CASE COMPILATION OF PARALLEL IMPORT DOCTRINE

INTRODUCTION
Parallel importing or grey market importing occurs when a business organization in a country
obtains products directly from licensed or authorized sources outside that country's borders, by-
passing any authorized domestic suppliers or licensees1. And, first sale doctrine can be termed
as the via media between copyright law and property law, where in the owner or the licensee
loses his or her right with regards to that particular copy which has already been sold to someone
legally. The doctrine of exhaustion of copyright enables free trade in material objects on which
copies of protected works have been fixed and put into circulation with the right holder's
consent. The "exhaustion" principle in a sense arbitrates the conflict between the right to own a
copy of a work and the author's right to control the distribution of copies2. And, the exhaustion
principle can be explained in the following way:

BOOK ABC

India China
Here, in this example, we can say that China is adopting National Exhaustion policy.

1
"Copyright: The Last Trade Barrier in a Globalised World? Louise Longdin, Associate- Professor of Commercial
Law, University of Auckland
2
Para 57, Warner Bros. Entertainment Inc. and Ors. Vs. Mr. Santosh, MIPR2009(2)175
CASE ANALYSIS

1: Penguin Books Ltd. v. India Book Distributors and Ors.3

In this case the appellants, Penguin Books Ltd of England original plaintiffs brought a suit for
perpetual injunction against the respondents, M/s. India Book Distributors of New Delhi,
Bombay, Madras, and Calcutta restraining them from infringing Penguins' territorial copyright
license in 23 books. The defendant company was importing some of these books, and
distributing and offering them for sale in India.

The judgment, pronounced by Delhi High Court, clearly observed the fact of non-publishing by
the defendants when it said, It is true that Indian Distributors are not printing these books
and are not guilty of what is called primary infringement. But when they issue copies of these
titles for public distribution they are guilty of secondary infringement.

The Court also said the following before holding the Indian Company liable: Issue of copies for
public distribution is publication. Of publication in India the right is given to Penguins under an
exclusive license. What matters is the issue of copies in India for purposes of infringement.
Whether they have already been published lawfully in America is of little consequence. The
importation, sale and public distribution of American editions constitute infringement of
copyright of the exclusive licensee.

Unfortunately, the categories created in the judgment, with regards to primary and secondary
infringement, were not explicated properly. The common law properly right, which exists
everywhere, was not even recognized and the bridge to copyright and property right was burnt
through a judicial fiction, which was unfounded on sound logic.

Implication of this Judgment

The confusion with regards to the First Sale doctrine was sought to be dispelled. And, in
pursuance to overturn the Penguin Books4 decision, the 1994 amendment to the Copyright Act

3
AIR 1985 Delhi 29
4
Id.
included a change in wordings, wherein, right to publish was removed and instead it introduced
a right to to issue copies of the work to the public not being copies already in circulation.

2: Eurokids International Pvt. Ltd. v. India Book Distributors Egmont5

The suit was filed by the plaintiff in its capacity as an exclusive licensee of one Egmont
Books limited, United Kingdom. The exclusive license is for importing and distributing various
titles including "TINTIN" in the territories of India, Sri Lanka, Nepal, Bangladesh, Bhutan and
Maldives. Defendant Indian company had allegedly infringed the copyright of the plaintiff on
account of illegal and unauthorized importation, distribution and sale of TINTIN books in India.

When the judgment was given, surprisingly, there was no mention of first sale doctrine.
Moreover, the amendment of 1994 to section 14 was not even noted, which in turn led to a
complete irrational reading of the copyright Act while arriving at the conclusion. The rationale
that was given was, "any copy that is sold in India by a third party in contravention of an
exclusive license contract is automatically assumed to be an infringement." Therefore, the term
infringing copy which is defined in the Act itself was not construed properly.

The injunction that was sought by the plaintiff was granted, making a per incuriam judgment.
The case of Penguin Book was relied on, showing absolute antipathy to onus of proper
interpretation of the Statute Book. A paragraph which was quoted from the Penguin Books case
is, if any person, without the license of the copyright owner, imports into India with the
purpose of selling or distributing for purposes of trade the literary work, the copyright is
infringed, any importation of infringing copies is for the importer's own use. According to
the court, Plaintiffs had a prima facie established case of infringement of their copyright by first
Defendant.

3: Warner Brothers v. Santosh V.G.6

This was a case of Parallel Import regarding DVDs, and not books. The Plaintiff, Warner
Brothers, as we all know, carried on the business of film production. The films in which they
claimed copyright were first published in the United States. Under the International Copyright

5
2005(6) BOM CR 198
6
MIPR 2009(2) 175
Order, 1991 read with the Copyright Act, 1991, the plaintiffs therefore claimed copyright in the
films even in India. The Defendant was a movie club or video library based in India; in the
business of hiring out DVDs of popular and critically acclaimed films on rent to Indian
customers. The Plaintiffs had not released some of their films in India, but the films had been
released in the United States in DVD format. The DVDs were coded according to specific
geographic zones. The Defendant legally bought these DVDs in the United States, and imported
them into India. Thereafter, the copies legally owned were made available to Indian customers
on request.

After hearing both the sides, the Court held that the defendants actions would amount to
infringement of copyright. Defendant's action, giving on hire or rent in India, copies of films
authorized for sale or rental in a particular territory outside India, in which cinematograph films
the plaintiffs claim copyrights, would constitute infringement of copyright under Section
51(b)(iv), as long as the plaintiff's authorization was not secured.

Analysis of this Case:

While arriving at conclusion, Justice Ravindra Bhat dissected the theories of First Sale
referring to both Copyright Act and the letters of Berne Convention. According to him, An
infringing copy is one made or imported in contravention of the provisions of this Act. In
this context, the proviso to Section 51(b)(iv), in the courts view, provides the key to
Parliamentary intention. It carves only one exception, permitting import of one copy of any
work for the private and domestic use of the importer. Therefore, what he meant was that the
importing for commercial use cannot be permitted. However, the pertinent fallacy with this
proposition is that the term infringing copy was misread in its application here.

Moreover, the public interest argument was also rejected by the Court, quite unequivocally,
when it said, There is no public interest in insisting that such copies should be permitted, on
the ground that the cinematograph films are not made available in the country. If that is the
position, the defendant is always free to negotiate the terms of a license, in such of the films as
are not available, for the purpose of their publication or performance in India.7

7
Id. Para 86
4: Supap Kirtsaeng v. John Wiley & Sons8

Starting in 2006, Supap Kirtsaeng, an immigrant scientist from Thailand, enlisted his family to
make the rounds at Bangkok bookstores, buying titles like Organic Chemistry and Fundamentals
of Physics. They shipped the textbooks to Supaps apartment in LA, and he posted the books for
sale on eBay.

In 2008, John Wiley & Sons, Inc. filed suit against the defendant, citing reason that the alleged
sale of copies by the Thailand Native is of those copies which are made outside United States,
marked for sale exclusively abroad, was imported by him into United States. Thereafter,
interestingly, Wiley won the copyright infringement case in two lower courts, which includes the
decision of Second Circuit Court where in the court slapped a ban on the importation of the
copyrighted work without the authority of the owner.

On appeal, the Supreme Court of United States rejected the justification given by the lower
courts and held no infringement. And, thereby, the principle that 'the legal purchaser of a
copyright-protected item may dispose of that property anyway he or she sees fit was', was
correctly recognized. Quoting Justice Breyer when he pronounced the opinion, We see no way,
however, to reconcile this half-geographical/half-non-geographical interpretation with the
language of the phrase, lawfully made under this title. As a matter of English, it would seem
that those five words either do cover copies lawfully made abroad or they do not. In sum, we
believe that geographical interpretations create more linguistic problems than they resolve.
And considerations of simplicity and coherence tip the purely linguistic balance in
Kirtsaengs, non-geographical, favor.

Implication of this case:

We cannot overlook the fact that if the legal framework bans the importation of foreign-made
copies, it generally encourages the copyright owners and big publishers like John Wiley to offer
low-price editions in less developed countries like India, where it would otherwise be
unaffordable. And, expectedly, John Wiley had started increasing the prices all over the world as
direct fallout of this case.

8
654 F. 3d 210
5: John Wiley & Sons & Ors. v. Prabhat Chander Kumar Jain & Ors.9

Big names in the book publishing market, such as, John Wiley & Sons, Pearson Education
and their respective exclusive license holders are the plaintiffs in this case. The plaintiffs are in
the business of book selling in India and are particularly famous for their low price editions,
specifically made for developing countries, where affording high price books is near impossible.
The defendants allegedly set up websites which would sell the low priced Indian editions to
customers in U.S.A. Therefore, apart from initiating suits in United States District courts, the
plaintiffs had also filed a lawsuit in India, as per Indian Law.

To the surprise of many, the judgment from Delhi High Court evidently misread the law
regarding the First Sale Doctrine, as embodied in section 14 of the Copyright Act and restrained
the defendants from exporting the books published by the plaintiffs. The basic flaw in this
judgment is twofold. First of all, once the copies are sold legitimately, the owner or the exclusive
license holder for that matter gets stripped of his right over that particular copy. Explanation to
section 14 of Copyright Act, which says, For the purposes of this section, a copy which has
been sold once shall be deemed to be a copy already in circulation, it should be immaterial
whether the copy is being exported to any country thereafter. Secondly, the falsified notion that
the exhaustion doctrine keeps a stranglehold to the factum of exporting too, in addition to
importing, doesnt seem to arise from any sound logic. In fact, it is U.S.A. only who has to read
its exhaustion policy whether to allow the import and it is no business of Indian Courts to apply
exhaustion doctrine to disallow export. Nevertheless, a bad precedent has already been set in this
case. And, in my opinion, exports cannot be banned under Copyright Act, 1957.

6: John Wiley and Sons Inc. and Ors. v. International Book Store and Anr.10

The suit arises out a similar case of parallel export where in the defendant is exporting the
copies of low priced editions in United States. The plaintiff, a group which includes the book
publishers and their exclusive license holders, seeks to retrain the defendants from infringing
their copyright. The allegations were that the defendants, by unauthorized and with mala fide

9
170 (2010) DLT 701
10
2010(43) PTC 496 (Del)
intentions, selling such low priced editions in USA. The fact of the territorial notice, written in
the cover of each book, was brought to the notice of the court.

The decision was ex-parte and all the argument made by the plaintiff went un-rebutted. The
court observed as follows:

From the averments in the plaint and documents placed on record, the Court is of the opinion
that the plaintiffs have established their claim for copyright infringement, against the defendants.
The plaintiffs have disclosed that they are copyright owners or exclusive licensees in respect of
the published works that are the subject matter of the suit. They have also proved that the
defendant used to market unauthorized copies of such works, on his website.

The court while granting injunction made an observation as follows:

The sale, and offer for sale, of such LPEs, meant for exclusive use in India, by the defendant,
who is clearly targeting overseas buyers, to whom such products cannot be sold at Indian prices,
constitutes acts of infringement under Section 51.

Unfortunately, there was no mention of doctrine of first sale and its allied concepts which
would have supported the case of the defendants. This kind of interpretations has led to many
more confusion with regards to the applicability of the doctrine, in cases of export particularly.

CONCLUSION

In my opinion, India still needs some time to be able to afford a single global price;
however, given the rising waves of globalization, it would be difficult to control parallel import.
And black market would inevitably emerge in such a situation if parallel import will not be
allowed in the long run in our country. By bringing necessary amendment to allow Parallel
Import to section 2(m) of the Copyright Act will clarify the confusing readings given by different
courts with this regard. It must be noticed that TRIPS agreement gives the leverage a country
may need to create a beneficial regime under Article 6 of the agreement. As such, the explicit
international exhaustion regime would benefit authors, libraries, second-hand book stores,
persons with disabilities and the student community in general, by allowing easier access to
knowledge.

In todays digital era when people can buy anything from anywhere in the world, the problem
of controlling the misuse in the policy of national exhaustion seems thorny and intricate and no
wonder if it becomes more cumbersome in coming times. So, finally, international exhaustion
should be the way forward in order to simplify the copyright regime, however, there would be a
legitimate apprehension that the prices would go up gradually, though we have to brace for the
price rise in the long run. And, we cannot, and must not, afford to throw the baby out with the
bath water.