Delhi High Court: Trademark Infringement and Passing Off – Upholds Injunction, Restrains Former Rights Holder from Using Deceptively Similar Mark to Assigned Trademark

Court’s Decision

The court dismissed the appeal against the interim injunction granted by the Single Judge, restraining the appellants from using the contested trademark or any mark deceptively similar to the respondent’s registered trademarks. The court upheld the findings that the appellants’ adoption of a similar mark was prima facie deceptive and aimed at benefiting from the goodwill and reputation of the respondent. The court concluded that the injunction was necessary to prevent consumer confusion and unfair advantage.

Facts

• The respondent is the registered proprietor of multiple trademarks, including a well-known brand for herbal floor cleaners and other cleaning products.
• The appellants were previously engaged in manufacturing and selling products under the contested trademarks before assigning them to the respondent in 2018 for a valuable consideration.
• The assignment agreements granted the respondent exclusive rights, including the right to prevent any derivative or deceptively similar marks from being used.
• The appellants, after the expiry of a non-compete clause, introduced a floor cleaner under a brand name that combined key elements of the previously assigned trademarks.
• The respondent filed a suit alleging trademark infringement, passing off, and unfair competition, leading to an ex-parte interim injunction against the appellants.
• The appellants challenged this injunction in the present appeal, arguing that their new mark was distinct and that they were not violating the respondent’s exclusive rights.

Issues

1. Whether the appellants’ use of the contested mark amounts to trademark infringement under Section 29 of the Trade Marks Act, 1999.
2. Whether the use of the mark constitutes passing off by misleading consumers and unfairly benefiting from the respondent’s goodwill.
3. Whether the respondent’s claim is maintainable despite the expiration of the non-compete clause in the assignment agreement.
4. Whether the Single Judge’s order was correctly issued, considering the balance of convenience and irreparable harm.

Petitioner’s (Appellant’s) Arguments

• The appellants argued that their new mark was independently conceived and bore no deceptive similarity to the respondent’s trademarks.
• They claimed that the prefix and suffix used in their brand name were commonly used in the industry and not exclusive to the respondent.
• They contended that the respondent had not objected to the registration of their mark when it was published in the Trade Marks Journal.
• The appellants maintained that the non-compete clause had expired, allowing them to compete freely in the market.
• They asserted that their product had not been sold in certain territories, including the one where the respondent claimed jurisdiction.
• The appellants argued that the injunction order failed to analyze the essential features of the trademarks in question and did not establish a likelihood of confusion.
• They contended that allowing the injunction would create an unfair monopoly for the respondent and restrict their legitimate right to trade.

Respondent’s Arguments

• The respondent emphasized that they had acquired exclusive ownership of the assigned trademarks, including all associated goodwill, trade dress, and derivative rights.
• They argued that the appellants’ mark was a deliberate attempt to mislead consumers by combining key elements from two of the respondent’s registered trademarks.
• The respondent pointed out that the appellants had previously manufactured the same products under the assigned trademarks, making their claim of independent adoption implausible.
• They highlighted the significant investments made in advertising and marketing the acquired trademarks, which had developed substantial consumer recognition.
• The respondent contended that the adoption of a similar trade dress and packaging further demonstrated the appellants’ intent to deceive consumers.
• They argued that trademark infringement does not depend on whether the respondent actively used all registered marks but rather on the unauthorized use of a deceptively similar mark.
• They maintained that the balance of convenience favored them, as allowing the appellants to continue using the mark would cause irreparable harm to their business and brand reputation.

Analysis of the Law

• Under Section 29 of the Trade Marks Act, 1999, infringement occurs when a registered trademark is used in a manner likely to cause confusion. The court considered whether the appellants’ mark was deceptively similar to the respondent’s trademarks.
• The court applied the test of deceptive similarity, emphasizing that even partial adoption of a mark’s essential elements can constitute infringement.
• The doctrine of passing off was analyzed in light of the three-part test:
  1. Goodwill – The respondent had established a strong brand presence through long-term use and significant market investments.
  2. Misrepresentation – The appellants’ adoption of a similar name and packaging was likely to mislead consumers into associating their product with the respondent’s brand.
  3. Damage – Consumer confusion could lead to reputational and financial harm to the respondent.
• The court rejected the appellants’ argument that the expiration of the non-compete clause allowed them to use a similar mark, holding that contractual restrictions do not override statutory protections under trademark law.
• The principle of prior use and acquired distinctiveness was considered, reinforcing the respondent’s exclusive right to the trademarks.

Precedent Analysis

The court relied on several key precedents:

• Kaviraj Pandit Durga Dutt Sharma v. Navaratna Pharmaceutical Laboratories (1964) – Established that trademark infringement can be determined by comparing essential features rather than requiring exact replication.
• Cadila Healthcare Ltd. v. Cadila Pharmaceuticals Ltd. (2001) – Laid down the broad factors for determining deceptive similarity, emphasizing consumer perception and market practices.
• Wander Ltd. v. Antox India P. Ltd. (1990) – Held that appellate courts should not interfere with an interim injunction unless the lower court’s decision was arbitrary or perverse.
• South India Beverages Pvt. Ltd. v. General Mills Marketing Inc. (2014) – Highlighted that the dominant feature of a mark plays a crucial role in consumer recall, even if the entire mark is not copied.
• M/s Kirorimal Kashiram Marketing v. M/s Shree Sita Chawal Udyog Mill (2010) – Stated that even partial copying of a registered trademark is impermissible, especially when the adoption is deliberate.

Court’s Reasoning

• The court found that the appellants had intentionally adopted key elements of the respondent’s trademarks to create a deceptively similar brand.
• The visual, phonetic, and structural similarities between the marks could lead to consumer confusion.
• Given the prior relationship between the parties, the appellants’ conduct appeared to be a deliberate attempt to benefit from the goodwill of the respondent.
• The balance of convenience favored the respondent, as allowing the appellants to continue using the mark would cause irreparable harm.
• The delay in filing the suit was not unreasonable, as the respondent acted upon discovering the appellants’ new mark in the market.
• The non-compete clause’s expiration was not relevant to the question of trademark infringement, as statutory rights under the Trade Marks Act override contractual agreements.

Conclusion

The court upheld the injunction and dismissed the appeal, ruling that:

1. The appellants’ use of the contested mark constituted trademark infringement and passing off.
2. The balance of convenience and irreparable harm weighed in favor of the respondent.
3. The interim injunction was justified to protect the respondent’s statutory rights and prevent consumer confusion.

Implications

• This judgment reinforces the principle that a trademark assignee gains exclusive rights, including protection against derivative or deceptively similar marks.
• It underscores the importance of maintaining brand identity and preventing former rights holders from attempting to regain market presence through slight variations of the assigned mark.
• Businesses engaging in trademark assignments must be cautious of post-assignment conduct to avoid legal challenges.
• The ruling provides clarity on the scope of trademark infringement, passing off, and the role of non-compete clauses in intellectual property disputes.

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