NEON LABORATORIES LTD. Vs. MEDICAL TECHNOLOGIES LTD. & ORS
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 1018 of 2006, Judgment Date: Oct 06, 2015
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPEALLATE JURISDICTION
CIVIL APPEAL NO. 1018 OF 2006
Neon Laboratories Ltd. ... Appellant
Versus
Medical Technologies Ltd. & Ors. ... Respondents
J U D G M E N T
VIKRAMAJIT SEN, J.
1 This Appeal assails the Judgment dated 19.12.2005 of the Learned
Single Judge of the High Court of Gujarat at Ahmedabad, who returned the
opinion that the Trial Court had rightly granted an injunction in favour of
the Plaintiffs (Respondents before us) till the disposal of the suit.
2 Briefly stated, the Plaintiff-Respondents 1 & 2 had filed a suit for
injunction, damages and account of profits. The Plaintiff-Respondents are
engaged in the business of manufacture and marketing of pharmaceutical
products and medicinal preparation, and as pleaded by them, have acquired
high reputation and goodwill in the market. Hematal Biologicals Ltd. or
Core Health Care Ltd., the predecessor-in-title of Plaintiff-Respondents is
stated to have introduced the molecular preparation and generic drug
“Propofol” in India, in respect of which an application had been filed
before the Drug Controller of India on 22.4.1998. Product Permission was
received on 2.5.1998 from the Commissioner of Food and Drugs Control
Administration. It has been pleaded that the predecessor-in-title of
Plaintiff-Respondent No.1 had coined and invented the trademark PROFOL in
April 1998 and not applied for registration of the said trademark on
24.5.1998 in Class V. However, it seems to us that this claim may not find
acceptance inasmuch as PROFOL is almost an anagram of and is phonetically
almost indistinguishable from the molecular compound, namely “Propofol”.
In our opinion, to claim exclusivity of user, the trademark should normally
partake of a new creation, or if an existing word, it should not bear
descriptive characteristics so far as the product is concerned, nor should
it be of an extolment or laudation. It would be surprising if exclusivity
is given to marks such as ‘bestsoap’ etc. Having said this, we must accept
the reality that in the pharmaceutical industry it is commonplace that
trademarks reproduce and resonate the constituent composition. While this
aspect and feature may be a good ground for declining registration of the
trademark, it may nevertheless remain a favourable determinant in a passing-
off action. So far as the subject trademarks are concerned, not only do
their names constitute part of the generic drug “Propofol”, but they are
also so similar that even the concerned medical
practitioner/anaesthesiologist could fail to discern the difference between
them. It has been pleaded in the plaint that the said predecessor-in-title
has been openly employing this mark since April 1998. After amalgamating
with its predecessor-in-title on 17.2.2000, Plaintiff-Respondent No. 1
became the owner of the trademark PROFOL, and has been using it since 2000,
when it also applied for its registration. Plaintiff-Respondent No. 2 is a
licensee of Plaintiff-Respondent No. 1. On coming to learn that
Defendant No. 1, the Appellant before us, had introduced into market the
same generic drug under the trademark ROFOL, the Plaintiff-Respondents
filed the present suit on 17.7.2005, on the predication that ROFOL is
identical and deceptively similar to the Plaintiff-Respondents’ trademark
PROFOL. As is to be expected, the assertion in the plaint is that the
Defendant-Appellant is marketing and passing off its products as that of
the Plaintiff-Respondents.
3 This Court does not normally entertain appeals against interlocutory
orders. In the case of trademarks, however, keeping in perspective the
endemic delay in concluding cases/suits in India because of the
exponentially increasing docket explosion, temporary ad interim injunctions
are of far reaching consequences, oftentimes effectively deciding the lis
and the disputes themselves. Possibly for this reason ‘Leave’ has already
been granted in the present Appeal. However, it is now well entrenched in
our jurisprudence that the Appellate Court should not flimsily, whimsically
or lightly interfere in the exercise of discretion by a subordinate court
unless such exercise is palpably perverse. Perversity can pertain to the
understanding of law or the appreciation of pleadings or evidence. We
shall restrict ourselves to reference in Wander Ltd. v. Antox India P. Ltd.
1990 Supp SCC 727, wherein it has been adumbrated that the Appellate Court
ought not to “reassess the material and seek to reach a conclusion
different from the one reached by the court below if the one reached by
that court was reasonably possible on the material. The appellate court
would normally not be justified in interfering with the exercise of
discretion under appeal solely on the ground that if it had considered the
matter at the trial stage it would have come to a contrary conclusion. If
the discretion has been exercised by the trial court reasonably and in a
judicial manner the fact that the appellate court would have taken a
different view may not justify interference with the trial court’s exercise
of discretion”. We shall be careful not to transgress these frontiers.
4 Before granting an ad interim injunction, the Court in seisen of the
litigation has to address its attention to the existence or otherwise of
three aspects – (a) whether a prima facie case in favour of the applicant
has been established; (b) whether the balance of convenience lies in favour
of the applicant; and (c) whether irreparable loss or damage will visit the
applicant in the event injunctory relief is declined. We shall cogitate on
the first factor first – is the law favourable to the applicant.
5 The primary argument of the Defendant-Appellant is that it had
received registration for its trademark ROFOL in Class V on 14.9.2001
relating back to the date of its application viz. 19.10.1992. It contends
that the circumstances as on the date of its application are relevant, and
on that date, the Plaintiff-Respondents were not entities on the market.
However, the Defendant-Appellant has conceded that it commenced user of the
trademark ROFOL only from 16.10.2004 onwards. Furthermore, it is important
to note that litigation was initiated by Plaintiff-Respondents, not
Defendant-Appellant, even though the latter could have raised issue to
Plaintiff-Respondents using a similar mark to the one for which it had
filed an application for registration as early as in 1992. The Defendant-
Appellant finally filed a Notice of Motion in the Bombay High Court as late
as 14.12.2005, in which it was successful in being granted an injunction as
recently as on 31.3.2012. We may reiterate that every High Court must give
due deference to the enunciation of law made by another High Court even
though it is free to charter a divergent direction. However, this
elasticity in consideration is not available where the litigants are the
same, since Sections 10 and 11 of the CPC would come into play. Unless
restraint is displayed, judicial bedlam and curial consternation would
inexorably erupt since an unsuccessful litigant in one State would rush to
another State in the endeavour to obtain an inconsistent or contradictory
order. Anarchy would be loosed on the Indian Court system. Since the
Division Bench of the Bombay High Court is in seisin of the dispute, we
refrain from saying anything more. The Plaintiff-Respondents filed an
appeal against the Order dated 31.3.2012 and the Division Bench has, by its
Order dated 30.4.2012, stayed its operation.
6 It may be reiterated that the Plaintiff-Respondents asserts that
their predecessor-in-interest had initiated user of the trademark PROFOL in
1998, when it commenced production thereof and Plaintiff-Respondents
succeeded to the user of the mark upon amalgamation with their predecessor-
in-title in the year 2000. The position that emerges is that whilst the
Defendant-Appellant had applied for registration of its trademark several
years prior to the Plaintiff-Respondents, (1992 as against 26.5.1998 at the
earliest), the user thereof had remained dormant for twelve years. We can
appreciate that this passivity may be the result of research of the product
or the market, but the Defendant-Appellant will have to explain its
supineness through evidence. In this interregnum, the Plaintiff-Respondents
had not only applied for registration but had also commenced production and
marketing of the similar drug and had allegedly built up a substantial
goodwill in the market for PROFOL. The legal nodus is whether the prior
registration would have the effect of obliterating the significance of the
goodwill that had meanwhile been established by the Plaintiff-Respondents.
Would a deeming provision i.e. relating registration retrospectively
prevail on actuality – competing equities oscillate around prior
registration and prior user.
7 Section 34 of the Trade Marks Act, 1999 (the Act) deserves
reproduction herein:
34. Saving for vested rights.—Nothing in this Act shall entitle the
proprietor or a registered user of registered trade mark to interfere with
or restrain the use by any person of a trade mark identical with or nearly
resembling it in relation to goods or services in relation to which that
person or a predecessor in title of his has continuously used that trade
mark from a date prior—
(a) to the use of the first-mentioned trade mark in relation to those goods
or services be the proprietor or a predecessor in title of his; or
(b) to the date of registration of the first-mentioned trade mark in
respect of those goods or services in the name of the proprietor of a
predecessor in title of his;
whichever is the earlier, and the Registrar shall not refuse (on such use
being proved), to register the second mentioned trade mark by reason only
of the registration of the first mentioned trade mark.
This Section palpably holds that a proprietor of a trade mark does not have
the right to prevent the use by another party of an identical or similar
mark where that user commenced prior to the user or date of registration of
the proprietor. This “first user” rule is a seminal part of the Act.
While the case of the Plaintiff-Respondents is furthered by the fact that
their user commenced prior to that of the Defendant-Appellant, the entirety
of the Section needs to be taken into consideration, in that it gives
rights to a subsequent user when its user is prior to the user of the
proprietor and prior to the date of registration of the proprietor,
whichever is earlier. In the facts of the case at hand, the Defendant-
Appellant filed for registration in 1992, six years prior to the
commencement of user by the Plaintiff-Respondents. The Defendant-Appellant
was, thus, not prevented from restraining the Plaintiff-Respondents’ use of
the similar mark PROFOL, but the intention of the Section, which is to
protect the prior user from the proprietor who is not exercising the user
of its mark prima facie appears to be in favour of the Plaintiff-
Respondents.
8 Section 47 of the Act is in the same vein and statutory strain
inasmuch as it postulates the possibility of a registered mark being taken
off the register on an application being made by any aggrieved person,
inter alia, on the ground that for a continuous period of five years and
three months from the date on which the trademark was registered, there was
no bona fide use thereof. In the case in hand, prima facie, it appears
that for over five years after a registration application was made by the
Defendant-Appellant, the mark was not used. Facially, the Act does not
permit the hoarding of or appropriation without utilization of a trademark;
nay the Defendant-Appellant has allowed or acquiesced in the user of the
Plaintiff-Respondents for several years. The legislative intent behind
this Section was to ordain that an applicant of a trademark does not have a
permanent right by virtue of its application alone. Such a right is lost if
it is not exercised within a reasonable time.
9 We must hasten to clarify that had the Defendant-Appellant commenced
user of its trademark ROFOL prior to or even simultaneous with or even
shortly after the Plaintiff-Respondents’ marketing of their products under
the trademark PROFOL, on the Defendant-Appellant being accorded
registration in respect of ROFOL which registration would retrospectively
have efficacy from 19.10.1992, the situation would have been unassailably
favourable to it. What has actually transpired is that after applying for
registration of its trademark ROFOL in 1992, the Defendant-Appellant took
no steps whatsoever in placing its product in the market till 2004. It
also was legally lethargic in not seeking a curial restraint against the
Plaintiff-Respondents. This reluctance to protect its mark could well be
interpreted as an indication that the Defendant-Appellant had abandoned its
mark at some point during the twelve year interregnum between its
application and the commencement of its user, and that in 2004 it sought to
exercise its rights afresh. It would not be unfair or fanciful to favour
the view that the Defendant-Appellant’s delayed user was to exploit the
niche already created and built-up by the Plaintiff-Respondents for
themselves in the market. The ‘first in the market’ test has always
enjoyed pre-eminence. We shall not burden this Judgment by referring to
the several precedents that can be found apposite to the subject. In the
interest of prolixity we may mention only N.R. Dongre v. Whirlpool
Corporation (1996) 5 SCC 714 and Milmet Oftho Industries v. Allergan Inc.
(2004) 12 SCC 624. In Whirlpool, the worldwide prior user was given
preference nay predominance over the registered trademark in India of the
defendant. In Milmet, the marks of pharmaceutical preparation were similar
but the prior user worldwide had not registered its mark in India whereas
its adversary had done so. This Court approved the grant of an injunction
in favour of the prior user. Additionally, in the recent decision in S.
Syed Mohiden v. P. Sulochana Bai (2015) 7 SCALE 136, this Court has pithily
underscored that the rights in a passing-off action emanate from common law
and not from statutory provisions, nevertheless the prior user’s rights
will override those of a subsequent user even though it had been accorded
registration of its trademark. Learned counsel for the Defendant-Appellant
has endeavoured to minimise the relevance of Whirlpool as well as Milmet by
drawing the distinction that those trademarks had attained worldwide
reputation. However, we think that as world shrinks almost to global
village, the relevance of the transnational nature of a trademark will
progressively diminish into insignificance. In other words, the attainment
of valuable goodwill will have ever increasing importance. At the present
stage, the argument in favour of the Defendant-Appellant that we find holds
more water is that in both Milmet and Whirlpool, as distinct from the case
before us, the prior user of the successful party predated the date of
application for registration of the competing party. The question to
examine, then, would be whether prior user would have to be anterior to the
date of application or prior to the user by the Defendant-Appellant. In
other words, the question before the Court would remain whether the
situation on the date of application for registration alone would be
relevant, or whether the developments in the period between this date and
the date of grant of registration would have any bearing on the rights of
the parties. All these considerations will be cast into a curial cauldron
to be appreciated by the Court before which the suit is being contested.
In these premises, we cannot conclude that a prima facie case has not been
disclosed by the Plaintiff-Respondents.
10 Since we are confronted with the legal propriety of a temporary
injunction, we must abjure from going into minute details and refrain from
discussing the case threadbare, in order to preclude rendering the suit
itself an exercise in futility and the decision therein a foregone
conclusion. All that we would say in the present Appeal is that since the
Plaintiff-Respondents have alleged, and have prima facie supported with
proof, that they had already been using their trademark well before the
attempted user of an identical or closely similar trademark by the
Defendant-Appellant, the former would be entitled to a temporary
injunction, in light of the abovementioned ‘first in the market’ test. We
find that the Plaintiff-Respondents have made out a prima facie case. The
two other factors in an interim injunction, namely the balance of
convenience and an irreparable loss, are both in favour of the Plaintiff-
Respondents, given the potential loss of goodwill and business they could
suffer should an injunction be denied. The Defendant-Appellant has been
injuncted from using the mark ROFOL since 2005, after having launched
products bearing the mark only in the previous year, so the balance of
convenience is in favour of allowing the injunction to continue. In
Milmet, this Court had taken note of the fact that the unsuccessful
litigating party had in the duration of the litigation started using
another mark, and found that this would prima facie assume significance in
assessing “irreparable loss”.
11 For manifold and myriad reasons, we are of the opinion that the
decision of the Trial Court, as affirmed by the First Appellate Court, is
reasonable and judicious, and does not suffer from perversity by any
dialectic that the Defendant-Appellant may proffer. The Appeal is
accordingly dismissed, but with no order as to costs.
……………………………..J.
(VIKRAMAJIT SEN)
……………………………..J.
(SHIVA KIRTI SINGH)
New Delhi,
October 5, 2015.
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