When “WHAL” Goes Worldwide….
The long battle with COVID-19 does not seem to be ending soon. Millions around the world are currently unemployed and have lost their jobs since the pandemic started. Online sales naturally became the top choice for people to make money after being unemployed. Many turned themselves into “online sellers” by importing interesting products from overseas and reselling them in their countries. Even if those products are genuine, the frequently asked question is, “can we legally resell them?” – particularly, in circumstances where those products are protected under Intellectual Property (IP) Laws but are resold without the permission of the IP owners.
Importing non-counterfeit goods into another country and reselling them without the consent of the IP owners, which is known as “Parallel Importation”, normally happens when the product price is lower in one country and higher in another country. It may be a great opportunity for those who profit from the price gap, but the IP owners of those products would not be happy because their rights are literally “exhausted”. This concept is therefore called “Exhaustion Doctrine” or “First-sale Doctrine” which some countries adopt, but some do not.
Does this doctrine apply in Thailand?
This interesting case (i.e. “WAHL case”) that happened in 2000 could answer this question…
P.C.L. Co., Ltd (the defendant) was sued in the Central Intellectual Property and International Trade Court (IP&IT Court) by Wahl Clipper Corporation (1st plaintiff) with an accusation that the defendant had infringed the plaintiffs’ rights by importing “hair clipper products” under the registered trademark “WAHL”, ordered from 1st plaintiff’s distributor in Singapore, for reselling in Thailand.
In this case the defendant did not just import and resell the 1st plaintiff’s products in Thailand, but also added another layer of product packaging with the statement that “Genuine products must have a one-year limited warranty card” and attached a “one-year limited warranty card” stating its name and address as the service center. The 1st plaintiff’s trademark “WAHL” was also printed on that wrapper by the defendant without the consent of the 1st plaintiff.
That act directly affected the circulation rate of the 1st plaintiff’s products sold in Thailand by the 2nd plaintiff, the authorized importer. Both plaintiffs therefore filed a complaint before IP&IT Court and asked for damages from the defendant.
This case was pursued until the Supreme Court. However, before telling you the Supreme Court’s judgement, we would like to first draw your attention to the legal situation in Thailand relating to parallel importation.
In Thailand, although the Thai Patent Act and the Thai Copyright Act contain some provisions relating to the concept of “exhaustion of IP rights”, they are still unclear as to whether they should be applied as national exhaustion, regional exhaustion, or international exhaustion. In the context of Trademarks, the Thai Trademark Act does not contain any provision relating to parallel importation nor the exhaustion doctrine. Section 44 of the Thai Trademark Act simply mentions that, “a person who is registered as the owner of a trademark shall have the exclusive right to use it for the goods for which it is registered.” So, the two major questions that are often discussed in court would be, (i) do parallel imports constitute any infringement to the trademark owners? and (ii) does the Thai Court recognize the doctrine of international exhaustion of rights?
THAILAND SUPREME COURT JUDGEMENTS
Previously, the Supreme Court established a benchmark in many court judgements which could be compared and applied to this matter that “The owner of a registered trademark is the only person who could sell the goods bearing such trademark. Ordering products embodying that trademark to be sold in the country without any consent from the trademark owner, even if they are non-counterfeit products, it still is an infringement of the trademark owner. (Supreme Court Judgements No. 657/2499, No. 1271-1273/2508, No. 1669-1672/2523 and No. 4603/2533)”
However, the mentioned benchmark had been reversed by the latest Supreme Court Judgement No. 2817/2543 (2000) (“WAHL case”) that “Once the relevant goods are put on sale for the first time by the registered trademark owner, the buyer has legal rights to resell such goods without constituting any trademark infringement…. So, the importation of the 1st plaintiff’s products by the defendant into Thailand does not constitute an infringement of the 1st plaintiff’s trademark and the 2nd plaintiff’s rights in any way.”
The Supreme Court gave the supportive reasoning in the WHAL case that even if the 1st plaintiff is the true owner of the registered trademark “WAHL”, who has the exclusive right of using their trademark or selling the goods bearing such trademark in Thailand according to Section 44 of the Thai Trademark Act, when the products were originally sold by the 1st plaintiff, it means the 1st plaintiff had already exercised their rights and enjoyed the benefits from the products’ prices. Therefore, the 1st plaintiff could not object to subsequent circulation of the products.
The Supreme Court also stated in the judgement that the purpose of using a trademark is to distinguish the trademark owner’s goods from those of others and to indicate that the goods are really owned by the respective owners. It normally happens in trade practices that the buyers might resell the products that they bought for the sake of making profits. Once the relevant goods are put on sale for the first time by the registered trademark owner, it means the registered trademark owner already obtained and enjoyed the benefit of their rights. They then have no legal rights to stop the buyers from importing genuine products embodying their trademark from Singapore for reselling in Thailand.
For the issue of the defendant attaching a one-year limited warranty card with the products and presenting itself as the service center for the products under the 1st plaintiff’s trademark, the Supreme Court did not find such action of the defendant as an obstacle to the applicability of the exhaustion of right because all of the defendant’s actions still represent the fact that the products that it sells genuinely belong to the 1st plaintiff. The Supreme Court viewed that the defendant did not act as the true owner of 1st plaintiff’s trademark nor the authorized person – but what it really did is just “providing after sales service” to its customers.
The Supreme Court also viewed that the 2nd plaintiff is just the authorized importer of 1st plaintiff’s products from the United States to sell in Thailand, not the exclusive distributor in Thailand. It therefore does not constitute an infringement of the 2nd plaintiff’s rights because there is no damage caused to the 2nd plaintiff.
From the Supreme Court Judgement in the WAHL case, we would see that the Supreme Court clearly changed the approach towards this matter to rely on “the international exhaustion of rights doctrine”. They also confirmed that parallel importation is something that could be done legally in Thailand.
It should be noted however that, as Thailand is a civil law country, the judicial precedent is not binding for the next case nor the lower courts. Even if the Supreme Court in this case allows parallel importation of non-counterfeit goods, it is still uncertain whether the court in the next case would still follow this discretion or whether it would change its approach – thus, the next important question is “would the parallel importation of genuine products bearing the registered trademark be allowed in every circumstance in Thailand?”
To be honest, we do not have the answer to this question now due to unclear laws relating to parallel importation in Thailand. However, please rest assured that we will promptly update you on the next parallel importation case, especially for worldwide brands!
Saowanee Leewijitsin is an IP Executive at KASS IP Services (Thailand) Company Limited. KASS is an established intellectual property firm with over 20 years of experience and offices in Malaysia, Singapore, Indonesia, Myanmar, Thailand and Vietnam. For more information, visit www.kass.asia or drop an e-mail to firstname.lastname@example.org.