Trademark Registration Does Not Confer Immunity From Challenges, When Allegations Of Passing Off Are Substantiated: Delhi High Court

Therefore, the High Court restrained the Defendants from manufacturing, selling, exporting, offering for sale, advertising/ displaying, directly or indirectly, their products under the trademark “HUALI”.

Section 27(2) of the Trademarks Act, 1999 allows for actions for passing off to proceed independently of the registration status of a mark, whereas Section 34 of the Trademarks Act articulates that registration does not confer a right to interfere with or diminish the rights of those who have previously used the mark in commerce.

Bench of Justice Sanjeev Narula observed that “the Defendants' subsequent adoption of the identical “HUALI” trademark for identical goods and services is evidently a dishonest attempt to deceive consumers into believing that their products are associated with or originate from the Plaintiff. This mala fide intent is further underscored by the Defendants' reliance on documents that, as previously detailed, are ex facie forged and fabricated”. (Para 25)

The observation came pursuant to an interim injunction sought by the Plaintiff to prevent the Defendants from utilizing the trademark “HUALI”, claiming to be a prior user of the “HUALI” trademark.

It was argued by the Plaintiff that in view of their prior usage rights, the registration obtained by the Defendant in the said mark under No. 4146654 for goods categorised in Class 20 does not diminish the entitlement of Plaintiff to protect their trademark under the common law principles of passing off.

Facts of the case:

Incorporated in China, the Plaintiff is one of the largest manufacturers of furniture components, specializing in PVC and melamine edge banding, alongside a broad range of furniture accessories and related goods. They market these products under the trademark “HUALI”. The Plaintiff first adopted this trademark in 2004 for international operations and subsequently in 2007 within India, and has been employing it consistently and extensively ever since. In addition to asserting strong common law rights in the “HUALI” trademark, the Plaintiff has also undertaken efforts to secure statutory rights in several international jurisdictions. In India, reinforcing their commitment to secure these rights, the Plaintiff filed for registration under the Trade Marks Act, 1999 in Class 20.

In the meanwhile, Defendant No. 1 applied for registration of the mark “HUALI” through application No. 4146654, which persisted with the claimed usage date of 24th August, 2008, on a 'Proposed to be Used' basis, which was granted. The Plaintiff is therefore aggrieved on account of the Defendants' adoption and use of the identical trademark “HUALI” in respect of identical goods. When Plaintiff claimed that Defendant No. 1 has dishonestly secured registration for “HUALI” based on a fictitious user claim, the Trademark Registry initially raised certain objections citing the Plaintiff's pending application and calling upon the Defendant to produce documents in support of the claimed user date. Upon coming across the Defendants' infringing activities in October 2022, the Plaintiff filed police complaints reporting the same, however, no appropriate legal action was taken. Accordingly, the Plaintiff has filed the suit seeking protection of their common law rights in the trademark “HUALI”.

Observations of High Court:

The Bench observed that the trademark registration does not confer immunity from challenges, particularly when allegations of passing off are substantiated by evidence of prior use.

The Bench also explained that the registration, while offering statutory benefits, does not obliterate prior common law rights established through actual use and accrued goodwill in the market.

Hence, the Bench stated that the status of Defendant No. 1 as the registered owner of the “HUALI” trademark does not negate the Plaintiff's ability to pursue a passing off action.

From the detailed description of the interconnected corporate structure, the Bench found the continuity of trademark usage claims across different but related entities, thereby substantiating the Plaintiff's position as the prior user of the mark.

The Bench also found that the Defendants had made deliberate attempt manipulate and misrepresent their business operations' timelines, so as to establish their purported early use of the “HUALI” trademark.

Additionally, the Bench found that the Defendant's trademark application was initially rejected with an objection u/s 11(2) of the Trademarks Act, citing the Plaintiff's application for “HUALI” an identical mark.

Also, the retrospective claim of early use suggests a strategic manipulation of facts tailored to counter the Plaintiff's prior application, which had been cited in the First Examination Report, added the Bench.

Hence, while concluding that Plaintiff has demonstrated their continuous usage of the “HUALI” trademark since the year 2007, the High Court granted interim injunction to the Plaintiff and listed the matter for further consideration on Aug 01, 2024.

Counsel for Plaintiff: Advocates Varun Goswami, Yogesh Goel, Sahil Agarwal, Hritik Chaudhary and Aryan

Counsel for Defendants: Senior Advocate Chinmoy Pradip Sharma and Advocate Ashish Choudhary

Case Title: DONGGUAN HUALI INDUSTRIES CO. LTD vs. ANAND AGGARWAL AND ORS

Citation: 2024 LiveLaw (Del) 743

Case Number: CS(COMM) 229/2023, I.A. 3085/2024, I.A. 3114/2024

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