Samsonite Parallel Imports: Trade mark rights not exhausted in Singapore
Samsonite bags trade mark infringement win against a local parallel importer of genuine Samsonite-branded backpacks. Singapore’s High Court rules that the oft-cited “exhaustion of rights” defence does not apply.
Why is this case significant?
This is the first local case squarely addressing the meaning of the phrase “put on the market” in the exhaustion of rights provision. The doctrine of exhaustion in Singapore is on the face of it quite broad because it applies to goods put on the market (with the trade mark owner’s consent) whether inside or outside Singapore.
Samsonite’s Chinese subsidiary (Samsonite China) was licensed to manufacture and supply Samsonite-branded backpacks under a co-branding agreement with Lenovo.
It was strictly intended that the backpacks were to be given away for free by Lenovo’s authorised distributors in China in conjunction with the sale of Lenovo laptops to end users in China.
Instead, some 2,328 backpacks were diverted from their envisioned pathway, and imported into Singapore. Samsonite sued the importer for trade mark infringement; the importer raised the exhaustion of rights defence.
“Put on the market”?
The court focused on the phrase “put on the market” and noted the following:
- “Put on the market” refers to the situation where an independent third party acquires the right of disposal of the trade-marked goods under circumstances which simultaneously allow the trade mark owner to realise the commercial or economic value of the trade-marked goods.
- The typical circumstance by which such value is realised would include, but is not limited to, the sale of the trade-marked goods; commercial value can be realised through other methods designed to increase brand awareness or penetrate a specific market, for example.
- Mere preparatory acts such as offers for sale do not suffice; a balanced interpretation of the phrase must be consistent with the underlying principle that the trade mark owner must realise the first right of reaping a “reward” for his intellectual labour before his rights can be derogated from under the exhaustion doctrine.
- The “market” in question is contingent on the precise factual matrix of each case and the economic objective of the particular trade mark owner.
The court held that Samsonite’s economic objective was to give away the backpacks in order to raise awareness of its brand and to achieve market penetration in China through the association with Lenovo. This objective was entirely frustrated because of the unauthorised diversion of the goods and their eventual importation into Singapore. Accordingly, the diverted backpacks had never been “put on the market” and the importer remained liable for trade mark infringement.
The decision is unlikely to change the application of the exhaustion doctrine in typical parallel import scenarios. However, in unique factual scenarios where a trade mark owner’s specific commercial objectives in relation to its goods are thwarted, it may be possible for the trade mark owner to maintain his right to sue for infringement on the basis that his goods have not in fact been “put on the market”.
Originally published in BrandWrites 8th Edition. Co-authored by Yuet Ping Tai.