Trademark

Sale of existing stock in trademark disputes: Interim confusion?


In a recent pharma trademark infringement and passing off dispute, the Delhi High Court permitted the defendant to sell its existing stock (pending further orders) without vacating the interim injunction against the defendant. The Delhi High Court characterised this arrangement as an ‘interim arrangement’ required to serve public interest.

Facts

Respondent / plaintiff (M/S Laborate Pharma) had filed a suit against the appellant / defendant (Alkem Labs) alleging trademark and copyright infringement and passing off with respect to its registered trademark ‘LABDIC RELIEF’ (for pain relief tablets) and related product packaging. The trial court granted the respondent an ex-parte interim injunction restraining the appellant from manufacturing, selling or dealing in pharmaceutical preparations under their trademark ‘ALDIGESIC PAIN RELIEF’ or any other similar mark and also from using trade dress / product packaging similar to that of respondent’s packaging.

The appellant filed two applications – one, under Order 39 rule 4 to vacate the interim injunction and another, under Section 151 praying for permission to sell its existing stock. Both these applications were rejected (S. 151 application was treated as an ancillary interim relief). Aggrieved, the appellant filed an appeal before the Delhi High Court.

Since the application for interim injunction under Order 39 was pending consideration before the trial court, the Delhi High Court did not go into the merits of the case. However, the court considered whether or not the appellant should be permitted to sell existing stock (worth INR 90 lakhs) pending further orders.

The court was of the view that balance of equities would be maintained if the appellant is permitted to sell existing stock (subject to maintaining a record of the sales for computing a claim of damages). Since the quality of the medicine was not in question (as also admitted by the respondent), the court held that public interest would be well served if the appellant was allowed to sell its existing stock. To support this view, the court cited decisions in other pharmaceutical cases (e.g. Lupin Limited v. Sun Pharma (2014), Sun Pharma v. Ajanta Pharma (2019), Saga Lifesciences v. Aristo Phrama (2022)). However, in none of these cases was public interest the reason for allowing continued sale. For instance, in Lupin, the defendant was permitted to sell existing stock because ‘issues concerning payment of excise duty etc. would arise if the existing stock with the stockist or in the market or lying with the appellant, has to be repackaged in strips with new trade mark.’

Thoughts

It is now well settled that, in trademark matters, public interest lies in protecting consumers against deceptively similar products. This is especially so in trademark matters concerning pharmaceuticals.

As held in Wyeth Holdings Corporation & Anr. v. Burnet Pharmaceuticals (Pvt.) Ltd. (2008)a consumer who desires to obtain a medicine even for an ordinary ailment is entitled to be sure that the drug that he purchases is of an assured character and quality. A manufacturer builds up a reputation for quality and standards assiduously over a length of time and an established mark assures to the consumer that the medicine which he has purchased is of a requisite quality that is associated with the mark. A less than strict standard cannot be applied on the hypothesis that the ailment which the drug is intended to treat is not life threatening, nor for that matter can the application of a lower standard be justified merely on the ground that the composition of the Plaintiff’s product is the same as that of the Defendant and the confusion caused by mistaking one for the other would not result in a danger to health. Undoubtedly, where the competing drugs are meant to cure the same ailment but the compositions are different, mistaking one for the other may result in deleterious consequences. But, merely because the two competing marks are used for drugs with the same composition that would not justify applying a lower standard of scrutiny. For, even in such a case, the public interest lies in protecting the consumer against an unwary purchase of a deceptively similar product.

Therefore, even if the general ‘quality’ of the medicine is not in question, public interest is not served if there are two competing marks for the same medicine being sold in the same market. As per the decision above, a lower standard of scrutiny cannot be adopted even in such cases. This may be because therapeutic quality / range of medicines can vary from manufacturer to manufacturer. While there may be several medicines curing the same illness, some medicines, may be more effective than others. Further, small variations in compositions can also have adverse consequences / reduced therapeutic value. For these reasons, public interest is best served by limiting confusion in the marketplace of medicines. Therefore, public interest is not served by allowing the defendant to continue to dispose their existing stock (until further orders) despite a prima facie finding of confusion.

While the Delhi High Court did not interfere with the ex-parte interim injunction, its decision to permit the appellant to continue to sell its existing stock reversed the very effect of the injunction. If the court was really concerned about public interest then the ex parte interim injunction should have been vacated on the ground that there was no likelihood of confusion.

These kinds of interim arrangements are, however, welcome for defendants who suffer ex parte and interim injunctions. Such reliefs can dampen the effect of a harsh ex parte order. In some cases, it may be worthwhile to sell existing stock (and eventually pay damages, if at all) rather than rebrand or destroy stock. As gleaned from the other cases cited above, rebranding / repackaging could entail expensive payments such as excise duty etc. making the exercise costly. Also, destruction of stock may result in contractual claims from stockists, distributors etc., loss of business, which defendants may want to avoid.

 

Aparajita Lath

Aparajita graduated from the National University of Juridical Sciences, Kolkata where she was on the Board of Editors of the NUJS Law Review. She has worked at AZB & Partners and Trilegal. She is currently pursuing her LL.M at Harvard Law School and is a Student Fellow at the Petrie-Flom Centre.

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