Isabella Mariam

The High Court of Delhi Single Bench of Justice Amit Bansal has directed the release of seized hard disk drives (HDDs) to the defendant, permitting their disposal strictly as scrap, conditional upon the removal of all marks associated with the plaintiffs. The Court further held that import and resale of goods bearing the registered trademarks of the plaintiffs is permissible under the Trade Marks Act, 1999, provided full disclosure norms are adhered to. In doing so, the Court disposed of the applications seeking both the enforcement and vacation of an earlier ex parte injunction granted in favour of the plaintiffs. The judgment also clarified the applicability of international exhaustion principles under Sections 30(3) and 30(4) of the Trade Marks Act, allowing future imports of genuine, second-hand, and even refurbished goods, contingent on proper disclosure.

The plaintiffs in the present case comprise Western Digital Technologies, Inc. and its wholly owned subsidiary Western Digital UK Ltd., collectively referred to as the plaintiffs. According to the plaint, the plaintiffs are among the largest global manufacturers of computer storage devices, including hard disk drives (HDDs) and solid-state drives (SSDs), sold under registered trademarks such as ‘WESTERN DIGITAL’ and ‘WD’. The plaintiffs have operated in India since 1997 and commenced use of the 'WD' trademark in 1999.

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As stated in the plaint, the plaintiffs are the registered proprietors of the 'WESTERN DIGITAL' and 'WD' trademarks in India under Class 9. In addition, the plaintiffs maintain several domain names incorporating the said trademarks, used for marketing and selling their products. The defendant, operating under the proprietorship concern M/s Supreme Enterprise, allegedly imported commercial quantities of HDDs bearing these trademarks.

The cause of action arose on 9 September 2019, when the Deputy Commissioner of Customs, Kolkata, informed the plaintiffs about three Bills of Entry filed by the defendant involving the import of HDDs, including those bearing the plaintiffs' trademarks. The plaintiffs were invited to inspect the goods. Upon inspection and testing, the plaintiffs contended that the HDDs were second-hand products, with two of the five sample drives found non-functional due to damage to internal components.

Accordingly, the plaintiffs filed a suit seeking a permanent injunction and ancillary reliefs, which led to the issuance of an ex parte ad interim injunction by the High Court on 21 October 2019. The Court restrained the defendant from dealing with the goods bearing the plaintiffs' trademarks and appointed a Local Commissioner to seize and inventorize the goods.

The Local Commissioner executed the commission on 29 October 2019, seizing approximately 7,500 HDDs, which have remained in the custody of the Customs House Agent. The matter was referred to mediation on 26 November 2020, but no settlement was reached. The defendant subsequently filed an application under Order XXXIX Rule 4 CPC for vacation of the injunction order, citing a coordinate bench judgment dated 21 May 2024 in Seagate Technology LLC v. Daichi International, 2024: DHC:4193.

In its written statement, the defendant argued that the goods were imported legally and in compliance with all applicable taxes and duties. Relying on the CBEC Circular dated 8 May 2012, the defendant asserted the legality of parallel imports, provided the goods are original and not counterfeit. It was further submitted that the goods were believed to be unused and were lawfully acquired without any change or impairment.

The plaintiffs contended that the imported drives were not meant for consumer retail, having been manufactured for specific OEMs. The plaintiffs submitted that many drives were non-functional and the defendant intended to misrepresent them as new, thereby damaging the plaintiffs' goodwill. They invoked Section 29(6) read with Section 30(4) of the Trade Marks Act, arguing that only lawfully acquired second-hand goods with proper certification and compliance can be imported and sold.

The plaintiffs also distinguished the Daichi judgment on the ground that the defendants in that case were resellers and not importers. In contrast, the defendant here was directly involved in importation.

The defendant responded by arguing that even in Daichi, importers were involved and that the judgement reaffirmed the principle of international exhaustion under Sections 30(3) and 30(4). It was stated that there was no statutory bar against importing end-of-life goods and that the defendant had not sold or misrepresented any goods in India, given that the goods were seized before entering the market.

Justice Amit Bansal recorded that the Division Bench judgment in Kapil Wadhwa v. Samsung Electronics Co. Ltd., 2012: DHC:6136:DB recognized the principle of international exhaustion under the Trade Marks Act. The Court observed:

"We accordingly conclude that ‘the market’ contemplated by Section 30(3) of the Trade Marks Act 1999 is the international market i.e. that the legislation in India adopts the Principle of International Exhaustion of Rights."

On the issue of impairment, the Court cited:

"It is not the case of the respondents that the appellants are changing the condition of the goods or impairing the goods... as long as the goods placed in the International market are not impaired or condition changed."

Further, the Court referred to the Daichi judgment, noting: "It is an admitted position that these refurbished HDDs sold by the defendants were originally manufactured by either Seagate or WD..."

and

"Notably, despite queries by the Court, counsel for the plaintiffs were not able to produce any rule, regulation or policy which prohibited import of discarded HDDs/equipment into India."

The Court accepted that there was no agreement between the plaintiffs and OEMs restricting resale and observed: "The warranty that may have been provided by the plaintiffs in the concerned jurisdiction would not be applicable to the imported goods."

Citing Section 30(3) and Section 30(4) of the Trade Marks Act, the Court stated: "Section 30(4) is an exception to Section 30(3), and excludes its applicability in a situation where the condition of the goods has been changed or impaired, after they are put in the market."

With regard to the packaging and sale of refurbished goods, the Court extracted paragraph 116 of the Daichi decision, which laid down guidelines for wordmark usage, warranty disclosures, and consumer warnings, including:

"A prominent statement on the front of packaging to the effect that the product is 'Used and Refurbished'..."

"Reference to the plaintiffs should be through their word marks... Defendant shall not use plaintiffs’ logos..."

Addressing the plaintiffs’ contention that the Daichi case did not involve importers, the Court clarified: "...the defendant 'Cubicor'... was an importer of the HDDs..."

The Court also examined a prior compromise in Xerox Corporation v. Shailesh Patel, where second-hand goods were allowed to be sold with full disclosures.

The Court directed that the goods seized by the Local Commissioner and currently held by Customs shall be released to the defendant. The release is conditional upon the filing of an undertaking stating that: "The said goods shall be sold only as scrap after removing all marks of the plaintiffs."

The Court recorded: "The defendant shall be free to pursue his remedies that may be available in law with regard to demurrage charges payable to the customs."

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In regard to future imports, the Court held: "The defendant would be free to import second-hand goods or ‘end-of-life’ goods bearing the trademarks of the plaintiffs, while adhering to the disclosure norms in Xerox Corporation (Supra)..."

For refurbished goods, the Court mandated: "The disclosure norms given in paragraph 116 of Daichi (Supra) would apply mutatis mutandis in respect of goods imported by the defendant and sold after refurbishment."

Finally, the Court concluded: "Any observations made herein are only for the purpose of adjudication of the aforesaid applications and would have no bearing on the final outcome of the suit."

Advocates Representing the Parties:

For the Petitioners: Ms. Shwetasree Majumder, Mr. Prithvi Singh and Ms. Devyasni Nath, Advocates

For the Respondents: Mr. Sidharth Chopra, Mr. Kanishk Kumar, Mr. Angad Makkar and Mr. Priyansh Kohli, Advocates

Case Title: Western Digital Technologies, Inc. & Anr. v. Hansraj Dugar

Neutral Citation: 2025: DHC:3844

Case Number: CS(COMM) 586/2019

Bench: Justice: Amit Bansal

[Read/Download order]