We’re pleased to bring to you a guest post by Yash More and Hitoishi Sarkar, discussing the Indian courts’ interpretation of what constitutes ‘use’ while adjudicating upon disputes concerning prior use of trademarks in light of the recent UK decision in MERCK KGaA v. MERCK Sharp. Yash and Hitoishi are 2nd year students at Gujarat National Law University, Gandhinagar.
In May this year, the UK High Court of Justice in MERCK KGaA v. MERCK Sharp, while ruling on an alleged trademark infringement claim, considered what constitutes ‘use’ in the course of business under the trademark law. For those familiar with the nuances of trademark law, the definition of ‘use’ holds much relevance for Indian courts while adjudicating upon disputes concerning the prior use of trademarks under Section 34 of the Trademarks Act, 1999.
Earlier in March, the Delhi High Court in Peps Industries Pvt. Ltd. v. Kurlon Ltd. was called upon to adjudicate a similar question of law wherein it held ‘sales’ to be an essential criterion to claim the defence of ‘prior use’ under Section 34. (The aforementioned decision has been appealed before a Division Bench of the same court which refused to delve into the merits of the matter and directed the parties to arrive at an amicable settlement.) However, in MERCK KGaA, the UK High Court remarked that there could be ‘use’ in the course of trade without any actual sales which runs contrary to the approach taken by the Delhi High Court in Peps Industries.
The decision in MERCK KGaA has several takeaways for India, especially when examined from the touchstone of Section 34. In this post, we seek to analyse the vastly inconsistent interpretation of this provision in the Indian jurisprudence while juxtaposing them with several decisions from English courts.
Merck Global, a German pharmaceutical company, entered into a co-existence agreement with its subsidiary, Merck US, that it can only use the Merck brand in the US and Canada, whereas Merck Global would use it elsewhere. In 2016, Merck Global initiated infringement proceedings against Merck US in the UK for trademark infringement based on their use of the trademark on various US websites, social media posts and email addresses that Merck Global claimed were targeting the UK market. The most interesting point discussed by the court was whether the activities of Merck US constituted ‘use’ in the UK in the course of trade. The reason this was in dispute was that Merck US never actually sold any wares in the UK using the Merck brand. Merck Global argued that the advertisements issued by Merck US would establish in the mind of the average consumer a link between the sign constituting the company or trade name and the products.
What constitutes ‘First Use’?
In India, Section 34 of the Trademarks Act, 1999 states that the proprietor of a registered trademark cannot interfere with the use of any identical or similar mark if the person has been using the mark from an earlier date. In this context, the Supreme Court in S. Syed Mohideen v. P. Sulochana Bai had laid down that the rights of the prior user are recognised as superior to that of the registered user, and therefore, a registered proprietor cannot disturb or interfere with the rights of the prior user.
While trademark litigation in India often realms around the question of prior use of trademark, the jurisprudence on what constitutes ‘use’ under Section 34 is limited. Indian courts, for long, have struggled to delineate the meaning of ‘use’ pursuant to Section 34. This makes the decision in MERCK KGaA significantly important and interesting in the Indian IP domain. The issue remains largely unsettled with much back and forth from various high courts across the country.
The Delhi High Court in Revlon Inc. v. Sarita Manufacturing Co., held that the dissemination of knowledge of a trademark in respect of a product through advertisement in the media amounts to use of the trademark whether or not the advertisement is coupled with the actual existence of the product in the market. Similarly, in J.N. Nichols Limited v. Rose & Thistle and Anr., the Calcutta High Court explained that the use of a trademark does not postulate actual sale of the goods bearing such a mark. The ‘use’ can be in any form or way and does not necessarily mean and imply actual physical sale and even mere advertisement without having even the existence of the goods can be said to be a use of the trademark. This reasoning was also upheld later in Kabushiki Kaisha Toshiba v. Toshiba Appliances Co.
On the contrary, a single judge bench of the Bombay High Court in Kamat Hotels (India) Limited v. Royal Orchid Hotels Limited and Ors., opined that concept of continuous use emphasises that a right vests in a person when he puts his goods with the mark in the market and that mere adoption of a mark is not sufficient. Interestingly, the Bombay High Court in Kamat Hotels relied on the Supreme Court’s ruling in Hardie Trading Ltd. and Ors. v. Addisons Paint and Chemicals Ltd., where the apex court had in fact held that the term ‘use’ may be other than physical use and it should not be merely limited to physical use on the goods or to sale of goods bearing the trademark. Likewise, this market availability test has been relied upon by the Supreme Court in several decisions such as N.R. Dongre and Ors. v. Whirlpool Corpn. and Milmet Oftho Industries and Ors. v. Allergan Inc.
The Division Bench of the Delhi High Court in Pioneer Nuts and Bolts Pvt. Ltd. v. M/s. Goodwill Enterprises, most authoritatively ruled on this issue. In this case, while expounding on the concept of ‘use’ under Section 34, it dismissed the contention of the defendants that merely issuing advertisements bearing the impugned trademark would confer upon it preferential rights. It explained that reliance on Hardie Trading is misleading because that case concerned rectification of the trademarks register under Section 46 of the Trademarks Act and the question of a prior continuous user under Section 34 was not an issue for adjudication before the court. Similarly, the bench negatived the verdict in Kabushiki Kaisha Toshiba reasoning that the advertisements in Toshiba were coupled with the fact of maintenance of service centres in India for the products imported into India. It was not as if the trademark was not used in relation to the goods. In Peps Industries, the Delhi High Court upheld its earlier reasoning in Pioneer Nuts.
How have UK Courts defined ‘First Use’ ?
Indian courts have always relied upon the trademark law in UK as a source of guide to adjudicate upon important questions of law. In Harold Radford & Co. Ld’s Appl, it was held that the mere issuance of an advertisement would not constitute a use of the mark. It was observed that otherwise the proprietor of a trademark might, without having any goods to offer, advertise its marks at periodical intervals and thereby prevent any attack being made upon the mark. It was emphasised that use of a mark in advertising media must be concurrent with the placing of the goods in the market if it is to be regarded as a trademark. Interestingly, in REVUE Trade Mark the court refused to endorse such an interpretation of the law and opined that “that it is not necessary that the goods must exist concurrently with the advertisements.” Thus, the recent decision in MERCK KGaA implicitly affirms the position of law laid down in REVUE Trade Mark by ruling that that there could be ‘use’ in the course of trade without any actual sales.
In MERCK KGaA, the essential finding was that there could be ‘use’ in the course of trade without any actual sales. Juxtaposing the legal pronouncements in Hardie Trading and J.N. Nichols, the authors believe that the position of law is similar in India. The argument that a business has not launched its products under the trademarks and thus is not entitled to disturb the honest and bonafide use of a prior adopted trademark stands unsustainable as use of a trademark does not necessarily mean and imply actual physical sale.
However, the contrary approach upheld in Pioneer Nuts & Bolts and Peps Industries, which not only necessitated the physical use of mark but also logically rebutted the cases which held otherwise, makes it a daunting task for the courts to determine the legality of this issue authoritatively. It is extremely crucial for the courts to clear the muddy waters and settle the flip-flop in this regard as the Bombay High Court in Kamat Hotels had ruled that that “a right vest in a person when he puts his goods with the mark in the market” while interpreting Section 34 of the Trademark Act. However, it had reiterated the ruling in Hardie Trading where the Supreme Court had refused to endorse such an interpretation of the law.