In the previous post, I discussed the various findings of the court in the present case regarding exhaustion, removal and replacement of the original mark and the requirement of ‘full disclosure’. In this post, I will answer as to why the court held that removal and replacement of the original mark was prohibited u/s. 30(3). Then, I will discuss Prof. Kur’s article wherein she discusses the distinction between ‘substantial’ and ‘simple’ repair of a good and the implications of that in the present case. Lastly, I will focus on the positive impact this judgement is likely to have on the refurbishment industry. 

Why can I ‘not’ remove the mark? 

Although the court is silent on this, it seems that it relied upon the arguments raised by the amicus curiae against the removal and replacement of a brand. The amicus argued that de-branding a product and selling it under one’s brand indicates a ‘lack of legitimacy’. The ‘lack of legitimacy’ would arise since a person would be taking someone else’s product and making it their own for commercial purposes.  

To further substantiate its position against the removal of a brand, the court relies upon an article titled ‘As Good as New’ – Sale of Repaired or Refurbished Goods: Commendable Practice or Trademark Infringement?’ written by Annette Kur (Prof. Dr, Max Plank Institute for Innovation and Competition Munich).

The article notes the constant risk of trademark infringement suits faced by refurbishers while selling repaired goods. It also discusses whether it is advisable for the sellers to remove the brand from the repaired product to avoid trademark disputes. The court, in Para 106-107, notes down its understanding of the article on the question of the removal of a brand. The court writes- 

“The author then seems to recommend that removing the mark is a drastic measure, and it is preferable to employ less intrusive means….reseller as well as customers may have an interest to give and receive information about the identity of the original brand, which deserves at least some consideration.” 

The court, it seems, based on the above, held that the refurbisher needs to retain the original mark to avail the defence u/s. 30(3).  

‘Simple’ and ‘Substantial’ repair: Analysing Kur’s argument on de-branding further

I argue that the court fails to notice an important distinction that the author makes between ‘simple’ and ‘substantial’ repair 

Prof. Kur argues that two kinds of change can made to a good-

• Simple ‘repair’ of the good while keeping the identity of the good intact. 
• ‘substantial’ or ‘profound’ changes made to the good which changes the ‘identity of the product.

In the former, the identity of the good is not disrupted i.e. the outer appearance and the substratum of the good correspond to the originally placed good. For instance, minor repairs carried out in a used car keep the identity of the car intact. In this situation, if the brand is removed and replaced, the seller is appropriating someone else’s good and selling it as his own. The argument raised by the amicus about ‘lack of legitimacy’ applies in this situation.

In the latter, profound changes are carried out which thoroughly change the ‘substance’ of the product. The changes made to the goods are so significant that, according to the Kur, only the outer appearance corresponds to the originally marketed good while the inside is completely rebuilt. This means that the identity of the good has changed and it is no longer the same good. Rather, it is a different specimen of the originally manufactured good. Depending on the scale of changes made, this could include changes made to an electronic good to keep it ‘alive’ beyond ‘end-of-life’. Kur also notes that removal of the mark is justified in this situation since the good ‘no longer originates from the trademark proprietor, but rather from the person transforming it.’ 

The only reason Kur advises against de-branding later in the article is due to the CJEU’s persistent position (here and here) that removing the mark from the good and replacing it for commercial purposes is an act of trademark infringement. 

In the present case, applying the above distinction framework of ‘simple’ and ‘profound’ repair, articulated in the article, the court could have decided the present case. The Defendants in the present case had argued that the process of refurbishing was not limited to the sole act of removing the removal and replacement of the marks but adding ‘value’ to the life of the product. (Para 40; 44) Therefore, the court, based on the article it relies upon, should have further undertaken an exercise to determine whether the ‘refurbishment’ process ‘substantially’ changed the HDDs to the extent that the identity of the good was transformed. Only then it could have arrived at the finding as to whether the removal of the mark from HDDs was justified or not. 

It is another matter if the court then decides that ‘substantial’ repairs to goods could be a legitimate ground for the trademark proprietor to oppose its ‘further’ sale due to ‘change’ or ‘impairment’. My simple aim here is to point out that the court missed out on a crucial argument in the article which could possibly have become another step in its inquiry in the present case. 

Refurbishment Industry: Need to Protect

The Court, in its observations, was sympathetic to the ‘refurbishment’ industry. It observed injuncting the Defendants from dealing in the refurbished HDDs would effectively ‘kill’ the refurbishment industry. It also noted that the refurbishment industry enabled consumers from lower economic levels to use refurbished products at cheaper prices and contributed to less electronic waste/dumping by prolonging the life of electronic goods. 

The article written by Kur, which was relied upon by the Court, also highlighted the need to protect the secondary markets. It noted that the purpose of the refurbishment industry was to keep a product still fit ‘alive’, though it does not conform to the original product. It also argued how such industries respond to a growing societal concern: preserving resources and reducing waste. As a result, it is important to protect people who work in the refurbishment industry and incentivize others to join. A situation where such individuals or firms are under constant threat of trademark infringement suits will eventually kill the industry.

Seen from this perspective, the outcome in this case is a welcome one. It finds an optimal ‘middle’ which indeed balances the interests of the consumer, refurbishers, manufacturers, and society. The ‘full disclosure’ regime provides the workers inside the refurbishment industry certainty and stability. It allows them to work without the fear of being bogged down with endless trademark litigation. At least for now. 

Another crucial point, the judgement seems to broaden the ambit of 30(4) in the interest of the Trademark owner. By reading into the provision of the requirement of resale of goods only under the original mark, it provides the owner with an additional ground to oppose the ‘further sale’ of the good. Correspondingly, it restricts the rights of exhaustion for the buyer of the good from the trademark owner.