Registered mark v. unregistered mark: Who wins?

The life of ​the law is not logic but experience, goes a famous aphorism by Justice Oliver Wendell Holmes. And it is indeed experience that informs the law and perhaps empowers courts to become creative in order to find solutions for problems that appear to be seemingly intractable.

One such situation was presented recently in the Delhi High Court in Dongguan Huali Industries Co Ltd v. Anand Aggarwal and ors. In its essence, the point of controversy was whether an unregistered mark can, in any way, triumph over a registered trademark. Essentially, whether an unregistered mark can succeed against the registered trademark in a passing-off action. This is stark contrast to the usual set of cases where the holder of a registered mark seeks injunctive relief.

The Trademarks Act, 1999 broadly adopts a quadripartite framework to protect marks. At the first instance is the emphasis of the law to protect register trademarks. But here too, the law is tentative. The protection applies only if the mark is valid (Section 28). At the second level is the protection that is accorded  to concurrently registered marks in relation to products which may be similar or identical (Section 12). At the third level is the protection granted to unregistered marks who may, to protect their reputation, institute passing-off actions [Section 27(2)]. And at the fourth level is Section 34, where an unregistered mark may triumph over a registered trademark.

In Huali, the plaintiff instituted a suit seeking to obtain a permanent injunction against the defendants. Both the parties used the mark “HUALI” and both were in the same line of business. Although it was shown to the Court that the plaintiff was the first user of the mark, it had not yet secured its registration. The defendant, on the other hand, had secured a registration for the mark. So, the question before the Court turned to addressing the issue of how the plaintiff could seek relief. Drawing from a combined reading of Sections 27, 28 and 34 of the Trademarks Act, the Court held that the law certainly does not confer the holder of a registered trademark with absolute immunity from all claims made against it. As the Court saw it:

“The trademark registration does not confer immunity from challenges, particularly when allegations of passing off are substantiated by evidence of prior use. The registration, while offering statutory benefits, does not obliterate prior common law rights established through actual use and accrued goodwill in the market. This understanding is supported by a conjoint reading of Sections 27, 28 and 34 of the Act.”

Fundamentally, the law empowers the holder of an unregistered mark to protect the mark and its reputation by pursuing passing-off actions under Section 27(2). Linking that with Section 34, the Court reasoned that notwithstanding the fact that there is a registered mark, an unregistered mark can prevail over such a registered mark provided it falls within the four corners of Section 34 of the Trademarks Act. From here, the Court held:

“Therefore, registration, while providing certain statutory protections, does not confer an absolute right – rather, it is contingent upon respecting prior users’ established rights. Thus, if the Plaintiff can demonstrate that they have been using the “HUALI” mark prior to its registration by Defendant No. 1 and that significant reputation and goodwill are associated with their mark, they can substantiate a claim for passing off.”

In the past, the Supreme Court has also commented on the scope of Section 34 of the Trademarks Act. In NR Dongre v. Whirlpool Corporation, the Supreme Court recognised that the rights conferred by the registration of a trademark have deliberately not been granted absolute supremacy. The law did not grant, as the Supreme Court saw it, “an indefeasible right” to the holder of a registered trademark. On the other hand, these rights are contingent on the overall scheme of the Act. Thus, as per the Act itself, a prior user of a mark can maintain a passing-off action against a registered trademark. It was held:

“Neither section 28 nor any other provision of the Act bars an action for passing off by an anterior user of a trade mark against a registered user of the same. In other words registration of a trade mark does not provide a defence to the proceedings for passing off as under section 27(2) of the Act a prior user of a trade mark can maintain an action for passing off against any subsequent user of an identical trade mark including a registered user thereof.”

This viewpoint has been reiterated on recent occasions as well. In S Syed Mohideen v. P Sulochana Bai, the Supreme Court examined the interplay between Section 28 and Section 34. It noted that Section 28 begins with the phrase “Subject to other provisions of this Act.” Accordingly, this implied that the right of a registered trademark holder under Section 28 to exclusively use the mark was contingent on another person not setting up an indefeasible right to use the same mark that they may hold. It was held:

“Thus, the scheme of the Act is such where rights of prior user are recognised superior than that of the registration and even the registered proprietor cannot disturb/interfere with the rights of prior user. The overall effect of collective reading of the provisions of the Act is that the action for passing off which is premised on the rights of prior user generating a goodwill shall be unaffected by any registration provided under the Act.”

In another judgment, in Neon Laboratories Ltd v. Medical Technologies Ltd, the Supreme Court observed that Section 34 was of crucial importance since it protected a mark which is used first in time, from those who may have obtained a registration of a similar or identical mark at a later point in time. It was held:

“This section palpably holds that a proprietor of a trade mark does not have the right to prevent the use by another party of an identical or similar mark where that user commenced prior to the user or date of registration of the proprietor. This "first user" rule is a seminal part of the Act.”

The judgment of the Delhi High Court has restated some of the fundamental principles in trademark law in relation to the rights of an unregistered mark to maintain a passing-off action vis-à-vis a registered trademark. The following legal principles are forthcoming:

• Section 34 commences with a non-obstante clause thus signifying that it overrides the conditions of protection granted to trademarks by the sections in the Trademarks Act. This is made clear by the opening words of Section 28 which commences with language making the rights to use a registered trademark contingent on other provisions of the Act.

• The bar prohibits a registered trademark holder from interfering with or restraining the holder of an unregistered mark from using the same, when the second mark in question is identical or similar to the first mentioned registered trademark.

• The condition for this protection to apply is that the second mark in question must have been continuously used from a date anterior in point of time than the registered trademark in questions. Essentially, the use of the second mark must predate the registration of the first trademark.

• A second entitlement is conferred by the law in the last part of the provision. That is to say, if prior use is established, then the unregistered trademark can seek registration notwithstanding that a similar or identical mark is already registered.

• Section 34 is capable of being used as a sword. It can be used by the holder of an unregistered mark to launch an action seeking injunctive relief against the holder of a registered trademark. In such a situation, the factum of registration in itself does not assume such salience that it can repel such a claim.

Rohan J Alva is an arguing counsel in the Supreme Court and Delhi High Court.