Establishing Goodwill: A Key Factor in Trademark Disputes

By Rima Majumdar and Anuj Dhar

Introduction

Hon’ble Mr. Justice C. Hari Shankar, while deciding the case of Khadi and Village Industries Commission vs Girdhar Industries and Anr.[1], established strict parameters to maintain a plea of passing off against a registered trademark. The Learned Single Judge emphasized on the importance of goodwill and reputation in cases relating to passing off actions, while adjudicating upon an interim relief concerning the use of the mark “KHADI”.

Brief facts about the Case

Khadi and Village Industries Commission or KVIC (Hereinafter referred to as ‘Plaintiff’) was constituted in 1957 to carry out work relating to implementation of programs for the development of Khadi and related industries in rural areas. During its operations, it promotes products bearing the trademark “Khadi” and also aids in the improvement of small-scale artisans, weavers and other members of the rural industries. The Plaintiff is the registered proprietor of the mark “KHADI” and has enjoyed continuous and uninterrupted use of the trademark “KHADI” in several classes, for a variety of goods and services since 1956. A list of registrations obtained by the Plaintiff across several classes are provided below:

Sr. No.	Date of Application	Trademark	Class	User Claimed
1.	November 27, 2014	KHADI	1, 2, 3, 4, 5, 6, 7, 8, 14, 16, 18, 19, 20, 21, 23, 24, 25, 26, 27, 29, 30, 32, 34, 35, 38 and 42	September 25, 1956
2.	November 28, 2014	KHADI	22	October 4, 2014
3.	June 19, 2018		1, 2, 3, 4, 5, 6, 7, 8, 14, 16, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 29, 20, 32, 34, 35, 38 and 42	September 25, 1956
4.	December 2, 2014		1, 2, 3, 4, 5, 6, 7, 8, 14, 16, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 29, 30, 32, 34, 35, 38 and 42	May 31, 2000
5.	March 31, 2020		12, 13, 17, 28, 31, 33 and 37	September 25, 1956

 

Girdhar Industries (Hereinafter referred to as ‘Defendant’) is the registered proprietor of the mark “GIRDHAR KHADI” in Class 3, claiming use since 2001 for goods related to Soaps and Detergents.

The pith and marrow of the present case is the alleged trademark infringement of Plaintiff’s registered trademark “KHADI” by Defendant’s registered mark “GIRDHAR KHADI” in Class 3 of the NICE Classification.

Plaintiff’s Contentions:

The Plaintiff made the following submissions:

1. The Plaintiff holds several registrations of the word mark ‘KHADI’ and the device mark in multiple classes, with the earliest registration dated November 27, 2014, claiming use from September 25, 1956.
2. The Plaintiff operates various websites, social media platforms, and a mobile application called “Khadi India” to help customers locate Khadi India stores.
3. Products with the Plaintiff’s KHADI mark are sold nationwide, with substantial expenditure on advertising and promotion, resulting in the KHADI trademarks acquiring significant reputation and goodwill as source identifiers for the Plaintiff.
4. The Plaintiff has filed applications under Section 57 of the Trademarks Act to cancel the Defendant’s registrations, alleging violations of Sections 9 and 11 of the Act.
5. The Plaintiff has presented invoices raised by the Defendants describing goods as “Khadi Class,” “Khadi Pure,” “Khadi Plus,” “Khadi Soap,” etc., without mentioning ‘GIRDHAR.’
6. Photographs of the Defendants’ “Khadi Pure” detergent powder showcase the prominent use of “Khadi” with “Girdhar” in a disproportionately small image above “Khadi.”
7. The Plaintiff contends that ‘KHADI’ is a well-known mark, referencing the judgment in Khadi & Village Industries Commission vs Raman Gupta[2], where ‘KHADI’ was deemed to be a well-known trademark.
8. The Plaintiff holds subsisting registrations for the word mark “KHADI” in Class 5 (pharmaceuticals) and Class 35 (variety of goods including soap).
9. In the rejoinder, the Plaintiff emphasizes that the Defendants are using the mark “KHADI” alone, despite their registration being for the mark “GIRDHAR KHADI,” suggesting prima facie infringement of the Plaintiff’s mark.
10. The Plaintiff argues that its KHADI trademark was already registered in Class 3, when the Defendant’s mark was granted, indicating bad faith in the Defendant’s registration.
11. The Plaintiff cited the judgments in Polson Ltd. Vs Polson Dairy Ltd[3], Raj Kumar Prasad v. Abbott Healthcare (P) Ltd[4], and Clinique Laboratories LLC v. Gufic Ltd[5], to assert that an action for passing off can be based on a lapsed mark and that infringement actions can be taken against a registered trademark.

Defendant’s Arguments:

The Defendant made the following submissions in response to the Plaintiff’s claims:

1. The Defendant is the registered proprietor of the mark “GIRDHAR KHADI” in Classes 3, 29, and 30, claiming uninterrupted and continuous use since 2001.
   

   Sr. No.	Date of Application	Trademark	Class	User Claimed
   1.	March 4, 2005	GIRDHAR KHADI	3	April 1, 2001
   2.	July 18, 2007	GIRDHAR KHADI	29	April 1, 2004
   3.	October 6, 2021	GIRDHAR KHADI	35	April 1, 2001

 

2. The Defendant denied that consumers are likely to be confused by the Defendant’s products under the trademark ‘GIRDHAR KHADI’ as those of the Plaintiff’s.
3. The Defendant argued that they were using the words “GIRDHAR” and “KHADI” in conjunction together and were not using “KHADI” alone or in an individual capacity.
4. The dispute concerns the use of the Defendant’s mark on soaps and detergents in Class 3.
5. Registrations for the mark “KHADI” held by the Plaintiff in Classes 29 and 30 are still subsisting, however, the registration for the impugned mark under Class 3 has lapsed on February 18, 2023, due to non-renewal.
6. The Plaintiff currently has only two valid registrations in Class 3, effective from 19 June 2018 and 2 December 2014, claiming use since 31 May 2000. These registrations are on a “proposed to be used” basis, thereby failing to establish prior goodwill and reputation.
7. No evidence has been submitted by the Plaintiff to show use of the ‘KHADI’ mark related to soaps and detergents prior to 2001.
8. The Plaintiff did not possess the domain name khadiindia.gov.in until May 2015, while the Defendant’s website, www.girdharkhadigroup.com, was registered on 7 April 2013.
9. The Defendant had already disclosed the grant of registration for its mark “GIRDHAR KHADI” in Class 3 to the Plaintiff in 2017, while countering the opposition filed by the Plaintiff against the Defendant’s application in Class 29. This means that the Plaintiff’s claim of discovering the said mark in December 2020 is false and misleading.
10. The Plaintiff adopted and started using the “KHADI” marks for soaps, detergents, and allied goods only since 2018-2019, whereas the Defendant’s use for the said goods was much prior to that.
11. The Defendant holds several copyright registrations for “GIRDHAR KHADI” labels.
12. In response to the Plaintiff’s claim regarding the disproportionately small size of “Girdhar” on the packaging as opposed to that of “Khadi”, the Defendant submitted packaging images, as used as on the packs of its products, shows that “GIRDHAR” in the “GIRDHAR KHADI” mark is prominent and, in several cases, larger in size than “KHADI”. The Defendant also emphasized its willingness to use “GIRDHAR” in a larger font than “KHADI” on its branding and packaging. A side-by-side comparison of the Plaintiff’s and the Defendant’s marks are given below:

The Plaintiff’s Mark	The Defendant’s Mark

 

13. The Defendant argued that “KHADI” can only be considered a well-known trademark if determined by a court or the Registrar, per Section 11(8) of the Trade Marks Act.

Legal Issues considered by the Hon’ble Court and its subsequent findings

Goodwill and reputation of the Plaintiff and the plea of passing off

The court examined the Plaintiff’s claim of goodwill and reputation for the “KHADI” mark, finding most of their evidence irrelevant to proving actual use on the relevant products. The court highlighted the Plaintiff’s failure to provide concrete sales and promotional data before the Defendant’s 2005 registration of the “GIRDHAR KHADI” mark. Due to this lack of evidence, the court concluded that the Plaintiff did not establish a prima facie case of passing off.

Validity of Defendant’s registration

The court emphasized that the Plaintiff’s registration for “KHADI” became effective in Class 3 since 2014, while the Defendant’s “GIRDHAR KHADI” mark had been registered since 2005. As infringement remedies are only available from the effective registration date, the Defendant’s earlier registration stands. The Hon’ble Court found no sufficient grounds to invalidate the Defendant’s registration, noting the Plaintiff’s failure to prove bad faith or dishonesty on the part of the Defendant. Consequently, no infringement action by the Plaintiff was maintainable.

Suppression of facts

The court addressed the Plaintiff’s alleged suppression of facts regarding its awareness of the “GIRDHAR KHADI” mark. Evidence showed the Plaintiff knew of the mark since 2017 and not 2020 as claimed. The court viewed the Plaintiff’s selective disclosure and omission of key details as detrimental, thus disqualifying the Plaintiff from equitable interlocutory relief.

Balance of convenience and irreparable loss

The court considered the long delay by the Plaintiff in taking legal action, despite the Defendant’s mark being registered since 2005 and extensively used. Given the substantial growth and high sales of the Defendants’ business, the court determined that the balance of convenience and irreparable loss did not justify granting an injunction against the Defendants’ use of the “GIRDHAR KHADI” mark.

Judgement

The High Court of Delhi held that the grant of interlocutory injunction against Defendants, restraining the use of “GIRDHAR KHADI” and “BR KHADI” marks is denied.

Hon’ble Mr. Justice C. Hari Shankar laid down strict parameters for the Plaintiff to contest infringement, stating that the pleadings must not only establish the invalidity of the Defendant’s registration but also present convincing prima facie grounds to satisfy the court. The court also emphasized the importance of establishing goodwill and reputation in the context of passing off actions.

Thereafter, after careful consideration and analysis of the dispute and the submissions of counsels, the Hon’ble Court held that the Plaintiff is prima facie not entitled to interim relief due to the following reasons:

1. Defendant is the registered proprietor of the “GIRDHAR KHADI” trademark. Since there is no prima facie basis to hold the registration of the Defendant’s mark invalid, there can be no finding of infringement against Defendant’s registered trademark.
2. There is no prima facie evidence of the Plaintiff’s mark KHADI having acquired goodwill or reputation for soaps prior to 2001 (Defendant’s claim of use) or even prior to 2005 (Registration granted for Plaintiff’s mark). Thus, no case of passing off can lie against the Defendant, as for the allegation of passing off to be sustained, the Plaintiff has to prove goodwill in the asserted mark, for the asserted goods, prior to the adoption of the rival mark.
3. There is prima facie suppression of material facts on the part of the Plaintiff. The Plaintiff, in 2017, had filed an opposition to Defendant No. 1’s application for registration of GIRDHAR KHADI mark in Class 29, to which the Defendant filed a counterstatement. In the said counter, the Defendant disclosed the details of its earlier registration of the GIRDHAR KHADI mark in Class 3. However, the Plaintiff, in the present petition, submitted that the cause of action arose when the Plaintiff came to learn of the Defendant’s registration in Class 3 only in December 2020. Such suppression would prima facie disentitle the Plaintiff to any equitable relief.
4. Other factors like balance of convenience, Plaintiff’s delay in initiating action, high volume of Defendant’s sales in the market, etc. were also considered to reach the present decision against the Plaintiff.

Concluding that there was an absence of a prima facie case for restricting the Defendants from using their marks, the Delhi High Court dismissed the Plaintiff’s application.

Author’s Note

This case, Khadi and Village Industries Commission vs Girdhar Industries, highlights the intricacies surrounding trademark infringement and passing off actions. The Hon’ble Mr. Justice C. Hari Shankar, in delivering the judgment, underscores the importance of establishing both the invalidity of the Defendant’s registration and presenting convincing prima facie grounds in such legal disputes.

The case emphasized the need for Plaintiff to substantiate claims of goodwill and reputation, particularly in the context of passing off actions. The court meticulously examines the evidence presented by both parties, addressing the validity of registrations, suppression of facts, and the delicate balance of convenience of the parties involved.

Ultimately, this judgment serves as a legal benchmark, providing clear and stringent parameters for Plaintiff constituting infringement against another registered mark. It sheds light on the evidentiary requirements crucial for establishing infringement claims, offering valuable insights for practitioners, scholars, and experts in the field of intellectual property law.

Anuj Dhar , Junior Associate Advocate at S.S. Rana & Co. has assisted in the research of this article.

[1] CS (COMM) 130/2022

[2] 2022 SCC OnLine Del 2264

[3] 1994 (31) DRJ 220

[4] 2014 (60) PTC 51

[5] 2009 (41) PTC 41