Can a Foreign Company Register a Trade Mark It Plans to Use Through an Indian Partner? The 'Dristan' Story
A Detailed Analysis of American Home Products Corporation v. Mac Laboratories Pvt. Ltd. and Another Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney] High Court of Delhi
Trade Mark Trafficking and Bonafide Intention to Use a Registered Trademark : American Home Product Judgement by Supreme Court of India
Introduction
Trade marks are not merely labels or logos. They represent the goodwill, reputation, and consumer trust that a business builds over years of hard work. When a trade mark is registered, the law gives its owner exclusive rights to use it , but only if that owner genuinely intends to use it in relation to the goods for which it is registered. A person who registers a trade mark without any genuine intention to use it perhaps with the idea of selling the registration to someone else for profit , is said to be engaged in what trade mark law calls 'trafficking'. The underlying policy of trade mark law across the world is to prevent such trafficking.
Against this backdrop, the Supreme Court of India in American Home Products Corporation v. Mac Laboratories Pvt. Ltd. and Another [(1986) 1 SCC 465] decided on September 30, 1985, was called upon to address a fascinating and commercially important question: can a foreign multinational company, which does not itself use a trade mark in India but intends to use it through an Indian partner company as a registered user, be said to have had a genuine and bona fide intention to use that trade mark? And if such a foreign company applies for registration of the mark on the basis of that intention, can the mark subsequently be removed from the Register on the ground that there was no bona fide intention to use it at the time of the application?
The Supreme Court's answer to these questions, delivered through a detailed and wide-ranging judgment , has become one of the most important precedents in Indian trade mark law, especially in the context of multinational corporations, registered user arrangements, the legal fiction created by Section 48(2) of the Trade and Merchandise Marks Act, 1958, and the interpretation of Section 46(1)(a) dealing with removal of trade marks from the register on the ground of non-use.
Factual and Procedural Background
American Home Products Corporation, the appellant, is a multinational corporation incorporated under the laws of the State of Delaware in the United States of America. Its pharmaceutical division, called 'Whitehall Laboratories', was engaged in the manufacture and marketing of pharmaceutical products and drugs. In 1956, the appellant introduced an anti-histamine drug in the American market under the trade mark 'Dristan' , a decongestant tablet intended for symptomatic relief of cold, congestion, and other respiratory ailments. The trade mark 'Dristan' was registered in the United States and subsequently, between 1957 and 1961, in approximately 39 other foreign countries.
The appellant held a 40% shareholding in an Indian company called Geoffrey Manners and Co. Ltd. (the Indian Company). As early as December 1957, it was decided that the Indian Company should introduce in the Indian market nine new products of the appellant, including 'Dristan' tablets. On August 18, 1958, the appellant filed an application under Section 14(1) of the Trade Marks Act, 1940 in Form No. TM-I for registration of the trade mark 'Dristan' in class 5 as a medicinal preparation for treatment of respiratory ailments. No notice of opposition was filed by anyone, and the trade mark 'Dristan' was registered as Trade Mark No. 186511 in class 5 on June 8, 1959. The Trade Marks Act, 1940 was replaced by the Trade and Merchandise Marks Act, 1958 with effect from November 25, 1959.
After registration, the Indian Company took several concrete steps. It obtained a licence for purchase of a Stokes Triple Layer Machine, installed it at its Ghatkopar factory on October 5, 1960, obtained samples and the manufacturing manual from the appellant, applied to the Central Government for a manufacturing licence under Section 11 of the Industries (Development and Regulation) Act, 1951 (granted on January 19, 1961), and obtained Drugs Control Administration approval on February 10, 1961.
Meanwhile, on May 31, 1960, Mac Laboratories Private Limited the first respondent applied for registration of the trade mark 'Tristine' in class 5. On January 18, 1961, the appellant filed a notice of opposition. As a counterblast, the first respondent on April 10, 1961 filed Application No. CAL-17 with the Registrar of Trade Marks, Calcutta, for rectifying the Register by removing the appellant's trade mark 'Dristan'.
On October 18, 1961, the appellant and the Indian Company entered into a registered user agreement. The 'Dristan' tablets were first marketed in India on October 22, 1961. On March 6, 1962, both parties jointly applied for registering the Indian Company as registered user of the mark.
On December 7, 1964, the Registrar of Trade Marks, Calcutta dismissed the rectification application. The first respondent appealed; a learned Single Judge of the Calcutta High Court allowed that appeal on May 10, 13, 14, 1968. The appellant's further appeal Appeal 165 of 1968 was dismissed by the Division Bench of the Calcutta High Court on December 16, 1969. It was against this judgment that the present appeal by certificate was filed before the Supreme Court under Article 133(1)(a) and (c) of the Constitution of India.
The Dispute
The central question was whether the trade mark 'Dristan' was liable to be removed from the Register under clause (a) of Section 46(1) of the Trade and Merchandise Marks Act, 1958, on the ground that it was registered without any bona fide intention on the part of the applicant that it should be used in relation to those goods by him, and that there had in fact been no bona fide use of the trade mark by any proprietor up to one month before the date of the rectification application.
The dispute turned on two connected questions. First, whether the appellant at the time of its application on August 18, 1958 had a bona fide intention to use the trade mark and whether an intention to use it through a registered user (the Indian Company) satisfied the requirement of 'intention to use by him'. Second, whether the legal fiction in Section 48(2) of the 1958 Act deeming use by a registered user to be use by the proprietor applied only to cases of actual use, or also extended to the intention limb under Section 18(1) and the first condition of clause (a) of Section 46(1).
Reasoning and Analysis of the Court
The Object of Trade Mark Law and the Meaning of Trafficking
The Supreme Court explained that a trade mark cannot exist in isolation it exists only in connection with the goods in relation to which it is used or intended to be used. Since registration confers very valuable rights, the law cannot permit a person to register a trade mark when he has not used it in relation to the goods or does not genuinely intend to use it. The fundamental object of all trade mark laws is to prevent trafficking in trade marks. The Court accepted the meaning of trafficking from Re American Greetings Corp's Application [(1983) 2 All ER 609] and the House of Lords decision [(1984) 1 All ER 426], per Lord Brightman that trafficking in a trade mark context conveys dealing in a trade mark primarily as a commodity in its own right, not for identifying or promoting merchandise. There must be a real trade connection between the proprietor and the licensee or his goods.
The Two Conditions Under Section 46(1)(a) Are Cumulative
The Court held that both conditions of clause (a) absence of bona fide intention at the time of registration, and no bona fide use up to one month before the rectification application are cumulative and not disjunctive. Both must be satisfied. The reason is to prevent harassment of a legitimate trade mark registrant, since setting up manufacturing and marketing for a new product necessarily takes time. The burden of proving both conditions rests on the person seeking removal from the Register.
Can Proposed Use Through a Registered User Satisfy the Intention Requirement?
This was the central legal question. The Court held that the legal fiction in Section 48(2) is not limited to cases of actual use it applies wherever the word 'use' occurs in any of its permutations and combinations in the Act, including 'proposed to be used by him' in Section 18(1). Carrying the fiction to its logical conclusion as required by the principle in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952 AC 109], approved by this Court in State of Bombay v. Pandurang Vinayak Chaphalkar [1953 SCR 773; AIR 1953 SC 244] Section 18(1) must be read as 'any person claiming to be the proprietor of a trade mark used or proposed to be used by him or by a registered user'. Any other construction would render the provisions relating to registered users almost meaningless. The Court further held that to avail this fiction, the proprietor must have had in mind at the date of his application some specific person whom he intended to allow to use the trade mark as a registered user otherwise the protection of the fiction is unavailable.
Application to the Facts
The Court found that the continuous chain of events the 40% shareholding in the Indian Company, the collaboration agreement from November 1, 1957, the machinery procurement, manufacturing licence, drug controller approval, samples and manufacturing manual, the registered user agreement dated October 18, 1961, and the first marketing of 'Dristan' tablets on October 22, 1961 established beyond doubt that the appellant had a bona fide intention at the date of its application to use the trade mark 'Dristan' through the Indian Company. There was no trafficking. The first condition of clause (a) was not satisfied.
The 'Pussy Galore' Case and English Decisions Distinguished
The Court held that the Calcutta High Court was unduly impressed by the 'Pussy Galore' Trade Mark case [1967 RPC 265], which was merely a decision of the Board of Trade under the English Trade Marks Act, 1938. The relevant provisions of the English Act are materially different the English Act creates two legal fictions (in Sections 28(2) and 29(2)), while the 1958 Act contains only one (in Section 48(2)). English decisions have persuasive value but applicability must be judged in the context of Indian laws as held in Forasol v. Oil and Natural Gas Commission [(1984) 1 SCR 526; 1984 Supp SCC 263]. A construction leading to manifest absurdity or palpable injustice must also be rejected, as settled in M. Pentiah v. Muddala Veeramallappa [(1961) 2 SCR 295; AIR 1961 SC 1107].
Final Decision of the Court
The Supreme Court allowed the appeal with costs. The judgment of the Division Bench of the Calcutta High Court dated December 16, 1969 was reversed and set aside. Appeal 165 of 1968 filed by the appellant before the Division Bench was allowed with costs. The judgment of the learned Single Judge and the order passed by him were also reversed and set aside. Appeal 61 of 1965 filed by the first respondent before the Single Judge was dismissed with costs. The order of the Registrar of Trade Marks, Calcutta, dismissing the first respondent's rectification application No. CAL-17 with costs was confirmed. The first respondent was directed to pay the costs of the Supreme Court appeal to the appellant.
Points of Law Settled in This Case
The two conditions in clause (a) of Section 46(1) of the Trade and Merchandise Marks Act, 1958 are cumulative both must be proved to remove a trade mark from the Register on that ground. The legal fiction in Section 48(2) applies not only to actual use but also to proposed use under Section 18(1) and the intention limb of clause (a) of Section 46(1). To claim the benefit of this legal fiction, the proprietor must have had a specific person in view as a prospective registered user at the time of the application for registration. Intention to use is a state of mind ascertained from all circumstances, including subsequent events. English decisions under the Trade Marks Act, 1938 are not directly applicable to the 1958 Indian Act owing to material differences in the provisions. A statutory construction leading to absurdity or palpable injustice must be rejected.
Disclaimer: Readers are advised not to treat this as substitute for legal advise as it may contain errors in perception, interpretation, and presentation
Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney], High Court of Delhi
Suggested SEO Titles
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- American Home Products v. Mac Laboratories: Landmark Supreme Court Ruling on Trade Mark Registration and Registered User Legal Fiction
- Can a Foreign Company Register a Trade Mark for Use Through an Indian Registered User? Supreme Court Settles the Law
- Section 46(1)(a) Trade and Merchandise Marks Act 1958: Two Conditions Are Cumulative — Supreme Court Explains in American Home Products Case
- Section 48(2) Legal Fiction and Bona Fide Intention Under Section 18(1): Supreme Court's Definitive Ruling in American Home Products v. Mac Laboratories
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Headnote
The Supreme Court of India, held that the two conditions precedent specified in clause (a) of Section 46(1) of the Trade and Merchandise Marks Act, 1958 are cumulative and not disjunctive , both must be satisfied before a registered trade mark can be removed from the Register on that ground, and if either condition is not satisfied, clause (a) will not apply. The Court further held that the legal fiction enacted in Section 48(2) which deems permitted use of a trade mark by a registered user to be use by the registered proprietor applies not only to the second condition of clause (a) relating to actual bona fide use, but also to the first condition relating to bona fide intention at the time of the application for registration under Section 18(1). Accordingly, Section 18(1) must be read as permitting an application for registration of a trade mark 'used or proposed to be used by him or by a registered user'. However, for a proprietor to invoke the benefit of this legal fiction, he must have had in mind at the date of his application for registration some specific person whom he intended to allow to use the trade mark as a registered user. On the facts, the continuous chain of events — the appellant's 40% shareholding in the Indian Company, the technical collaboration agreement effective from November 1, 1957, the machinery procurement, the licences obtained, the samples and manufacturing manual supplied, the registered user agreement of October 18, 1961, and the first marketing of 'Dristan' tablets in India on October 22, 1961 — established beyond doubt that the appellant had a bona fide intention at the date of its application for registration on August 18, 1958 to use the trade mark 'Dristan' through the Indian Company which was to be subsequently registered as its registered user. The first condition of clause (a) of Section 46(1) was therefore not satisfied, and the appeal was allowed with costs. The English 'Pussy Galore' Trade Mark decision [1967 RPC 265] was held inapplicable as the relevant provisions of the English Trade Marks Act, 1938 are materially different from those of the 1958 Act.
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