Sun decision brightens the way for trademark assignees

In Sun Pharmaceuticals Industries Limited v Cipla Limited (2009 (39) PTC 347 (Del), October 3 2008, only recently reported), the Delhi High Court has held that an assignee acquires title to a registered trademark upon assignment itself, and not upon registration of the assignment.
The trademark THEOBID, which is used for medicinal and pharmaceutical preparations, was initially registered in July 1985 in the name of M/s Natco Fine Pharmaceuticals Private Limited. The mark was subsequently assigned to Sun Pharmaceuticals Industries Limited, along with its goodwill, via a deed of assignment dated October 31 1998.

Cipla Limited subsequently adopted the trademark THEOBID-B for medicinal preparations. Sun filed suit before the Delhi High Court seeking, among other things, a permanent injunction restraining Cipla from infringing Sun's mark. The main issue before the court was whether, in the absence of a registered deed of assignment, Sun could be considered as the registered proprietor of the THEOBID mark and be allowed to file an action for infringement against Cipla.
Relying on the judgment of the Madras High Court in Soundarapandian Match Works v Chetty (PTC (2) 145 (Mad)), Cipla argued that:
  • an assignee cannot exercise any right until the registration of the assignment has been completed;
  • under Section 28 of the Trademarks Act 1999, the right to use a trademark and obtain any relief in respect thereof vests with the registered proprietor of the mark (Section 2(1)(v) defines 'registered proprietor' as the person entered in the register as proprietor of the trademark);
  • Section 45(2) of the act prohibits the court from admitting as proof of assignment any document that has not been registered; and
  • since the THEOBID mark was registered in the name of Natco and Sun did not appear in the Register of Trademarks as the registered proprietor, Sun had no right to file suit against Cipla.
The court rejected the reasoning of the Madras High Court for two reasons. First, it observed that because it was undisputed that there had been an assignment in favour of Sun, the non-registration of the assignment should not affect Sun's position. Second, registration of an assignment is not a prerequisite to an action for infringement. Differentiating the present case from Soundarapandian Match Works, the court noted that since Sun had applied for registration in July 2000, it should not be penalized because the registrar had not yet decided on the application. Accordingly, Sun was entitled to exercise the rights of the registered proprietor of the THEOBID mark.
The court clarified that the process of assignment does not mandate registration (Section 2(1)(b) of the act defines an 'assignment' as an act in writing by the parties concerned). Section 45(1) of the act requires merely that the proof of such title of assignment be registered. Thus, the title of assignment exists before registration. The court also clarified that although the language of Section 45(2) is commanding in nature, it confers a discretionary power on the court to admit any document as evidence of assignment. The court stated that the term 'registered proprietor’ in Section 28 of the act should be construed broadly to include an unregistered assignee.
The court also rejected Cipla's arguments that:

  • Sun's mark was invalid on the grounds of non-use; and
  • because Cipla was in a position to compensate Sun, no injunction should be granted in favour of the latter.
The court emphasized that registration of a mark under Section 31 of the act constitutes prima facie evidence of validity. Section 47 of the act provides that a trademark should be removed from the register on the grounds of non-use if there was no good-faith intention to use the mark, but the court pointed out that this was a matter for the Registrar of Trademarks. The court noted that a mere break in use of a mark should not end the rights of the registered owner. Moreover, Sun could not be considered as a trafficker of marks, as there was sufficient evidence to show that it had used or intended to use its mark.
The court also observed that an injunction should not be denied on the grounds that alternate reliefs may be available. As the balance of convenience tilts in favour of the registered user and the courts are obliged to protect the rights of the rightful owner of a trademark, the court issued an interim order restraining Cipla, its directors, assignees, distributors and dealers, during the pendency of the suit, from manufacturing, selling or dealing in medicinal preparations under the trademark THEOBID-D, or any other trademark that may be deceptively similar to THEOBID. However, in view of the extensive use of the THEOBID-D mark by Cipla since 2007, the court directed that the order become operative after a month.
The decision represents an attempt by the court to protect the rights of IP owners who, at times, are made to suffer because of procedural and administrative lapses. In the absence of a provision permitting an assignee to protect its trademark pending registration of the assignment, the assignor, having deprived itself of the rights pertaining in the assigned mark, would be unable to take action against an infringer, and the assignee, which is not the registered proprietor, would not be allowed to protect the mark. This, in effect, would leave the assignee remediless and would give an undue advantage to infringers.
Aarushi Jain and Prerak Hora, Nishith Desai Associates - Legal & Tax Counselling Worldwide, Mumbai

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