Carlton Shoes Ltd. and Ors. vs. VIP Industries Ltd.

Case Citation: MANU/DE/4605/2023
Jurisdiction: High Court of Delhi
Date of Decision: July 17, 2023
Hon’ble Judge: Jyoti Singh, J.

Acts/Rules/Orders:

Code of Civil Procedure, 1908 (CPC) – Order XXXIX Rule 1; Code of Civil Procedure, 1908 (CPC) – Order XXXIX Rule 2; Trade Marks Act, 1999 – Section 27, Trade Marks Act, 1999 – Section 27(2), Trade Marks Act, 1999 – Section 28, Trade Marks Act, 1999 – Section 28 (1), Trade Marks Act, 1999 – Section 28(1), Trade Marks Act, 1999 – Section 28(3), Trade Marks Act, 1999 – Section 29, Trade Marks Act, 1999 – Section 30 (2), Trade Marks Act, 1999 – Section 30(2), Trade Marks Act, 1999 – Section 31, Trade Marks Act, 1999 – Section 34, Trade Marks Act, 1999 – Section 7; Trade Marks Rules, 2002 – Rule 22

Issue(s) Presented:

The court addressed the following legal issues in its decision:

• Whether the Defendant’s use of trademarks CARLTON and its variants for goods in class 18 amount to infringement of the Plaintiff’s registered and well-known trademarks?
• Whether the Defendant’s claim of alleged infringement is valid given the prior adoption and registration of the Plaintiff’s trademarks?
• Whether the Defendant’s claim of spillover and trans-border reputation is substantiated?
• Whether the Plaintiff’s delay, laches, and acquiescence bar their claim of infringement?

Rule(s) of Law:

Relevant legal principles and rules applied in the case include:

• Trade Marks Act, 1999 – Section 27: Deals with infringement of registered trademarks.
• Trade Marks Act, 1999 – Section 28: Provides for rights conferred by registration.
• Trade Marks Act, 1999 – Section 29: Discusses the consequences of infringement.
• Trade Marks Act, 1999 – Section 34: Covers the rights of action for passing off arising out of the use of trade marks.
• Common law principles of passing off: Protects unregistered trademarks and prevents misrepresentation in trade.
• Principle of prior use: Determines the first user and adopter of a trademark.
• Code of Civil Procedure, 1908 (CPC) – Order XXXIX Rule 1 and Rule 2: Relates to temporary injunctions.

Procedural History:

The case involves two applications filed for interim injunctions. Carlton Shoes Ltd. and Carlton Overseas Pvt. Ltd. (hereafter “Carlton”) filed CS(COMM) 730/2019, seeking a permanent injunction against VIP Industries Ltd. (hereafter “VIP”) for infringing their registered trademarks and engaging in passing off. VIP filed a cross suit CS(COMM) 52/2020, seeking an injunction against Carlton’s use of trademarks “CARLTON LONDON” and formative marks for class 18 goods. The applications were heard together due to common questions of law and fact.

Facts:

Carlton, a renowned manufacturer of footwear and fashion accessories, boasts a storied history with the trademarks “CARLTON LONDON” and “CARLTON,” having adopted them in 1992 and 1993 respectively. The company’s commitment to safeguarding its intellectual property led to the registration of the word mark “CARLTON” under Application No. 627450 in India on 06.05.1994 for class 18 goods, encompassing leather, trunks, bags, and more. Simultaneously, the distinctive mark “CARLTON LONDON” was embraced. Internationally, the earliest registration for “CARLTON LONDON” occurred on 28.09.1998 under No. UK00002178254, securing class 25 goods, including footwear, in the United Kingdom. VIP Industries, a leading figure in luggage and travel bags, has a history dating back to its incorporation in 1968. Initially adopting the mark “DIPLOMAT CARLTON” in 1980 and later “CARLTON” in 1986, VIP’s predecessor-in-title paved the way for the mark’s use. By applying for UK registrations on 23.12.1986 (class 25) and 19.05.1988 (class 18), VIP’s predecessor established its presence. VIP’s expansion to over 50 countries by 1994 fueled the application for “CARLTON” mark registration in India on 26.07.1995, valid in class 18. Subsequent acquisitions and assignments, notably from Carlton International PLC in 2004, solidified VIP’s rights. On 21.04.2006, VIP’s mark “CARLTON” was officially registered in class 18 in India through Application No. 1445045, marking usage since 25.05.2004. It’s important to note that Carlton’s mark “CARLTON” is registered in class 18, encompassing leather goods and the like, while VIP’s “CARLTON” mark is similarly registered in class 18, encompassing travel bags, suitcases, laptop bags, and more.

Arguments on Behalf of the Plaintiff:

• Carlton argues that VIP’s use of identical/similar marks for class 18 goods constitutes infringement and passing off, causing misrepresentation and confusion.
• Carlton claims statutory rights under Section 28 of the Trade Marks Act, 1999, and protection under Section 29.
• Carlton asserts that VIP’s claims of prior adoption and use of the mark “CARLTON” are erroneous and not substantiated by evidence.
• Carlton argues that VIP’s delay in asserting rights, along with Carlton’s trans-border reputation, highlights the merit of their claim.
• Carlton asserts the existence of common law rights through extensive use of the marks and their reputation.

Arguments on Behalf of the Defendant:

• VIP denies infringement, asserting that it has continuously used the “CARLTON” mark since the 1980s.
• VIP claims ownership of common law rights and trans-border reputation due to substantial sales, advertising, and goodwill.
• VIP argues that Carlton’s use of the mark is fraudulent, relying on Section 34 of the Trade Marks Act, 1999, and asserts that Carlton’s delay in seeking injunctions constitutes acquiescence.
• VIP claims that its adoption of the mark predates Carlton’s usage and that Carlton has adopted the mark dishonestly.
• VIP asserts that both parties can coexist in the market as they deal in different goods and there is no likelihood of confusion.

Court’s Analysis and Decision:

The court first considered the legal principles governing trademark infringement and passing off. It emphasized the importance of consumer perception, the likelihood of confusion, and the concurrent existence of registered and unregistered marks.

On the issue of infringement, the court analyzed the similarities between the marks and the goods in question. It held that while both parties used the “CARLTON” mark, Carlton’s usage was preceded by VIP’s. However, VIP failed to establish its prior use before Carlton’s registration of the mark. VIP’s case rested on an assignment agreement in 2004, but it failed to demonstrate usage by its predecessor before that.

The court considered VIP’s claim of trans-border reputation and spillover effect. It held that VIP’s reputation was mainly in relation to class 18 goods, while Carlton’s reputation pertained to footwear and accessories. The spillover effect, as argued by VIP, was not established as there was no evidence of VIP’s goods being sold in the footwear market.

Regarding the issue of delay, the court noted that Carlton’s adoption of the mark in 1992 was followed by continuous use, substantial sales, and advertisements. Therefore, Carlton’s delay in seeking injunctions was not tantamount to acquiescence.

The court addressed the question of laches, holding that VIP was aware of Carlton’s mark and yet did not assert its rights for over two decades. Thus, laches could be attributed to VIP, and the delay was not a bar to Carlton’s claim.

The court concluded that Carlton had established a prima facie case of infringement. However, in the absence of material on balance of convenience and irreparable loss, the court deferred the grant of injunctions. It directed Carlton to furnish additional evidence within six weeks.

The key points and principles discussed:

Trans-Border Reputation and Goodwill: To succeed in a passing-off claim, proving goodwill and reputation within the specific jurisdiction (e.g., India) is crucial. Global reputation alone is insufficient; evidence of local reputation is required.

Market Presence: A successful passing-off claim necessitates establishing a strong market presence in the defendant’s jurisdiction. This is proven by demonstrating considerable spillover of reputation and awareness into that jurisdiction through advertisements and promotions.

Customer Awareness and Confusion: The claimant must show that customers in the defendant’s jurisdiction are aware of its mark and likely to be confused by the defendant’s similar mark. The mere intent to enter the market is insufficient without actual awareness and confusion among customers.

First in the Market Principle: The “first in the market” principle must be applied within the specific jurisdiction, prioritizing the party that introduced the mark there. In considering the “first in the market” principle and its application within a specific jurisdiction, it is important to acknowledge the evolving landscape of trademark law, particularly in cases where global implications are at play.

In the case of Milmet Oftho Industries & Ors. v. Allergan Inc[1]., the court’s ruling emphasized the necessity for a comprehensive evaluation of trademark ownership, especially in the pharmaceutical sector. The court recognized that the potential harm resulting from deceptive similarity in the pharmaceutical industry may exceed the consequences in cases involving ordinary consumer products. The court’s reasoning implies that the identical use of a mark associated with a drug globally could lead to adverse outcomes if permitted within a specific jurisdiction.

This perspective introduces the idea of the “first in the world market” principle, which extends beyond mere territorial boundaries. While the traditional “first in the market” principle prioritizes the entity that introduced the mark within a specific jurisdiction, the “first in the world market” principle takes into account the global impact of a product and the potential harm caused by deceptive similarity.

Therefore, in the context of determining trademark ownership, it is crucial to strike a balance between the territoriality principle and the universality doctrine. While territoriality remains a foundational principle, the case of Milmet Oftho Industries & Ors. v. Allergan Inc. highlights the need to adapt the “first in the market” principle to the unique circumstances of each case, especially when global implications are involved. The ultimate test for establishing “first in the market” should consider not only the party that introduced the mark within a jurisdiction but also the potential global consequences of deceptive similarity.

Evidence Requirement: Substantial evidence is necessary to support claims of reputation, prior use, and market presence. Mere promotional materials or articles might not suffice if they don’t establish the mark’s existence within the jurisdiction.

Likelihood of Confusion: Passing off involves confusion and deception. The defendant’s mark causing confusion among consumers highlights the significance of the claimant’s reputation and market presence.

Balancing of Interests: The court considers convenience and harm, with a prima facie case for an injunction demonstrated by one party while the other fails to prove sufficient reputation and presence in the market.

Territoriality Principle vs. Universality Doctrine: The territoriality principle emphasizes proving local goodwill and reputation, contrasting with the universality doctrine that protects the first global user of a mark.

Presence and Customers in the Jurisdiction: The claimant must have a tangible presence within the defendant’s jurisdiction, including actual customers there, not just abroad customers visiting.

Nature of Evidence: Various forms of evidence like articles, surveys, app downloads, and website access data can establish reputation and goodwill.

Intent to Enter the Market: Mere intent to enter the defendant’s market isn’t enough; actual reputation and goodwill within the jurisdiction are required.

Defendant’s First Use: When the defendant is the first user of the mark within the jurisdiction, the claimant’s action may fail if they can’t prove sufficient reputation and goodwill there.

Likelihood of Confusion vs. Actual Confusion: While the likelihood of confusion serves as a valid test, actual confusion might need proof during final adjudication.

Conclusion:

The court’s decision in this case highlights the importance of prior use and continuous usage in trademark matters. It emphasizes the need for substantial evidence to substantiate claims of prior use, reputation, and infringement. While the court recognized Carlton’s prima facie case, it deferred the grant of injunctions due to the absence of certain evidence.

The court specifically looked for evidence that would demonstrate the spillover of the plaintiff’s reputation into the Indian market, particularly in the context of EV (electric vehicle) charging services. The court acknowledged that the plaintiff had cited various documents, including articles, surveys, and sales-related data, to support their claim of reputation. However, upon examination, the court found that these pieces of evidence did not sufficiently establish the necessary criteria for a transborder reputation in the Indian EV charging segment.

The court’s assessment focused on several key factors:

Lack of Mention of EV Charging Services: The court noted that the articles and documents provided by the plaintiff primarily highlighted the plaintiff’s activities in electric scooter-sharing and related fields. These documents did not make any direct reference to the plaintiff’s engagement in the EV charging business in India. Therefore, they did not contribute to the establishment of a transborder reputation in the EV charging sector.

Scope of Activities: The court found that the plaintiff’s activities, as reflected in the evidence, were primarily centered on taxi-hailing and electric scooter sharing. The evidence did not indicate a clear presence or intention to engage in EV charging services in India.

Territoriality Principle: The court emphasized the importance of the territoriality principle, which requires that reputation and goodwill be established within the jurisdiction where the alleged passing off is claimed. The plaintiff’s evidence primarily demonstrated its reputation in other regions but lacked substantial evidence of its reputation and activities within the Indian market.

Requirement of Customers and Sales in India: The court stressed the necessity for the plaintiff to show actual customers, sales, and a physical presence in the Indian market. Mere downloading of the plaintiff’s app by users in India or accessing the plaintiff’s website did not sufficiently demonstrate the plaintiff’s reputation or activities in the EV charging sector.

Intent vs. Evidence: The court rejected the argument that the plaintiff’s intent to enter the Indian market would be sufficient to establish a reputation. Instead, the court maintained that the actual evidence of reputation and customer confusion was essential.

This analysis underscores the significance of providing concrete and territorially relevant evidence when attempting to establish a transborder reputation in legal cases of passing off.

[1] MANU/SC/0512/2004