Sale Of Used HDDs With Disclosure Does Not Amount to Trademark Infringement: Delhi High Court

The Delhi High Court on 9 March, dismissed appeals by Western Digital and Seagate against the sale of refurbished hard disk drives (HDDs), upholding the Single Judge's order permitting such sales.

A Division Bench of Justice C. Hari Shankar and Justice Om Prakash Shukla, held that refurbishers selling end-of-life HDDs do not commit trademark infringement or “reverse passing off,” provided they comply with strict disclosure requirements.

The Bench noted:

“Inasmuch as import of goods bearing a registered trade mark amounts to “use” of the registered trademark under Section 29(6), and as the respondent was neither the proprietor, nor the permissive user of the registered trademark of the appellant, the import of the HDDs by the respondent was infringing in nature, within the meaning of Section 29.”

The dispute concerned HDDs originally manufactured by Western Digital and Seagate and sold to equipment manufacturers abroad. Once these HDDs reached “end-of-life” and their original warranties expired, they were extracted from discarded computers, imported into India, and sold to refurbishers including Geonix, Daichi, and Consistent Infosystems.

Western Digital and Seagate argued that the refurbishers were committing a triple intellectual property tort: infringing registered trademarks, committing passing off, and engaging in "reverse passing off.”

The manufacturers also contended that removing the original marks and replacing them with new brands constituted “impairment” under the Trade Marks Act and that technical tools could still trace the hardware back to them, potentially harming their reputation if refurbished drives failed.

The refurbishers countered that their business is legitimate, promoted by the government, and provides affordable technology. They test, reformat, and sell the drives under their own brands with two-year warranties, and argued that removal of original marks means there is no “use” of the trademarks capable of causing consumer confusion.

The Court noted that under Section 29, infringement requires use of the registered mark in trade. Since the refurbishers remove the original marks, their actions do not constitute infringement. The Court also observed that Section 30(3), on lawful acquisition, serves as an "escape route" from infringement rather than a separate category, and further inquiry was unnecessary.

Regarding Section 30(4) on “change” or “impairment” of goods, the Court applied the principle of noscitur a sociis (it is known by its associates), and ruled that a change that makes non-functional goods functional or useless goods useful without prejudicing the manufacturer cannot justify opposition.

The Court emphasised that the “umbilical cord” between manufacturer and product is severed once the HDD reaches end-of-life, and the Trade Marks Act protects against passing off as another, not the other way around.

The Court found no evidence that consumers at the “initial interest” stage would identify the rebranded HDDs as originating from Western Digital or Seagate, and held that technical scanning tools are irrelevant to the average buyer's experience.

In a related appeal involving Hansraj Dugar, who imported branded HDDs directly, the Court concluded that he was entitled to protection under international exhaustion because the original purchase was lawful and there was no evidence of impairment to justify opposition. The Court rejected technical reports claiming imported goods were old or lacked original packaging as insufficient to restrict resale.

Accordingly, the Court upheld the Single Judge's disclosure requirements, which include clear packaging stating “used and refurbished,” identification of the original manufacturer by word mark only, and a clear disclaimer that no original warranty applies.

The Bench also noted that while it could have dismissed the injunction applications entirely, it did not disturb these directions, ensuring the manufacturers were “no worse off” for having appealed.