When Nationalisation Meets Trademark Law: The Supreme Court's Landmark Ruling in Cycle Corporation of India Ltd. vs. T.I. Raleigh Industries Pvt. Ltd.
Introduction
Few trademark disputes in Indian legal history arise from as remarkable a set of circumstances as the one decided by the Supreme Court of India on May 10, 1996, in Cycle Corporation of India Ltd. vs. T.I. Raleigh Industries Pvt. Ltd. and Others. This case sits at the crossroads of trademark law, industrial licensing law, and the consequences of government nationalisation of private industry — a unique confluence that makes it a deeply instructive precedent not only for intellectual property lawyers but for anyone seeking to understand how Indian courts balance commercial reality with statutory formality.
At the core of this case was a question that sounds almost paradoxical: can a company that manufactures goods and sells them in the market under a well-known brand name be considered a legitimate user of that brand, even if it never formally registered itself as a "registered user" under the applicable trademark statute? And when a foreign trademark owner tries to have its mark removed from the Indian register on the ground that no one has been using it for over five years, can an Indian company resist that attempt by pointing to its own long history of actual use — use that was unregistered, unrecognised by the registry, but undeniably real and continuous on the ground?
The Trade and Merchandise Marks Act, 1958, which was the governing legislation at the time, provided in Section 46(1)(b) that a registered trademark could be removed from the register if, for a continuous period of five years or more up to one month before the date of the removal application, the mark had not been used in good faith. Section 48 of the same Act created the concept of a "registered user" — someone other than the trademark proprietor who is formally registered to use the mark. Section 46(3) carved out an exception, protecting proprietors who could show that non-use was due to special circumstances in the trade, not any intention to abandon the mark.
The Supreme Court's navigation through these provisions, against the backdrop of a nationalised Indian bicycle industry and a decades-long collaboration with a British company, produced a judgment of lasting significance. The appeal was dismissed and the High Court's refusal to strike off the trademark from the register was upheld.
Factual and Procedural Background
The respondents, T.I. Raleigh Industries Pvt. Ltd. and others, were connected to the well-known British bicycle brand "Raleigh." Through their agents, they had registered the trademark "Raleigh" and 11 other trade marks — totalling 12 marks — under the Indian Merchandise Marks Act, 1889 (4 of 1889) and the Trade Marks Act, 1940 (5 of 1940). The Trade and Merchandise Marks Act, 1958 (43 of 1958), which came into force on October 3, 1958, repealed the predecessor Acts and is the statute under which this dispute was ultimately decided.
The chain of events that led to this case began as far back as November 3, 1948, when the respondents entered into an agreement with one Sudhir Kumar Sen to provide technical know-how to an Indian company that would be formed to manufacture bicycles and market them under Raleigh's Indian trade marks. Pursuant to this arrangement, a company called Sen Raleigh Ltd. was incorporated, which manufactured bicycles with technical assistance from the respondents and sold them under the Raleigh brand and trade marks belonging to the respondents. On April 24, 1954, Sen Raleigh was recorded as a permitted user of the trade marks. By a further agreement dated December 29, 1962, Sen Raleigh and the respondents agreed that Sen Raleigh would be a registered user of the marks for a further period extending up to 1976.
On September 8, 1975, Sen Raleigh Ltd. was taken over by the Government of India under the Industrial (Development and Regulation) Act, 1951 — commonly referred to as the IDR Act — and the Government assumed management of the company. The agreement dated December 29, 1962, was modified and the respondents were given the option to terminate it. A fresh agreement was then entered into on December 20, 1976, between the appellant, Cycle Corporation of India Ltd. — into which Sen Raleigh had by then been merged by operation of the IDR Act following nationalisation — and the respondent, under which the appellant used the 12 trade marks as a registered user for a period of 5 years.
On March 28, 1978, a joint application signed by the respondent as proprietor and by Sen Raleigh Ltd. as registered user was filed before the Registrar of Trade Marks. On October 24, 1980, Sen Raleigh was formally nationalised and vested in the appellant Corporation by publication of a notification under the IDR Act. On March 5, 1982, the respondent wrote to the appellant stating that in the absence of a new agreement, they were instructing their advocates to prevent the appellant from using the trade mark with effect from April 1, 1982.
On March 24, 1982, the appellant filed an application under Sections 32, 46, and 56 of the Trade and Merchandise Marks Act, 1958, before the High Court of Calcutta in Suit No. 266 of 1992, seeking to have the respondents' trade marks removed from the register. The appellant's case was, in essence, that neither the respondents nor any registered user had used the trade mark for a continuous period of five years or longer, and that further use by the respondents would be likely to deceive and cause confusion among the trade and public. Simultaneously, on March 25, 1982, the appellant also filed an application for registration of three trade marks in its own favour. However, by proceedings dated June 13, 1984, the Registrar of Trade Marks informed the appellant that the registered user applications were treated as abandoned because the appellant had failed to comply with statutory requirements.
The learned Single Judge of the Calcutta High Court dismissed the appellant's application by a judgment dated September 13, 1990. He held that the expression "by any registered proprietor" in Section 46(1)(b) extends beyond the registered proprietor and the registered user to include any bona fide or authorised user. He further held that special circumstances were available to the respondent as a defence for non-use even after 1979, since the supply of technical know-how by the respondent was not entirely absent after the termination of the collaboration agreement. He declined to rectify the trade marks and refused to strike them off the register. The Division Bench of the Calcutta High Court, in Appeal No. 13 of 1991, confirmed this decision by its judgment dated June 3, 1994. The Division Bench held that from October 25, 1980 onwards, the respondent had allowed and permitted the appellant to manufacture bicycles and pass off the goods under the respondents' trade marks. Though the collaboration and registered user agreements had stood expired from October 31, 1981, no new agreement was executed. There was no specific bar preventing an unregistered licensee from using a registered trade mark, so long as there existed a connection in the course of trade between the licensor and the licensee. The Division Bench also held that the non-registration of the user agreement by Sen Raleigh and the appellant was due to the default of the appellant, and that the appellant could not take a contradictory stand of applying for rectification while simultaneously seeking registration of its own marks. The appellant then came before the Supreme Court by way of special leave.
The Dispute
The dispute that came before the Supreme Court had three principal dimensions. The first was whether the appellant Corporation could be considered a "bona fide user" of the respondents' trade marks for the purpose of Section 46(1)(b), notwithstanding that it was not a formally registered user under Section 48(1) of the Act, particularly after the expiry of the registered user agreement on December 20, 1981, and the abandonment of the joint application. If the appellant was not a bona fide user, then the respondents too could not take credit for that use, and the five-year period of non-use might be established — which would then entitle the court to remove the mark.
The second dimension was whether the provisions of Section 46(3) — the special circumstances exception — were available to the respondents to defend themselves against the non-use allegation. The appellant argued that the respondents had not been using the marks as registered proprietors since April 20, 1954, and had failed to prove that they were prevented from using the marks for a period of five years or more preceding the date of the removal application due to special circumstances in the trade.
The third dimension was whether the High Court had properly exercised its discretion under Section 46 in refusing to rectify and strike off the trade marks from the register. The appellant contended that the public interest in having access to quality goods produced under the Raleigh brand should weigh in favour of keeping the marks alive in Indian hands, and that the court should have exercised its discretion to remove the marks.
Reasoning and Analysis of the Judge
The judgment of the Supreme Court was delivered by K. Ramaswamy, J., with whom Faizan Uddin, J., and G.B. Pattanaik, J., concurred.
On the Statutory Framework
The Court began by carefully setting out the relevant statutory provisions. Section 46(1)(b) of the Trade and Merchandise Marks Act, 1958, provides that a registered trade mark may be taken off the register if it is established that up to a date one month before the date of application, a continuous period of five years or longer had elapsed during which the trade mark was registered and during which there was no bona fide use thereof in relation to those goods by any proprietor for the time being. Section 46(3) provides that an applicant shall not be entitled to rely on non-use if the non-use was due to special circumstances in the trade and not to any intention to abandon or not use the trade mark.
Section 48 provides for registered users and states that the permitted use of a trade mark shall be deemed to be used by the proprietor thereof, and shall be deemed not to be used by a person other than the proprietor, for the purpose of Section 46 or for any other purpose for which such use is material under the Act or any other law.
The Court read these provisions together and explained their interplay clearly. The benefit of Section 46 — meaning the protection from having a mark struck off — would be available during the period for which an agreement was registered and use continued in furtherance of that agreement. Under Section 48(1), for the purpose of the deemed use fiction, the use must be either by the registered proprietor or by a formally registered user. An unregistered permitted person does not benefit from the deemed use fiction under sub-section (2) of Section 48. So far, the statutory position seemed to favour the appellant.
On the Concept of Bona Fide User and the Unregistered Licensee
However, the Court went further, and here lay the most important and original reasoning of the judgment. The Court held that even in the case of an unregistered licensee — that is, someone who is using the mark with the permission or consent of the proprietor but is not formally registered as a user — so long as there is an unbroken connection in the course of trade between the licensor and the passing off of the licensee's goods under the trade mark, there would be sufficient connection in the course of trade between the proprietor and the bona fide user of the trade mark by that unregistered licensee. This connection would link the registered proprietor and the user of the trade mark through the activities of the unregistered licensee. The permission or consent for such use may be express or may be implied by a long course of dealings. The appellant must, by course of conduct, be presumed to be a bona fide user for the purpose of Section 46(1)(b).
The Court acknowledged a decision of the Delhi High Court in K.R. Beri & Co. vs. Metal Goods Mfg. Co. (P) Ltd., reported at AIR 1980 Del 299, where the Division Bench had taken the view that an unregistered user of the trade mark, even with the consent of the proprietor, cannot be construed to be a registered user under Section 48(1), and that construing it otherwise would render sub-section (2) of Section 48 surplusage or otiose. The Supreme Court disagreed with this view, holding that it was not correct to hold that proving a bona fide user of an unregistered user when connection between the proprietor of the trade mark and the permitted user in relation to passing off of the goods under the trade mark are proved, renders sub-section (2) of Section 48 surplusage or otiose. The Delhi High Court's view on this specific point was, therefore, partly overruled.
The factual foundation for this conclusion was important. The High Court had found, and it was not disputed before the Supreme Court, that the appellant had entered into an agreement with Sen Raleigh — which was a permitted user of the trade marks — and had used the trade mark until November 1, 1976. Thereafter, by the registered user agreement dated December 20, 1976, the trade mark had been used for a period of 5 years. The Court found that it was not in dispute that till the date of filing of the application, the appellant had used the trade mark in passing off the bicycles under the trade mark of the respondent. The appellant had come to succeed to the position of Sen Raleigh by statutory operation following nationalisation under the IDR Act. This was therefore not a case of getting the trade mark registered under a predecessor Act and continuing under the Act for trafficking in the trade mark — an entirely different and less meritorious situation.
The Court also relied on American Home Products Corpn. vs. Mac Laboratories (P) Ltd., reported at (1986) 1 SCC 465, to reiterate that getting a trade mark registered without any intention to use it in relation to any goods but merely to sell it to others would be trafficking in the trade mark, and such conduct would not receive the assistance of the court. The court requires a real trade connection between the proprietor and the licensee of the goods, and the intention to use the trade mark must exist at the date of the application and must be genuine and bona fide and continue to subsist. In the present case, the facts showed that such a genuine trade connection existed throughout the relevant period.
On the Special Circumstances Exception under Section 46(3)
The Court held that while the burden lies on the registered proprietor to establish the special circumstances exception under Section 46(3), the application for rectification itself prima facie shows non-use for the relevant period, after which the burden shifts to the proprietor of the trade mark to affirmatively prove that the non-use was strictly due to special circumstances of the trade and not due to any intention not to use the mark. The non-use must be due to something that would have prevented use by the mark's owner independently of whether or not those special circumstances had arisen.
However, the Court concluded that it was not even necessary to enter into this question in the present case. The admitted position was that Sen Raleigh — admittedly a registered user — had been the channel through which the appellant had bona fide used the registered trade mark of the registered proprietor. Since Sen Raleigh was a registered user through whom the appellant had bona fide used the trade mark, there was no discontinuance or non-use of the trade mark by the respondent to establish the special circumstances argument. Sub-section (3) of Section 46 was therefore not attracted to the facts of the instant case at all.
The Court also chose not to decide whether the pendency of the application filed by the appellant under Section 48(1) for registration as a registered user would have constituted a special circumstance in favour of the respondent for the purpose of Section 46(3), leaving that question open.
On the Exercise of Discretion under Section 46
The Court affirmed that while exercising discretion under Section 46, the court must take into consideration not only the commercial interests of the parties but also the public interest. It referred to paragraph 21.82 at page 386 of the Law of Trade Marks and Passing-off by P. Narayanan (4th Edition), which states that ordinarily a mark will be expunged — taken off the register — when the factual circumstances necessary for its removal are established, unless it is shown that the case falls within the exceptions provided in sub-section (3).
The Court noted that the appellant had never at any point of time abandoned the use of the trade mark of the respondent-registered proprietor till the filing of the application. Although the appellant had not used the trade mark by itself since 1954 and after the expiry of the permitted use by Sen Raleigh, once the respondent issued notice directing the appellant not to use the mark, the appellant came to use the same in passing off bicycles manufactured by it under the trade mark of the respondent. The High Court had, therefore, rightly declined to rectify the trade mark under Section 46(1)(b) of the Act. The Supreme Court found no persuasive reason to take a different view from that of the High Court. The High Court had, in its opinion, properly exercised its discretion and refused to rectify and strike off the trade mark from the register of trade marks.
The Final Decision of the Court
The Supreme Court dismissed the appeal. It upheld the judgment of the Division Bench of the Calcutta High Court dated June 3, 1994, which in turn had confirmed the judgment of the Single Judge dated September 13, 1990. The respondents' 12 trade marks, including the mark "Raleigh," were not removed from the register. The appeal was dismissed without costs in view of the particular circumstances of the case.
Points of Law Settled in the Case
This judgment settled several important propositions under the Trade and Merchandise Marks Act, 1958, that continue to guide courts and practitioners in trademark matters.
The first and most important point is that the concept of a bona fide user under Section 46(1)(b) is not confined to formally registered users under Section 48(1). Even an unregistered licensee — someone using a trade mark with the express or implied permission of the registered proprietor — can constitute a bona fide user for the purposes of Section 46, provided there is an unbroken connection in the course of trade between the licensor and the passing off of the licensee's goods under the trade mark. This connection is what links the registered proprietor's ownership of the mark with the actual commercial use of the mark in the market.
The second point is a clarification of the relationship between Section 46 and Section 48. The deemed use fiction in sub-section (2) of Section 48 — which says that permitted use is deemed to be use by the proprietor — is specifically referable to the registered user or the permitted user who is registered. It does not extend automatically to unregistered permitted users. However, this does not mean that unregistered use is entirely irrelevant. The connecting link of passing off goods under the trade mark between the licensor and the unregistered licensee, when bona fide and with permission, can establish sufficient trade connection to prevent the mark from being taken off the register.
The third point relates to the burden of proof under Section 46(3). The burden to establish special circumstances for non-use lies on the registered proprietor of the trade mark. An application for rectification itself creates a prima facie presumption of non-use, following which the proprietor must affirmatively show that the non-use was due to special circumstances in the trade alone, not to any other cause and not to any intention to abandon the mark.
The fourth point is that Section 46(3) is not attracted when, on the facts, there has actually been bona fide use of the trade mark — whether by the registered proprietor, the registered user, or an unregistered licensee with a genuine trade connection. The special circumstances exception is only relevant when non-use is actually established.
The fifth point reinforces the principle from American Home Products Corpn. vs. Mac Laboratories (P) Ltd., (1986) 1 SCC 465, that trademark registration obtained merely to traffic in the mark — that is, to sell it rather than use it — will not receive judicial protection. There must be a real and genuine trade connection between the proprietor and the licensee, and the intention to use the mark must be genuine and subsisting.
The sixth point is that discretion under Section 46 must be exercised having regard to both commercial interest of the parties and broader public interest. When the factual circumstances for removal are not established — particularly because bona fide use by an authorised party has been proved — the court is entitled to decline to strike off the mark.
Case Details
Title: Cycle Corporation of India Ltd. Vs. T.I. Raleigh Industries Pvt. Ltd. and Others
Date of Order: May 10, 1996
Case Number: Civil Appeal No. 8266 of 1996 (arising from Judgment and Order dated June 3, 1994 of the Calcutta High Court in Appeal No. 13 of 1991)
Neutral Citation: (1996) 9 SCC 430; H-M/T/16307/S
Name of Court: Supreme Court of India
Name of Hon'ble Judges: K. Ramaswamy, J.; Faizan Uddin, J.; G.B. Pattanaik, J.
Disclaimer: Readers are advised not to treat this as substitute for legal advice 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
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Headnote
The Supreme Court of India, in this appeal by special leave from the judgment of the Division Bench of the Calcutta High Court, held that the appellant — Cycle Corporation of India Ltd., a nationalised entity that had succeeded to the position of Sen Raleigh Ltd. by statutory operation under the Industrial (Development and Regulation) Act, 1951 — was a bona fide user of the respondents' trade marks for the purpose of Section 46(1)(b) of the Trade and Merchandise Marks Act, 1958, notwithstanding that it was not formally registered as a permitted user under Section 48(1) of the Act after the expiry of the registered user agreement dated December 20, 1976. The Court held that even an unregistered licensee, so long as there is an unbroken connection in the course of trade between the licensor-proprietor and the passing off of the licensee's goods under the trade mark, constitutes a bona fide user sufficient to prevent removal of the trade mark from the register under Section 46(1)(b). The deemed use fiction in sub-section (2) of Section 48 is referable to the registered user or the permitted user who is registered, and does not extend to unregistered permitted users; however, the connecting link of bona fide passing off of goods under the trade mark with the permission — express or implied — of the registered proprietor is independently sufficient to establish bona fide use under Section 46(1)(b). The Court further held that sub-section (3) of Section 46 — the special circumstances exception for non-use — was not attracted on the facts of this case, since bona fide use of the trade mark through the registered user Sen Raleigh and thereafter through the appellant had been established throughout the relevant period, leaving no non-use to be excused by special circumstances. On the question of discretion under Section 46, the Court held that the High Court had properly exercised its discretion in refusing to rectify and strike off the respondents' trade marks from the register of trade marks, since the factual circumstances necessary for removal had not been established. The view of the Delhi High Court in K.R. Beri & Co. vs. Metal Goods Mfg. Co. (P) Ltd., AIR 1980 Del 299, insofar as it held that bona fide use by an unregistered user with the proprietor's consent renders sub-section (2) of Section 48 surplusage, was partly overruled. Reliance placed on American Home Products Corpn. vs. Mac Laboratories (P) Ltd., (1986) 1 SCC 465, to reaffirm that there must be a real and genuine trade connection between the proprietor and the licensee at the date of the application for registration of the trade mark, and the intention to use the mark must be genuine, bona fide, and continuing. Appeal dismissed without costs.
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