Kerly’s impasse is something that one does not encounter regularly in Trademark law. Priyam Mitra, in this post, unpacks what it actually means and asks whether it has any real place in the modern world. Priyam is a 3rd-year student at the National Law School of India University, Bengaluru. He is interested in contemporary discussions surrounding intellectual property and criminal law.
The Kerly’s Impasse: A Relic of the Past?
By Priyam Mitra
A very interesting development took place in the Delhi High Court when a division bench had a chance to discuss a situation yet res integra (a legal question not yet decided by any court). Termed as the “Kerly’s Impasse” (following an anticipation of such a situation in Kerly’s Law of Trade Marks and Trade Names), the peculiar situation arises when a person uses a mark identical to a registered trademark for identical goods before the registered proprietor’s use of the trademark and acquires goodwill. The Court explained it as “before commencement of user of a registered trade mark by the registrant, another person, uses an identical mark, for identical goods, without registration, and acquires goodwill, prior to the commencement of user by the registration holder” (¶3 of the judgment). The “impasse” is a result of two different rights available to both parties. The registrant may injunct the prior user on grounds of infringement (S.29 of the Trade Marks Act) while the user may injunct the registrant on grounds of passing off (saved by S.27(2) of the Act). While such a situation is definitely unique and deserves an academic discussion, this post argues that in the digital era, such an event might just remain as a relic of the past.
Brief Background of the Case
The case marks a climactic end to a longstanding 40-year dispute over the “FIELDMARSHAL” mark, which was registered by Jain Industries in 1965 for centrifugal pumps. Jain, however, did not use the mark commercially till 1986, when it assigned the mark to Thukral Mechanical Works, in 1986 who began using the mark in 1988. Meanwhile, P.M. Diesels (PMD) began using the same mark from 1975, building a national reputation with around 1400 dealers.
The division bench of the Court relied on orders such as Neon Laboratories (see discussion here) to hold that the user of the mark who gathers enough goodwill has the ability to sustain a passing off action along the “first user” doctrine. This means that P.M. Diesels’ passing off application was allowed as the prior user, while Thukral was allowed to restrain P.M. Diesels on ground of infringement located in Section 28(1) of the Trade and Merchandise Marks Act, 1958. This is how the impasse comes to be, as different parties are entitled to injunct the other on the basis of different rights in both common law (passing off) and statute (infringement).
Another important aspect of the case was how Jain had assigned the mark to Thukral on May 30, 1986, and whether this assignment carried with it the “disability” attached to the mark. The disability referred to here is with respect to the non-use of the mark by Jain from 1965 and the subsequent challenge to the mark on the basis of Section 46(1)(b) of The Trade And Merchandise Marks Act, 1958 (TMMA). The Supreme Court in Thukral v PM Diesels (2008) held that P.M. Diesels infringed Jain’s registered mark and, in doing so, stated that the disability of non-use will not be inherited by the assignee. Section 47 of the Trade Marks Act 1999 substantially changes the conditions for determining non-use, and this will be discussed later in the post. The cause of action in the Supreme Court emanated from PMD seeking to cancel Thukral’s registration on ground of non-use. The present case, however, reaches the DHC because PMD sought to register the mark FIELDMARSHAL on grounds of using the mark earlier than the registered proprietor. Thukral opposed the application, and IPAB accepted the opposition. PMD appealed the same, and the single judge found in favor of PMD. Thukral appealed to the division bench in this case, and thus the cause of action here is different than what came up before the Supreme Court.
How the Kerly’s Impasse is different from HCU and prior use (S. 34)
To appreciate the uniqueness of the Kerly’s impasse, it is important to analyse here how this event is different from the principle of honest concurrent use (HCU) and rights vested by virtue of prior use (S.34 TM Act corresponding to S.33 of the TMMA). Honest Concurrent Use has been traditionally located in Section 12 of the TM Act. Readers of the blog would know that it has been argued by Lokesh Vyas (here) and Eashan Ghosh (here and here) that the principle of HCU must not be restricted to S.12 of the TM Act. HCU should be looked at as a principle against infringement, and in fact, this is seen in provisions such as “Section 30(1)(a) protecting honest practice, Section 34 saving prior users, and Section 35 protecting bona fide use”. These protections, however, are extremely narrow and are useful only in specific situations, like the dispute over the Goenka mark in educational institutions. In other cases, HCU would have limited application, especially in the facts of the PM Diesels case when a distinctive mark is in question. Coming to the defense of prior use under Section 34, the Court, relying on the Supreme Court’s decision in S. Syed Mohideen v. Sulochana Bai (2015), states that this protection is extended only when the use is prior to both the registration and use by the proprietor of the mark. In a Kerly’s impasse, the user starts after the mark is registered and gathers goodwill while the registrant remains dormant, and hence the section was held to be not applicable to the facts of the case in the P.M. Diesels case.
Why is This Unlikely to Occur Now
The reason I state that such a situation is highly unlikely to occur now is because of two reasons underpinned by the notion of how businesses have become vigilant and expectant with respect to intellectual property. Firstly, and perhaps this is the more important reason, the definition of “bona fide use” has been expanded by cases to cover even pre-sale commercial activities. In a 2024 decision, the DHC in Toshiba Appliances Co. v. Kabushiki Kaisha Toshiba interpreted “use” to be broader than actual physical sales. “Mere advertisements” that arrive before the goods themselves exist in the market were considered a valid “use” of the mark. This reasoning followed the Supreme Court’s judgment in Hardie Trading Ltd. v. Addison’s Paint and Chemicals Ltd. (2003). In this case, the Court clarified that “use” as defined in Section 2(2)(b) of the TM Act entails more than mere physical use of the mark and extends to advertisements. In the digital world, this type of use can be easily established by the trademark registrants. This expanded reading of “use” would then enable the registrant to have superior rights as the “prior user” as well. The Kerly’s impasse then goes out of the picture. There is an argument to be had that mere advertisements etc., should not be able to sustain the claim of “use” beyond a certain period of time (see further discussion here). Till a court deliberates on this aspect of advertisements as use, the registrants are put in a very strong position, as the threshold to establishing use is lowered.
Secondly, even when the registrant does not take any steps to “use” the mark and a different party seeks to use the mark, a smart user would search on the Trademark Registry for any similar or identical marks and would thus be aware of any possible threats of infringement. The TM registry now has advanced AI search options, which even search for phonetically similar marks. Additionally, there are trademark watch software options that companies regularly employ for seeking out similar marks (see e.g. here). After doing so, the purporting user would apply under section 47 of the TM Act for removal of the mark on the ground of non-use if the conditions of the section are satisfied. Indeed, as already discussed, PM Diesels sought to approach the registry in this case under section 46 of the TMMA 1958 which is largely similar to section 47 of the TM Act 1999. A major change in the 1999 regime is that the period of non-use is calculated from the date that the mark was actually entered in the register and not the date of the application. A situation such as the PM Diesels case, where the questions of the assignment being bona fide are raised become irrelevant now as the section in the 1999 Act makes it explicitly clear that there is no fresh lease for the calculation of period under S.47 when an assignment is made and the period is now calculated from the date the mark was entered in the register.
To conclude, it must be mentioned here that the Kerly’s impasse is still very much possible in the modern context if both the registrant and the user are negligent and unaware of the modern tools that are available to their disposal. However, at the risk of repetition, such negligence on both sides is a highly unlikely event in this age, and thus we may refer to it as a relic of the past. Nevertheless, the reason why discussions on such pronouncements are warranted is that they are stark examples of how, in the ever-evolving IP landscape tasked with dealing with emerging technologies of AI and LLMs, there are still lacunae (like the impasse as envisioned by Kerly as early as 1894) left for exploring by both courts and academics.
