All you need to know about the origin of foreign trademark
Production of goods under foreign trademark:
Modern times have seen the advent of powerful MNCs that market their products world wide and exploit their technological skills and prestigious trademarks or market power by establishing production facilities in various countries. A foreign concern or an MNC with or without an Indian collaborator may choose to establish production facilities in India. It may market or product under its own established trademark, operating in one or more countries.
The major route of introduction of FTMs in India has been the establishment of production facilities for goods by foreign interests, irrespective that the goods were earlier introduced in India by way of imports or not. This is the specific area where the government had desired to control the use of FTMs and issued the guidelines that FTMs shall not be allowed for internal sales.
The 1999 act does not bar the use of any trademark, including trademarks of foreign origin, in India. The manufacturer or trader of goods can introduce goods in the market with any mark. There is no requirement of any consent or permission from any authority whatsoever. An FTM enjoys legal protection as an unregistered trademark in India at common law as incorporated in the 1999 act.
If the trademark owner wants to acquire better rights, he may choose to register the trademark under 1999 act.
Permissions necessary for use of FTMs:
The use of FTM in India has had many implications, most of which are not valid from early 1992 or late 1991.
- The permission for production of goods on which the FTM would be placed.
- The permission for establishing an undertaking to manufacture goods.
- Ownership pattern of the undertaking – foreign equity, Indian collaborator and public and
- Registration of FTM in India by a foreigner;
- Permission from the owner of the FTM;
- Permission from the government as to the use of the FTM at industry level;
- Permission under section 28(1)(C) FERA, if applicable from RBI.
- Permission to remit the consideration for use of FTM in foreign exchange from the reserve bank;
- Registration of Indian user as registered user involving permission from the government under 1958 act;
- This involved actual exercise of the quality control by the trademark owner over the licensee or registered user.
The question of consideration to be paid to the foreign owner for allowing the Indian licensee to use his trademark, or if the consideration is adequate or excessive in the interest of country, is no more of concern to the government.
It is one market worldwide in which licensor and licensee decide between themselves and even if the terms are unequal, the trademark laws do not help the licensee.
Ban on FTMs lifted in 1992:
At the industry level, the ban on the use of the FTMs was expressly lifted from 15 May, 1992. The earlier practice of registration of trademark in the name of an Indian affiliate in order to avoid the requirement of permission of the reserve bank was normally not favored, as the foreign owner continued to be the proprietor of the impugned trademark (FTM) in other countries.
Proprietor to ensure quality of goods:
Simultaneously, there is an important proviso that the proprietor of the trademark must oversee the quality of goods. This enables the proprietor of the FTM to engage in many restrictive practices which raise the cost to licensee unit. The developing countries find pursuit of such policies detrimental to their interest. This was endorsed by various studies conducted by the UNCTAD on technology transfer and the use of the trademarks.
The Indian government had been following the policy of not allowing the use of FTMs and was also putting in an effort to curb restrictive practices at the time of establishment of the undertaking with foreign collaboration with the help of licensing provisions under various legal powers. The government, under the MRTP act (since repealed) and the IRDA, enjoyed some powers to monitor the detrimental practices on an on-going basis; under this the government could restrict the expansion of industries or control monopolistic and restrictive trade practices. But these powers were seldom exercised for lack of institutional structures. The New industrial policy, 1991 had relaxed the scope of licensing and took many industries out of the purview of the IRDA.
Hybridization of FTMs:
To reduce the adverse impact of use of FTMs, the hybridization of FTMs with an Indian prefix had been pursued in India successfully till about the year 1989. At the politico-legal level, the government had found it easy to say that they considered such hybrid marks as Indian trademarks and not foreign. At the enterprise level, the Indian collaborator in the joint venture could fall back upon the Indian prefix of trademark in case the foreign owner terminated the license to use the FTM. It could then reap some advantage from the expenses on advertising and promotion of the hybrid trademark, as against when the FTM alone was used.
In terms of measures, 51% foreign equity has been allowed in the Indian joint ventures. The pre-condition of using hybrid trademark had been scrapped in 1991. It was a foregone conclusion that the hybridization would not remain in vogue. The enterprises using hybrid trademarks have switched over to the FTMs without any debate. The change in trademarks had come very fast after the announcement in may 1992.
The single most important use of trademarks, is in advertising and building product differentiation or trademark preference in the market. In 1984, provisions were incorporated in the MRTP act, 1969 (since repealed) requiring advertising to be truthful or fair. The same were enhanced by their incorporation in the consumer protection act, 1986. These provisions further increase the value of FTMs. FTMs could honestly claim their successful overseas market operations and rely upon international image, whereas domestic or comparatively new trademark are at disadvantage. When a trader in a brochure claimed that the bajaj quality was accepted internationally and it was found they had never exported the goods, the court took the view that the claim in the brochure was likely to cause confusion. The dishonest claim was also a factor in giving relief or injunction to the plaintiff.
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