Restriction on Assignments or transmissions of trademark in India

This clause contains restriction on assignments or transmissions of trademark where multiple exclusive rights would be created in more than one person, which would be likely to deceive or cause confusion. Like, such assignment is not suitable to be invalid, if having reference to the limitations imposed, the goods are to be sold in different markets – either within India or for exports. The provisions also apply to services. Sub-clause (2) lays down the procedure for obtaining a certificate for the purposes of assignment envisaged in sub-clause (1) and empowers the Registrar to issue certificate for the purpose as to whether or not the proposed assignment is valid. Unless obtained by fraud, the certificate as to validity shall be conclusive.

Comments

This restriction section corresponds to section 39 of the previous law of 1958 Act. Despite the liberalization of law relating to assignment permitting assignments of marks with or without the goodwill of business, section 40 seeks to continue the old law imposing restrictions on assignment or transmission of a trademark where multiple exclusive rights would be created in more than one person and which would be likely to deceive or cause confusion. In this connection it may be mentioned that the new law governing licensing of trademarks (Section 48-55) is liberal in its entire approach. The law has deleted the reference to the concept of “trafficking in trademarks”.  The Parliament has rightly followed the British Approach and considered the notion of trafficking in trademarks, namely dealing in trademarks as a commodity by itself, is more imaginary than real. As a trademark representing the goodwill of the owner’s business is invaluable asset of industrial property, the proprietor himself would exercise due control over the manner in which the trademark is used by the permitted user, to protect his own reputation. Section 39 of the Old Act was based on section 22(4) and 22(5) of the U.K. trademarks Act, 1994. In the background of the general reform of Trademarks law in India, especially for registration of an identical or similar mark in relation to same or similar goods or services based on consent of the proprietor of the earlier trademark or earlier right in terms of section 11(4) of the Act; for registration of such marks based on honest concurrent use or of other special circumstances under section 12; and for restriction of assignment of trademark with or without goodwill of the business under sections 38 and 39, the provisions in section 40 and 41 appear wholly out of tune. It marks little sense in continuing the old restrictive and complex provisions controlling the assignment of trademarks. The strongest guarantee is that the proprietor of a trademark will not do anything to debase his proprietary right in the trademark.

Registered or unregistered

The provisions in sub-section (1) of section 40 cover both registered as well as unregistered trademarks.

Assignment or transmission not invalid in certain circumstances

Sub-section (1) states the general proposition prohibiting generally the restriction  of assignment or transmission of trademarks which would result in exclusive rights in more than one of the persons concerned to the use of the mark in relation to-

• Same goods or services
• Same description of goods or services
• Goods or services or description of goods or services which are associated with each other as being likely to deceive or cause confusion.

However, the sub-section (1) enacts that if, having regard to the limitations applied, such exclusive rights are not exercisable by two or more of the persons concerned in relation to goods to be exported to same market outside India, the assignment or transmission will not be deemed to be invalid. Whether or not the goods or services are same is one of fact. The expression “the same description of goods or services” is to be construed in light of the criteria laid down in the Jellinek’s case, as is being followed by the British Registry. The expression “goods or services or description of goods or services which are associated with each other” would refer to the marks which are associated with each other” would refer to the marks which are associated under sections 16, read with section 2(3) of the Act.

Special provision for assignment of registered trademark

In the case of a registered trademark, sub-section (2) allows the proprietor who proposes to assign the mark to submit to the Registrar an application on Form TM-P, along with a statement of case in duplicate with a draft copy of the proposed deed of assignment. The Registrar may call for any additional information or require the case to be verified by an affidavit on Form TM-M as may be required for the satisfaction. Wherever required the Registrar may also hear the applicant and any other person whom the Registrar may consider to be interested in the transfer. Where a statement of case is amended, three copies thereof in final form shall be left at the Trademarks Registry. The Registrar will seal a copy of the statement of case in final form to certificate or notification. Thereafter the Registrar may issue a certificate stating whether, having regard to the similarity of the goods or services and of the trademarks referred to in the case, the proposed assignment would or would not be invalid under sub-section(1). It has been held that the Registrar is not to go behind the assignment to ascertain whether the assignment would have the effect of destroying the trademark by causing it to become deceptive.  Since sub-section (2) covers only registered trademark, the benefit of this procedure is not available in respect of an unregistered trademark.

Transmission

The expression “transmission” is defined to mean transmission by operation of law, devolution on the personal representative of a deceased person and any other mode of transfer, not being assignment. Sub-section (2) of section 40 is not applicable in the case of a mark involved as a result of a transmission, even if the concerned mark is a registered trademark. In respectively, whether or not the transmission is valid will be determined and found out by the authority at the time of consideration of an application for trademark registration of the title of the person becoming entitled by transmission under section 45. In Finley Mills versus National Textile Corporation, the court referred to the term “transmission” as it appeared in Black’s law dictionary and the Court then held thus: “It is very clear from this definition that the term “transmission” by the operation of law pre-supposes the class of cases as are set out in the definition, namely, that as a result of orders passed in judicial proceedings or as a result of survivor ship, or any other such case, a trademark can be said to be devolve an another person by operation of law”.

Section 39 brings about an important change in the law concerning restriction of assignment of unregistered trademark. Section 38 of the repealed Trade and Merchandise Act, 1958 did not permit an unregistered trademark to be assigned or transmitted except along with the good will of the business concerned, unless the following conditions are fulfilled:

• At the time of assignment or transmission of the unregistered trademark it is used in the same business as a registered trademark; and
• The registered mark is assigned or transmitted at the same time and to the same person as the unregistered trademark; and
• The unregistered trademark relates to goods in respect of which the registered is assigned or transmitted.

The restriction law was so unrealistic and uncertain; it was not clear whether registered or unregistered trademark should be same or similar. The law did not envisage the possibility of a situation where there existed only one trademark which was unregistered, nor did it require the validity of the registration of the registered mark at the time of assignment. The above unsatisfactory situation has been cured by section 39, which has enacted explicitly that an unregistered trademark may be assigned or transmitted with or without the good will of the business concerned.

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