Guru Kirpa Overseas vs Hero Exports

S.J. Vazifdar, C.J. - This is an appeal against the order passed by the learned Additional District Judge, Ludhiana, restraining the appellant/defendant from exporting to Bangladesh and certain other countries bicycles, bicycle parts and bicycle components under the trade-mark ''HERO'' or mark deceptively similar thereto.

Appellant No.2 is one Gurmeet Singh, who carries on business in the firm name and style of the first appellant - M/s Guru Kirpa Overseas as a sole proprietor thereof. The respondent filed a suit against the appellant for a permanent injunction restraining the appellant from manufacturing, marketing, selling, exporting or offering for sale or exporting any bicycles, bicycle parts or components or any similar products or articles allied or cognate thereto under the trade-mark ''HERO'' with or without any prefix or suffix either in word per se or as a label, monogram or device or any other mark identical with or deceptively similar to the said mark. The respondent also sought the consequential relief for delivery up for destruction of all goods bearing the said mark or any mark deceptively similar thereto and a decree for rendition of accounts and damages for infringement and passing off.

The respondent, a partnership firm, is a part of a group known as the Munjal Group which was engaged, inter alia, in manufacturing and selling bicycles, bicycles parts and components for over 60 years. The group has, over the years, diversified into various other activities. It is admittedly a leading business and industrial group which managed and controlled different companies, firms and enterprises including Hero Cycles Limited and the respondent. There is no dispute that ''HERO'' is a well known mark. It was coined and adopted by the Munjal Group. It was initially registered in the name of Hero Cycles Ltd. under Class 12 under The Trade and Merchandise Act, 1958 on 13.06.1966. It stands registered in Class 12 under The Trade Marks Act, 1999. The registration is subsisting.

The respondent-firm was constituted in 1993. It has since inception been engaged in the business of bicycle parts and components under the mark ''HERO''. It is one of the largest exporters of bicycles. It is not disputed that there is an enormous reputation in the mark not only in India but even abroad and its sales run into several crores of rupees per annum.

In the year 2010, a family settlement agreement dated 20.05.2010 was entered into by and among the members of the Munjal Group. The agreement dealt with several aspects including properties and rights of the Munjal Group. The agreement identifies four groups, namely, the Vijay Kumar Munjal, Satyanand Munjal, Brij Mohan Lall Munjal and Om Parkash Munjal groups. The individuals who own each of the groups are mentioned in Schedules 1 to 4. The respondent-plaintiff is part of the Vijay Kumar Munjal Group which comprises of the individuals listed in Schedule 1 and is referred to in the agreement as the F1 group. The family settlement agreement, in so far as it is relevant to this appeal, is as follows:-

"Article XVII (Brand)

17.1 The parties confirm that Hero Cycles is the owner of the trademark and brand popularly known as ''Hero'' under which the Munjal Group carries on its various businesses and entities. The parties agree and confirm that the ''Hero'' trademark and brand shall be separated in accordance with a Brand Agreement substantially in form as at Schedule 10 hereto and to be executed by the four Patriarchs and Hero Cycles Limited as the confirming party.

17.2 Accordingly the parties shall take all such steps as may be required to separate the ''Hero'' trademark and brand in accordance with the provisions of Article 17.1. The parties also confirm that the Four Family Groups have agreed that the specific mechanics of transfer and realignment of the trademark ''Hero'' to give effect to the understanding as contained in the Schedule 10 hereto shall be determined by the Facilitator under the advice rendered by a law firm.

Schedule 10

Brand Agreement

Trade Mark And Name Agreement

By And Between

F1 Family Group

And F2 Family Group

And F3 Family Group

And F4 Family Group

And Hero Cycles Limited

�.. �.. �� �� �� ��.

Whereas

�.. �.. �� �� �� ��.

(C) Hero Cycles Limited which is being realigned under the Family Settlement Agreement to F4 Family Group, is the proprietor and owner of all rights, title and interest in the trade mark and name HERO including marks containing HERO and other words and devices registered and/or pending registration, in respect of various goods and services in India and many other countries of the world (hereinafter collectively referred to as "HERO Marks") and together with the goodwill of the business accrued by use of HERO Marks and appurtenant thereto.

�.. �.. �� �� �� ��.

(E) The Parties have now reached an understanding on the ownership and use of the trade mark and name HERO, in accordance with the Family Settlement Agreement going forward and desire to formalize such understanding and execution thereof intending to be legally bound.

�.. �.. �� �� �� ��.

Principles of Interpretation

1.1 Definitions.

�.. �.. �� �� �� ��.

1.1.7 "F1 Family Group Trade Marks" means

�.. �.. �� �� �� ��.

d. the trademark HERO registered or unregistered and used for export of Bicycles and Bicycle parts by F1 Family Group for all territories, other than USA, Russia, Australia, New Zealand, Japan and European Union (except UK, Germany & Turkey) which exclusively are retained by F4 Family Group.

�.. �.. �� �� �� ��.

Understanding between the parties

The parties fully understand and agree that the ownership and use of the trade mark and name HERO heretofore shall be in accordance with the following terms:

(ii) F1 Family Group shall have the exclusive right of ownership and use over F1 Family Group Trade Marks.

�.. �.. �� �� �� ��.

3.5 The Parties agree that F1 Family Group would be entitled to continue using the Entity Name/Firm Name/Company Name hero exports, hero exports Pvt. Ltd., Hero Electric devices Pvt. Ltd., Hero ecotech limited, Hero Eco vehicles Pvt. Ltd., Hero Eco ventures Pvt. Ltd. and hero exports middle east limited and all other Entity Name/Firm Name/Company Name with prefixing or suffixing Hero Exports or Hero Eco or Hero Electric. It is further clarified that F1 Family Group can use these names with prefixes or suffixes for creating joint ventures and subsidiary companies, provided the F1 Family Group owns and continues to own a minimum of 26% share capital in each such company.

�.. �.. �� �� �� ��.

3.7 The Parties agree that they shall execute all applications, agreements, deeds, authorizations and documents as may be necessary to fulfil the purposes of this Agreement and perform all further acts and things and execute and deliver such further documents, as may be required by law or as may be necessary or reasonably required by any of the Parties to implement and give effect to this Agreement and for the purpose of vesting in F3 Family Group the full benefit of the ownership rights and benefits in such registrations and applications, and for the further purpose of vesting in F1 Family Group the perpetual right of ownership and use over F1 Family Group Trade Marks. Including giving of all necessary waivers and consents and the passing of all resolutions and otherwise exercising all powers and rights available to them."

(emphasis supplied)

Hero Cycles Limited is admittedly the registered proprietor of the mark ''HERO'' in Class 12 as evidenced by the Registration Certificate dated 01.04.1997. The respondent relied upon the certificates of registration of trade mark in respect of the said mark ''HERO'' for various products in Class 12 dated 15.05.1970, 10.08.1976 and 13.05.2005 which were handed over in Court. Under the family settlement agreement, the mark was separated in accordance with the brand agreement as per Schedule 10. The parties were to take steps to separate the mark under Clause 1.1.7(d). The "F1 Family Group Trade Marks" was defined to mean the trade-mark HERO used for export of the said goods by the F1 Family Group of which the respondent is a part for all territories other than those mentioned therein. Bangladesh is not one of the countries mentioned therein. Therefore, the F1 Family Group was entitled to use the mark for export of the goods including to Bangladesh.

The respondent, under cover of its attorney''s letter dated 22.04.2015, submitted an application in Form TM-1 for registration of the said mark in Class 12. The application read as under:-

"Application is hereby made for registration in the Register of the accompanying trade mark in Class 12 in respect of "Export of Bicycles, Bicycle parts & its accessories from India to all countries except USA, Russia, Australia, New Zealand, Japan and European Union (except UK, Germany & Turkey)" in the name of M/s. Hero Exports, manufacturers and merchants of the address Hero Nagar, G.T. Road, Ludhiana, Punjab 141003, India who claim to be the proprietor thereof and by whom and their predecessor in title the said mark has been continuously used since March 02, 1993 in respect of the said goods."

A copy of the letter and the application were tendered in Court. The same shall be marked as ''X'' and ''X1'' for identification.

The appellant i.e. the defendant purchases products from Hero Cycles Ltd. and/or is a dealer of Hero Cycles Ltd. in respect thereof. The respondent has no objection to the appellant dealing in the products bearing the mark except to the extent that it infringes their rights under the family agreement by exporting them to countries other than those referred to in clause 1.1.7d of schedule 10 to the family agreement. The respondent has the exclusive right to do so qua the parties to the agreement. The question is whether it is entitled to enforce this right against third parties such as the appellant.

Mr. Amar Vivek agreed that in view of the family arrangement, Hero Cycles Limited itself could not have exported the goods to Bangladesh but initially contended that the purchaser of goods from Hero Cycles Limited bearing the said trade mark cannot be prevented from doing so. This contention was founded on the doctrine of exhaustion or international exhaustion. He contended that the appellant/defendant had admittedly been dealing in products bearing said mark. The appellant''s defence is that he has been acquiring his goods from Hero Cycles Limited since the year 2014 and has been dealing with them including by exporting them to Bangladesh bona fide and without knowledge of the respondent''s rights under the said family agreement. I will, for the purpose of this appeal, which is against an order at the interlocutory stage, assume this to be true although Mr. Jain, the learned counsel appearing on behalf of the respondents, contended otherwise. The doctrine of exhaustion, however, does not apply for the simple reason that the exports to Bangladesh are not in respect of the goods sold by the respondent. The goods are sold by Hero Cycles Limited with which after the family settlement agreement the respondent has no concern.

Section 56 of The Trade Marks Act, 1999, relied upon by Mr. Amar Vivek, is not relevant for the purpose of this appeal. Section 56 reads as under:-

"56. Use of trade mark for export trade and use when form of trade connection changes.-(1) The application in India of trade mark to goods to be exported from India or in relation to services for use outside India and any other act done in India in relation to goods to be so exported or services so rendered outside India which, if done in relation to goods to be sold or services provided or otherwise traded in within India would constitute use of trade mark therein, shall be deemed to constitute use of the trade mark in relation to those goods or services for any purpose for which such use is material under this Act or any other law.

(2) The use of a registered trade mark in relation to goods or services between which and the person using the mark any form of connection in the course of trade subsists shall not be deemed to be likely to cause deception or confusion on the ground only that the mark has been or is used in relation to goods or services between which and the said person or a predecessor in title of that person a different form of connection in the course of trade subsisted or subsists."

Section 56 merely provides inter alia that the application in India of a trade mark to goods to be exported from India which, if done in relation to goods to be sold within India would constitute use of a trade mark therein, shall be deemed to constitute use of the trade mark in relation to those goods. I am unable to understand how Section 56 comes to the appellants'' aid.

It does not support Mr. Amar Vivek''s submission that since under the family arrangement parties other than the respondent are entitled to use the goods in India and export constitutes use in India, the appellants can export the goods to Bangladesh despite the family arrangement and the application for registration made by the respondent pursuant thereto.

Mr. Amar Vivek then contended that the appellants acquired the goods lawfully. I will presume that to be so. His further contention that the appellants are, therefore, entitled to export them to Bangladesh is not well founded. He contended that there cannot be more than one proprietor of a mark. He contended that as Hero Cycles Ltd. from whom he acquired the goods is also entitled to use the mark and is a registered proprietor thereof the provisions of the family agreement are violative of section 40 of the Trade Marks Act, 1999 and are, therefore, of no legal effect.

In this regard, Mr. Jain''s reliance upon the proviso to section 40 of the Trade Marks Act, 1999 and rule 76 of the Trade Marks Rules, 2002 is well founded. They read as under:-

"40. Restriction on assignment or transmission where multiple exclusive rights would be created.-(1) Notwithstanding anything in Sections 38 and 39, a trade mark shall not be assignable or transmissible in a case in which as a result of the assignment or transmission there would in the circumstances subsist, whether under this Act or any other law, exclusive rights in more than one of the persons concerned to the use, in relation to-

(a) same goods or services;

(b) same description of goods or services;

(c) goods or services or description of goods

or services which are associated with each other, of trade marks nearly resembling each other or of identical trade mark, if having regard to the similarity of the goods and services and to the similarity of the trade marks, the use of the trade marks in exercise of those rights would be likely to deceive or cause confusion:

Provided that an assignment or transmission shall not be deemed to be invalid under this sub-section if the exclusive rights subsisting as a result thereof in the persons concerned respectively are, having regard to limitations imposed thereon, such as not to be exercisable by two or more of those persons in relation to goods to be sold, or otherwise traded in, within India otherwise than for export therefrom, or in relation to goods to be exported to the same market outside India or in relation to services for use at any place in India or any place outside India in relation to services available for acceptance in India.

(2) The proprietor of a registered trade mark who proposes to assign it may submit to the Registrar in the prescribed manner a statement of case setting out the circumstances and the Registrar may issue to him a certificate stating whether, having regard to the similarity of the goods or services and of the trade marks referred to in the case, the proposed assignment would or would not be invalid under subsection (1), and a certificate so issued shall, subject to appeal and unless it is shown that the certificate was obtained by fraud or misrepresentation, be conclusive as to the validity or invalidity under sub-section (1) of the assignment in so far as such validity or invalidity depends upon the facts set out in the case, but, as regards a certificate in favour of validity, only if application for the registration under Section 45 of the title of the person becoming entitled is made within six months from the date on which the certificate is issued.

�� �.. �.. �� �� �� ��.

Rule 76. Separate registration.-Where pursuant to an application under Rule 68, and as the result of a division and separation of the goods or services of a registration or a division and separation of places or markets, different persons become registered separately under the same registration number as subsequent proprietors of a trade mark, each of the resulting separate registrations in the names of those different persons shall be deemed to be a separate registration for all the purposes of the Act."

Sub-section (1) of Section 40 indeed provides that a trade mark shall not be assignable or transmissible if, as a result thereof, there would subsist exclusive rights in more than one of the persons concerned to the use in relation to the same goods or services, same description of goods or services, goods or services or description of goods or services which are associated with each other of trade mark nearly resembling each other or of identical trade mark if, having regard to the similarity of the goods and services, etc., the use of the trade mark in exercise of those rights would be likely to deceive or cause confusion.

I will assume that in the present case the assignment would fall within the opening part of sub-section (1) of Section 40. If, for instance, the respondent and one or more of the groups were entitled to use the mark within India simultaneously without restriction, this may well have been so. However, the family agreement and in particular schedule 10 clause 1.1.7d thereof, specifies the area of operation at least so far as the respondent''s right to use the mark is concerned with respect to exports. Mr. Jain''s reliance upon the proviso to sub-section (1), in these circumstances, is well founded. It is necessary to analyse the proviso. The opening words "Provided that an assignment or transmission � �� �� exercisable by two or more of those persons ���. �." must be read with the following three parts thereof. The proviso, therefore, is analysed as follows:-

"Provided that an assignment or transmission shall not be deemed to be invalid under this subsection if the exclusive rights subsisting as a result thereof in the persons concerned respectively are, having regard to limitations imposed thereon, such as not to be exercisable by two or more of those persons:

(i) in relation to goods to be sold, or otherwise traded in, within India otherwise than for export therefrom, or

(ii) in relation to goods to be exported to the same market outside India or

(iii) in relation to services for use at any place in India or any place outside India in relation to services available for acceptance in India."

The respondent does not seek to enforce a right in relation to the goods to be sold or otherwise traded within India but in respect of the export thereof to countries such as Bangladesh i.e. countries other than those mentioned in clause 1.1.7d of the Family Settlement Agreement. It has under the family settlement agreement the exclusive right to export the goods under the mark inter alia to Bangladesh. Nor is there any question of both the parties exporting the goods to the same market outside India. The respondent is entitled exclusively to the right to market the goods inter alia to Bangladesh. The respondent''s case, therefore, falls within the proviso to section 40. Thus, although the assignment results in more than one party being entitled to use the same mark, the plaintiff''s right in respect of the mark under the family settlement agreement is not affected for the purpose of export to the countries other than the countries mentioned in clause 1.1.7d of Schedule 10 which includes Bangladesh. The plaintiff''s right is saved by virtue of the proviso to section 40.

Rule 76 also contemplates separate registrations in the names of different persons for all the purposes of the Act. The validity of such a registration, however, would depend upon whether it violates the provisions of section 40 or not. If it does not, a separate registration is permissible.

In the circumstances, the appeal is dismissed. The interim order granted at the time of admission of this appeal, however, shall continue till 30.11.2016 to enable the appellant to challenge this order. The appellant shall, however, keep accounts and furnish copies thereof to the respondent from the date of the interim order till it continues using the mark.