Restriction on Assignment and Transmission of Trademark registration

restriction

This Article contains restriction on assignments or transmissions of trademark registration where multiple exclusive rights would be created in more than one person, which would be likely to deceive or cause confusion. Nevertheless, such assignment is not deemed to be invalid, if having regard to the limitations imposed, the goods are to be sold in different market either within India for exports. The provisions also apply to services. Sub-clauses(2) lay down the procedure for obtaining a certificate for the purpose 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. This section corresponds to section 39 of the previous law of 1958. Despite the liberalization of law relating to assignment permitting assignments of mark with or without the goodwill of business, section 40 seeks to continue the old law imposing restriction 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.

Restriction on Assignment and transmission in certain circumstances

Sub-section (1) states that general proposition prohibiting generally the assignment or transmission 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 service or description of goods or services which are associated with each other as being likely to deceive or cause confusion.

However, the provision to sub-section (1) enacts that if, having regard to the limitation imposed; such exclusive rights are not exercisable by two or more of the persons concerned in relation to goods within India, otherwise than for export there from, or 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 constructed I light of the criteria laid down in the JELLINEK’s case as being followed by the British Registry.

Transmission

The expression “transmission” is defined to mean transmission by operations 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 a concerned mark is a registered trademark. Accordingly, whether or not the transmission is valid will be determined 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.

Trademarks Act, 1999

Clause 38 and 39 lay down the provisions regarding assignability and transmissibility of the registered trademark or unregistered trademark along with the goodwill of business subject to provisions contained therein. Subject to these provisions, the clause lays down the restriction on assignment or transmission so as to prevent the spitting of rights of a trademark on a territorial basis and creating rights on different persons in different parties of India. However, the Registrar has been conferred the power to approve such assignment or transmission if he satisfied that it would not be contrary to public interest. This clause is the same as section 40 of the existing Act with necessary amendment only regarding services. The law in this respect in effect is the same as was contained in section 40 of the 1958 Act. The section lays down the restriction on assignment or transmission so as to prevent splitting of rights of a trademark on a territorial basis and creating rights on different persons in different parts of India. The object of the provision is clearly to prevent confusion and deception in the minds of the public as to the trade source of the goods or service. At the same time, to prevent hardship to the commercial community, the law empowers the Registrar to approve such assignment or transmission, if he is satisfied that it would not be contrary to the public interest.

Law applicable to registered and unregistered trademarks

The provisions of the section are applicable to both registered and unregistered trademarks, as well as transmission, as is evident from the provision to the section, which uses the expression “on application in the prescribed manner by the proprietor of a trademark”, as distinct from the expression “proprietor of a registered trademark”. An application may thus be made on form TM-P even by a proprietor of an unregistered trademark, seeking the approval of a proposed assignment.

Registrar’s approval of a proposed assignment

Provision to section 41 permits a person to obtain Registrar’s certificate or prior approval of the assignment or transmission and for this purpose any person may make an application on Form TM-P together with the statement of case setting out the circumstances and a copy of any instrument or proposed instrument effecting the assignment or transmission . The Registrar may call for any evidence or further information that may be necessary. The statement of case may also need to be amended if required to include all the relevant circumstances and, if necessary be verified by an affidavit. After hearing the applicant and any other person, whom the Registrar may consider to be interested in the transfer, the Registrar may consider the matter and issue in writing notification of approval or disapproval to the applicant and such other person accordingly. The Register shall seal a copy of the statement of case in its final from to his approval. An assignment or transmission so approved shall not be deemed to be invalid, if application for trademark registration under section 45 of the title of the person becoming entitled is made within six months from the date on which the approvals is given or in the case of the transmission made before that day, unless it is shown that the approval is obtained by fraud or misrepresentation.

Registration of title to be applied within 6 months

Section 41 explicitly provides that where an approval has been given by the Registrar under section 41, application for the trademark registration of the title is to create within the time period of six months from the date on which by the trademark approval is obtained. Since the period of six months is stipulated in the Act itself, the period is not extendable. There is nothing in the law which says as to what will happen if certain application is not made within six months. Perhaps, the proprietor of the trademark may have to make an application.

Exercise of right would not be contrary to public interest

Whether the proposed assignment or transmission would not be contrary to public interest is to be considered from a broader perspective, though essentially the question is whether in the circumstances of the case, deception will have to be approached from a practical point of view, having regard to the nature of goods and the business. By empowering the Registrar to approve cases where he is satisfied that in the circumstances of such case, the use of the trademark would not be contrary to the public interest, the law clearly envisages a discriminatory approach between business extending throughout the country and local trade without altogether prohibiting assignment of trademark registration resulting concurrent rights being vested in different proprietors in different places in India. Such discrimination is apparently justified where the trade in relation to which the mark is used is local in character, vegetables, ice creams, bread or similar perishables articles. Indeed in case of the trademark KWALITY for ice cream, the Registrar applied similar considerations and allowed assignment of the trademark, under the corresponding provisions of the old Act. On the other hand, where the business in the goods and services is such which extends to the whole or a large part of the country, such as cigarettes, textiles, pharmaceuticals, wine etc., it is possible that the use of the same mark by different proprietors with exclusive rights on each of them in different parts, will be likely to cause confusion and deception and the law does not permit such assignment.

Distinction between powers under section 40(2) and provision to section 41

Power of Registrar to issue certificates of validity under section 40(2) is limited to assignment of registered trademarks. However, the scope of provision to section 41 is wider and covers assignments of registered and unregistered trademarks and also transmissions. Section 41 contains an absolute prohibition unless covered by the exception contained in the provision so that an assignment of unregistered trademark which is contrary to section 42 is bad in law. However, the question of validity of the assignment of an unregistered trademark under section 40(2) may be considered by the Court in the context of proceedings under section 134(1)(c).The provision to section 41 covers a transmission which is already effected, and also a proposed assignment. While a proposed assignment can be subject to scrutiny in terms of the provision, a transmission by operation of law does not contemplate any such scrutiny.

Conclusion of Restriction on assignment or transmission in different parts of India

Notwithstanding anything in section 38 and 39, a trademark shall not be assignable or transmissible in a case in which as a result of the restriction on assignment or transmission there would be in the circumstances subsist, whether under this Act or any other law.

  • An exclusive right in one of the persons concerned, to the use of the trademark limited to utilize in relation to goods to be sold or otherwise traded in, in any place in India, or in relation to services for utilize, or services available for acceptance in any place in India; and
  • An exclusive right in another of these persons concerned, to the use of a trademark nearly resembling the first described trademark or of an identical trademark in relation to the same goods or services; or the same description of goods or services; or
  • Services which are associated with those goods or goods of that specification or goods which are accompanied with those services or services of that description and restriction, limited to use in relation to goods to be sold or otherwise traded in, or services for use, or applicable for acceptance, in any other place in India.

Provided that in any such type of the case, on application in the prescribed manner by the proprietor of a trademark who proposes to assign it, or by a person who claims that a registered trademark has been transmitted to him or to a predecessor in title of his since the commencement of this Act, the Registrar, if he is satisfied that in all the circumstances the use of the trademark in exercise of the said rights would not be contrary to the public interest may approve the assignment or transmission , and a restriction on assignment or transmission so approved shall not be deemed to be invalid under this section or section 40 if application for the trademark registration under section 45 of the title of the person becoming entitled is made within six months, from the date which the approval is given or, in the case of a transmission made before that  date.

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