Assignment of trademarks shall not take effect unless the assignee applies to registrar for advertisement within 9 months: Calcutta High Court

The Calcutta High Court recently restrained an assignee from using the trademarks made under the assignment of trademarks. The court said that the assignee did not apply to the Registrar within the 9-month time limit set by Section 42 of the Trade Marks Act, 1999.

The Single Judge Bench of Justice Moushumi Bhattacharya observed that the petitioners had made out a case under section 42 as the respondents took no steps as required under section 42 for the assignment of trademarks.

The Judge observed, “In the present case, the assignment was made on 3rd April 2017 and there is nothing on record to show that respondent no. 6 took the steps as required under section 42 or the Registrar of Trade Marks affected the conditions under section 42 for assignment of the trademarks in question. Therefore, prima facie, the petitioners have made out a case under section 42 with regard to the impugned assignment.”

Background Facts of the Case

The petitioners claimed to be in the pharmaceutical industry and the purchasers of 14 trademarks at an auction held in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC).

The 14 trademarks related to pharmaceutical products were owned by respondent no. 3 Duckbill Drugs Private Limited, which was ordered into liquidation on April 13, 2021, by the NCLT.

The 14 trademarks as mentioned above, were the subject matter of an e-auction notice published on April 23, 2022, as part of a public auction of sale of respondent no. 3.

The Union of India (the first petitioner) participated in the online auction and was declared the winning bidder. On May 11, 2022, the liquidator issued a sale certificate in favour of petitioner no. 1 and verified the sale.

The certificate of sale included a list of the 14 trademarks registered under the company's name. However, the petitioner later learned that seven of the fourteen trademarks listed on the sale certificate were registered to respondent no. 6, the daughter-in-law of one of the former Directors of respondent no. 3 (the company in liquidation).

It was also brought to the attention of the petitioners that the seven trademarks had been assigned to respondent no. 6 via a Deed of Assignment dated April 3, 2017, for Rs. 7000/-.

Respondent no. 6 had filed a Title Suit in the Alipore Court against the company in liquidation, seeking a decree of declaration that respondent no. 6 is the registered proprietor of the trademarks and a permanent injunction prohibiting the defendant (respondent no. 3) from infringing or misappropriating the respondent no. 6's intellectual property, namely its trademarks. However, said the court did not grant respondent no. 6 any ad-interim relief, against which she lodged an appeal with the High Court in 2023.

The divisional bench of the High Court, in an order dated January 24, 2023, restrained the appellant (respondent no. 3) from using the trademarks in question until March 31, 2023, which was then extended until April 6, 2023.

The present petitioners approached the High Court and prayed for a Writ of Mandamus to be issued against the Trade Marks Ministry, Kolkata to revoke the assignment of those 7 trademarks in favour of respondent no. 6 and to restore trademarks in favour of respondent no. 3.

The court noted that respondent no. 6 had filed the proceedings only after this writ petition was filed.

The court noted, “In the present case, the charge of abuse or giving birth to multiple litigations in respect of the subject matter of the dispute is not on the petitioners but on respondent no. 6.”

The Court also reaffirmed that the presence of an alternative and effective remedy, such as a statutory remedy, is not an absolute bar to the High Court's jurisdiction to hear a writ petition under Article 226 of the Constitution.

The Court emphasised that the issue, in this case, is whether the petitioner no. 1, as the auction purchaser of the seven trademarks, is entitled to protection against the alleged unauthorised use of these trademarks, which were part of the assets of the company sold to the petitioner no. 1.

The court observed, “It is an established principle of law that a third-party auction-purchaser’s interest in the property which has been sold to the auction-purchaser continues to be protected. Once the hammer falls, certain rights accrue to that purchaser which cannot be extinguished other than in exceptional circumstances such as fraud.”

It was further highlighted by the Court that the above-mentioned protection is necessary to give sanctity to court sales where the expectation is to fetch the best and most fair price for the property.

“Law makes a clear distinction between a stranger who is a bona fide purchaser of the property at an auction sale and a decree-holder purchaser at a court auction. The protection given to the former is of a higher order”, the Court said.

However, the Court noted that the trademarks were registered in the name of respondent No. 6 on January 18, 2022, despite the Registry being put on notice that the Official Liquidator has stepped into the shoes of respondent no. 3 company.

Thus, the Court restrained respondent no. 6 from using the said 7 trademarks till the matter is heard out on affidavits.

Case Title: Paul Brothers & Anr. vs. UOI & Ors.

Statute: Trade Marks Act, 1999