Delhi High Court: In a suit filed to seek a permanent injunction to prevent the defendants from utilizing the trade mark ‘HUALI’, a Single Judge Bench of Sanjeev Narula, J. held that the plaintiff had made out a prima facie case in their favour for grant of interim injunction and that if no interim injunction were granted in their favor, they would suffer irreparable harm.
Background
Established in 1995 and incorporated in China, the plaintiff was one of the largest manufacturers of furniture components, and these products were marketed under the trade mark ‘HUALI’. Over the decades, the plaintiff expanded its market presence to several countries including India.
The mark was first adopted by the plaintiff in 2004 for international operations and has been employed consistently and extensively within India since 2007. The plaintiff stated that significant financial resources had been dedicated to promoting their products under the ‘HUALI’ trade mark.
To reinforce their commitment to secure their rights, the plaintiff filed for registration under the Trade Marks Act, 1999 (‘Act’) through application dated 21-07-2014. The rights in the trade mark were officially transferred to the plaintiff through a Deed of Assignment dated 27-11-2014 which was opposed by defendant 1.
Defendant 1, a director of a Hong Kong based company, initially applied for registration of the mark ‘HUALI’ through an application dated 24-08-2018 filed on a ‘proposed to be used’ basis. However, shortly before opposing the trade mark application, defendant 1 strategically amended the application to claim usage dating back to 24-08-2008.
Thereafter, defendant 1 withdrew the initial application and reapplied through a subsequent application. This application, which had been granted, was filed on the same date that defendant 1 opposed the plaintiff’s trademark application. However, no mention of the second application was made in the notice of opposition, which hindered the plaintiff’s ability to contest the same.
Initially, the Trade mark Registry raised certain objections to the said application, citing the plaintiff’s pending application and calling upon the defendant to produce documents in support of the claimed user date. In response, defendant 1 produced certain documents that appeared to be ex facie forged and fabricated to state that they had a prior user date.
The defendants were using the disputed mark in respect of identical and similar goods to the plaintiff despite being aware of the prior presence of the plaintiff in the market. Defendant 1 was even purchasing manufactured products bearing the ‘HUALI’ trade mark from the plaintiff. Upon coming across the defendants’ infringing activities in October 2022, the plaintiff filed the present suit to seek the protection of their common law rights in the trade mark ‘HUALI’.
Analysis and Decision
The Court stated that the status of defendant 1 as the registered owner of the ‘HUALI’ trade mark does not negate the plaintiff’s ability to pursue a passing off action. Further, the Court stated that the trade mark registration does not confer immunity from the challenges, particularly when allegations of passing off are substantiated by evidence of prior use.
Further, the Court stated that the registration, while offering statutory benefits, does not obliterate prior common law rights established through actual use and accrued goodwill in the market. The Court stated that this understanding was supported by a conjoint reading of Sections 27, 28, and 34 of the Act.
After referring to S. Syed Mohideen v. P. Sulochana Bai (2016) 2 SCC 683, the Court said that if the plaintiff could demonstrate that they had been using the ‘HUALI’ mark prior to its registration by defendant 1 and that significant reputation and goodwill are associated with their mark, they could substantiate a claim for passing off.
Further, given the mutual acknowledgment by both parties of using the identical ‘HUALI’ mark for identical goods, the Court found no necessity for it to engage in a comparative analysis of the marks to assess deceptive similarity.
The Court stated that the identity of trade dress was also an important consideration for adjudication of passing off since it increases the propensity for unwary members of the public to be deceived. The Court stated that this situation directly invoked the principle of ‘one mark, one source’ and emphasized the need to identify a single source for goods under one trade mark to avoid public confusion.
The Court noted that the plaintiff submitted certain documentary evidence to support his claim of prior usage of trade mark as a challenge to which the defendants argued that they did not directly mention the plaintiff’s name. In response, the plaintiff effectively demonstrated that the issuing entities of these documents were wholly-owned subsidiaries of the plaintiff company.
Further, the Court stated that it found no compelling reason to doubt the authenticity of the certificate of ownership of the plaintiff. It was stated that a detailed description of the interconnected corporate structure supports the continuity of trade mark usage claims across different but related entities and also substantiates the plaintiff’s position as the prior user of the mark.
The Court noted that the domestic usage of the trade mark by the plaintiff was supplemented by its global engagement with the mark since 2004 which was demonstrated through its participation in various international trade exhibitions. The Court stated that these activities not only affirmed the continuity and extent of the trademark’s use but also the substantial goodwill associated with the ‘HUALI’ mark.
The Court held that in consideration of the above evidence, the plaintiff has prima facie established their use of the trade mark within India through their subsidiary companies since 2007. The Court also stated that significant inaccuracies were found in the documentation submitted by the defendants to the Trade mark Registry which undermined their claim of continuous usage.
Further, the Court stated that the temporal anomalies in the defendants’ documentation did not only suggest potential manipulation and fabrication but also seriously undermined the credibility of their assertions. It was also stated that these discrepancies indicated a deliberate attempt by the defendants to retroactively establish a usage timeline contrary to the established corporate and legal records.
The Court stated that the chronological inconsistencies in the documentation were stark and the timeline contradiction was not merely a clerical error but a fundamental flaw that suggested potential willful deceit or fraudulent intent to establish a backdated history of the use of the trade mark.
Thus, after considering the evidence in totality and the dubious nature of the defendants’ documentary submissions, the Court held that it was prima facie established that the plaintiff, having consistently used the mark since at least 2007, held seniority in usage rights of the ‘HUALI’ trade mark.
Further, the Court held that the continuous usage of the mark by the plaintiff had undeniably resulted in substantial goodwill and a strong reputation associated with the mark which was evidenced by the impressive annual sales figures. The Court stated that these figures not only quantified the mark’s economic impact but also served as a tangible representation of consumer recognition and trust over an extended period.
The Court stated that the defendants’ subsequent adoption of the identical mark for identical goods and services was evidently a dishonest attempt to deceive consumers into believing that their products were associated with or originated from the plaintiff.
The Court stated that the potential for consumer confusion created by such deceitful practices was substantial and was likely to lead to dilution of the plaintiff’s brand equity and diversion of sales which could inflict irreparable harm on the plaintiff’s business. The Court found that in case no interim injunction is granted to the plaintiff, they would suffer irreparable harm since the balance of convenience also lied in the plaintiff’s favour.
Accordingly, while disposing of the application, the Court directed that during the pendency of the suit, the defendants or anybody acting on their behalf were restrained from manufacturing, selling, exporting, offering for sale, advertising/ displaying, directly or indirectly, their products under the trade mark ‘HUALI’ or any other mark or dress which is identical and/or deceptively similar to the plaintiff’s.
The matter has been listed for further consideration on 01-08-2024.
[Dongguan Huali Industries Co. Ltd. v. Anand Aggarwal, 2024 SCC OnLine Del 4488, Decided on 01-07-2024]
Advocates who appeared in this case:
For Plaintiff — Advocate Varun Goswami, Advocate Yogesh Goel, Advocate Sahil Agarwal, Advocate Hritik Chaudhary, Advocate Aryan
For Defendants — Sr. Advocate Chinmoy Pradip Sharma, Advocate Ashish Choudhary, Sr. Advocate Dhruv Surana, Advocate Arya Hardik, Advocate Irfan Haseeb, Advocate Krishnajyoti Deha, Advocate S. Bhattacharya