The Karnataka High Court judgment lays down some significant pointers in trademark law which are helpful for practitioners: firstly, on lifting the corporate veil and secondly, for re-affirming the clean hands doctrine. Further, it is an interesting read as the judgment delivered by Justice P. S. Dineshkumar is well-structured and concise. This note shall deal with the prominent arguments of both the parties and the corresponding determination of the High Court.
As trademark practitioners are well aware of, there are several Supreme Court and High Court judgments which explain the legal position on deceptive similarity in trademarks. They can be interpreted by an ingenious lawyer in either ways to advance his/her case. SpicyIP has discussed the extant legal position time and again. Therefore, I shall not be elaborating this again.
This is a Miscellaneous First Appeal filed by the Appellant – defendant challenging the Trial Court Order dated 20.2.2016 allowing IAs No.1 & 2 filed under Order XXXIX Rules 1 & 2 read with Section 151 CPC. The aforesaid Trial Court Order restrained the Appellant- defendant from causing any sale and advertisement of its product under the trademark “cothagiri” or any other mark either in English or in any other language identified with or deceptively similar to Respondent-plaintiff’s registered trademarks “Cothas Coffee” and “Cothas”.
The Respondent – plaintiff, a registered Partnership Firm, brought the instant action by filing a suit before the Trial Court inter alia praying for:- a) permanent injunction restraining the Appellant-defendant and their agents etc., from infringing Respondent-plaintiff’s trademark “Cothas Coffee” and “Cothas”; and b) permanent injunction restraining the Appellant – defendant from manufacturing or selling any goods particularly Coffee, Tea or allied products under the trademark “cothagiri” either in Kannada or any other language, which is identical with or deceptively similar to the Respondent-plaintiff’s trademarks “Cothas” and “Cothas Coffee”.
The Respondent-plaintiff also filed an I.A. under Order XXXIX Rules 1 and 2 CPC praying for an order of temporary injunction and the Trial Court granted an ex-parte ad- interim order of injunction on 30.4.2015. Later, by impugned order dated 20.2.2016, Trial Court rejected an I.A. filed by the Appellant-defendant to vacate the ad-interim order and made it absolute. The Orders of the Trial Court are challenged here.
a) Whether the Respondent-plaintiff has made out a prima facie case entitling itself for a temporary injunction pending disposal of the suit?
b) Whether the impugned order requires any interference?
|Appellant – defendant||Respondent – plaintiff|
Section 29 of the Trade Marks Act, 1999 – only two contingencies can be envisaged – which will constitute infringement. The first one is direct use of a registered trademark and the second is use of a mark which is identical or deceptively similar. It was submitted that neither contingency has occurred in the instant case. Citing the packing material and its distinguishing features, it was argued that there is no infringement as defined under Section 29 of the Act.
Appellant-defendant is selling coffee under the trade name ‘cotha giri’ which is deceptively similar to ‘Cothas Coffee’ and it amounts to infringement of trademark as defined under Section 29 of the Act.
The words ‘cotha’ and ‘giri’ are written in two different lines in the packaging covers used by the defendant. ‘Cotha’ is written in the first line and ‘giri’ in the second line. This is deceptively similar to the manner in which Respondent-plaintiff has written ‘Cothas’ in the first line and ‘coffee’ in the second line. Therefore, coffee powder marketed by the Appellant-defendant can be easily passed off as ‘Cothas Coffee’.
The Appellant-defendant is protected under Section 35 of the Act. It has coined and chosen ‘cothagiri’ as its trade name for its product because ‘cotha’ is the family name of directors’ respective spouses. Under Section 35 of the Act, a registered user of a trademark shall not be entitled to interfere with any bonafide use by a person of his own name or that of his place of business or of his predecessor. Further, ‘giri’ means mountains, where coffee is grown. Thus, defendant is protected under Section 35 of the Act against any action.
Appellant-defendant is a company which is promoted by Mrs. Girija Chandan, wife of C.P. Chandan and Mrs. Satyavati Prakas, wife of Cothas K. Prakas. Respective husbands of both directors are the retiring partners and signatories to the ‘Deed of Retirement’ dated 23.12.2013 of the Partnership Firm “Cothas Coffee Co.”. Under the said Deed, Cothas K. Prakas has received a sum of Rs.11,74,25,000/- and C. Chandan has received Rs.59,90,000/- in full and final settlement of their claims. The retiring partners have covenanted not to engage in any activity similar to the one carried further by the plaintiff either directly or indirectly for a period of three years. However, in violation of the said covenant, Appellant-Defendant-Company was incorporated on 25.7.2014. Therefore, it shall not be entitled for any protection under Section 35 of the Act.
As per the Retirement Deed, the retiring partners agreed on a full and final settlement of their respective claims., which included all claims against immovable and movable properties, leasehold rights, possessory rights, receivables, claims, credits, goodwill, trade mark, patents and product names etc. Further, Clause 14 of the Retirement Deed reads as follows:- “14. The Retiring Partners shall not engage, for a period of 3 years from the Retirement Date, in any activity which is similar to the activities carried on by the Partnership as on this date, either directly or indirectly in any capacity including as a Proprietor, Partner, Share Holder, Director, Managing Director, employee, consultant or agent.”
Accordingly, it was observed that “Whatever be the explanation and justification on behalf of the defendant, it is indelible on record that prior to 25.7.2014 defendant-company was not in existence. On facts, it is not in dispute that the plaintiff has been producing and marketing its product as ‘Cothas Coffee’ for several years. The defendant-Company is floated by the two ladies, whose respective spouses are retired partners of ‘Cothas Coffee Co.’ The retiring partners have covenanted not to indulge in a business similar to the ‘Cothas Coffee Co.’ either ‘directly’ or ‘indirectly’. They have expressly given up the trade mark. In these circumstances, they cannot be heard to contend that defendant is an independent entity created under the Companies Act and enjoys an independent right to indulge in business similar to that of plaintiff oblivious of the covenants executed by the retiring partners of plaintiff- firm.…..Having perused the pleadings and re- examining the material on record, it is reasonable to presume that the defendants did have full knowledge of the trademark of plaintiff and its reputation in the market and yet, attempted to sell their product with similar name and style.”
The Court refused to interfere with the determination of the Trial Court stating that “a Court of appeal should be slow in interfering with the discretionary orders passed by the Trial Court, even if, a contrary view is possible by an appellate Court.” The High Court, therefore, refused to interfere with Trial Court Order making ad-interim injunction absolute.
In literal terms, the Court lifted the corporate veil of the Appellant-defendant. As a general rule, company is a juristic person. It is separate and distinct from its members. Its rights and obligations are different from those of its shareholders. It is a settled legal position that corporate veil can be lifted when justice so demands (like in case of tax evasion, fraud etc). The Appellant-defendant, in the instant case, used a corporate structure so as to circumvent the legal restriction imposed by Retirement Deed. As I see it, the Respondent – plaintiff could convince the High Court on this aspect and this effectively tilted the case in its favour. Even if the Appellant-defendant had a strong case on non-existence of deceptive similarity, I am of the view that the aforesaid impression so created heavily tilted the case in favour of the Respondent-plaintiff. The Indian judiciary has lifted the corporate veil on quite a few occasions and therefore, corporate veil was never an unliftable “iron curtain”, if I may use the popular Cold war expression. From a realist point of view, say, if one’s case is weak on two out of five issues, it can adversely affect the attitude of the Court vis-à-vis the other three issues as well. It is difficult and virtually impossible to compartmentalize them. Therefore, it is always safer, especially in litigation and arbitration, to come with clean hands on all the important issues. If not, it is safer to opt for alternative methods such as negotiation, mediation and conciliation. In other words, it is important to carry out a professional, impartial legal due diligence on probable legal outcomes and strategise accordingly.