Introduction

Once the beating heart of South India’s grey market, Chennai’s Burma Bazaar is now witnessing a sharp decline. As online retail and digital piracy gain ground, traditional parallel importers have seen sales drop by over 50%, signaling a profound shift in how grey markets operate in the digital age. This transformation reflects not just changing consumer behavior but also the complex legal and economic questions surrounding parallel imports in India.

At the centre of this issue lies the doctrine of trademark exhaustion, often called the first sale principle. The rule is straightforward in theory, once a trademarked product has been lawfully placed on the market by, or with the consent of, its proprietor, the proprietor’s control over that product’s resale is said to be “exhausted.” The doctrine prevents trademark owners from invoking their rights to block the resale or further commercialization of genuine goods already circulating in commerce.

Parallel imports or grey market goods occur when genuine, lawfully sold products are imported into another country without the local trademark owner’s authorization. The legal question, therefore, is one of scope, whether trademark rights are exhausted internationally or only within the jurisdiction of first sale. This creates a long-standing tension between two competing policy goals, a trademark owner’s right to maintain brand integrity and control distribution, and society’s interest in free trade, competitive pricing and consumer access.

In India, this question carries particular significance. As a vast and price-sensitive market, the country experiences frequent cross-border flows of goods especially in sectors such as electronics, luxury products, pharmaceuticals, and fast-moving consumer goods (FMCG). For trademark proprietors, parallel imports can undercut pricing strategies, erode exclusive distribution networks, and compromise after-sales support. For importers, they represent a legitimate channel to meet demand through lower-priced, globally sourced goods. For consumers, they promise accessibility and affordability but often at the cost of warranties, clarity on origin, or regulatory compliance.

This article explores India’s evolving stance on trademark exhaustion and parallel imports. It begins by analyzing the statutory framework under the Trade Marks Act, 1999, and the principles established by Indian courts. It then situates India’s hybrid exhaustion model within the global context by comparing it with the regimes in the European Union, United States and China. Finally, it proposes policy refinements to strengthen legal predictability, enhance enforcement consistency and better balance brand protection with consumer welfare and market competition.

Comparative and International Perspective

India’s treatment of trademark exhaustion and parallel imports is embedded within the statutory scheme of the Trade Marks Act, 1999, which seeks to balance the proprietary rights of trademark owners with the broader goals of market liberalisation and consumer welfare. Section 29 lays down the basic framework for infringement, prohibiting unauthorised use of registered trademarks in ways likely to cause confusion or deception. However, Section 30 introduces critical limitations to these rights. Specifically, Section 30(3) provides that the use of a trademark in relation to goods that have been “put on the market under the registered trademark by the proprietor or with his consent” does not constitute infringement. This shields parallel importers from liability when they deal in genuine goods that have been lawfully introduced into any market by the proprietor or an economically linked entity.

Section 30(4) qualifies this protection by permitting proprietors to oppose further commercialisation where “legitimate reasons” exist particularly if the condition of the goods has been changed or impaired after being placed on the market. This reflects the law’s concern with maintaining the essential functions of a trademark: origin, quality assurance, and brand integrity. It addresses scenarios where grey market goods may be repackaged, altered, or stripped of warranty information in ways that confuse or mislead consumers, breach regulatory standards, or damage brand reputation.

The issue becomes especially critical when sensitive or regulated products are involved. For instance, should parallel importation of medical devices or pharmaceuticals be allowed when relabelling or repackaging could compromise dosage accuracy, patient safety, or regulatory compliance? If the outer packaging of a drug is altered or if instructions are missing due to translation gaps, consumer harm may occur even when the core product is authentic. This raises urgent questions about where to draw the line between lawful commerce and consumer protection.

India’s framework aligns closely with Article 6 of the TRIPS Agreement, which allows WTO members to adopt their own exhaustion regimes. India has opted for an international exhaustion model, whereby trademark rights are exhausted once goods are lawfully placed on the market anywhere in the world with the proprietor’s consent. However, this is tempered by the legitimate reasons exception under Section 30(4), which serves as a crucial safeguard to protect against deceptive or materially altered goods entering the domestic market under the guise of authenticity.

India’s Hybrid Position

India’s regime most closely resembles the EU-US hybrid model, viz., it adopts formal international exhaustion, meaning rights are exhausted once goods are placed on the market anywhere by or with the proprietor’s consent, but this is tempered by a “legitimate reasons” limitation under section 30(4). This limitation is functionally analogous to the EU’s material differences doctrine and the US qualified exhaustion approach. As a result, Indian courts place significant weight on judicial fact-finding, assessing whether differences in labelling, serial numbers, warranties, or after-sales support justify intervention. Remedies are often tailored injunctions, as seen in Kapil Wadhwa v Samsung Electronics (2012 (194) DLT 23 (DB)), where the court permitted the import and sale of grey goods subject to strict disclosure and non-tampering conditions.[1]

While this hybrid system allows India to capture competitive benefits from parallel imports such as increased consumer choice and price competition, it also produces case-specific, fact-intensive decisions. This has led to a nuanced but sometimes unpredictable enforcement landscape, especially when online marketplaces and complex global supply chains are involved. The role of courts in shaping this balance remains central, highlighting the importance of clear compliance protocols by importers and marketplaces, and vigilant enforcement strategies by brand owners.

The Leading Decision

The leading articulation of India’s trademark-exhaustion doctrine arises from the Delhi High Court’s Division Bench decision in Kapil Wadhwa v Samsung Electronics Co Ltd (2012 (194) DLT 23 (DB)). The Court held that India follows an international exhaustion regime under Section 30(3) of the Trade Marks Act, 1999, meaning that a proprietor’s rights are exhausted once goods are lawfully placed on the market anywhere in the world by or with the proprietor’s consent.[2] Consequently, the parallel import and sale of genuine Samsung printers in India did not amount to infringement under Section 29.[3]

However, invoking Section 30(4), the Court required safeguards to protect consumers and preserve the integrity of the mark. It directed the importers to make clear, prominent disclosures that the goods were imported without Samsung’s authorisation, that manufacturer warranties would not apply, and that after-sales services were provided solely by the importers themselves.[4] The Court, thus, permitted parallel imports but prohibited misrepresentation, meta-tagging, or acts that might mislead consumers, exemplifying a calibrated, consumer-protective model rather than an outright ban.

International Perspective

Exhaustion regimes vary considerably across jurisdictions, reflecting different balances between intellectual property protection, market liberalisation and consumer welfare. The European Union follows a comparable logic through Article 7(2) of Directive 89/104/EEC[5] (now Article 15(2) of the EU Trade Mark Regulation 2017/1001), which allows proprietors to oppose further dealings where legitimate reasons exist, particularly where the condition of the goods has been changed or impaired after being put on the market.[6] In Silhouette International Schmied GmbH & Co KG v Hartlauer Handelsgesellschaft mbH (C-355/96, [1998] ECR I-4799), the Court of Justice of the European Communities confirmed that exhaustion within the EU is regional, not international: trademark rights are exhausted only when goods are first marketed within the European Economic Area (EEA) by or with the consent of the proprietor.[7]

While distinct from the U.S. “material differences” doctrine, the EU’s legitimate reasons exception serves a comparable consumer-protection function by allowing proprietors to oppose resale where goods’ condition or presentation may mislead as to quality or origin.

The United States, by contrast, follows a qualified international exhaustion approach: parallel imports of genuine goods are generally permissible but may be restrained if material differences between imported and domestic products are likely to cause consumer confusion.[8]

China has not formally codified the principle of trademark exhaustion, but judicial and administrative practice has evolved toward a de facto international exhaustion regime. Courts generally permit the parallel importation of genuine goods that were first placed on the market abroad by, or with the consent of, the trademark proprietor, provided that such imports do not cause confusion or violate Chinese regulatory requirements. However, proprietors may intervene where parallel imports materially differ from domestic versions, fail to meet China’s labelling or product-safety standards, or mislead consumers as to source or quality. For example, in Ferrero SpA v Shanghai Amazon Trading Co Ltd (Shanghai High People’s Court, 2009), Ferrero successfully argued that imported chocolates bearing only Italian-language labels breached Chinese food-labelling regulations and could mislead consumers, justifying an injunction despite the goods’ authenticity.

Online Marketplaces and Intermediary Liability

Although not directly an exhaustion case, the Delhi High Court’s decision in Christian Louboutin SAS v Nakul Bajaj & Ors (2018 SCC OnLine Del 12915) provides critical guidance on intermediary liability in the context of trademark enforcement.[9] The case concerned an e-commerce platform that listed and sold counterfeit luxury goods. The defendant claimed protection under the safe harbour provisions of Section 79 of the Information Technology Act, 2000, arguing that it acted merely as an intermediary. The Court rejected this characterisation, finding that the platform had adopted an “active” role in the commercial process. It curated listings, promoted goods through advertisements, offered logistical support, and provided customer guarantees. These actions were inconsistent with a passive intermediary role and, in the Court’s view, rendered the platform a seller in its own right rather than a neutral conduit.

The Court concluded that such active involvement deprived the defendant of safe harbour protection. It held the platform liable for trademark infringement, reasoning that intermediaries that go beyond mere technical facilitation can be treated as primary infringers where infringing transactions occur through their systems.[10] This principle is particularly relevant to parallel imports. If e-commerce marketplaces list or facilitate the sale of grey goods that are tampered, materially different, non-compliant with Indian regulations, or misrepresented as authorised stock, they may incur primary or contributory liability under the Trade Marks Act and the IT Act. This is especially pertinent given the surge in online sales of parallel imports across categories such as electronics, fashion, and luxury goods, where serial number tampering, misleading warranty claims, and non-compliant labelling are common. The Louboutin reasoning implies that platforms cannot rely on intermediary status to shield themselves from liability where they actively participate in or enable the sale of infringing or misleading goods.

Doctrinal Themes

Indian jurisprudence on trademark exhaustion and parallel imports is anchored in a set of recurring doctrinal themes that shape both the scope of permissible parallel trade and the limits of proprietor control.

Consent and Economic Link

Indian courts interpret “consent” broadly, in line with international exhaustion principles. Consent is inferred where goods are first placed on the market by the trademark proprietor or by an entity economically linked to the proprietor, such as a subsidiary, licensee, or authorised distributor. The crucial factor is whether the initial act of marketing reflects the proprietor’s quality assurance and control. If the first sale embodies the proprietor’s guarantee of origin and quality, subsequent parallel imports of those goods generally fall outside infringement under Section 30(3) of the Trade Marks Act, 1999, unless legitimate reasons exist to restrict resale (Kapil Wadhwa v Samsung Electronics, 2012 (194) DLT 23 (DB)).

The “Legitimate Reasons” Exception

Section 30(4) of the Trade Marks Act allows proprietors to oppose “further dealings” in genuine goods where legitimate reasons exist, particularly where “the condition of the goods has been changed or impaired after they have been put on the market.” Indian courts have interpreted this provision functionally, drawing on doctrines developed in the EU and US. Four recurring categories emerge:

  • Material differences: Differences in labelling, statutory warnings, packaging, plugs, or manuals tailored to other jurisdictions can mislead consumers or breach regulatory standards. For example, tobacco imports lacking Indian health warnings have been restrained for regulatory non-compliance.
  • Quality control and after-sales: Removal of serial numbers, tampering with batch identifiers, or stripping warranty documentation undermines traceability and after-sales support, affecting the mark’s quality guarantee.
  • Misrepresentation: Parallel importers misrepresenting themselves as authorised dealers or offering “manufacturer warranties” that do not apply locally have been held to mislead consumers, justifying intervention.
  • Changes to condition: Repackaging that diminishes presentation quality, de-branding or re-branding practices, and stickers obscuring mandatory disclosures have been treated as impairments of the goods’ condition within the meaning of section 30(4).

Remedies and Calibrated Injunctions

Indian courts have consistently favoured calibrated relief over blanket prohibitions in parallel import cases. Following Kapil Wadhwa, courts often allow the continued sale of genuine grey goods provided that corrective measures are implemented such as prominent point-of-sale disclosures, preservation of original identifiers, and the removal of misleading representations. Full injunctions are typically reserved for cases involving tampering, regulatory non-compliance, or consumer deception. This remedial flexibility reflects a pragmatic attempt to reconcile trademark control with consumer access and market competition, while preventing unfair free-riding on brand goodwill.

Competition and Consumer Welfare

India’s embrace of international exhaustion promotes consumer welfare by expanding access to genuine goods at lower prices, increasing market competition, and curbing monopolistic control over distribution channels. At the same time, the “legitimate reasons” carve-out preserves the essential trademark functions of origin, quality assurance, and reputation. By focusing on material differences, quality control, and misrepresentation, Indian courts aim to ensure that consumers benefit from competitive parallel trade without compromising product integrity or trust in trademarks. This dual emphasis mirrors international best practices and aligns with TRIPS Article 6, which leaves WTO members free to design exhaustion regimes suited to their policy priorities.

Conclusion

While India’s statutory framework on trademark exhaustion under Sections 29 and 30 of the Trade Marks Act, 1999 adopts an international model in principle, its implementation remains highly dependent on judicial interpretation. The courts have developed a nuanced and evolving jurisprudence that attempts to balance the rights of trademark proprietors with consumer welfare and market competition. However, this case-specific approach can create uncertainty for stakeholders, particularly in high-volume, cross-border trade.

To improve clarity and predictability, India’s IP ecosystem could benefit from incremental structural improvements. These may include formal guidance on what constitutes “legitimate reasons” under section 30(4), standardised disclosure norms for parallel imports, and simplified enforcement pathways for cases involving tampering or misrepresentation. Greater alignment between trademark regulation, customs enforcement, and product safety standards would also help pre-empt disputes and protect consumers more effectively.

Ultimately, as India continues to integrate into global value chains, its trademark exhaustion regime must evolve to offer both legal certainty and commercial flexibility. A balanced and transparent framework one that respects both proprietary rights and market access will be essential to maintaining this equilibrium.

Authors:

Mohit Porwal (Associate Partner)

Krupa Vyas (Associate)

Kyra Sinha (Intern)

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

End-notes:

[1] Kapil Wadhwa v Samsung Electronics (2012 (194) DLT 23 (DB)).

[2] Id.

[3] Supra note 1.

[4] Supra note 1.

[5] First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, Official Journal L 040 , 11/02/1989 P. 0001 – 0007, https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX%3A31989L0104%3Aen%3AHTML (last visited Nov. 11, 2025).

[6] Regulation (EU) 2017/1001 of the European Parliament and of the Council.

[7] Silhouette International Schmied GmbH & Co KG v Hartlauer Handelsgesellschaft mbH (C-355/96, [1998] ECR I-4799).

[8] Societe Des Produits Nestlé S.A. v Casa Helvetia, Inc., 982 F.2d 633 (1st Cir. 1992).

[9] Christian Louboutin SAS v Nakul Bajaj & Ors [2018] SCC OnLine Del 12915, (2018) 253 DLT 728 (Del HC).

[10] Ibid.