In a trademark dispute concerning the mark “MEDILICE” used for anti-lice shampoo brought by Wings Pharmaceuticals (the plaintiff) and the defendant’s use of the mark “MEDILICE LICE KILLER” for anti-lice ayurvedic (herbal) hair oil, the court ruled in favour of the plaintiff. The note outlines the Appeal filed by the defendant before the Division Bench (two judge Bench) of the Delhi High Court against the decree/permanent injunction order passed by the Commercial Court (at Tis Hazari, District Court). The High Court examined the impact of prior use by the plaintiff, prosecution history of the trademark registration in favour of the plaintiff, acquiescence argument raised by the defendant, and punitive damages awarded by the Commercial Court.

While affirming the findings on infringement and passing off, the Division Bench modified the damages, substituting punitive damages with notional compensation.

Factual Matrix

1. The plaintiff, Wings Pharmaceuticals claimed adoption of the mark “MEDILICE” in 1998 for anti-lice shampoo containing Permethrin and secured registration in Class 3 in 2014.
2. In 2020, the plaintiff discovered the defendant’s use of the mark “MEDILICE LICE KILLER” for anti-lice oil and instituted a suit alleging infringement, passing off, and seeking rendition of accounts.
3. The defendant, M/s Rapple Healthcare asserted prior use since March 2000, relying on affidavits of use filed before the Trademarks Registry and its own trademark registrations in different classes.
4. Both parties lead evidence through witnesses and upon conclusion of the trial, the Commercial Court held that the defendant had infringed the plaintiff’s registered mark “MEDILICE.”
5. Commercial Court ruled that:
   1. Plaintiff had established valid ownership, assignment, and continuous use since 2004, while the defendant failed to prove prior use.
   2. Both parties were marketing similar anti-lice products through the same trade channels, therefore, a clear likelihood of confusion, constituting infringement and passing off was established.
   3. An adverse inference has to be drawn owing to the defendant’s failure to produce financial records despite court directions. The Court on that basis awarded ₹10,00,000 (approx. Us $ 10700) as punitive damages in lieu of rendition of accounts.

Issues Before the Division Bench

The following issues came up for consideration in the appeal:

1. Infringement: Whether the defendant infringed the plaintiff’s registered trademark “MEDILICE” by use of “MEDILICE LICE KILLER”.
2. Passing off: Whether the defendant was passing off its goods as those of the plaintiff by use of the impugned mark and in defence the defendant proved prior and continuous use.
3. Delay/laches/acquiescence: Whether the suit/relief was barred due to alleged delay and acquiescence.
4. Monetary relief: Whether the plaintiff was entitled to rendition of accounts/damages and whether in the facts of this case punitive damages could be awarded.

The High Court’s Ruling

Deceptive Similarity and Dominant Feature Doctrine

1. The Court reaffirmed that in composite marks, the dominant feature is decisive. The word “MEDILICE” constituted the essential component of both marks. The suffix “LICE KILLER” was descriptive and insufficient to distinguish the marks.
2. Applying the test of the average consumer with imperfect recollection, the Court held that the rival marks were deceptively similar.
3. Importantly, the Court emphasized that where goods relate to medicinal or therapeutic treatment, a stricter standard of scrutiny applies due to potential public health implications.

Registration in Different Classes: Not a Complete Defence

1. Although both parties held registrations in different classes, the Court clarified that trademark protection is confined to the goods for which the mark is registered. However, classification does not determine infringement where goods are allied and cognate.
2. Anti-lice shampoo and anti-lice oil served the same therapeutic purpose, targeted the same consumer base, and were sold through identical over-the-counter trade channels. The Court therefore rejected the defendant’s reliance on its Class 16 registration.

Prior Use: Marketplace Evidence is Essential

The defendant relied on the following to substantiate prior use:

1. Trademark applications
2. User affidavits
3. Manufacturing licences

The Court held that the above documents, without proof of actual commercial sales, do not establish continuous and bona fide use in the marketplace. On the other hand, the plaintiff produced documented sales figures and invoices demonstrating continuous use from 2004 onwards evidencing prior use.

Prosecution History Estoppel

The defendant argued that the plaintiff was bound by earlier replies to examination reports stating that the marks were distinct.

1. The Court rejected this plea, holding:
   Replies to examination reports are not conclusive admissions.
2. Deceptive similarity is a question of law to be determined by the Court.
3. Statements made before the Registrar do not automatically act as estoppel in infringement proceedings.

The Court thus declined to extend prosecution history estoppel beyond its limited evidentiary value.

Delay and Acquiescence

1. On the issue of delay, the defendant contended that the plaintiff had knowledge of its mark since 2001 when it was cited in examination proceedings.
2. The court observed, citation of a mark in an examination report does not establish knowledge of actual commercial use. Since the plaintiff acted promptly upon discovering market presence in 2020, the plea of acquiescence failed.
3. The Court clarified that acquiescence requires positive encouragement or conduct indicating acceptance. Mere delay or silence is insufficient.

Passing Off Established

The Court upheld the finding of passing off on the classic trinity:

1. Goodwill established through long-standing sales and reputation.
2. Use of a nearly identical mark for the same purpose amounts to misrepresentation.
3. Likelihood of diversion of trade and injury to goodwill entitles the plaintiff to damages.

Given the identity of purpose and trade channels, the likelihood of confusion was clear.

Punitive Damages: Judicial Restraint Emphasized

The Commercial Court had awarded ₹10,00,000 as punitive damages, drawing an adverse inference from the defendant’s failure to produce financial records.

The Division Bench held that:

1. Punitive damages are exceptional and require proof of wilful, blatant misconduct.
2. This was a private commercial dispute without evidence of quantified loss or aggravated conduct.
3. The court ruled that while the adverse inference was justified, it did not warrant exemplary damages.

Accordingly, the Court set aside the punitive damages and granted nominal damages of ₹3,00,000 (approx. Us $ 3200) to balance deterrence and equity.

Key Takeaways

1. Dominant feature analysis governs deceptive similarity.
2. Classification of goods does not limit infringement where products are allied and cognate.
3. Prior use must be established through marketplace evidence.
4. Prosecution history does not create automatic estoppel.
5. Acquiescence requires positive conduct, not mere delay.
6. Punitive damages must be awarded cautiously and sparingly.