From Prior User to Prior Registrant: Rethinking Trademark Exhaustion
- Medhavi Capoor
- 7 days ago
- 6 min read
Introduction
In many instances, a cross-border distribution agreement can create an interesting trademark issue: A foreign manufacturer allows an Indian party to register and use the trademark in India and the Indian party develops goodwill based on such trademark registration and then the relationship goes sour between them. The question is then whether the rights of the first user of the mark overseas and who has continued to supply goods in India is superior to the rights of the registered proprietor of the mark in India? In the recent case of M/S Products and Ideas India Pvt. Ltd. v. Nilkamal Limited & Ors.[1], the Delhi High Court was faced with this conflict between the doctrine of prior use, the saving for vested rights under Section 34 of the Trade Marks Act, 1999, and the doctrine of international exhaustion, as set out in Section 30(3) of the Act. The Division Bench erred in reversing the Single Judge and clarified that the concept of exhaustion for foreign entity's prior use abroad and as an upstream supplier does not “automatically” negate the rights of a registered proprietor in India, and that exhaustion under Section 30(3) does not exist in situations where the goods are not registered in India.
Facts of the Case
In 2017, the Appellant, Products & Ideas India Pvt. Ltd., signed an Exclusive Agency Agreement ("EAA") with Taiwan-based Stella Industrial Co. Ltd. ("SIC"), who was the owner of the "STELLA" mark in China. The Appellant, under the EAA, became SIC's sole agent for distribution, sale and marketing of the programmes in India and was given permission to choose the design and the logo for selling the programmes. On the basis of this authority, the Appellant started selling the induction cookers under the trade mark STELLADEXIN since 2017, and registered the word mark STELLADEXIN in Classes 7, 9 and 11, as well as obtaining a copyright registration for the logo in 2024.
It was in June 2024 that the Appellant noticed Respondent 2, a joint venture of Respondent 1 (Nilkamal Ltd.) and Respondent 2, was selling induction cookers on its website under the trade mark "STELLA". The Appellant had initiated a suit for infringement of its registered mark STELLADEXIN (Trade Marks Act 1999, Section 29(2)(b) of the Act) and for passing off and obtained an ex parte ad interim order on 27 August 2024.
Respondent 2 and SIC (impleaded as Respondent 5) opposed the injunction, arguing that SIC and not the Appellant was the owner and prior user of the STELLA/STELLADEXIN mark. SIC had claimed prior use in China for 20 years since 2002, and had been selling their branded products in India since 2013 through a separate importer, “M/s Mittal International” on the basis of four invoices. It was also pointed out that SIC had itself abandoned its application to register STELLA/STELLADEXIN in India, and Respondent 2 was simply an authorised distributor of SIC's authentic goods and thus could be allowed to avail the exhaustion defence.
The learned Single Judge accepted these defences and hence, dismissed the Appellant's application for an ad interim order and set aside the earlier order granting it. The learned Single Judge held that SIC was a prior continuous user and hence, protected under Section 34 of the Act, that Respondent 2 was also a prior continuous user as SIC's reseller and, in any event, the principle of exhaustion of right in foreign market under Section 30(3) of the Act precluded granting of infringement. The Appellant took up the appeal before the Division Bench.
The court's decision and the analysis
On Section 34:
● The use of the mark by SIC since 2002 in China was irrelevant as foreign use only affects the mark where trans-border reputation is specifically pleaded, which the Appellant did not allege.
● The findings of the Single Judge indicate that the Appellant was using the mark in India since at least 2017.
● SIC's "prior use" claim was based only on four invoices, dated between 2012 and 2016, which was a very limited "use" over the five years required under Section 34.
● Two of those invoices didn't mention STELLA or STELLADEXIN; the other two were just proforma invoices and as Karn Vir Mehta v. Collector of Customs[2] established, a proforma invoice can't be evidence of a completed sale, unless corroborated.
Conclusions: There was no evidence of prior use by SIC in India, not even continuous prior use Section 34 was misapplied.
As for Respondent 2:
● The reason for rejecting the Single Judge's logic; SIC isn't an infringer, so its reseller Respondent 2 can't be either; was offered in two ways. First, it breathed its final gasps along with the defective Section 34 finding. Second (and more fundamentally): that importation of goods with another's registered mark is itself 'use' under Section 29(6)(c) an importer's liability is not defeated by his supplier's lack of liability on a different issue.
The doctrine of exhaustion on Section 30(3) in international exhaustion:
● Section 30(3) only applies to "sales of goods accompanied by a mark placed on such goods by, or with the consent of, the registered proprietor".
● For the purposes of Sections 2(w) and 2(t), "registered trade mark" means registered on the Indian Register, and not abroad.
● SIC was never registered in India (its registration was abandoned), and the Appellant was the only one who was registered in India.
● Exhaustion was not applicable because Respondent 2 did not import without the consent of the Appellant.
● The Single Judge had issued a general proposition that any person could import such goods for the mark of any entity and sell them in India without any restrictions, which he found to be ‘just wrong in law’.
Interplay between Sections 34, 29(6)(c) and 30(3) of the Trade Marks Act, 1999
The three distinct mechanisms offered by statute are carefully distinguished, frequently in practice applied together to the case. There is a saving for vested rights under Section 34, which means that a defendant can defend against the plaintiff's reliance upon the plaintiff's registration on the basis of its use of an identical or similar mark prior to the plaintiff's use, but would have to establish strict proof of continuity, most importantly use in India and not use in foreign countries. As per the definition in section 29(6)(c), any importation of goods under the registered mark will be deemed to be “use” of the registered mark and such importation can be deemed to be an infringement of the registered mark even if the foreign supplier of the goods is not found to be infringing the registered mark. Section 30(3), however, is an independent exception which applies to goods sold in India, which were lawfully introduced into the country by or with the permission of the registered proprietor of the trade mark and the Bench went out of its way to state that the word ‘registered trade mark' in Section 30(3) would apply only to the marks registered under Sections 2(w) and 2(t). The Division Bench's analysis thus cannot be explained as the application of foreign trademark owner's priority or his supply chain with Indian importers to the statutory defence available under the Indian trademark law, which is based on registration and use in India.
Conclusion
The Division Bench allowed the appeal, set aside the impugned judgment dated 1 July 2025 and remanded the three interlocutory applications for fresh hearing keeping the ad interim injunction dated 27 August 2024 in force in the meanwhile of appeal. The judgment clarifies that prior use abroad cannot be an alternative to prior continuous use in India under section 34, separate defence by a supplier under section 34 is not an automatic defence for importer under section 29(6) (c) and that the international exhaustion defence under section 30(3) is only available for registered marks in India and goods put on the market by or with the consent of the registered proprietor in India. This is a significant judgment that confirms the fact that despite the foreign licensor's longer pedigree, registration in India is of real effect against the foreign licensor as well as the downstream importers, for Indian licensees and registered users who invest in marketing in this country.
Medhavi Capoor
Associate
[1] M/S Products and Ideas India Pvt Ltd v Nilkamal Ltd 2026:DHC:2385-DB
[2] Karn Vir Mehta v Collector of Customs 1997 SCC OnLine Ker 238
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