• The case involved an agreement between the parties for the purchase of trademarks for a specified amount spread over a certain period of time.
• The High Court found that the defendants had failed to comply with the conditions for the transfer of the trademarks.
• The partial payment made by the defendants did not entitle them to enforce their rights under the agreement.

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

Background

The plaintiff, a manufacturer and marketer of pharmaceutical products, initiated an action against the defendants, alleging infringement of its rights in the registered artistic work for the ENERZY powder – an energy powder containing dextrose, sucrose, vitamin C and zinc.

The plaintiff claimed to have entered into an agreement with the defendants for the purchase of trademarks for a specified amount spread over a period of three financial years. The plaintiff alleged that the defendants failed to pay the entire amount as per the agreed terms, leading to a dispute over the validity of their ownership claim over the trademark ENERZY.

Despite the termination of the agreement, the defendants began manufacturing and selling products with the ENERZY artwork, amounting to a 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 that the plaintiff had already sold the ENERZY mark and received full consideration.

The Commercial Court dismissed the application for an injunction, citing:

1. the absence of a forfeiture clause in the agreement; and
2. the lack of notice of termination by the plaintiff to the defendants.

The court further observed that the plaintiff had not refunded any amount to the defendants, and that the latter claimed to havepaid interest on the outstanding dues.

Appeal

Aggrieved by the order, the plaintiff approached the High Court in an appeal on the following grounds:

1. The court below had committed an error in disregarding important email evidence in which the defendant admitted to not having the trademarks transferred to them.
2. As per the agreement, time was of the essence and the defendant had failed to make the payment within the specified time. This resulted in the automatic termination of the agreement.
3. The plaintiff’s copyright registration dated 1998 evidenced its prior use. As no rights in the trademarks were transferred to the defendants, the order passed by the first-instance court was liable to be set aside.

The defendants countered the plaintiff’s contentions as follows:

1. The defendants had acquired exclusive rights to market the plaintiff’s products based on the agreement entered into by theparties.
2. The defendants had paid full consideration to the plaintiff regarding the mark ENERZY, which now belonged to them.
3. The trademark application filed by the plaintiff for the mark ENERZY was opposed by the defendants; however, the plaintiff had illegally obtained a copyright registration for the same.
   There was no forfeiture clause in the agreement and the reference to the email evidence by the plaintiff could not be relied upon.
4. There were no merits to the appeal, which ought to be dismissed.

High Court’s findings

The court, after considering the pleadings and the documents on record, observed that the defendants had failed to comply with the conditions precedent for the transfer of the trademarks. The documents further evidenced that the defendants had failed to pay the entire consideration within the stipulated time, which resulted in the automatic termination of the agreement.

The terms of the agreement specified that there would termination upon non-compliance of any provision, without any prior notice. Thus, the finding of the first-instance court that the plaintiff had failed to issue a termination notice to the defendants was incorrect, as the terms of the agreement did not stipulate so.

The High Court also rejected the argument that the partial payment made by the defendants entitled them to enforce their rights under the agreement.

Further, the documents on record did not provide unambiguous evidence regarding the payment of compound interest by the defendants to the plaintiff. The plaintiff’s prior use of the mark ENERZY was evident and further exemplified by the copyright registration certificate dating from 1998.

Considering the above, the High Court held that the findings of the first-instance court were contrary to the facts, as well as the terms of the agreement. The High Court thus allowed the appeal, set aside the order of the first-instance court and granted an injunction restraining the defendant from using the mark ENERZY.