What if you manufactured toys and Santa Claus who was merely supposed to give your toys to kids stole your trademark and started to claim it as his own? This situation could actually arise in the real world if Santa were your distributor. It may happen that one day your loyal distributor may think that since he has been advertising and selling your goods, he is entitled to your trademark.

G’FIVE Case

Just such a situation arose in a case decided recently by the Delhi High Court in a suit filed by WUXE ZHANG & ANR against SUBHASH AGARWAL & ANR. In this case, the Defendant, SUBHASH AGARWAL, had been the distributor of the Plaintiffs’ goods (mobile phones) and had been selling the Plaintiffs’ goods under the Plaintiffs’ trademark G’FIVE since 14th August 2009. The Plaintiff had begun using this mark since 1st September 2008. The Defendant adopted the trademark X’FIVE which was considered to be deceptively similar to the Plaintiffs’ mark and filed an application for registration of the same. This was considered as an act on the part of the Defendant to ride upon the good will of the Plaintiffs by adopting a deceptively similar mark.

The Delhi High Court had initially granted an ex-parte ad interim injunction against the Defendant in this case and was later pleased to grant a permanent injunction restraining the Defendant from using the trademark X’ Five or any confusingly similar mark to the trademark G’Five. The Hon’ble Court also granted half a million Rupees in monetary compensation and damages in favour of the Plaintiff.

Foreign Manufacturer - Use of trademark in India

The aforementioned case highlights that a manufacturer must be cautious while selling its products through a distributor. If a manufacturer abroad sells its goods through its distributor in India, is it the Manufacturer or the Distributor who is using the trademark in India? According to Indian trademark law, if the goods are imported and sold in India through a Distributor under the trademark of the Manufacturer, the trademark would be deemed to be used by the Manufacturer and not the Distributor.

Double Coin Case

In 2011, the Delhi High Court decided a similar case wherein Double Coin Holdings Ltd (a Chinese entity) had been manufacturing and supplying tyres under the trademark Double Coin to various countries through a company called ZAFCO. ZAFCO had appointed dealers in India for selling Double Coin tyres in India. One of the authorized dealers was Trans Tyres (India) Private Ltd. ZAFCO had appointed Trans Tyres (India) Pvt. Ltd. as its authorized representative and distributor vide agreement dated 1st July, 2006, which was valid till 30th June, 2007 but was not renewed thereafter. In the year 2007, Trans Tyres, obtained the registration of the mark Double Coin in its name. Though Trans tyres alleged that this was done with the knowledge of Double Coin Holdings, no documents were placed on record to prove this and Double Coin Holdings denied giving consent.

In its decision the Hon’ble Delhi High observed-

The ownership of a trademark as a general rule vests in the person, who puts the mark on the product. If the manufacturer himself is putting a brand name on the goods, the ownership or goodwill in the trademark, would ordinarily belong to him and a distributor or an importer of such a product cannot claim ownership or goodwill in the trademark already put on the product imported and/or distributed by him. Thus, there is presumption of proprietorship of trademark in favour of the manufacturer when he himself is putting the mark on the product manufactured by him. The relevant consideration in this regard would be to the person "who invented the trademark", "who first affixed it on the product", "who maintains the quality of the product" and "with whom the relevant public identifies the goods", "to whom it looks for warranty and redressal of complaints" and "who possesses the goodwill associated with the product". Use of the mark by the importer/distributor of the product is deemed to be a use by the manufacturer of the product, who puts his mark on the product. This ownership and goodwill which the manufacturer of the product enjoys in respect of the trademark under which his goods are sold, is not displaced merely by marketing and promotion of the product by the distributor/importer, even if he uses the mark while advertising/promoting the product.

The Hon’ble High Court found in favour of Double Coin Holding and held that Double Coin Holding and not Trans Tyres are the owners of the trademark Double Coin and the goodwill therein.

Conclusion

If you are the manufacturer and wish to protect your trademark, you need to remember to

  1. Register your trademark in your own name in the country you are exporting to. It is generally cheaper and quicker to obtain registration in your name rather than to cancel your distributor’s registration.
  2. Ensure that it is your brand which is prominent on the product and not the distributors
  3. Carry out the advertising and promotions in such a way so as to make the public associate the brand with you the manufacturer rather than the distributor.
  4. Ensure that you affix your trademark on your product prior to dispatching them to the distributor.