Supreme Court applies 'first in market' test to restrain prior adopter of mark

In Neon Laboratories Ltd v Medical Technologies Ltd (Civil Appeal No 1018 of 2006), the Supreme Court of India has affirmed the lower courts’ interim order and restrained Neon Laboratories Ltd from using the mark ROFOL, which was applied for before Medical Technologies Ltd started making use of the mark PROFOL, but was not used for 12 years after the date of application.

The above matter originated from Medical Technologies’ passing-off action against Neon before the City Civil Court at Ahmedabad. The court ruled in favour of Medical Technologies, and Neon's appeal to the Gujarat High Court was rejected. Although it had adopted its PROFOL mark after Neon adopted its own ROFOL mark, Medical Technologies secured an injunction against Neon on the basis of its prior common law rights in the mark PROFOL, since Neon had failed to use its ROFOL mark.

Neon’s defence was that it was the prior adopter of/applicant for the mark ROFOL (since it had applied for registration in 1992, when Medical Technologies was not even an entity in the market). The mark proceeded to registration only in 2001. Based on this prior adoption, Neon subsequently filed an action against Medical Technologies before the High Court of Bombay, where it initially obtained an injunction order. The order was subsequently stayed by the Division Bench of the same court.

Aggrieved by the orders passed in Medical Technologies’ passing-off action, Neon appealed to the Supreme Court. Relying on the grounds below, the Supreme Court passed an interim order against Neon:

• Neon’s dormant use of the mark for 12 years - in this regard, the Supreme Court relied on Section 47(1)(b) of the Trademarks Act 1999 on the basis that Neon had not used the mark ROFOL for over five years after the application for registration was filed;
• The intention of Section 34, which is to protect a prior user from a proprietor not using its mark, prima facie appeared to be in favour of Medical Technologies; and
• Medical Technologies had built up goodwill in the market for PROFOL during the period during which Neon had failed to launch its ROFOL brand.

Neon may feel disappointed with this decision, as it appears that it waited until the mark proceeded to registration before launching its brand - a practice followed by many pharmaceutical companies. When Neon applied for the mark in 1992, the Trademarks Registry was known to take considerable time in processing applications for registration, which appears to have been prejudicial to Neon in this case. Further, although the basis of this decision - non-use for 12 years - may appear appropriate, the application of Section 47(1)(b) of the act by the Supreme Court appears erroneous, as the prescribed period of five years set out in said section is calculated from the date on which the mark is entered into the Register of Trademarks, and not from the date of application of the mark. Neon’s mark was registered (ie, entered into the Register of Trademarks) in 2001 and the five-year period had thus not elapsed so as to make the mark vulnerable to non-use cancellation under Section 47(1)(b) of the act. In this respect, Medical Technologies failed to cancel Neon’s mark before the Intellectual Property Appellate Board and the High Court of Bombay on the basis that Neon’s mark was not vulnerable to non-use cancellation (although this was not stated in the present Supreme Court order).

This decision is important as it is likely to change brand launch strategies, especially for pharmaceutical companies that usually wait for the registration of the mark before launching a product.

Adheesh Nargolkar and Shailendra Bhandare, Khaitan & Co, Mumbai