“Who Owns the Goodwill in a Mark?”- Coin Flips in Favour of the Manufacturer

This post was first published on 15th February, 2012.
A trademark associates a considerable amount of goodwill with a product and hence businesses go to great extents to exploit this potential of a trademark and therefore, they strive hard to protect their trademarks. A recent instance where a seller of a product fought with the manufacturer of the product over the ownership of the trademark is the Trans Tyres India Pvt. Ltd. v. Double Coin Holdings Ltd. & Anr. case, which was decided by the Delhi High Court.
The question of law decided, in this case, is — between the seller of a product and the manufacturer of the same, who is the owner of the trademark and what circumstances and actions of either of them will contribute to the entitlement of ownership? It was held that the most important issue to be resolved is to find out to whom the goodwill in the trademark is connected?
In the instant case, there have been two suits filed by the parties against each other (cross suits). The appellants in the instant case, Trans Tyres (India) Pvt. Ltd. and Satish Kakkar, were the authorized sellers of the “Double Coin” brand of tyres which were manufactured by respondent no.1 Double Coin Holding Ltd.
Double Coin Holding Ltd. manufactures tyres at its factory in China and ZAFCO Trading LCC is its agent which sells the tyres manufactured by Double Coin Holding Ltd. in the global market.
Double Coin Holding Ltd. through ZAFCO Trading LCC entered into an agreement in 2006 with Trans Tyres (India) Pvt. Ltd., (which took over the business of the firm, Trans India- of which Mr Satish Kakkar was a partner and which had initially entered into the agreement) to the effect that Trans Tyres became the only authorised entity to sell/advertise Double Coin’s products in India and execute government liaison jobs including BIS.
Trans Tyres (India) Pvt. Ltd. conducted a series of exercises and events to promote the sale of the “Double Coin” brand of tyres and also established warehouses and branch offices in various parts of the country. Throughout all these Trans Tyres (India) Pvt. Ltd. tried to promote the sales by claiming that the tyres sold by it were those manufactured by Double Coin Holding Ltd. in China, thus associating the name “Double Coin” with the place of manufacture of the tyre.
Trans Tyres (India) Pvt. Ltd. obtained a registration of the trademark “Double Coin” on 31.03.2009 under classes 4, 9 and 12 (on 31.05.2010) and when this came to Double Coin Holding Ltd’s notice it sought an explanation from Trans Tyres (India) Pvt. Ltd. One of the Directors of the company, Mr Tony sent an email to Double Coin Holding Ltd., explaining that the trademark was obtained only to prevent other local companies from selling tyres under the “Double Coin” brand name and reassured that the tradename was Double Coin Holding Ltd.’s property. Later when Double Coin Holding Ltd. and ZAFCO Trading LCC came to know about the attempts of the appellants (TransTyres (India) Pvt. Ltd.)  to register the Double Coin trademark pertaining to other goods relating to automobiles, they issued a cease and desist notice to the appellants. The appellants (Trans Tyres (India) Pvt. Ltd.), filed a suit for injunction against usage of the name “Double Coin” by Double Coin Holding Ltd., and ZAFCO Trading LCC claiming that since Trans Tyres (India) Pvt. Ltd.,  was the prior user of the name in Indian territory it had exclusive rights over the name within India.
The bench while adjudging the case analysed the Territoriality Doctrine and Universality Doctrines relating to trademarks. It held that the world over the Territoriality Doctrine has prevailed over the Universality Doctrine and rightly so. It held that the registered proprietor of a trademark would be entitled to the protections conferred by law and exclusivity vested within the territorial limits as conferred by a Municipal Law. Prior use of a trademark in a dominion would ipso facto not entitle its owner to claim exclusive trademark rights in another dominion. It held that the theory that a trademark necessarily connected the product with its manufacturer was no more true in the current global scenario and in most of the situations it was observed that the trademark connected the product to the place where the product entered the market, it could be the agent, the distributor or even a person who purchases goods from a manufacturer and sells them in the market.
Further, it was held that wherever there was an agreement existing between the manufacturer and the seller as to the assignment and ownership of the trademarks such disputes about its ownership would not arise and that such disputes arose only in situations where no agreements existed. In such situations implied/tacit consent for the usage of such trademarks or silence amounting to acquiescence would be taken into consideration.
Referring to the UK decision in Scandecor Development AB vs. Scandecor Marketing AB (2001 UKHL 21) it was held that a mark may be identified with the source from where the goods enter the market rather than with the manufacturer. This, it was observed, occurs in situations where the seller, in carrying out the sales, uses the trademark in such a way that the public comes to identify the goods with it rather than with the manufacturer, but in such situations, the burden would be on the seller to show that the customers have linked the trademark with the seller and not the manufacturer. In such circumstances, it should not be lost sight of the possibility that a foreign manufacturer can also acquire domestic goodwill in the trademark, in addition to any foreign goodwill that it might enjoy, provided that the trademark serves to identify the manufacturer as the source of the goods within the new domestic territory. It would not be difficult in a case where the foreign origin of the goods is concealed, in which circumstance the seller would be the person connected with the goodwill.
Also referring to the UK decision in Adrema Ld vs. Adrema-Werke G.m.b.H,( 1958 RPC (13) 323), where the defendant(manufacturer) sold it to the plaintiff (seller) as a principal for the purpose of resale, without any reference to the manufacturer, it was observed that it would also depend on the method of trading adopted by the manufacturer of the goods with the seller which would decide the person connected with the goodwill.
It was held that the most important issue which had to be resolved was not with respect to the goodwill in the goods, but with reference to: “Who owns the goodwill in the mark?” and the answer to this question is based on the facts of each case. Referring to the facts of this case where the seller (TransTyres (India) Pvt. Ltd.) had clearly indulged in promoting the sales of the product by connecting it with the manufacturer (Double Coin Holding Ltd) and the manufacturer’s goodwill it was held that the manufacturer had the goodwill in the trademark and the lower court’s judgment was upheld relating to the issue of the injunction.

Author: Himendra Kartantik Simha M.N.

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