High Court upholds sanctity of the Trademark Assignment Agreement

This is an appeal before the Madhya Pradesh High Court against the order of the Commercial Court, Indore. The gist of the appeal is the interpretation of the agreement entered into between the parties in the year 2015 in relation to transfer of various trademarks upon payment of the agreed consideration.

Facts in a nutshell

  1. The Plaintiff, a manufacturer and marketer of pharmaceutical products, initiated action against the Defendants alleging infringement of rights in the registered artistic work for ‘ENERZY’ which is an energy powder containing dextrose, sucrose, vitamin-c and zinc.
  2. The Plaintiff claims to have had entered into an agreement with the Defendants for the purchase of trademarks for a specified amount spread over a period of three financial years.
  3. The Plaintiff has alleged that the Defendants failed to pay up the entire payment as per the agreed terms, leading to a dispute over the validity of their ownership claim over the trademark ‘ENERZY’.
  4. Despite termination of the agreement, the Defendants began manufacturing and selling products with the ‘ENERZY’ artwork, amounting to violation of the Copyright Act, 1957.

Along with the suit the Plaintiff also filed an application seeking an interim injunction. The Defendants countered the application contending that the suit was frivolous and the Plaintiff had already sold the ‘ENERZY’ mark and received full consideration.

The Commercial Court after hearing the parties dismissed the injunction application citing a) the absence of a forfeiture clause in the agreement and b) the lack of notice of termination by the Plaintiff on the Defendants. The Court further observed that the Plaintiff had not refunded any amount to the Defendants, and the latter claimed to have paid interest on the outstanding dues.

Aggrieved by the order the Plaintiff has approached the High Court in an appeal:

  1. The Court below committed an error in disregarding important email evidence where the Defendant admitted to not having the trademarks transferred to them.
  2. As per the agreement, time was of the essence and the Defendant failed to make the payment within the specified time. Therefore, it resulted in the automatic termination of the agreement.
  3. Plaintiff’s copyright registration of the year 1998 evidences their prior use. As no rights in the trademarks have been transferred to the Defendants, the order passed by the court is liable to be set aside.

Defendants countered the contentions on the following:

  1. Defendants have acquired exclusive rights to market the products of the Plaintiff based on the agreement entered between the parties.
  2. Defendants have paid full consideration to the Plaintiff regarding the mark ‘ENERZY’ and it now belongs to them.
  3. The trademark application filed by the Plaintiff for the mark ‘ENERZY’ has been opposed by the Defendant, however, the former has illegally obtained copyright registration for the same.
  4. There is no forfeiture clause in the agreement and the reference to the email by the Plaintiff/Appellant cannot be relied upon.
  5. There are no merits in the appeal, and it ought to be dismissed.

High Court’s findings

  1. The Court after considering the pleadings and the documents on record observed that the Defendants have failed to comply with the condition’s precedent for transfer of the trademarks. The documents further evidence the fact that the Defendants failed to pay the entire consideration within the stipulated time which resulted in the automatic termination of the agreement.
  2. The terms of the agreement specify termination on non-compliance of any provision, sans any prior notice. Thus, the finding of the Court below that the Plaintiff failed to issue a termination notice to the Defendant was incorrect as the terms of the agreement does not stipulate so.
  3. The High Court also rejected the argument that the part payment made by the Defendants entitled it to enforce its rights under the agreement.
  4. The documents on record do not provide any unambiguous evidence regarding payment of compound interest by the Defendants to the Plaintiff. In the instant case Plaintiff’s prior use of the mark ‘ENERZY’ is evident and further exemplified by the Copyright registration certificate from the year 1998.

Court Ruling

Considering the above the High Cout held that the findings of the Court below are contrary to the facts as well as the terms of the agreement. The High Court thus allowed the appeal and set aside the order of the Court below and granted an injunction in favour of the Plaintiff restraining the Defendant from using the mark ‘ENERZY.’

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