Manufacturer Vs. Distributor- Who owns the goodwill?

The Delhi High Court’s Division Bench has held that good will belong to the party that creates customer confidence and on whose reputation the goods were sold.

In the instant matter, the dispute arose between Trans Tyres (Appellants/ Defendants) and Double Coin Holdings Ltd. (Respondents/ Plaintiffs) a Chinese enterprise that manufactures tyres.

In 2006, the Respondents appointed the Appellants as authorized representatives to sell and advertise its products under the name Double Coin in India. The Respondent’s did not have any registration for Double Coin in India. On the other hand, Trans Tyres applied for and obtained registrations for the mark Double Coin for tyres and tubes.

The Plaintiffs filed a suit restraining the Defendants from manufacturing, advertising the mark Double Coin and holding themselves as owners of the trademark. The Defendants contended that it was they who had gotten the mark registered and that by virtue of being the sole distributor of the product in India and considering the fact that the Defendants incurred huge costs to advertise and popularize the product, the goodwill associated with the mark Double Coin rests with them.

Considering the evidence placed on record, the courts held that the customer confidence was built on the strength of the reputation of Double Coin Holding Ltd. and that the goods were marketed in India, linking the goods to the source of manufacture and not the source of sale and hence goodwill rests with manufacturer.

Therefore, the Division Bench dismissed the Appeal and ruled in favor of the Manufacturer.

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