The Supreme Court of India (Supreme Court), giving credence to the ‘first in the market’ test, has passed a significant decision in the case of Neon Laboratories Ltd v Medical Technologies Ltd & Ors (Civil Appeal No 1018 of 2006) affirming the City Civil Court’s and Gujarat High Court’s interim order restraining Neon Laboratories Ltd (Neon) from using the mark ROFOL (which was applied prior to the use of Medical Technologies Ltd’s mark PROFOL) on the basis of its similarity to Medical Technologies Ltd’s (Medical Technologies) mark PROFOL. In effect, the Supreme Court held that a prior application for registration of a mark is of no assistance if the use of the said mark is commenced after twelve years that too after the rival’s use of their mark (in this case, Medical Technologies).

Background

On 17 July 2005, Medical Technologies filed a passing off action against Neon before the City Civil Court, Ahmedabad after Neon started using the mark ROFOL in 2004, which as per Medical Technologies was similar to Medical Technologies’ mark PROFOL used since 1998. In its primary defence, Neon argued that it is the prior adopter (although admitting that it was the subsequent user) of the mark ROFOL since it applied for registration of the same in 1992 (when Medical Technologies was not even an entity in the market) which subsequently proceeded to registration in 2001. The City Civil Court was pleased to restrain Neon from using the mark ROFOL on the basis of Medical Technologies’ prior common law rights in the mark PROFOL. Neon, thereafter, preferred an appeal before the Gujarat High Court which was rejected.

It is also pertinent to note that, on 14 December 2005, based on its registration of the mark ROFOL (which related back to the date of application i.e., since 1992), Neon filed an action before the Bombay High Court to restrain Medical Technologies from using the mark PROFOL. Before the Single Judge, Neon was successful in obtaining an injunction against Medical Technologies but the operation of the same was stayed by the Division Bench when Medical Technologies preferred an appeal (as stated in the present order of the Supreme Court). 

Order

Aggrieved by the order of the Gujarat High Court, Neon preferred the above appeal before the Supreme Court, which was pleased to affirm the decisions of the City Civil Court and Gujarat High Court on the basis of the following:-

  1. Neon’s user of the mark had remained dormant for twelve years after the date of application in the year 1992. In this regard, the Supreme Court relied on Section 47 of the (Indian) Trade Marks Act, 1999 (Act) and stated (relying on 47(1)(b) of the Act) that Neon had  not used the mark ROFOL for over five years after a registration application was made (emphasis on the aforesaid underlined content is set out below in the concluding paragraph);
  2. The intention of Section 34, which is to protect the prior user from the proprietor who is not exercising the user of its mark, prima facie appears to be in favour of Medical Technologies; and
  3. The balance of convenience was in favour of Medical Technologies since it had built up goodwill in the market for PROFOL during the period Neon failed to launch its product under the mark ROFOL.

Comment

This decision is important especially in case of pharmaceutical trademarks where trademark owners in many cases are known to not launch a brand till it secures registration or till the research in that regard is completed. In the present case, although Neon had applied for the mark in 1992, it only secured registration of the same in 2001. Going by the aforesaid practice, Neon may feel disappointed with this decision as it waited till the mark proceeded to registration. When Neon had applied for their mark in 1992, the Indian Trade Marks Registry was known to take considerable time in processing the application for registration which appears to have been prejudicial to Neon in this case. Further, the application of the language used in Section 47 (1) (b) of the Act by the Supreme Court appears erroneous as the prescribed period of completion of five years as set out in the said section is calculated from the date when the mark is put on the Register of Trade Marks and not from the date of application of the trademark (as underlined above). Neon’s mark was registered i.e., put on the Register of Trade Marks in 2001 and the five year period had not elapsed to make the mark vulnerable for non-use proceedings under Section 47 (1) (b) of the Act. To this extent, it is also pertinent to note that Medical Technologies had in fact preferred a cancellation action against Neon’s registration of ROFOL (not mentioned in the present Supreme Court order) which was dismissed by the Intellectual Property Appellate Board (IPAB) and the Bombay High Court (upon a writ petition no 2669 of 2011 filed by Medical Technologies against IPAB’s order) on the basis that Neon’s mark was not vulnerable for non-use proceedings. Therefore the reasoning for the present order based on the non-use of twelve years may be appropriate but the application of the same qua Section 47 (1) (b) may appear erroneous. One more aspect which does not appear to be touched upon is whether Medical Technologies had conducted a prior availability search for it to realise the prior application of Neon. Nevertheless, this decision is likely to change the brand launch strategies especially the practice of pharmaceutical companies to wait for the registration of marks before launch.