Trade Marks Act, 1999

Notes on Clauses – This clause deals with the assignability and transmissibility of a registered trademark whether with or without goodwill of the business either in respect of all goods or services or part thereof. This corresponds to section 37 of the existing Act. The only change which is consequential is in relation to the provision for registration of trademark for services.

Comments  – This section corresponds to section 37 of the earlier Act of 1958 and provides for assignability and transmissibility of the registered trademark, whether with or without good will of the business in respect of all goods/services or part thereof. It was also held by the Courts that the goodwill of a business was in general one and indivisible. Where, therefore, two or more trademarks were used in the same business in respect of articles made and sold by the proprietor an assignment of one of the marks without the transfer of the goodwill of the entire business was ordinarily held to be improper, see, British American Tobacco Co. Ltd. v. Mahboob Buksh although in exceptional cases a business could be split up, and parts assigned separately with separate trademarks.

The inseparable character of the connection between a trade mark and the goodwill of the business concerned in the goods was recognized as fundamental under all the U.K. statutes. See section 2 of the Act of 1875, section 70 of the Act of 1883 and section 22 of the Act of 1905, before the U.K. Act of 1938 came into force. The question as to the extent to which goodwill should pass with a trade mark was brought into prominence in In re John Sinclair, Ld’s Tm., followed in George Dobie & Son, Ld’s Tm. In that case Messrs. Carreras, Ld., the well-known tobacco manufacturers, who had registered a trade mark containing the word ‘Tatler’ in respect of tobacco, whether manufactured or unmanufactured, but had used it only on cigarettes, assigned the mark for cigarettes to John Sinclair. Under an agreement the assignees were to be merely the sellers and the assignors continued to be the manufacturers of the cigarettes. Within a year after the assignment the sales of the Tatler’ cigarettes rose from 89,000 to 69,000,000. It was held that the assignment was bad on the ground that the whole of the goodwill of the business was not assigned along with the trade mark. MAUGHAM J., observed: “If the true meaning of the Mark was that the cigarettes were vouched for by the owners of the mark, Carreras Ld, and the only thing that has really been assigned with the so-called goodwill is the right to put the cigarettes on the market, still it seems to me equally clear that no true goodwill has been assigned with the cigarettes, because the reputation of Carreras, which, so to speak, was all that was vouched for by the Mark, is no longer vouched for in the hands of the Respondents. “His Lordship pointed out that the only severance in the goodwill of a business of a manufacturer permitted by section 22 of the 1905 Act was one along the lines of the classes into which goods were classified for the purposes of trademarks registration since “the goodwill concerned in the goods for which the mark has been registered is a single goodwill.” His judgment was affirmed by the Court of Appeal. Referring to the above case the Goschen Committee observed: “This decision took many members of the commercial community by surprise; and we understand that many assignments had been made without the whole of the goodwill of the assignor’s business in the goods for which the mark was registered”.

Goschen Committee

After careful consideration of the question the Goschen Committee recommended certain important changes in the Statue law in the United Kingdom. The Committee pointed out that the law governing the assignment of trademark was based upon the theory that a trade mark owed its value to the goodwill and reputation of the business concerned. See for instance, In re Magnolia Metal Co., where it was observed by the Court of Appeal that the main object of the restriction upon assignments, imposed by the Act, was to prevent confusion or deception, and this theory was no longer universally correct. “Under modern conditions of trading the tendency is for the business to be built up around the trade mark, and the commercial view today is that the goodwill of a business frequently is inherent in the trade mark itself. The Statute and common law on the subject are based largely upon obsolete conditions and take no account of this change in view”.  The Committee came to the conclusion that the requirement for the transfer of the goodwill of the business on the assignability of a trade mark was unduly restrictive in the circumstances of modern business and ought in the interests of trade to be relaxed, and accordingly suggested certain proposals by which a trader might be allowed the greatest possible liberty for the assignment of his marks consistent with the avoidance of deception to the purchasing public and the prevention of mere trafficking in trade marks. The committee recommended that the best course would be “to dispense altogether with the requirement that any goodwill must accompany an assigned or transmitted trademark“, and to provide in a proper case and with proper safeguards for assignability for parts only of the goods for which the trade mark is registered. “Deception might, however, be caused if the assignor were to continue to use the mark on goods of the same description as those for which it has been assigned, or to use a similar mark on the same goods or on goods of the same description” and necessary safeguards were suggested to prevent this. The Committee suggested further that assignment for part only of the United Kingdom, might result in confusion, if allowed freely, but that with proper safeguards such assignments would sometimes be useful and should be permitted. The Committee observed that there was no possible risk of a traffie being set up in trademarks if their suggestions were adopted, as the amendment proposed  by them in the definition of trade mark according to which the use or proposed use of the mark must be use by the proprietor, “will have the effect of invalidating any registration by a person who has no intention to use the mark himself in trade, and will thus minimize any such risk.”

The above recommendations of the Goschen Committee were implemented by section 22 of the U.K. Act of 1938.

TRIPS agreement

Article 21 of the agreement mandates that the owner of a registered trade mark shall have a right to assign the trade mark with or without the transfer of the business to which the trade mark belongs.

The above express provision in the TRIPS agreement is designed to state authoritatively the modern view in the matter of assignability of trademarks, since at common law the view was that the good will of the business was indivisible in which the mark was used and therefore an assignability of a trademark without the good will of the business and stock in trade was inoperative. Thus it was held by Fry L.J. in Pinto v. Badman Can a trader who has used a brand upon a particular article, alinate that brand to another person, so as to give the alienee any right whatever? It appears me upon first principle; he can have no such right. The brand is an indication of origin and if you transfer an indication of origin without transferring the origin itself, you are transferring a right, if any right at all, to commit fraud upon the public and such right is not recognized by the law of England.

The U.K. Act of 1938 modified the law relating to assignability so as to dispense with requirement that any good will must accompany an assigned or transmitted trade mark. The current U.K. Act of 1994 not only permitted a registered trade mark to be assigned either with or without the good will of business but also abolished law as contained in section 22(7) of the 1938 Act requiring the assignment to be advertised as per directions of the Registrar. The British Government took the view that such a requirement was of little practical effect as a safeguard to the public, but a burden to the trademark owners and the Registry. Further, the 1994 Act also permits assignability of a pending application for registration of trade mark, except in certain circumstances, which was not possible under the earlier law

Present law in India

Section 38 of the Trade Marks Act, 1999 which permits assignability and transmissibility, of a registered trademark whether with or without the goodwill of business continues the same law as it existed under the 1958 Act. However, it now permits unregistered trades mark also may be assigned or transmitted with or without the goodwill of the business concerned.

Goodwill

The expression “Goodwill” is not defined in the Act. But the term has been construed in the several cases. In Churton v. Dogules, it was held that “Goodwill must mean every advantage that has been acquired by the old firm by carrying on its business, everything connected to the premises and the name of the firm, and everything connected or carrying with it the benefit of the business”. Goodwill must mean every advantage, every possible advantage as contrasted with the negative advantage of the later partner, not carrying on the business himself- that has been acquired by the old firm in carrying on its business, whether connected with the premises in which the business was previously carried on or with the name of the late firm, or with any other matter carrying with it the benefit of the business.

Goodwill related to business

Goodwill as the subject of proprietary right is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached. It is local in character and divisible, if the business is carried on in several countries a separate goodwill attaches to it in each. So, when the business is abandoned in one country in which it has acquired goodwill, the goodwill in that country perishes with it, although the business may continue to be carried in other countries. The word “goodwill” is to be understood “to include whatever adds to the value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others which do not occur to me. In this wide sense, goodwill is inseparable from the business to which it adds value and, in my opinion, exist where the business is carried on. Such business is carried on in one place or country or in several and if in several, there may be several businesses each having a good will of its own. “

As was said by the Master of the Rolls in R.J. Reuter Co. Ld. versus Mulhens, where section 22(1) of the U.K. Act of 1938 was construed, “A firm of well-known cigarette manufacturers and proprietors of a trade mark such as “Gold flake” might as I apprehend, effectively sell or transfer to another cigarette manufacturer the mark “Gold Flake” without any contemporaneous transfer of their own goodwill or any part thereof; and thereafter the mark, although still indicative of origin, would be indicative of the manufacturing origin of the assignee and no longer of the previous owners”.

Where the secret process of manufacture, which constitutes an important element of the goodwill, is not transferred with the assignment, the assignability should be treated as one made without the goodwill of the business and would require to be advertised subject to the provisions of section 42.

Effect of assignment with Goodwill

The goodwill of a trademark is subject of a value and price. It may be sold, bequeathed or become assets in the hands of the personal representative of a trader. The transfer of goodwill confers on the transferee the exclusive rights to carry on the business transferred, the exclusive right to represent himself as carrying on such business and as against the transferor the exclusive right to use the name under which the business has been carried on; but such name must not be used so as to expose the transferor to a risk of personal liability owing to his being held out as the owner of or a partner in the business.

Sale of goodwill does not impart restraint. A person selling the goodwill of a business, for, however large a consideration, is not prevented from setting up the trade. The sale of goodwill leaves the vendor at liberty to set up the same trade in any other situation.

Assignability in some cases may be contrary to section 11

There may be some cases where the mark may be “so completely personal as of necessity to import that the goods sold under it have been manufactured by a particular individual.” This is particularly relevant in the case of trade mark for services. In the context of corresponding provisions in the U.K. Trade Marks Act, 1938, EVERSHED, M.R. said: “It may well be that it is still true to say that a mark which is on the face of it distinctive of goods made by ‘A’ cannot be assigned or transferred so as to be applied to goods made by B. for a trademark is still distinctive of origin, which decided that a trade mark could not be validly registered in respect of goods which was not distinctive of the business origin of the goods, but only of the fact that a repairing process had been applied to them. A mark on the face of it distinctive of one origin, if applied to goods of a different origin, would prima facie be deceptive and therefore subject to the terms of sec. 11 of the Act.”

In Elizabeth Emanuel Trade Mark, Elizabeth Emanuel a well-known designer of fashion clothes assigned the name ELIZABETH EMANUEL and all assets of her business including goodwill and a trade mark application for registration of the mark ELIZABETH EMANUEL. In the opposition it was contended that the use of the trademark ELIZABETH EMANUEL upon goods which were not designed by her was liable to lead to deception.

Effect of assignment on licence

In BDA Ltd. versus State of Utar Pradesh30 it is held that after assignability of the trademark, the license agreement stands automatically terminated. This decision was followed in Wonderworld Electrodes (P) Ltd. v. Ahura Welding Electrodes Manufacturing Co. Ltd, where the court observed that “it is settled law that once there is a transfer of property, the license granted by the owner/transferor for use of the property stands automatically terminated. The said principle is not only applicable to immovable property right, but also applies in respect of movable property as well.”

In SVS Oil Mills versus SVN Agro-refineries, the Division Bench had considered the rights of an outgoing partner in a partnership firm. In the said judgment, it was observed that the partner who retired from the partnership firm was having the rights which had to be settled through the settlement of accounts. The right over the property and the outstanding could be decided while the accounts are settled between the parties. Similarly, the use of trademark of the partnership firm also had to be worked out in the accounting. For more clarification about Trademark Registration in Tirupur, kindly visit our site and feel free to contact us.. We are here to help you.. Thanks for reading!!!!