For ease of convenience, let me illustrate this with an example.
Assume that Apple Inc owns the trademark "iPhone" in the US, EU, India and several other jurisdictions including Bangladesh. An India retailer figures out that the iPhone sells cheaper in Bangladesh than in India. He imports the phones from Bangladesh into India and begins selling it here. Apple sues him, alleging that his sales within India amount to an infringement of their trademark (despite the fact that he is essentially selling Apple's very same iPhones, without alteration of any sort). The reason Apple does this is to ensure complete control of its markets and to preserve its exclusive licensing relationship with partners in India, Bangladesh etc.
However, if the law disregards the notion of international exhaustion (and recognises only national exhaustion), then Apple could prevent the said imports. Such disregard however flies in the face of "free trade" and often works to the detriment of consumers who might have otherwise been able to access cheaper versions of perfectly legitimate branded good.
From a purely jurisprudential perspective, the law leans in favour of international exhaustion (also referred to as the "first sale" doctrine) and has traditionally been very averse to any control over goods that had been purchased legitimately, a view best expressed in an 1886 copyright case (Henry Bill vs Smythe).
Besides, the very essence of trademark law is to guard against customer confusion of any sort. An iPhone by Apple is an iPhone by Apple..is an iPhone by Apple...no matter how many times it changes hands! Permitting circulation of legitimately purchased trademarked goods across borders does not in any way run counter to this basic underlying rationale of trademark law. If at all anything, it supports it!
"The Supreme Court has issued notices on a complaint filed by South Korea's Samsung Electronics against the sale of imported Samsung-branded products without its authorisation, an issue which has major implications for trade and business in the country.
..Samsung was represented by senior counsel T R Andhyarujina, while Shyam Divan
Given that I am a strong supporter of international exhaustion and have had several heated debates and writings on this front, I really hope the Supremes uphold the order of the Delhi High Court.
A large part of the interpretative dispute turned on whether or not the Statements of Objects and Reasons underlying the Trademarks Act could be used as an aid to interpretation. This Statement, which made it clear that our legislature (while introducing section 30 (3) and (4) of the present trademarks act) was keen on "international exhaustion" reads thus:
As this "international exhaustion" laden legal vessel enters the choppy waters of the Supreme Court, one can only hope that it does not go down like the Titanic. But that the Supremes uphold the fine legal reasoning of the Delhi High Court and dock it on firmer legal shores.
I'd ruminated extensively on this issue (along with Mrinalini Kochupillai, an ex blogger at SpicyIP and dear friend who now does stellar work around plant variety protection at the Max Planck), in this paper here, offering suggestions on how one might interpret this provision to ensure compliance with that behemoth of an international instrument called TRIPS.
As we debate this issue in India, its interesting to note that the US Supremes are also ruminating over whether or not to endorse international exhaustion.
Certainly, interesting (and dare I say, exhausting) times ahead for many of us, as we struggle to stave off attempts to "nationalise" international exhaustion!