Supreme Court decision opens door to sham assignments

In Thukral Mechanical Works v PM Diesels Pvt Ltd (Case 7404/2008, December 18 2008), the Supreme Court has held that the Intellectual Property Appellate Board had correctly rejected a petition for the cancellation of the trademark FIELD MARSHAL.
The parties to this case have been engaged in a dispute over the rights to the FIELD MARSHAL mark for over 20 years. 
PM Diesels Pvt Ltd has been the registered proprietor of the trademark FIELD MARSHAL for, among other things, "centrifugal pumps" in Class 7 of the Nice Classification since 1964. In 1985 it filed an action for trademark infringement and passing off against Jain Industries. An ex parte injunction granted by the Delhi High Court in 1985 was vacated in 1986 on the grounds that Jain also owned a registration for the trademark FIELD MARSHALL for the same goods.
PM Diesels filed a petition for the cancellation of Jain's trademark under Sections 46, 56 and 107 of the Trade and Merchandise Marks Act 1958.
The petition was withdrawn when Thukral Mechanical Works responded to the court notice and revealed that Jain had assigned the trademark to it. PM Diesels filed a new petition for cancellation against Thukral, but did not name the assignor, Jain, as co-respondent. The petition was examined by the Intellectual Property Appellate Board after the Trademark Act 1999 came into force on September 15 2003.

Under Sections 46(1)(b) of the old act, a trademark may be cancelled where:

"[up to] one month before the date of the application, a continuous period of five years or longer had elapsed during which [...] there was no bona fide use [of the mark] in relation to the goods [for which it is registered] by any proprietor thereof."
The board dismissed the petition, holding that PM Diesels had to show that the mark had not been used for a period of five years and one month from the date on which Thukral became the proprietor of the mark (ie, May 30 1986). Therefore, as the petition had been filed only seven-and-a-half months from the date of the assignment of the mark, the petition was not maintainable.
PM Diesels appealed. A single judge of the Delhi High Court refused to stay the board's order. On appeal, a division bench set aside the order of the single judge and directed that the board decide the case on the merits. Thukral appealed to the Supreme Court.
The Supreme Court held as follows:
  • The decision of the board was correct;
  • Registration of a trademark is a valuable right that is not automatically extinguished by non-use; and
  • The owner of a validly assigned trademark cannot face the same adverse consequences as the assignor.
Arguably, the decision is disappointing since it will open the door to sham assignments - that is, a trademark owner may decide to assign its mark whenever it fears that its mark is vulnerable to cancellation on the grounds of non-use. The court disregarded the opinion of a reputed commentator on trademark law in India, who relied on the intent of the legislature in enacting the relevant provisions. Moreover, the court did not adequately consider the fact that an assignment is subject to the rights of third parties.

Binny Kalra, Anand And Anand Advocates, New Delhi

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