Value of Trademarks Can Be Estimated In Monetary Terms: Delhi High Court

Introduction

Recently, in the case of Mr Sanjay Chadha Trading as M/s Eveready Tools Emporium v. Union of India & Ors., the Division Bench of the Delhi High Court acknowledged the investment function of trademarks and held that the value of a trademark can be estimated in monetary terms as the proprietor invests in building the reputation and goodwill or a mark over a period of time.

Background

The present appeal was instituted by the Appellant challenging the impugned judgment passed by the learned Single Judge through which the Appellant’s petition against cancellation of his registrations for the word mark “EVEREADY” and the device mark “” was dismissed. In the subject petition, the Appellant challenged the cancellation order passed by the Intellectual Property Appellate Board (IPAB).

The Appellant claimed to be engaged in the business of manufacturing and marketing of hand tools, sold under mark “EVEREADY” since 1985. It was submitted that in 1978, the Appellant’s mother (hereinafter the “Predecessor”) commenced her business as a sole proprietor, under the name of ‘Everest Tools Industries’. Thereafter, the Predecessor was granted registrations of the mark “EVEREADY”.

On the other hand, Eveready Industries India Limited (hereinafter the “Respondent”) was incorporated in 1934 and is engaged in the business of manufacturing and trading in dry cell batteries, rechargeable batteries, flashlights, general lighting products, and small home appliances. The Respondent claimed that it applied for registration of the mark 'EVEREADY’ in 1942 and has acquired a significant reputation and goodwill amongst the general public.

In 2009, the Respondent, besides filing cancellation petitions against the trademarks adopted by the Appellant before the IPAB, also filed a suit before the Delhi High Court, alleging infringement and passing off.

Upon considering the contentions of the Respondent, the IPAB allowed cancellation petitions filed by the Respondent and directed for the trademarks of the Appellant to be removed from the Register of Trademarks. Further, the IPAB found that the Respondent’s mark is a distinctive mark which is recognized nationally as well as internationally and, therefore, is a well-known mark within the meaning of Section 2(1)(zg) of the Trade Marks Act, 1999. It was also held that the adoption of the mark “EVEREADY” by the Appellant/Predecessor was not honest and that the said mark was adopted with the intention to take unfair advantage of the goodwill and reputation of the Respondent. The IPAB inferred that since there was no continuous use of the mark either by the Appellant or the Predecessor, the cancellation petitions ought to be allowed. Rejecting the Appellant’s defense of acquiescence under Section 33(1) of the Trade Marks Act, 1999, it was held that such a defense is not available against the proprietor of a registered trademark.

The learned Single Judge concurred with the decision of the IPAB and found no ground to interfere with the same.

In appeal, it was contended that the IPAB had failed to appreciate that the Appellant had recommenced using the mark from the year 2005. Further, it was submitted that the Appellant in 2006 did file an application for restoration of the trademark and it was renewed by the competent authority in 2018. The Appellant stated that the standard of review, as applied by the learned Single Judge, was narrower than what was warranted.

Findings of the Court

The Court concurred with the IPAB’s findings that the Respondent’s trademark is a well-known trademark with substantial goodwill and reputation associated with it. The Court held that the Respondent’s mark “EVEREADY” is a coined and non-generic word that is formed by joining the two words ‘Ever’ and ‘Ready’ and by deleting the letter ‘R’ from the combined mark. Further, it was noted that the lettering was distinctive, as the letters in the center of the mark ‘EVEREADY’ were in a larger font than the letters ‘E’ and ‘Y’ at the two ends, giving it a pyramidal shape that is clear from the device mark.

Considering the Appellant’s dishonest use, the Court held that the Appellant’s use of the identical trademark “EVEREADY” as that of the Respondent cannot be a matter of coincidence and therefore concluded that the Predecessor from whom the Appellant claimed to derive title had adopted the Respondent’s mark to ride on their goodwill and to take an unfair advantage of their reputation.

Upholding the ruling of the IPAB, it was held that the trademark in question ought not to have been registered in favour of the Predecessor, and therefore, the registration was liable to be canceled. The Court noted that ‘apart from the primary function of identifying the source of goods, a trademark, amongst other functions, has an investment function as well. This is to preserve the investments made by the proprietor of a trademark in publicity and building up reputation of the said mark. The trademark, thus, acquires value that can be estimated in monetary terms and although intangible, is a valuable asset.’

Further, upon deliberation of Section 33 of the Trade Marks Act, 1999 and a host of judgments, the Court overruled the findings of the learned IPAB in respect of the defense of acquiescence. It held that such a defense is also available against the proprietor of a registered trademark. However, since the impugned trademark was not used by the Predecessor from the year 2000 to 2005, the Respondent cannot be held to have acquiesced in any such use.

The appeal was accordingly dismissed, along with all the other pending applications.

Conclusion

The investment function of a trademark can be defined as the use of the mark by its proprietor to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty. Therefore, trademarks, although intangible assets, do acquire a significant value even in monetary terms. This case is a testament to the Delhi High Court’s approach that no one can freely ride on the coat-tails of a famous mark or attempt to trade upon its reputation.