considered as infringement of a registered trade mark. Section 29(1) of the Act reads that "a registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which is identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered and in such manner as to CS (Comm.) No. 2480/2019 Page No. 27 of 64 render the use of the mark likely to be taken as being used as a trade mark." By virtue of this section, a person who is not the registered proprietor or a permitted user of a trade mark, will be liable for infringement of a registered trade mark of the registered proprietor.
62. Expounding his arguments further, Ld. Counsel for the plaintiff submitted that section 30 of the Act is an exemption and provides defense to an infringement action in certain cases. As per Section 30 (3) of the Act, if the goods bearing a registered trade mark are lawfully acquired by a person, then the sale of such goods in the market is not infringement, if the goods bearing the registered trade mark are put in the market by the registered proprietor or with the consent of the registered proprietor. Therefore, in order to avail the exemption under Section 30 (3) of the Act the defendant has to establish firstly that the defendant is using the trade mark of the registered proprietor (herein PRESTIGE) and is not a registered proprietor or permitted user of the same, and secondly that the defendant is selling the goods which have been lawfully acquired, and thirdly that the registered proprietor (herein TTK Prestige) has put the goods in the market with its consent, in the present case consent to sell the goods on online platforms including on www.udaan.com.
63.Ld. Counsel for the plaintiff deeply dwelt on the aspect of lawful acquisition It is submitted that an essential ingredient to be satisfied to avail Section 30(3) defense is the 'lawful acquisition' of the goods. In the present case, the goods being sold by the defendant no. 1 on its platform are not lawfully acquired since there is no consent of the plaintiff. The plaintiff CS (Comm.) No. 2480/2019 Page No. 28 of 64 has produced agreements with its distributors and dealers with specific clause that these distributors/sub dealers will not sell the plaintiff's goods on e-commerce websites without permission from the plaintiff and the clause 3.10 on Page 12 and clause 4.8 on Page. 25 of annexures to application for summary judgment are self-speaking of the matter. In view of the said clauses, the goods which are being sold on the platform of the defendant no. 1 cannot be considered as lawfully acquired by it.
64. Ld. Counsel for the plaintiff argued that in order to establish that these goods are not lawfully acquired, it has to be first established that the Distributorship Agreement entered into by the plaintiff are not valid contract and are unlawful. It is submitted that agreements such as the Distributorship Agreements of the plaintiff, which impose certain conditions on the trade, are valid agreements and negative covenants with positive covenants during the subsistence of a contract would not be regarded as a restraint of trade unless the same is completely one-sided. On this aspect reliance has been placed on Ozone Spa Pvt. Ltd. vs. Pure Fitness and Others 2015 (63) PTC 505 (Del) placing emphasis on paras 32, 33, 34(i) of the judgment.
65. Carrying forward the above argument, Ld. Counsel for the plaintiff submitted that in the present case, the issue whether the goods sold on the platform of defendant no. 1 have been lawfully acquired and the same are without the consent of the plaintiff is a mixed question of fact as well as law which can only be proved in trial and not at this stage. This requires summoning of witnesses from both the sides including the CS (Comm.) No. 2480/2019 Page No. 29 of 64 sellers, distributors and dealers who have sold the goods to the defendant to prove the inter se relationship of the defendant no. 1 and these parties, business arrangement in acquiring the goods in question and whether the goods are genuine and with consent of the Plaintiff etc. Therefore, oral evidence cannot be dispensed with.
66.Next, the Ld. Counsel for the plaintiff dwelt on the concept of the defendant no. 1 being an intermediary. It is submitted by the Ld. Counsel for the plaintiff that even otherwise, the defendant herein cannot take the defense of section 30(3) as it has taken the defense of being an intermediary under the IT Act 2000, which is apparent in para 6 (a) of the written statement. The defense of section 30 (3) and being an intermediary are contrary to each other as Section 30(3) is available to a seller as evident from the section itself, reproduced hereinbelow:-
"(3) Where the goods bearing a registered trade mark are lawfully acquired by a person, the sale of the goods in the market or otherwise dealing in those goods by that person or by a person claiming under or through him is not infringement of a trade by reason only of--(a) the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods; or (b) the goods having been put on the market under the registered trade mark by the proprietor or with his consent...."
67.Reliance has been placed upon Amazon Seller Services Pvt. Ltd. vs. Amway India Pvt. Ltd. and Ors. (2020 SCC OnLine Del 454) citing in particular Paras 141 and 145 stating that Hon'ble Division Bench of High Court of Delhi has already CS (Comm.) No. 2480/2019 Page No. 30 of 64 held that the said issue has to be decided only in trial. It is submitted that the fact whether Defendant No. 1 will be allowed to sell the genuine goods on its platform will depend upon whether Defendant No. 1 is an intermediary or not. If defendant no. 1 is not an intermediary, then all the liabilities of Section 29 in connivance with sellers/ distributors will fall upon the Defendant No. 1 including the damages which has been caused to the plaintiff. This issue can only be decided in trial and the oral evidence of witnesses cannot be dispensed with.
68.Challenging the argument of the defendant no. 1 as regards non-impleading the dealers/distributors who have allegedly committed the breach of agreement and therefore has no prospects in succeeding in the suit, Ld. Counsel for the plaintiff stated that such argument is fallacious as non- impleadment of distributors/dealers does not absolve the defendant no. 1 from its liability of infringement under the Act as well as under the Information Technology Act. The case of the plaintiff is that the defendant no. 1 is inducing breach of contract and committing infringement in connivance with other sellers on its platform. The Hon'ble High Court of Delhi in the judgment of Amazon Sellers (supra) has held that issue of inducement to breach of contract is an issue which can be decided only in a trial. The Plaintiff cannot be deprived of its right to summon the sellers as witnesses, cross-examine them including cross-examination of defendant no. 1's witnesses to prove the inter se business relationship of the defendant no. 1 with the sellers, role of the defendant no. 1 in CS (Comm.) No. 2480/2019 Page No. 31 of 64 breach of such contracts as well as the damages which have been caused to the plaintiff.
69. Ld. Counsel for the plaintiff argued that the judgments cited by the defendant no. 1 are distinguishable. The defendant no. 1 has not established as to why the oral evidence ought to be dispensed with and nothing is required to be established in the trial with respect to lawful acquisition of the goods and consent of the plaintiff. The judgment relied upon by the defendant no. 1 does not help the case of the defendant and are distinguishable.
70. It is submitted that the judgment of Kapil Wadhwa vs Samsung Electronics Co. Ltd. 2012 SCC OnLine Del 5172 is distinguishable as admittedly, the defendants were importing genuine goods; there was no plea that the defendants were selling counterfeit goods or there was an impairment with the goods; it was not a case of sale on online market place; the defendants had not taken the defense of being intermediaries.
71. Distinguishing the case of Samsung Electronics (supra) it is submitted that the said suit had been disposed of by the Ld. Single Judge vide its order dated 16.01.2018 since the Ld. Single Judge has categorically recorded the admission on the part of the plaintiff that the defendant were importing genuine goods and it's a pure question of law and nothing was required to be proved in trial. This is not the situation here.
72.As regards the distinguishing aspect of Amazon Seller Services Pvt. Ltd. vs. Amway India Pvt. Ltd. and others- 2020 SCC OnLine Del 454 It has been submitted that in that case the Hon'ble Division Bench has recorded that there were no CS (Comm.) No. 2480/2019 Page No. 32 of 64 pleadings with respect to trade mark registration or proprietorship rights and hence the case of trade mark infringement was not made out. On the other hand, in the present case the plaintiff has enlisted its trade mark registrations and has also pleaded infringement of trade mark. The Hon'ble Division Bench has held that the issue of intermediaries and the breach of agreements are issues to be decided in trial. It is further pertinent to mention herein that all the judgments cited by the defendant no. 1 acknowledge the fact of lawful acquisition of the goods which the defendant has not established in the present case.
73. Ld. Counsel for plaintiff also cited Tayabbhai International A/S vs. Hind Rubber Industries Pvt. Ltd. AIR 1997 SC 1240 on the aspect of contempt under Order XXXIX Rule 2A of the Code and another judgment passed by the Hon'ble High Court of Chhatishgarh on 08.05.2015 titled as Mile Stone Soft Tech Pvt. Ltd. vs. Nidhi Chhiber on Contempt of Court Act.
74. Responding to the submissions of the defendant no. 2, Ld. Counsel for the plaintiff submitted that though it has not filed any application for summary judgment, it has adopted the arguments of the defendant no. 1 and has raised various grounds viz. the defendant being a logistics company is not involved in sale or purchase of the plaintiff's goods under the trade mark PRESTIGE and that the activities of defendant no. 2 are not covered under the ambit of Section 29 of the Act and thus no cause of action exists against defendant no. 2. The same are not tenable as the defendant no. 2 is a 100% owned subsidiary of defendant no. 1 and is acting in collusion with defendant no.1 to provide transport, storage, logistics services CS (Comm.) No. 2480/2019 Page No. 33 of 64 to the users registered on defendant no. 1's platform. Reference is made to para 5 of the Replication filed by the plaintiff to the Written Statement filed by defendant no. 2. The role of the defendant no. 2 and its involvement in the infringing activities can only be decided at the trial and the defendant no. 2 cannot take shelter and seek summary judgment without going to trial. On this aspect reliance is again placed on Amazon Seller Services (supra).
75.In view of the above facts and circumstances the Defendants have not established a case of summary judgment and the present application is liable to be dismissed with costs.
Rebuttal Arguments of Defendant No. 176.In rebuttal, Ld. Counsel for the defendant no. 1 made submissions to refute the arguments of plaintiff and distinguished the case law propounded by the plaintiff.
77.It is submitted that the plaintiff's reliance on the judgment of the Hon'ble Division Bench of the High Court of Delhi in Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd.(supra) is entirely misconceived. The said judgment does not stand for the proposition that even a case where the most basic particulars of the claim are not made out and the Court does not even have the benefit of the contract of which breach is alleged must be sent to trial. The Hon'ble High Court merely stated that whether "in fact any of the online platforms induced a breach of contract between the DSE and its ABOs/sellers is at best a matter of evidence, and not of inference". However, in the present case, even the contract whose breach is alleged is not filed and the party which has CS (Comm.) No. 2480/2019 Page No. 34 of 64 breached the contract is not before the Court. In such a case, the plaintiff has no real prospect of succeeding on this claim of inducement of breach of contract and there is no compelling reason for this claim to proceed to trial
78.Responding to the plaintiff's stand on the issue of exhaustion, Ld. Counsel for the defendant no. 1 submitted that the plaintiff argued that due to the contractual restriction on the dealers/distributors of the plaintiff against selling the plaintiff's products via e-commerce, even genuine goods of the plaintiff sold on defendant no. 1's platform are unauthorized and are not lawfully acquired. The response of the defendant no. 1 is that any contractual restriction prohibiting a buyer of goods from alienating those goods once title has passed is contrary to law. However, even assuming that such a contractual restriction is valid, the lawfulness of the acquisition of goods cannot be affected by a subsequent sale. Since the plaintiff has categorically admitted that title in its goods passes to its dealers/distributors, and that the goods listed on defendant no. 1's platform which are relevant for this application are genuine goods, the plaintiff cannot claim that an acquisition which was lawful at the time it was made subsequently becomes unlawful due to further sale. At most, the plaintiff may allege that such further sale amounts to a breach of contract by its dealers/distributors. However, this has no bearing on the doctrine of exhaustion of trademark rights or the effect of Section 30(3) of the Trademarks Act, 1999. Therefore, regardless of the contractual restriction placed by the plaintiff, once a lawful acquisition of the plaintiff's goods has occurred, there is an immediate CS (Comm.) No. 2480/2019 Page No. 35 of 64 exhaustion of the trademark rights in such goods and no case can be made out for trademark infringement merely on the ground of the contractual restriction.
79. The second limb of the plaintiff's argument that the question of "lawful acquisition" is to be established at trial has been responded by submitting that the products in question have been lawfully acquired is based entirely on the plaintiff's own categorical admissions in the plaint and documents filed along with the plaint. The sole fact pleaded in the plaint to allege that the acquisition of the plaintiff's goods was 'unlawful' is that the Plaintiff has not consented to sale of such goods on defendant No. 1's platform. However, even assuming that such lack of consent is true and is valid in law, it does not dilute the effect of Section 30(3) of the Trademarks Act, 1999 and does not provide any cause of action for a claim of trademark infringement. There is therefore no question that remains to be tried with respect to the issue of 'lawful acquisition' Reliance on the Order dated 26.02.2018 passed by the Hon'ble High Court of Delhi in Samsung Electronics Company v. Kapil Wadhwa, CS(OS) 1155/2011 is reiterated.
80.Responding to the plaintiff's argument that defendant no. 2 cannot take the benefit of section 30(3), since for invoking section 30, first Section 29 is to be satisfied and the mark is to be used in the course of trade it as plaintiff has sued the defendant on the basis that they have connived with the sellers, while the defendants takes the defence of an intermediary and the defendant no. 1 seems to be fighting the case and taking the defence on behalf of its sellers, it is submitted that this CS (Comm.) No. 2480/2019 Page No. 36 of 64 argument is an admission that the defendant is not engaged in any infringing act and the claim fails on this basis alone. It is also submitted that the argument exposes a fatal flaw in the plaintiff's case that they have not impleaded the sellers as a party to the case. The plaintiff seems to be taking advantage of its own wrong.
81. The next argument of the plaintiff which is refuted by the defendant no. 1 is regarding whether or not the defendant is an intermediary is a question of trial. In response it has been submitted that section 79 of the IT Act, 2000 is only a defence to liability. Without infringement of trademark being established, there is no question of liability. Hence, defendant's intermediary status is irrelevant to deciding as to whether the plaintiff has established infringement.
82.In conclusion and to sum-up, it is submitted on behalf of the defendant no. 2 that the above submissions establish that a significant part of the plaintiff's claim relates to sale of genuine goods originating from the plaintiff which are being sold on defendant no. 1's platform without the plaintiff's authority. This conclusion flows from the categorical admissions made by the plaintiff in the plaint and documents filed along with the plaint. The offer to sell or sale of genuine goods originating from the trademark proprietor without the trademark proprietor's consent does not amount to trademark infringement or passing off, even if the trademark owner has sold the goods to its distributors/dealers with the condition that they will not sell the products through the e-commerce mode without its consent. This conclusion is based on the express language of Section 30(3) of the TM Act, binding precedents CS (Comm.) No. 2480/2019 Page No. 37 of 64 interpreting this provision, and the doctrine of exhaustion of trademark rights that is well-settled across common law jurisdictions.
83.It is then stated that it is evident that the plaintiff has no real prospect of succeeding on the claim that the sale of genuine goods originating from the plaintiff on the platform of defendant no. 1, without the plaintiff's authority, amounts to trademark infringement or passing off. There is no compelling reason to go to trial in this case and oral evidence is not required to be adduced in this case. It is also stated that in the present application, the submissions made by the defendant no. 1 are limited to the admissions made by the plaintiff itself, and the interpretation of Section 30(3) of the TM Act even assuming that all allegations made by the plaintiff are true. The issue to be determined is therefore a pure question of law, and there is no additional evidence that either the plaintiff or defendant no. 1 could present at trial with respect to this issue. The plaintiff's claim in this respect is not even arguable, being directly contrary to law. There is no compelling reason for this claim to proceed to trial, as all the facts required to decide this claim are already before this Court.
Analysis, Findings and Reasons
84.I would, first of all, deal with the issue of maintainability of the application for summary judgment filed under Order XIIIA of the Code.
85.A trial in a civil suit commences on the identification of the issues. These issues may be issues of facts, or issues of law. If the case entirely depend in a pure question of law, it can be CS (Comm.) No. 2480/2019 Page No. 38 of 64 disposed of by a judgment on the preliminary issue, more pertinently, if such issue pertains to jurisdiction of the Court or a bar to the suit created by any law for the time being in force. It has been so provided under Order XIV Rule 2 of the Code.
86.But this is not the only exit gate for a lis. If a party fails to present written statement called for by the Court, a judgment may be pronounced against it under Order VIII Rule 10 of the Code. Order VII Rule 11 provides for rejection of plaint, if one or more of the grounds stated therein are attracted. A judgment on admissions can be passed in accordance with Order XII Rule 6 of the Code.
87.So, as the scheme of the Code shows, that trial is procedure, which must be followed as ritual, invariably in all the cases, as a rule of thumb, is not the correct interpretation. In appropriate cases, if the requisite conditions are met with, a litigation may be shown the exit door in accordance with the law.
88.The concept of summary judgment as enshrined in the Order XIIIA of the Code of Civil Procedure and applicable only in respect of a commercial suit is of a recent origin with the enactment of the Commercial Courts Act, 2015. It is a unique provision, so far having no sibling in any other statute.
89.On a cursory examination, it may appear that the summary judgment is akin to 'judgment on admission' under Order XII Rule 6 of the Code of Civil Procedure or a 'default judgment' under Order VIII Rule 1 of the Code of Civil Procedure or in some way similar to the 'summary procedure' under Order XXXVII of the Code of Civil Procedure. A careful scrutiny of the provision reveals that it is in fact quite different from these CS (Comm.) No. 2480/2019 Page No. 39 of 64 provisions. It is an independent provision, self-contained in itself having characteristic distinctions vis-à-vis the other provisions cited above.
90.In the judgment of Ambalal Sarabhai Enterprises Vs. K. S. Infraspace LLP reported as 2019 SCC OnLine SC 1311, the Hon'ble Supreme Court of India has been pleased to hold that "keeping in view the object and purpose of the establishment of the Commercial Courts and fast tracking procedure provided under the Act, the statutory provisions of the Act and the words incorporated thereon are to be meaningfully interpreted for quick disposal of commercial litigations so as to benefit the litigants especially those who are engaged in trade and commerce which in turn will further economic growth of the country."
91.It is the duty of the Court to show an exit door to a litigation without following the entire ritual of trial, if the same can be done within four corners of the law. It is, in fact, a duty incumbent upon the Court to resort to all such measures, in accordance with the law to curtail the dockets explosion. This situation can be best illustrated by quoting the following poem by Shel Silverstein which is self speaking:-
"Sarah Cynthia Sylvia Stout Would not take the garbage out! She'd scour the pots and scrape the pans, Candy the yams and spice the hams, And though her daddy would scream and shout, She simply would not take the garbage out. And so it piled up to the ceilings:
Coffee grounds, potato peelings, Brown bananas, rotten peas, Chunks of sour cottage cheese.CS (Comm.) No. 2480/2019 Page No. 40 of 64
It filled the can, it covered the floor, It cracked the window and blocked the door With bacon rinds and chicken bones, Drippy ends of ice cream cones, Prune pits, peach pits, orange peel, Gloppy glumps of cold oatmeal, Pizza crusts and withered greens, Soggy beans and tangerines, Crusts of black burned buttered toast, Gristly bits of beefy roasts.
The garbage rolled on down the hall, It raised the roof, it broke the wall. Greasy napkins, cookie crumbs, Globs of gooey bubble gum, Cellophane from green baloney, Rubbery blubbery macaroni, Peanut butter, caked and dry, Curdled milk and crusts of pie, Moldy melons, dried-up mustard, Eggshells mixed with lemon custard, Cold french fried and rancid meat, Yellow lumps of Cream of Wheat.
At last the garbage reached so high That it finally touched the sky.
And all the neighbors moved away, And none of her friends would come to play. And finally Sarah Cynthia Stout said, "OK, I'll take the garbage out!"
But then, of course, it was too late.
The garbage reached across the state, From New York to the Golden Gate.
And there, in the garbage she did hate, Poor Sarah met an awful fate, That I cannot now relate Because the hour is much too late.
But children, remember Sarah Stout And always take the garbage out!"
92.The provision of Summary Judgment gives a right of any party to a commercial dispute instituted under the Commercial Courts Act, 2015 to get a claim decided in its favour without going through the process of recording the oral evidence. It is CS (Comm.) No. 2480/2019 Page No. 41 of 64 an effective tool for deciding cases where it can be clearly demonstrated that a trial is unnecessary. In various quarters this provision has been labelled as a 'blunt instrument' that can abruptly terminate litigation. However, as the case law jurisprudence that has developed on this subject has recognized it is a tool that allows Courts to weed out cases that do not need a trial to be resolved, and the precious time of the Courts can be utilized fruitfully by focusing on the areas of actual dispute, which require particular attention. The Superior Courts, in a catena of case law, have strictly interpreted this provision so that the rule does not deprive the parties of their innings in the Court.
93.All commercial disputes are covered under the provision of Order XIIIA with only one exception i.e. the cases originally instituted under the summary procedure under Order XXXVII of the Code of Civil Procedure, in which case this provision cannot be invoked.
94.The right to get a summary judgment can be claimed by any of the parties to a commercial dispute and this window is not open all the times. It is open from any stage after the service of summons of the suit upon the defendant till the stage of the framing of the issues. Once the issues have been framed, the window gets closed for good. It has been so expounded in the judgment of Bright Enterprises Private Limited & Anr. vs. M J Bizcraft LLP & Anr 2017 SCC OnLine Del 6394.
95.There are four ways in which the claims can be decided by way of a summary judgment. Firstly, the entire claim of either of the parties; secondly, a part of claim of either of the parties;
CS (Comm.) No. 2480/2019 Page No. 42 of 64thirdly a counter-claim and lastly any particular question on which the claim, whether in whole or in part, depends can be decided under this provision.
96.A Court may give a summary judgment against any party to a commercial dispute on two grounds. These two grounds have been joined by the word 'and' connoting that both the grounds must exist together and simultaneously. The first ground is that the Court considers that the plaintiff has no real prospect of succeeding on the claim or that the defendant has no real prospect of successfully defending the claim. The second ground is that there is no other compelling reason why the claim should not be disposed of before recording of oral evidence.
97.The Hon'ble High Court of Delhi in Su-Kam Power Systems Ltd. vs. Kunwer Sachdev & Anr. reported as 2019 SCC OnLine Del 10764 has been pleased to hold that this provision empowers the Court to grant a Summary Judgment against the defendant where the Court considers that the defendant has no real prospects of successfully defending the claim and there is no other compelling reason why the claim should not be disposed of before recording of oral evidence.
98.The judgment of Su-Kam (supra) expounded the concept of the expression 'real' and held that is means 'realistic' as opposed to 'fanciful' prospects of success. Consequently, Order XIII-A CPC would be attracted if the Court, while hearing such an application, can make the necessary finding of fact, apply the law to the facts and the same is a proportionate, more expeditious and less expensive means of achieving a fair CS (Comm.) No. 2480/2019 Page No. 43 of 64 and just result. In another case, Hon'ble Ambawatta Buildwell Pvt. Ltd. vs. Imperia Structure Ltd. & Ors. 2019 SCC OnLine Del 8657, Hon'ble High Court of Delhi has held that it has to be seen whether the defence pleaded, has any chance of succeeding in law and if the answer is in the negative, a decree on admissions or under Order XV of CPC or a Summary Judgment under Order XIII-A of the Code has to follow. Other significant judgments, expounding the various facets of the scope and ambit of a summary judgment, pronounced by the Hon'ble High Court of Delhi are Rockwool International and Anr. vs. Thermocare Rockwool (India) Pvt. Ltd. 2018 SCC OnLine Delhi 11911; R. Impex vs. Punj Lloyd Ltd. 2019 SCC OnLine Delhi 6667; Mallcom (India) Limited and Anr. vs Rakesh Kumar & Ors. 2019 SCC OnLine Delhi 7646 and Jindal Saw Limited vs. Aperam Stainless Services & Solutions Precision SAS & Ors. 2019 SCC OnLine Delhi 9163; Venezia Mobili (India) Pvt. Ltd. vs. Ramprastha Promotors and Developers Pvt. Ltd., a judgment passed by Hon'ble High Court of Delhi on 26.03.2019 in CS (Comm.) 760/2017 and the law laid down in all these judgments have been duly considered by this Court.
99.Thus, while undertaking the task of considering a case or a claim for summary judgment, is indeed a task which must weigh and evaluate a host of factors. This situation can be aptly described by referring to the Verse 17 from Chapter 4 of Bhagvad Gita, which reads that "कररणण हपप बणदवयय , बणदवयय च पवकररण:|अकररणशच बणदवयय गहनन कररणण गपत:||" meaning thereby that logic for an action must be known, so also the logic for CS (Comm.) No. 2480/2019 Page No. 44 of 64 inaction and that the logic for a prohibited action must also be known, therefore the practice of 'karma' is profound.
100. An application for summary judgment has three aspects viz. the factual submissions; the legal submissions; and the documentary evidence.
101. While dealing with an application for summary judgment the Courts must consider certain factors. The following factors have been culled out from various judgments--
(i). Whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success? Swain v. Hillman MANU/UKWA/0649/1999: [2001] 1 All ER 91. A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable. ED & F Man Liquid Products v. Patel [2003] EWCA Civ 472 at [8].
(ii). Court must not take at face value and without analysis everything that a claimant says in his submissions before the Court. ED & F Man Liquid Products v. Patel (supra).
(iii). Court must take into account not only the evidence actually placed before it, but also the evidence that can reasonably be expected to be available at trial. Royal Brompton Hospital NHS Trust v. Hammond (No 5) [2001] EWCA Civ 550
(iv). The Court must be satisfied that there is no genuine issue requiring a trial with respect to a claim CS (Comm.) No. 2480/2019 Page No. 45 of 64 or defence.
(v). It is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction. ICI Chemicals & Polymers Ltd. v. TTE Training Ltd. [2007] EWCA Civ. 725
(vi). Summary judgment ought to be refused if there were compelling reasons to conduct a trial.
(vii). Court has to strike a balance between a fair trial and expedition.
102. In this context the case of the plaintiff has to be considered for grant of a summary judgment.
103. The scope and ambit of a summary judgment aspect having been considered, I would not analyze the specific objections of the plaintiff to the consideration of the instant application.
104. The first objection of the plaintiff that the limited issue on which the defendant no. 1 has been seeking summary judgment is the subject matter of the appeal being FAO (COMM) 519/2019. This Court, at two occasions, has taken a prima facie view in favour of the plaintiff by way of ex-parte injunction dt. 15.10.2019 and bi-parte injunction dated 25.10.2019. In fact, the scope of an injunction application vis- à-vis a summary judgment is quite different and there is no room for overlapping. While an injunction is subject matter of interlocutory jurisdiction and based on prima-facie view, the CS (Comm.) No. 2480/2019 Page No. 46 of 64 summary judgment pertains to final reckoning in a suit on the entire claim or a part of the claim. Both operate for different reasons and objectives. Hence, I do not find any force in this plea.
105. The other two aspects pressed into service viz. whether the goods sold on the platform of defendant no. 1 have been lawfully acquired and the same are without the consent of the plaintiff; and whether the defendant is of defendant no. 1 is an intermediary, would be discussed in the course of the consideration of this application.
106. Thus, the summary judgment application as presented is maintainable in the eyes of law. Whether, the same can be eventually allowed is a different matter altogether. This requires the sifting of the factual and legal aspects argued by the parties and tested on the touchstone of the various criteria stated above.
107. The pleadings of the case have crystallized and the respective parties have produced all the documents in their power and possession. It cannot be lost sight of the fact that in commercial matters in the present business milieu the evidence primarily constitutes to be documentary one and the scope of oral evidence is limited, if not altogether ruled out. The admission and denial of documents is also a step in lending further credibility to the documents by the adversary. This also reduces the scope for oral evidence.
108. The plaintiff has put various violations on the part of the defendants into various groups. The same are as under:-
CS (Comm.) No. 2480/2019 Page No. 47 of 64(i). "unauthorized products"
(ii). "fake products"
(iii). "products falsely applying false trademarks"
(iv). "products with no warranty"
(v). "products with tampered warranty"
(vi). "listing wrong brands under Prestige".
109. The scope of the instant application has been circumscribed by the defendant no. 1, that it pertain to the listing on its website in the category of unauthorized listings. Therefore, the order deals with only that category of goods.
110. What factors have been pressed into service by the plaintiff for deciphering as to what constitutes unauthorized listings of products, are enlisted as under, as culled out from the pleadings:-
(i). The goods being sold by the defendant no.
1 on its platform are not lawfully acquired since there is no consent of the plaintiff.
(ii). The plaintiff has agreements with its distributors and dealers with specific clause that these distributors/sub dealers will not sell the plaintiff's goods on e-commerce websites without permission from the plaintiff (Clause 3.10 and Clause 4.8).
(iii). In view of the said clauses, the goods which are being sold on the platform of the defendant no. 1 cannot be considered as lawfully acquired.
(iv). In order to establish that these goods are not lawfully acquired, it has to be first CS (Comm.) No. 2480/2019 Page No. 48 of 64 established that the Distributorship Agreement entered into by the plaintiff are not valid contract and are unlawful.
111. It is the case of the plaintiff that until and unless these agreements, which impose certain conditions, are termed as illegal, the defendant no. 1 cannot succeed in this application. Reliance has been placed on Ozone Spa Pvt. Ltd. vs. Pure Fitness and Others - 2015 (63) PTC 505 (Del). The relied upon paras of the judgment read as under:-
"32. It is well settled principle of law that the negative covenants contained in the agreement which are aimed at to operate during the subsistence/ validity of the agreement in a commercial contract can be validly enforced and injunction for enforcement of the said covenant cannot be refused on the ground that the same are in restraint of the trade as the underlying purpose of the said negative covenant prohibiting the party to conduct the competing business is to serve the contractual relationship and there exists no such restraint of trade in such a case as the party so restricted is already doing the business as per commercial arrangement under the contract.
33. In Taprogge Gesellschaft MBH v. IAEC India Ltd., AIR 1988 Bombay 157, learned Single Judge of the Bombay High Court while explaining the reason why covenants pertaining to the duration of the contract was not in restraint of trade observed as under:-
"The distinction between the restraints imposed by a Contract, operative during the subsistence of the contract and those operative after the lifetime of the contract is of a fundamental character .... Generally speaking, the negative covenants operative during the term of the contract are not hit by S.27 of the Contract Act because they are designed to fulfil the contract and not to CS (Comm.) No. 2480/2019 Page No. 49 of 64 restrict them.... This distinction which is of a fundamental nature has to be borne in mind; otherwise the perspective will be lost.... the restraints which operate during the term of the contract have to fulfil one kind of purpose viz. Furthering the contract. On the other hand, the restraints operative after the termination of the contract strive to secure freedom from competition from a person who no longer works within the contract...."
(Emphasis supplied)
34. Likewise, in the case of Wipro Limited vs Beckman Coulter International, (supra) the learned Single Judge of this Court after elaborately examining the decision of Gujarat Bottling case (supra) and other line of authorities on the subject of the restrictive covenant proceeded to summarise the legal position by observing as under
"After a review of all the decisions of the Supreme Court and the High Courts, including this Court, the following points become clear:
i) Negative covenants tied up with positive covenants during the subsistence of a contact be it of employment, partnership, commerce, agency or the like, would not normally be regarded as being in restraint of trade, business of profession unless the same are unconscionable or wholly one-sided;
ii) Negative covenants between employer and employee contracts pertaining to the period post termination and restricting an employee's right to seek employment and/or to do business in the same field as the employer would be in restraint of trade and, therefore, a stipulation to this effect in the contract would be void. In other words, no employee can be confronted with the situation where he has to either work for the present employer or be forced to idleness;
iii) While construing a restrictive or negative covenant and for determining whether such covenant is in restraint of trade, business or CS (Comm.) No. 2480/2019 Page No. 50 of 64 profession or not, the courts take a stricter view in employer-employee contracts than in other contracts, such as partnership contracts, collaboration contracts, franchise contracts, agency/distributorship contracts, commercial contracts. The reason being that in the latter kind of contracts, the parties are expected to have dealt with each other on more or less an equal footing, whereas in employer- employee contracts, the norm is that the employer has an advantage over the employee and it is quite often the case that employees have to sign standard form contracts or not be employed at all;
iv) The question of reasonableness as also the question of whether the restraint is partial or complete is not required to be considered at all whenever an issue arises as to whether a particular term of a contract is or is not in restraint of trade, business or profession." (Emphasis Supplied)"
112. In my view, the judgment has relied upon by the plaintiff on an all-together different context than the one that is in question there. The case-law cited by the plaintiff does not lay down that the any such agreement binds the third parties too. The question in this case is whether an agreement between the plaintiff and its distributors/dealers cannot bind a third person. The answer is squarely a big No. The agreements between the plaintiff and its distributors/dealers are 'in personam' and not 'in rem'. They do not have any force to bind the world at large. Thus, various rights and obligations defined in various agreements between the plaintiff and its distributors/dealers are enforceable between the parties to the agreement inter-se only and cannot bind any third person or the world at large.
CS (Comm.) No. 2480/2019 Page No. 51 of 64113. Further, these agreements define the corresponding rights and liabilities between the plaintiff and its distributors/dealers. Admittedly, these parties are not joined in the suit. No damages have been claimed against them. Who are these parties (distributors/dealers) is conspicuous by absence. How their acts or omissions can impinge upon the defendants is also not explained.
114. The liability on the defendants can either be fastened by virtue of a contract or by virtue of the operation of the law. Of course, there being no express or ostensible privity of contract between the plaintiff and the defendants, there being a contractual obligation of the defendants does not arise. Even presuming for the sake of argument that the defendants do attract a liability, the moot question is whether it can be imposed when the principal obligators viz. distributors/dealers of plaintiff have not been sued and given a go-bye.
115. Thus, the obligation of the defendants can only be searched for in the realm of law. The moot question here is whether the law imposes any obligations upon the defendants herein to which they are answerable, without reference to any contract whatsoever. If the law has imposed certain obligations, the question of any contractual obligation fades into insignificance.
116. The foundation of the trademark law has its roots in the law of torts termed a law of unfair competition. It originated as the common law, but many aspects of the same have been given a statutory recognition. The Trade Marks Act, 1999 sails in the same boat where infringement of a registered trademark is a statutory remedy, albeit the common law remedy of CS (Comm.) No. 2480/2019 Page No. 52 of 64 passing-off still continues, irrespective of registration or no registration of a trademark.
117. Section 29 of the Act reads as under:-
"29. Infringement of registered trademarks.--
(1) A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which is identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered and in such manner as to render the use of the mark likely to be taken as being used as a trade mark. (2) A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which because of--
(a) its identity with the registered trade mark and the similarity of the goods or services covered by such registered trade mark; or
(b) its similarity to the registered trade mark and the identity or similarity of the goods or services covered by such registered trade mark; or
(c) its identity with the registered trade mark and the identity of the goods or services covered by such registered trade mark, is likely to cause confusion on the part of the public, or which is likely to have an association with the registered trade mark.
(3) In any case falling under clause (c) of sub-
section (2), the court shall presume that it is likely to cause confusion on the part of the public.
(4) A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which--
(a) is identical with or similar to the registered trade mark; and CS (Comm.) No. 2480/2019 Page No. 53 of 64
(b) is used in relation to goods or services which are not similar to those for which the trade mark is registered; and
(c) the registered trade mark has a reputation in India and the use of the mark without due cause takes unfair advantage of or is detrimental to, the distinctive character or repute of the registered trade mark.
(5) A registered trade mark is infringed by a person if he uses such registered trade mark, as his trade name or part of his trade name, or name of his business concern or part of the name, of his business concern dealing in goods or services in respect of which the trade mark is registered.
(6) For the purposes of this section, a person uses a registered mark, if, in particular, he--
(a) affixes it to goods or the packaging thereof;
(b) offers or exposes goods for sale, puts them on the market, or stocks them for those purposes under the registered trade mark, or offers or supplies services under the registered trade mark; (c) imports or exports goods under the mark; or (d) uses the registered trade mark on business papers or in advertising.
(7) A registered trade mark is infringed by a person who applies such registered trade mark to a material intended to be used for labeling or packaging goods, as a business paper, or for advertising goods or services, provided such person, when he applied the mark, knew or had reason to believe that the application of the mark was not duly authorised by the proprietor or a licensee.
(8) A registered trade mark is infringed by any advertising of that trade mark if such advertising--
(a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters; or
(b) is detrimental to its distinctive character; or
(c) is against the reputation of the trade mark.
CS (Comm.) No. 2480/2019 Page No. 54 of 64(9) Where the distinctive elements of a registered trade mark consist of or include words, the trade mark may be infringed by the spoken use of those words as well as by their visual representation and reference in this section to the use of a mark shall be construed accordingly."
118. Section 30 of the Act reads as under:-
"30. Limits on effect of registered trade mark.
--(1) Nothing in section 29 shall be construed as preventing the use of a registered trade mark by any person for the purposes of identifying goods or services as those of the proprietor provided the use--
(a) is in accordance with honest practices in industrial or commercial matters, and
(b) is not such as to take unfair advantage of or be detrimental to the distinctive character or repute of the trade mark.
(2) A registered trade mark is not infringed where--
(a) the use in relation to goods or services indicates the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of services or other characteristics of goods or services;
(b) a trade mark is registered subject to any conditions or limitations, the use of the trade mark in any manner in relation to goods to be sold or otherwise traded in, in any place, or in relation to goods to be exported to any market or in relation to services for use or available for acceptance in any place or country outside India or in any other circumstances, to which, having regard to those conditions or limitations, the registration does not extend;
(c) the use by a person of a trade mark--
(i) in relation to goods connected in the course of trade with the proprietor or a registered user of the trade mark if, as to those goods or a bulk of which they form part, the registered proprietor or the registered user conforming to the permitted use has applied the trade mark CS (Comm.) No. 2480/2019 Page No. 55 of 64 and has not subsequently removed or obliterated it, or has at any time expressly or impliedly consented to the use of the trade mark; or
(ii) in relation to services to which the proprietor of such mark or of a registered user conforming to the permitted use has applied the mark, where the purpose and effect of the use of the mark is to indicate, in accordance with the fact, that those services have been performed by the proprietor or a registered user of the mark;
(d) the use of a trade mark by a person in relation to goods adapted to form part of, or to be accessory to, other goods or services in relation to which the trade mark has been used without infringement of the right given by registration under this Act or might for the time being be so used, if the use of the trade mark is reasonably necessary in order to indicate that the goods or services are so adapted, and neither the purpose nor the effect of the use of the trade mark is to indicate, otherwise than in accordance with the fact, a connection in the course of trade between any person and the goods or services, as the case may be;
(e) the use of a registered trade mark, being one of two or more trade marks registered under this Act which are identical or nearly resemble each other, in exercise of the right to the use of that trade mark given by registration under this Act.
(3) Where the goods bearing a registered trade mark are lawfully acquired by a person, the sale of the goods in the market or otherwise dealing in those goods by that person or by a person claiming under or through him is not infringement of a trade mark by reason only of
--
(a) the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods; or (b) the goods having been put on the CS (Comm.) No. 2480/2019 Page No. 56 of 64 market under the registered trade mark by the proprietor or with his consent.
(4) Sub-section (3) shall not apply where there exists legitimate reasons for the proprietor to oppose further dealings in the goods in particular, where the condition of the goods, has been changed or impaired after they have been put on the market."
119. Section 30 sub-clauses (3) and (4) of the Indian Trademarks Act, 1999, deals with the exhaustion of rights after first sale of goods. A combined reading of section 29 and 30 goes to show that section 30 is the exception of section 29. Section 30 of the Act lists down limits on the effect of registered trademark and also enumerates certain acts which do not amount for infringement. These act defence in suits of infringement of trademarks. An infringer may be unshackled from his liability if his use of the trademark falls within the scope of anything mentioned in Section 30. This view has been taken in Kapil Wadhwa vs. Samsung Electronics 2012 SCC OnLine 5172 (Del) in para 23.
120. The Division Bench in Kapil Wadhwa vs. Samsung Electronics 2012 SCC OnLine 5172 (Del) also noticed a printing error in section 30 and read it by rectifying the same as under:-
"32. We may highlight that there is an apparent printing error in sub-section (3), even the Gazette Notification issued by the Central Government contains the same. 'Not infringement of a trade by reason only of'' should read 'Not infringement of a trade mark by reason only of'. The reason is obvious. After being lawfully acquired by a person of goods bearing a registered trade mark, the CS (Comm.) No. 2480/2019 Page No. 57 of 64 further sale may be debatable as infringement of a trade mark, but there can be no further debate whether there is an infringement of a trade.
33. Be that as it may, and hoping that the legislature would rectify itself, but noting that patent printing errors can always be rectified and this would not be legislation by the Court, we revisit sub section (3). It can be broken into three segments; (i) goods bearing a registered trade mark are lawfully acquired by a person;
(ii) the sale of the goods in the market by that person; and (iii) not constituting infringement of the trade mark."
121. As the doctrine of exhaustion goes, in the product distribution chain, a trademark right is typically exhausted by the first sale of good or placing the same in market. The trademark owner or others with the consent of the owner have no right to prevent or prohibit others from reselling or using the product. The basic principle of this doctrine is that once the right holder has been able to obtain economic return from the first sale or placing in the market, the purchaser or transferee of the goods or services is entitled to use or dispose it off without any further restriction.
122. The doctrine of exhaustion focuses on properly balancing the interests of the trademark owners vis-à-vis the product owners. Exhaustion of rights is linked to the distribution right. The right to distribute objects means that such objects is released by or with the consent of the owner as a result of the transfer of ownership. However, the owner does not lose all extensions of the trademark right. The bond between the trademark and the product cannot be severed. If a legally obtained product damages a trademark's intrinsic values, CS (Comm.) No. 2480/2019 Page No. 58 of 64 including distinctiveness and goodwill, during reprocessing and reselling, it may still infringe the owner's exclusive right to use the trademark. In the instant case, in respect of the genuine goods sold unauthorizedly, there is no such allegation, though a averment of this nature in reference to the other categories of goods may be available to the plaintiff, in line with the pleadings, crystallized on record.
123. The defendant no. 2 has sought summary judgment only vis-à-vis the goods about which the categorical stand of the plaintiff is that they are genuine goods carving out only an exception that the same have been put up for sale unauthorizedly, in violation of the agreements. I have considerably dealt with the latter aspect. I do not subscribe to the argument of the plaintiff that the question of "lawful acquisition" is to be established at trial by leading evidence. In the instant case, even the contract whose breach is alleged is not filed and the party which has breached the contract is not before the Court.
124. A plain and meaningful reading of the plaint leaves no room for the doubt. There is clear averment in the plaint about various categories of goods. One of the such categories is 'genuine goods' but being sold in a 'unlawful' manner as the plaintiff has not consented to sale of such goods on defendant no. 1's platform. The scheme of section 30(3) of the TM Act, 1999 leaves no scope for any such stipulation and the same is therefore non-est in the eyes of the law. The objection is thus bereft of any legal force as there can be no estoppel against the law.
CS (Comm.) No. 2480/2019 Page No. 59 of 64125. Now coming to the aspect of 'íntermediary' status of the defendant no. 1. This status emanates from section 79 of the Information Technology Act, 2000. As the language of that section goes, it is simply a defence to liability. This provision is a safe harbour provision for intermediaries, to save them from liability for third party information on their websites.
126. According to section 79(1), any intermediary that complies with the provisions mentioned in Sections 79(2) and 79(3) shall not be liable for any third party information, data, or communication link made available or hosted by him. Specific reference must be made to Section 79(2)(b) which states that to gain safe harbour protection, the intermediary must not (i) initiate the transmission; (ii) select the receiver of the transmission; and (iii) select or modify the information contained in the transmission and pursuant to Section 79(3) must observe due diligence while discharging its duties.
127. The judgment of the Hon'ble Division Bench of the High Court of Delhi in Amazon Seller Services Pvt. Ltd. vs. Amway India Enterprises Pvt. Ltd.(supra) covers the aspect of intermediaries from para 136 onwards. This case, more particularly the para 141, has been read by the plaintiff to argue that whenever a question of an entity being an intermediary arises the only recourse is a trial. In my view, this is not the correct interpretation of the judgment by the plaintiff. In fact, the plaintiff has been attempting to read this para of the judgment in a perspective which is neither intended nor warranted.
CS (Comm.) No. 2480/2019 Page No. 60 of 64128. In Union of India and Ors. vs. Dhanwanti Devi and Ors. (1996 (6) SCC 44) it has been held that "in order to understand and appreciate the binding force of a decision is always necessary to see what were the facts in the case in which the decision was given and what was the point which had to be decided. No judgment can be read as if it is a statute. A word or a clause or a sentence in the judgment cannot be regarded as a full exposition of law. Law cannot afford to be static and therefore, Judges are to employ an intelligent in the use of precedents." In Deepak Bajaj vs. State of Maharashtra & ANR AIR 2008 SC 1935 It is well settled that a judgment of a Court is not to be read mechanically as a Euclid's theorem nor as if it was a statute.
129. In para 141 of the Amazon's judgment (supra), it is held that, "given the disputed questions of fact that emerges from the pleadings in the suit, it is obvious that the issues of whether an entity is an intermediary or not can be decided only after trial." This finding is only in reference to the cases under consideration in the judgment of Amazon Seller Services Pvt. Ltd. vs. Amway India Enterprises Pvt. Ltd.(supra) and not of universal application. In each particular case, the relevant pleadings shall hold the day to decide whether it should go to trial or not.
130. Therefore, in the present case, in the particular set of facts, that too admitted facts, and read in conjunction with virtue of the operation of law based on the doctrine of exhaustion, there is no question of infringement in that particular nature of the transaction wherein the genuine goods of the plaintiff are put up for sale. For want of infringement of the plaintiff's CS (Comm.) No. 2480/2019 Page No. 61 of 64 trademark the question of liability becomes non-est. Therefore, in this matrix of facts, the defendant's status as an intermediary or otherwise is inconsequential, though it may be relevant in the context of other types of transactions.
131. In this matrix of facts, the plaintiff has no real prospect of succeeding on this claim of inducement of breach of contract and there is no compelling reason for this claim to proceed to trial. Any oral evidence, which the plaintiff is contemplating of leading, would only be a superfluous exercise. No evidence, which is contrary to the pleadings can be allowed to be adduced. Thus, contemplating that by some iota of evidence the tables may turn is nothing but a wishful thinking without any legal basis. If the argument of plaintiff on this count is accepted it would lead to a situation which has explained by Ogden Nash, in his poem "One Times One Is Eight" as under:-
'Either old magic or new math Into our house has beat a path.
How else could Einstein or Diogenes Explain an exploit of our progeny's? While at the table with his ilk A child upsets a glass of milk.
The glass held half a pint when filled, And half a gallon when it spilled.'
132. Taking the plaintiff's own case at the face value, there is no warrant for proposition that in view of the settled position of law, the application of the defendant no. 1 deserves to be allowed. There is no compelling reason for this claim to proceed to trial, as all the facts required to decide the particular claim have crystallized in the pleadings and is an admitted position by the plaintiff from which it cannot take a 'U' turn CS (Comm.) No. 2480/2019 Page No. 62 of 64 now. Thus, the plaintiff has no real prospect of succeeding in this claim and there is no other compelling reason why this claim should not be disposed of without recording oral evidence.
133. Therefore, this application for summary judgment, under Order XIIIA of the Code of Civil Procedure, as mooted by the defendant no. 1, Hiveloop Technology Private Limited, is allowed thereby dismissing the claim of infringement or passing-off of the plaintiff, TTK Prestige Limited, which relate to the sale of goods, under the trademark PRESTIGE, originating from the plaintiff and which goods are being sold on defendant no. 1's platform without the plaintiff's authority. In view of the pari-passu status accorded to the defendant no. 2, Hiveloop Logistic Private Limited, by the plaintiff, this relief stands accorded to the defendant no. 2 as well, on the ground of parity.
134. The aspect of costs has been kept pending and would be taken into consideration at the time of final reckoning of the suit.
135. Decree sheet be drawn accordingly.
136. The issues in this case on the remaining aspects have also been framed separately.
137. If any of the pleadings, written submissions etc. have been filed on the email of the Court but not tendered physically, the same be so filed in the Court expeditiously by the party concerned.
CS (Comm.) No. 2480/2019 Page No. 63 of 64138. A copy of this judgment be given 'dasti' to the parties on payment of usual charges.
139. This judgment be uploaded on the website of Delhi District Courts forthwith. Digitally signed by MANMOHAN MANMOHAN SHARMA Announced in the open court SHARMA Date: 2021.12.01 15:10:56 +0530 on 01.12.2021 (Man Mohan Sharma) District Judge (Commercial Court)-06 Central District, Tis Hazari Courts,Delhi CS (Comm.) No. 2480/2019 Page No. 64 of 64