In ITC Limited v Arpita Agro Products Private Limited and Ors, Delhi High Court dealt with assignments of intellectual property rights and the obligations of parties, trademark infringement and passing off.
The plaintiff, a leading producer of floor cleaners and other fast-moving consumer goods (FMCG), acquired the trademarks NIMYLE and JOR-POWR from the first defendant in 2018 for INR1 billion (USD11.8 million). Under an asset purchase agreement and brand assignment agreements, the defendant transferred full rights to the marks. The agreements included a time-limited non-compete clause, preventing the defendants from using any confusingly similar marks or trade dress.
In 2023, ITC found the defendants selling a floor cleaner under the mark POWRNYM, strikingly similar to its NIMYLE and JOR-POWR marks. ITC sought a permanent injunction, alleging trademark infringement, passing off and unfair competition.
The court analysed whether the mark POWRNYM was an infringement under the Trade Marks Act, 1999. ITC contended that the mark was phonetically, visually and structurally similar to its registered trademarks. The court applied the established test of deceptive similarity, focusing on the overall impression created by the marks on an average consumer rather than analysing them piecemeal.
The court held that the defendants’ mark was deceptively similar to those of ITC. The use of POWR and NYM was not a coincidence but a calculated attempt to benefit from the goodwill of ITC’s brands. The defendants had not only adopted a similar mark but had also copied the distinctive trade dress, including the bottle shape, label design and colour scheme that had been associated with ITC’s NIMYLE brand since 1996. The court relied on precedent involving consumer confusion, especially in the FMCG sector, where the potential for confusion among ordinary consumers is high.
The defendants argued that NYM was derived from neem, a key ingredient in their product, and hence descriptive. The court rejected this argument. Even if the mark was intended to refer to neem, the combination of POWR and NYM created a mark that was deceptively similar to ITC’s trademarks. The defendants’ attempt to register the POWRNYM trademark confirmed their intent to create a derivative mark, further breaching their contractual obligations.
As to passing off, the court applied the test in Kaviraj Pandit Durga Dutt Sharma v Navaratna Laboratories, requiring proof of goodwill or reputation attached to the product; misrepresentation by the defendant, and the likelihood of damage to the plaintiff. ITC proved that its NIMYLE brand had garnered significant goodwill, with sales exceeding INR40.8 billion over five years. The use of POWRNYM and identical packaging was a clear case of misrepresentation, intended to make consumers believe that the product was a variant of ITC’s NIMYLE. The court also found that the trade channels, target consumers and retail outlets for both products were similar, increasing the likelihood of confusion.
Crucial to the case were the defendants’ contractual obligations. ITC argued that the defendants had breached the assignment agreements by adopting a mark confusingly similar to NIMYLE and JOR-POWR. The agreements explicitly barred the defendants from using or applying for trademarks identical or deceptively similar to the transferred marks. The court found that the defendants had violated both the letter and spirit of these agreements. The non-compete clause in the agreements had expired, but the clause prohibiting the adoption of confusingly similar marks was perpetual. The court held that such clauses were enforceable because they protected the assignee’s interests in the transferred intellectual property. By adopting POWRNYM, the defendants had breached the clause.
This was a landmark judgment, reinforcing the principles of trademark protection, particularly where deceptive similarity was proved. Trademark assignments must respect the exclusive rights of assignees. Courts are vigilant in protecting consumers from confusion and deception, especially in the FMCG sector, where brand recognition is vital in consumer choice. The judgment is a warning to businesses trying to circumvent intellectual property laws by adopting deceptively similar marks, particularly when bound by contractual obligations.
Authors: Manisha Singh and Ritika Agarwal
First Published by: Lexology here