Delhi High Court Issues Directions For Sale Of Used And Refurbished Hard Disk Drives
The Delhi High Court has recently issued a set of directions for the sale of used and refurbished hard disk drives (HDDs). As per the Court's ruling, the defendants will be permitted to sell the refurbished HDDs, provided they comply with the following:“(i) Packaging to identify the source of the product: Packaging in which the refurbished product is sold, will clearly indicate that the HDD...
The Delhi High Court has recently issued a set of directions for the sale of used and refurbished hard disk drives (HDDs).
As per the Court's ruling, the defendants will be permitted to sell the refurbished HDDs, provided they comply with the following:
“(i) Packaging to identify the source of the product: Packaging in which the refurbished product is sold, will clearly indicate that the HDD is manufactured by the concerned plaintiffs (Seagate or WD as the case may be). This may be displayed in a manner not to deceive the customer that the sale itself is of the original Seagate or WD i.e. it should be clear, but not dominating the packaging.
(ii) Reference to the original manufacturer is to be made through their word mark and not the device mark: Reference to the plaintiffs should be through their word marks as in “Seagate” or “WD”, as the case may be. Defendant shall not use plaintiffs' logos, in order to not cause any deception to the consumer.
(iii) Packaging must specify that there is no original manufacturer's warranty: A clear statement must be made to the effect that there is no manufacturers' warranty or service by (Seagate or WD, as the case may be) on this product.
(iv) Packaging must specify that the product is “Used and Refurbished': A prominent statement on the front of packaging to the effect that the product is “Used and Refurbished” by the concerned defendants (Consistent or Geonix or Daichi, as the case may be)
(v) Statement as to extended warranty by the Refurbisher: A clear and prominent message that the warranty or service of specified years is being provided by the concerned defendants (Consistent or Geonix or Daichi, as the case may be), along with customer care details and contacts.
(vi) Packaging must reflect an accurate description of the features: An accurate, truthful, precise description of features and purpose of the refurbished product, without any misleading, half-truth, deceptive, ambiguous statements (which could potentially misinform the consumer as to the features of the product and the purposes for which it could be used).”
Justice Anish Dayal, presiding over the case, stated that these directions should also be complied with by the defendants on promotional literature, website, e-commerce listings, brochures and manuals.
The above directions came in a batch of suits filed by Seagate Technology LLC and Western Digital Technologies Inc. against Daichi International Consistent Infosystems Pvt. Ltd, Geonix International Pvt. Ltd. and Cubicor Information Systems Pvt. Ltd.
The issue related to refurbishment of Hard-Disk Drives which were imported into India by various importers, resold to refurbishers in India, who, in turn, remove the marks of 'Seagate' or 'Western Digital' from the HDDs, refresh and repackage it under their own brand names, and sell it as refurbished products with an extended two-year warranty.
Notably, there are three major manufacturers in the world of HDDs viz. Seagate, WD, and Toshiba. These HDD manufacturers supply their HDDs to various Original Equipment Manufacturers (OEMs) for installation as part of laptops, desktops and other equipment. The HDDs have a lifespan, as prescribed by the manufacturers, and the HDDs are unserviceable by the manufacturers after the said period.
The HDDs, however, still retain functionality, and when used equipment is sold and discarded globally, consignments of these end-of-life HDDs are refurbished by various entities and sold to consumers. These refurbished HDDs are typically used for either assembled desktops or for surveillance cameras.
Seagate and WD alleged that these end-of-life HDDs could not be sold as refurbished products since the removal of their brand name from the product amounted to impairment, which was not permitted as per Sections 30(3) and 30(4) of the Trade Marks Act, 1999.
It was argued that these goods, which bore a registered trademark were not lawfully acquired and were sold in the market or otherwise dealt with. Moreover, even if they were lawfully acquired, the condition of the goods had been changed or impaired after they were put on the market, and, therefore, cause of action arose in favour of the registered trademark owners.
The Court noted, “Refurbished, secondhand, pre-owned goods exist in most countries of the world since it caters to a different market, that of a lesser paying customer. Originally manufactured goods, with their mint new warranty, are obviously sold at the maximum retail price and will be bought by people who require them and are ready to pay for them, which is the market of the manufacturer/ authorized distributor/ wholesaler/ retailer.”
“Once the sale has happened and the warranty period attached to the goods is exhausted, none of these entities i.e. manufacturer/ OEM/ wholesaler/ distributor/ retailer in the chain would be liable for any repair or servicing. Of course, if the retailer for purposes of promoting its sale, decides to give an additional warranty over and above the manufacturer's warranty or the OEM's warranty, that will only be a sales incentive,” the Court added.
The Court pointed out that post exhaustion of warranty, none of these entities i.e. manufacturer/OEM/ wholesaler/ distributor/ retailer have any liability or responsibility for the state of those goods, unless, of course, there is a mandate under any law, regulation, or policy of managing their disposal.
“This is exactly where the principle of exhaustion comes into play; therefore, under Section 30(3)(b), the registered owner/manufacturer has no right to object to any dealing,” the underscored said.
The Court noted the only caveat in Section 30(4): If the marks are removed from the original product or it is disfigured or changed in a manner that possibly amounts to 'change' or 'impairment', and when such goods are sold as goods identified with the manufacturer, the manufacturer's right kicks in to prevent the same.
The Court asserted, “This is obviously to prevent the loss of reputation and goodwill of the manufacturer, since a consumer may potentially purchase that product thinking that the changed/impaired product is from the manufacturer.”
“This is where the necessity of “full disclosure” becomes critical from the customer's perspective. If there is “full disclosure” by the refurbisher that the change has been done by the refurbisher and does not, therefore, resemble the original product, as doled out by the manufacturer, inter alia, in terms of warranty, serviceability, life, manuals and brochures - then consumers are fully warned as to what they are purchasing. The consumer gets “the whole truth”,” the Court added.
Case Title: Seagate Technology LLC v Daichi International & connected matters
Citation: 2024 LiveLaw (Del) 625