Tug of Trade mark War and Courts of law in respect of Permitted User

As an IP Lawyer, I become a witness of many IP battles in the battlefield i.e. court of law. One of the battles is in respect of the permitted user of the trade mark. Let me discuss it by way of writing this blog. The issue of this article is whether a permitted user of a trade mark can file a suit for infringement action or passing off action or can that permitted user be sued for infringement of a trade mark? Let me divide this one issue into two parts for better discussion and understanding. 

1) Whether a permitted user of a trade mark can file a suit for an infringement action.

2) Whether a permitted user of a trade mark can file a suit for passing off action.

3) Whether a permitted user of a trade mark can be sued by another registered proprietor of a trade mark. 

Before I discuss the above mentioned issues herein below, it is necessary to know who can be a user of trade mark. First of all it is required to be discussed that who is user of trade mark. The user of the trade mark, in general terms, means a person who uses the trade mark for the purpose of his trade, business or service.  In trade mark law, there is no particular definition is given for 'user' of a trade mark, however, in legal sense, there are three persons who can be called 'user' of  trade mark.

(1) a registered proprietor of a trade mark 
(2) a registered user of a trade mark and
(3) a permitted user of a trade mark. 

A registered proprietor is defined under section 2 (1)(v) of the Trade marks Act, 1999(the Act for short) whereas section 2 (1) (x) read with section 49 of the Act says about registered user and  section 2(1)(r) of the Act talks about permitted user. 

As the issue of this article revolves round 'permitted user', let me discuss the above mentioned issues one by one with the help of provisions of trade marks law and judicial pronouncements.

1) Whether a permitted user  of a trade mark can file a suit for infringement action.

First of all it is an essential point to know that who a  permitted user is. The information about who a permitted user is given in the form of 'permitted use' under Section 2(1)(r) of the Act which is as under.

(r) "permitted use", in relation to a registered trade mark, means the use of trade mark-

(i) by a registered user of the trade mark in relation to goods or services-

(a) with which he is connected in the course of trade; and
(b) in respect of which the trade mark remains registered for the time being; and
(c) for which he is registered as registered user; and
(d) which complies with any conditions or limitations to which the registration of registered user is subject; or

(ii) by a person other than the registered proprietor and registered user in relation to goods or services-

(a) with which he is connected in the course of trade; and
(b) in respect of which the trade mark remains registered for the time being; and
(c) by consent of such registered proprietor in a written agreement; and
(d) which complies with any conditions or limitations to which such user is subject and to which the registration of the trade mark is subject.

As per the above mentioned definition, it is clear that a person, who is given permission to use a  registered trade mark  in relation to goods or services in the course of trade, is a permitted user. Section 2(1)(r) is referred to a registered user and a person other than the registered proprietor and registered user. 

Coming back to the issue no. 1  whether a permitted user of a trade mark can file a suit for infringement action, the Section 53 of the Act itself is the answer of this issue which says that a person referred to in sub clause (ii) of clause (r) of subsection (1) of Section 2 shall have no right to institute any proceeding for any infringement.  Thus it is clear that the permitted user can not file a suit for infringement action.  In support of my view based on section 53 of the Act, I rely upon the latest judgment of Division Bench of Delhi High Court on 4th January, 2017 in the case of P.K. Sen vs. Exxon Mobile Corporation and Anr; setting aside the Order passing by the single bench; Hon'ble DB of Delhi High Court in paragraph no. 16 of the judgment held that "Section 53 is clear departure from Section 52 of the Act which stipulates that a person referred to in Section 2(1)(r)(ii) shall have no right to institute any proceeding for any infringement. The person referred in Section 2(1)(r)(ii) is a person other than the registered proprietor and registered user and would obviously include a 'permitted user'. In other words, the only persons who can bring a suit for infringement of a trade mark would be registered proprietor himself or the registered user and certainly not registered user. Therefore, in view of the Court, submission made by the learned counsel for the appellant that the suit could not have been instituted by the respondent No.2/plaintiff no. 2 is correct."

2) Whether a permitted user of a trade mark can file a suit for passing off action.

With reference to this point, the Act is silent about instituting a suit for passing off action by a permitted user. When a person has a title of a property, he is entitled to give his property to be used by other person  as a permitted user. The passing off action is not a statutory remedy. It is a common law remedy, however, to institute a suit for any remedy whether infringement or passing off, title of the property must be acquired by the plaintiff. In other words, the person who institutes a suit must be owner of the trade mark. Permitted user is neither a registered proprietor nor a registered user. He is not an owner or proprietor of the property i.e. trade mark. A person is only entitled to file a suit when he has title and therefore, permitted user can not file a suit for passing off action. 

For instance, Mr. A is the proprietor or owner of the trade mark. Mr. B is a permitted user or a licencee of the trade mark of Mr. A. Mr. C is infringing the rights of Mr. A by using that trade mark in trade or business or service without licence or permission of Mr. A. 

Here in this case Mr. A is entitled to file a legal action against Mr. C as Mr. A is having a title i.e. ownership of that trade mark. Mr. B is not entitled to take any action against Mr. C as Mr. B does not have a title i.e. he is not an owner of that trade mark. 

3) Whether a permitted user of a trade mark can be sued by another registered proprietor of a trade mark. 

With reference to this point, it is important to quote here the judgment of Hon'ble Supreme Court in a case M/s Gujarat Bottling Co. Ltd & Ors vs The Coca Cola Co. & Ors reported in 1995 AIR 2372, 1995 SCC(5) 545 wherein it was observed that it is permissible for the registered proprietor of a trade mark to permit a person to use his registered trade mark. Such licensing of trade mark is governed by common law and is permissible provided (i) the licensing does not result in causing confusion or deception among the public; (ii)it does not destroy the distinctiveness of the trade mark, that is to say, the trade mark, before the public eye,continues to distinguish the goods connected with others; and (iii) a connection in the course of trade consistent with the definition of trade mark continues to exist between the goods and the proprietor of the mark. [see : P. Narayanan = Law of Trade Marks and passing-Off, 4th Ed., para 20.16,p.335]. It would thus appear that use of a registered trade mark can be permitted to a registered user in accordance with provisions of the Act and for that purpose the registered proprietor has to enter into an agreement with the proposed registered user. The use of the trade mark can also be permitted dehors the provisions of the Act by grant of licence by the registered proprietor to the proposed user. Such a licence is governed by common law. 

In the above referred judgment it is observed by Hon'ble Supreme Court that the use of the trade mark by licencee of a registered proprietor can be made possible subject to the conditions that such licensing does not result in causing confusion or deception among the public. Now the question is when such licensing creates confusion or deception among people in respect of the trade mark of the third party, whether that third party can restrain that licencee from using that trade mark, the answer is in affirmative. The reason is agreement of licence between the licencor and licensee does not prevail over the statute irrespective of that fact that licensing falls under common law and such licensing is against the public interest. It is required to be noted that the concept of the trade mark since ages is to an indicator of exclusivity in trade under that mark and a licensee can be granted a limited right to use. Making use of a trade mark of third party is against the business ethics and dishonesty is reflected in the behaviour of the user of such trade mark. I would like to quote the landmark judgement of Hon'ble Supreme in case of Laxmikant V. Patel vs. Chetanbhai Shah and Another reported in (2002) 3 SCC 65 in support of my views in respect of business ethics. In paragraph no. 10 of this judgement Hon'ble Supreme Court is of the view that ......."the law does not permit any one to carry on his business in such a way as would persuade the customers or clients in believing that the goods or services belonging to someone else are his or are associated therewith. It does not matter whether the latter person does so fraudulently or otherwise. The reasons are two. Firstly, honesty and fair play are and ought to be the basic policies in the world of business. Secondly, when a person adopts or intends to adopt a name in connection with his business or services which is already belongs to someone else, it results in confusion and has propensity of diverting the customers and clients of someone else to himself and thereby resulting in injury."

Thus it is very clear that a licencee/ permitted user is using a trade mark under the licensing agreement and if that trade mark is in conflict with that of the third party, that third party who is an owner of the trade mark, is entitled to restrain the licencee of the trade mark whose use creates confusion and deception among people. Moreover, the very object of the trade mark Act is to establish the bridge between the goods and the source thereof. 

 

Chirag Bhatt 
on 16 October 2017
Published in Intellectual Property Rights
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