Drawing the Line at the Border: Trademark Exhaustion, Prior Use, and the Role of Intermediaries

The recent case of Products & Ideas v. Nilkamal Ltd. & Ors.^[1], addresses the issues that lie at the convergence of parallel imports, territoriality, and the obligation of intermediaries in international supply chains, all of which remain central to ongoing debates in intellectual property law.

Background and Facts

The Appellant, Products & Ideas, in 2017, entered into an Exclusive Agency Agreement (EAA) with Stella Industrial Co. Ltd. (SIC), a Chinese entity that owned the trademark "STELLA" in China. The said agreement appointed the Appellant as SIC’s exclusive agent for distribution, sale and promotion of “STELLA” branded commercial induction cookers in India. The Appellant was also given the authority to decide the designs and logos under which the induction cookers would be sold in India. As a result of the authority granted to the Appellant under the EAA, it started selling induction cookers under the trade mark, “STELLADEXIN” in India in 2017. Subsequently, in 2022, the Appellant also secured trademark registration for the mark “STELLADEXIN” in various classes, including Class 11 (covering induction cookers). Additionally, the Appellant also held a copyright registration for the associated logo dated July 12, 2024.

The dispute arose when Respondent No. 2, Cambro-Nilkamal Pvt. Ltd. (Respondent 1, Nilkamal Ltd and Respondent 2, CambroNilkamal Pvt. Ltd. constituting a joint venture) began selling induction cookers in India under the mark "STELLA". The Appellant filed a case for trademark infringement and passing off against the Respondent No. 2. 

Procedural History

Respondent No. 2, before the Single judge, contested the veracity of the purported authorisation letter, pointing to mistakes and lack of authorisation, and claimed that the Appellant lacked the EAA's jurisdiction to register the mark "STELLADEXIN." Additionally, it relied on Section 34 of the Trade Marks Act, which safeguards the rights of a prior user by stating that a Registered Proprietor cannot prevent the use of a trademark by a person who has continuously used that mark from a date prior to the Proprietor's use or registration. On this basis, the Respondent argued that SIC had previously used the mark in India and that there could be no infringement because both parties were importing authentic goods from SIC. In support of these submissions, SIC claimed sales in India since 2013, asserted prior adoption and use of the mark (with "STELLADEXIN" being a derivative of "STELLA"), and emphasised that Respondent No. 2 was an authorised distributor and the Appellant was only a reseller under a now-terminated agreement.

The Single Judge, having earlier granted an interim injunction, vacated the injunction and dismissed the Appellant's case on three main grounds:

1. that SIC had prior use of the mark “STELLA” in China since 2022 and in India since 2013 through Mittal International (under Section 34);

2. that if SIC's sale of the goods in India could not be considered infringing, no infringement could be asserted against Respondent 2, as it was merely a re-seller of SIC's branded goods and could not independently infringe; and

3. that the doctrine of international exhaustion (which implies that indicates that the owner of the intellectual property in question cannot regulate or stop the subsequent sale of the goods under the stated intellectual property once a legitimate transaction of sale has occurred^[2]) under Section 30(3) barred the infringement claim.

Aggrieved by the said order, the Appellant challenged the order of the Single Judge before the present division bench.

Analysis and Key findings

Prior Use under Section 34: At the outset, the Court clarified that use of the mark, “STELLA” by the SIC in China has no relevance in deciding the question of infringement in India. The Court added that use of a trademark in foreign territory is only significant in cases of passing off where it is claimed that the brand has permeated India, which was not the case here.

Further, the Court noted that the SIC's claim of prior use rested on four invoices spanning the period 2012 to 2016. In this regard, the Division Bench held that a plain reading of Section 34 of the Act, clearly requires the Respondent to show prior continuous use of the mark “STELLA” or “STELLADEXIN” in India and not mere prior use of the mark. Either way, the Court held that there is no evidence even of prior use of the marks by SIC in India, much less proof of prior continuous use. The Division Bench carefully examined the four invoices and determined that they were deficient for two reasons: first, of these four invoices, two invoices had no mention of the mark, “STELLA” or “STELLADEXIN”, rendering them irrelevant for the purpose of the present suit; second, the remaining two invoices were merely proforma invoices, which could not be representative of any concluded commercial transaction, in the absence of any other corroborative evidence to that effect. In furtherance to the same, the Division Bench also asserted that even if the four invoices that the Respondents rely on were to be regarded as credible, they do not, prima facie, demonstrate any ‘continuous use’ of the marks in question by SIC prior to 2017. 

As such, in the opinion of the Division Bench, the provisions of Section 34 were not attracted in the present case.

Independent Liability of Resellers: Section 29(6)(c): The Division Bench noted that the learned Single Judge’s rejection of the infringement claim against Respondent No. 2 was from the premise that SIC could not be said to be infringing on the Appellant’s rights owing to prior user of the mark, “STELLA” under Section 34 of the Act, then the reseller, Respondent No. 2, could not independently infringe as well. The Appellate Court however, found this reasoning flawed on multiple counts. First, the incorrect application of Section 34 made the fundamental premise of SIC not being liable, unsustainable. Second, the Court clarified that infringement liability under the Trade Marks Act is not solely derivative. An importer or reseller may be subject to independent infringement, even if the primary source/supplier is not held liable. Section 29(6)(c) specifically includes the import of products bearing a registered trademark in the definition of 'use' of a mark. Regardless of any agreements downstream players may have with the principals, this provision represents a conscious legislative decision to include them in the infringing net. The mere fact that the products were legally produced overseas by a person having rights in a foreign jurisdiction does not relieve an importer of bringing infringing goods into India.

Section 30(3) and the Exhaustion Doctrine: On the third issue, the Division Bench examined the learned Single Judge’s reliance on the doctrine of international exhaustion under Section 30(3) of the Trade Marks Act. The Court disagreed with the Single Judge’s viewpoint that any person in India could import and sell genuine goods bearing a trademark, and that such resale by an authorised importer would not amount to infringement. The Court clarified that Section 30(3) of the Act, does not represent an unrestricted principle of international exhaustion; rather, it offers a limited defence that is only applicable in cases “where the goods bearing a registered trade mark are lawfully acquired by a person”. The Court outlined that;

“The words “registered trade mark” cannot include registration outside India, as Section 2(w) defines “registered trade mark” as meaning “a trade mark which is actually on the register and remaining in force” and “register” is defined, in Section 2(t), as meaning “the Register of Trade Marks referred to in sub-section (1) of Section 6”. A trade mark which is registered in India alone is, therefore, a “registered trade mark” for the purposes of the Act and, therefore, for the purposes of Section 30(3) thereof as well.” [Para 49]

In view of the above, Respondent No. 2 had not imported the goods with the Appellant's permission, and since SIC had no trademark registration in India, and the Appellant was the lawful Registered Proprietor as per the provisions of the Indian Trade Marks Act, 1999.

Held

The Division Bench set aside the judgment passed by the Single Judge and revived the ex parte ad interim order passed earlier.

Conclusion

The said judgement contributes substantially to the Indian Trademark Jurisprudence by addressing and bringing clarity on several provisions of the Trade Marks Act, 1999 as well as doctrines revolving around the allegations of infringement and passing off. The Court clearly sets forth that in order to claim prior use under Section 34 of the Act, the party must be able to demonstrate prior ‘continuous’ use in India. A paltry number of irrelevant invoices is insufficient to claim any prior rights. It also clarified that a reseller or importer can be held liable for infringement/passing off, independent of the principal. Imports of goods to India are clearly covered under the definition of ‘use’ of mark in India under Section 29(6)(c) of the Act. Further, the Court also emphasised that the term ‘Registered trade mark’ cannot include any registration outside India, but rather one that is on the Indian Trademark Register.  The Court confined the scope of Section 30(3) strictly to cases where goods are placed on the market with the consent of the Indian Registered Proprietor. Overall, the said decision gives clarity on India's territorial framework for trademark protection while giving addressing points on prior use, intermediary’s obligation, and the doctrine of exhaustion.

Vrinda Harmilapi

Associate| Attorney at Law

vrinda.harmilapi@iprattorneys.com

References:

^[1] FAO(OS) (COMM) 111/2025, CM APPL. 41897/2025 & CM APPL. 41898/2025

^[2] The Doctrine of Exhaustion of IPRs in India, Bar and Bench (https://www.barandbench.com/view-point/the-doctrine-of-exhaustion-of-iprs-in-india)