This article has been written by Khyati Basant, pursuing BBA LLB from Symbiosis Law School, NOIDA. This article contains a brief description of the laws regarding the import of books in India.
A parallel import is a non-falsified product purchased from another country without the authorization of the proprietor of intellectual property. Parallel products are often referred to as a grey product and are active in international trade and intellectual property concerns. Parallel imports are based on the concept that intellectual property rights are exhausted. One limit of intellectual property (IP) rights is the exhaustion of intellectual property rights. When a commodity has been distributed under the authorisation of the IP owner, the resale, rental, lending and other contractual uses of IP-protected products on the domestic and foreign markets shall be regulated by the owner.
Parallel imports occur where genuine goods are manufactured illegally, without the permission of the seller holding a trademark, patent or any other intellectual property right over such goods, intending to compete with the manufacturer’s products which he initially sold internationally at a cheaper price. Parallel import refers to the importation into another country by an illegal manufacturer of legitimate products manufactured with permission of the rights holder. The lawfulness of parallel imports in the country is determined by the exhaustion regimes followed by the importing country.
As mysterious as the name may sound, “Grey-Market Products” has an equally fascinating sense. We apply to products that may be legitimate but that reach the market through illegal channels of commerce, thus “grey” (not “black” since the products are real). The drug may be legitimate, authentic, and not fraudulent but may have been imported from a country without the intellectual property owner’s permission for that country.
Principle of exhaustion
The Exhaustion principle plays an important role in making way for the continuation of this practice. Due to this theory, after the owner has sold goods in a legal contract, he ceases to influence its future selling. After the first sale, the owner’s proprietary right to sell the intellectual property is “exhausted” and can not be exercised again in respect of the same domain. The reasoning behind this argument is that after the first selling of the products and sufficiently compensating the copyright holder, he will not be able to benefit again from regulating the delivery and resale of such products. This theory is still subjected to restrictions that are enforced at a specific location. Although Indian patent law and trademark law expressly support the International Exhaustion Doctrine, uncertainty still prevails about its applicability for patented goods.
Types of exhaustions
- No Exhaustion: According to this doctrine, the right holder’s intellectual property (“IP”) rights are not exhausted. National Exhaustion: According to the doctrine of national exhaustion, the buyer of an IP (“Buyer”) carrying article may legitimately resell or move the same within the country itself. Any resale or redistribution within the land without the rights holder’s consent does not amount to any violation because the right holder lost the rights to the goods within the nation when the goods were first delivered. Nevertheless, as the IP rights of the right holder will recover if the products are sold to another country, without the consent of the rights holder, the buyer has the right to resell the products in another country.
- Regional Exhaustion: According to this law, the buyer of an IP-bearing article can legally resell or move the same within countries belonging to a specific region. In this case, by putting the goods on the market in each of the countries in that region, the right holder exhausts his rights in all the countries belonging to a country. The buyer can not, however, resell the same in a country outside the region, as the IP rights of the right holder would revive once the goods are exported to a country outside the region. The European Union implemented the Local Exhaustion Principle.
- Global Exhaustion: According to this theory the moment goods are put on the market somewhere in the world, the IP rights of the right owner are expended concerning those goods. In this case, then, the purchaser of such goods is free to resell the goods in any other market, as long as the purchaser does not manipulate them.
Laws relating to the importation
In 2010-14, there was a raging controversy on the legality of parallel imports of copyrighted works in India, concentrating in particular on imports from international markets of cheaper books. Under the Copyright Amendment Bill, 2010 the Parliamentary Standing Committee also proposed an amendment to Section 2(m) to require parallel imports in India to make the new versions of books available at cheaper rates, in particular, to protect student interests. However, this provision was omitted from the final version of the Act due to lobbying from the publisher lobby.
India boasts about having a thriving second-hand bookstore market. They allow for market segmentation and are seen as pivotal in increasing people’s access to cheaper books. Such bookstores in India are legal because of the law of the first sale. This theory is based on not allowing the author to restrict the future exploitation of a distributed copy of work because it has already gained from the first sale financially.
The Standing Committee sought to insert the following provision into Clause 2(m), Chapter-1 of the Indian Copyright Act, 1957: ‘provided that a copy of a work published in any country outside India with the permission of the author of the work and imported into India from that country shall not be considered an infringing copy.’ However, the addition of the controversial new proviso of Clause 2(m) has been removed from the Copyright (Amendment ) Act 2012, which culminated in legislative debate. The Union Minister for Human Resource Development, Shri Kapil Sibal, indicated that the National Council of Applied Economic Research should be asked to investigate the implementation of the current provision.
Interpretation as per the Copyright Act, 1957
Under the Indian copyright law, a literary work buyer is free to resell her copy but a computer software buyer is unable to do so. The reading of Section 14, which reflects the sense of the term “copyright.” Section 14(a)(ii) notes that in the case of literary, theatrical or artistic production, not being a computer program, distributing copies of production to the public not already in circulation. Lately, there has been much confusion with some publishers seeking to stop the government from amending Section 2(m) of the Indian Copyright Act, making it clear that a duplicate shipment would not be considered as an “infringing copy.” National or international exhaustion is based on the interpretation of the term “in circulation already.” If this was supposed to mean national fatigue then the lawmakers should have written it as “in India already in circulation.” The clarification to this Section reads, ” a copy sold once shall be called a copy already in circulation.” This makes no note of the location of the first sale event. But, on the other side, it would be incorrect to conclude that it applies exclusively to National Exhaustion.
Indian courts also ruled in Eurokids International Pvt. Ltd. vs India Book Distributors Egmont, on 5 August, 2005 that the 1957 Copyright Act forbids the concurrent importation of patented works as we obey national exhaustion. This adds to an insane situation fraught with uncertainty and possible piracy threats as second-hand bookstores have no way to differentiate between a copy that was purchased in parallel and one that was purchased solely.
There are not experts on the parallel import dimension of books or other works of a related literary, dramatic or musical type. Under other words, the courts are yet to address the parallel importation dimension, based on Section 14(a)(ii) of the 1957 Copyright Act as amended since 1994.
Warner Brothers Entertainment Inc. v. Santosh V.G
In Warner Brothers’ case, the complainants were filmmakers. After launching their film in theatres and completing their path, it was to be released via other distribution channels including DVDs, rental cables and satellite televisions. The plaintiffs had pursued a pattern of first publishing a film in certain nations, and then in other nations. The defendant bought such movies lawfully preserved in phonograms and shipped them to India. He operated a kind of video shop through which he hired these films.
The court was confronted with the question that whether giving these imported films, which are particularly authorized to be sold or rented outside India’s territory, on hire/rent/sale in India amounted to an infringement of the 1957 Copyright Act, under Section 51(a)(i). The court found that the doctrine of exhaustion was not applicable in this case since Section 14(a)(ii) of the Copyright Act requires the doctrine of exhaustion to be extended in the case of fictional, dramatic, and musical works and not to films. The panel, however, reserved itself and did not elaborate about whether the fatigue was either domestic or universal.
John Wiley & Sons v. Prabhat Chander Kumar Jain
In this case, John Wiley & Sons Inc., a New York-based corporation, solely awarded licenses to Wiley India Pvt Ltd. to exercise control over the sale of such books. Such books were sold as low-priced copies in India and other South Asian countries. A mark said in the book: “The book for sale only in the country to which Wiley India Pvt first consigned. Ltd and is not permitted to re-export. Only available for sale in Bangladesh, Myanmar, India, Indonesia, Nepal, Pakistan, Philippines, Sri Lanka and Vietnam.” It can be said that they intended to prohibit all buyers from selling the books to other countries except those listed on the label. After selling a book, all proprietary rights are vested on the book’s buyer.
In this agreement, the licensee does not sub-license the right to sell the book to the customer as the licensee is not allowed to sub-license on its own. A buyer must have legal ownership rights to the book and not any copyrights on the book; these two items have to be separated. And thus, a buyer’s right to re-sale stems from the doctrine of the first sale and not from the licensee’s passing on of such rights. The Indian Copyright Act also speaks about imports under Section 14 and does not mention anything about exports. Indian law can not ban the sale of books in US streets. It is only possible if there is any specific provision to tackle exports.
The court held this to be a violation under Section 51 of the Copyright Act, 1957 and dismissed the appeal of universal exhaustion arguing that, because the act has no explicit clause specifying so, it may be inferred that it requires only national exhaustion.
Standing committee report
The Commission was also made aware by the members of the printing industry that the Copyright Policy System was entirely separate from the Trade Marks Act, 1999 and the Patent Act, 1970. The implementation of these two laws’ requirements and guidelines put forth the suggested amendment to section 2(m) would fully abolish the business model currently operating, leaving many businesses unviable. The department informed on a specific question in this respect that the concept of international exhaustion provided for in Section 107 A of the Patent Act, 1971 and in Section 30(3) of the Trademarks Act, 1999 and in Section 2(m) of the copyright law was similar. That provision was in line with the right’s exhaustion national policy.
All the reservations/objections presented by the various stakeholders [including the Indian Publishers’ Federation and the Indian Publishers’ Association, whose objections are stated in the earlier paragraph of the reported] were taken up by the Committee with the Department to get a thorough understanding of the context involving the amendment proposed and its exact effect. As the Department has explained, the key aim of this provision was to require copyright materials ( e.g. books) to be imported from other countries. It was related to exhaustion of rights under Article 6 of the TRIPS Agreement whereby developing countries could facilitate access to works of the copyright at an affordable cost. Service exhaustion (popularly referred to as parallel import) was a legal framework used to regulate prices of covered IPR products. This was only possible if the quality of the same works on the Indian market was very high compared with that of other countries from which it was imported to India.
In other intellectual property laws, parallel imports are possible under Indian parallel imports. Parallel imports are provided for in regulations such as the Patents Act and the Trade Marks Act, and there is no legal justification that such a clause can not be applied to copyright. It is clear that allowing parallel imports is not likely to hurt publishers but will result in the expansion of the reading market. This amendment would primarily destroy the monopoly rights of international publishers over distribution, while Indian publishers, Indian authors, and Indian readers, particularly students, would stand to benefit.
The courts have made little effort to understand the complexity underlying parallel importation in various cases concerning the minute differences in facts which distinguish the cases from each other. We appear to have placed straight jacket calculations in the above cases to assess what contributed to a violation under Section 51 of the Copyright Act and also dismissed the applicability of universal fatigue by reckless application of the law. The benefits that will arise from increased competition arising from allowing concurrent (national and international) imports, greatly outweigh any advantages predicted from this protectionism activity.
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