S.S. Subramani, J.
1. Petitioner in O.P.No. 358 of 1982, on the file of this Court, is the appellant. The petition was filed for rectification of the Register or removal of the registered trademark, under Section 56 read with Section 107 of the Trade and Merchandise Marks Act, 1958.
2. The allegations in the petition are that the petitioner has been manufacturing and selling tiles by using the trade mark of 'Umbrella' from January, 1976. It has applied for registration of its Trade Mark consisting of the device 'Umbrella' on 20.12.1980 claiming user from January, 1976 and the same is pending consideration. It is further averred that one Messrs. Eastern Clay Works, Sudarsan Building, Calicut had filed O.S.No. 3 of 1982 on the file of the Additional District Court, Trichur against the appellant herein (petitioner) for the issue of a permanent injunction restraining the petitioner, its servants or agents from manufacturing and selling tiles with the Trade Mark consisting of the device 'Umbrella' and other reliefs. It is said that Messrs. Eastern Clay Works claimed themselves as lessees under Messrs. Sudarsan Trading Company, Calicut who are the registered proprietors of the trade mark in respect of the tiles under No. 2763. It is further said that the plaintiff therein has filed an application for impleading Messrs. Sudarsan Trading Company as second plaintiff wherein it has also been said that it has been doing business of manufacturing tiles, on lease, under the trade mark consisting of the device 'Umbrella' from Messrs. Faroke Tile Works. It is said that from the averments in the plaint, Messrs. Sudarsan Trading Company has allowed the registered trade mark to be used by Messrs. Eastern Clay Works.
3. The following grounds have been made for the purpose of rectification of the Register by removing the name of the first respondent from the Register. (1) That Messrs. Sudarsan Trading Company has been guilty of improper assignment or transmission of the registered trade mark in favour of Eastern Clay Works, Calicut. (2) Messrs. Eastern Clay Works have not applied to the Registry notifying their assignment in terms of Sections 41 and 44 of the Trade and Merchandises Marks Act, 1958. (3) By parting away with the Trade Mark rights in favour of Messrs. Eastern Clay Works, Messrs. Sudarsan Trading Company has not been using the mark registered by them and on the ground of non-user, the registration is liable to be cancelled in terms of Section 46 of the Trade and Merchandise Marks Act, 1958. (4) No application has been made by both the parties, i.e., Messrs. Sudarsan Trading Company and Messrs. Eastern Clay Works, notifying the assignment in terms of Section 49 of the Trade and Merchandise Marks Act, 1958. (5) Only the registered user is entitled to maintain a suit against the petitioner (appellant herein) and inasmuch as Messrs. Eastern Clay Works is not the registered user of the Trade Mark in question, the petitioner, as the aggrieved person, is entitled to maintain the petition for rectification in terms of Section 56 of the said Act. (6) The trade mark registered in the name of the first respondent, namely, Messrs. Sudarsan Trading Company is liable to be removed on account of dishonesty on the party of the first respondent and in public interest.
4. On the above allegations, it wanted cancellation or expunging the registered trade mark with the device 'Open Umbrella' under No. 2763 registered in the name of Messrs. Sudarsan Trading Company from the Register of the second respondent, and for consequential reliefs.
5. A detailed counter affidavit has been filed by the first respondent, namely, Messrs. Sudarsan Trading Company Limited, wherein it is said that it is a company duly incorporated under the Companies Act, 1956, having its Registered Office at Sudarsan Building, Calicut. The allegation that the appellant had been using the device 'Umbrella' from January, 1976, is denied. It is further said that whatever use the petitioner has made of the said offending mark, could only have been surreptitious, sporadic, meager, with full knowledge of the reputation and registration of the trade mark 'Umbrella' of the first respondent and in complete disregard and violation of the rights of the respondent No. 1. It is further said that Messrs. Eastern Clay Works Limited is a company which is a wholly owned subsidiary of the first respondent. It is said that Messrs. Sudarsan Trading Company has leased its tile factory under the name and style Feroke Tile Works, to Messrs. Eastern Clay Works Limited, by a deed executed in their behalf. It is also admitted that in the suit filed by Messrs. Eastern Clay Works Limited before the District Court, Trichur, it has filed an application to get the first respondent herein impleaded as an additional party. It is also admitted by the first respondent that it has permitted Messrs. Eastern Clay Works Limited to use the first respondent's trade mark, and this has been done by a deed executed between the first respondent and Messrs. Eastern Clay Works Limited. It is further stated that even though it had permitted to use the mark, the first respondent was always and at all times exercising its proper control and supervision with regard to the standard and quality, specifications and the like concerning the tiles manufactured in Feroke Tile Works. It is further said that the tiles manufactured by Messrs. Eastern Clay Works Limited always bore the name and style Feroke Tile Works which is nothing but one of the manufacturing divisions of the first respondent-Company. In other words, it is said by the first respondent that the use of the mark by Messrs. Eastern Clay Works Limited is in effect the use of the mark by the first respondent itself. At any rate, the use of the mark by Messrs. Eastern Clay Works Limited was under the direct control and supervision of the first respondent. The various grounds raised by the petitioner for removing the name of the first respondent from the Register of the second respondent are also denied. The first respondent asserted that there is neither assignment nor transmission of the trade mark and, therefore, the provisions of Section 44 or Section 46 have no application to the facts of this case. The further allegation that the first respondent has parted away with its trade mark rights in favour of Messrs. Eastern Clay Works Limited is untenable and baseless. They further denied the allegation that they had not been using their registered trade mark and that, therefore, the registration was liable to be cancelled under Section 46 of the Act on the ground of non-user. It is further said that there is no necessity for registering as a registered user, for, there had been no question of any assignment or transfer of the registered trade mark or the goodwill of the business. They further denied the averment that the appellant is an aggrieved person coming under Section 56 of the Act, and also the allegation of dishonesty on the part of the first respondent. It is on the basis of these statements, the first respondent has sought for dismissal of the petition.
6. The learned Judge, after taking oral and documentary evidence, came to the conclusion that the appellant has not substantiated any of the allegations made in the petition and therefore, not entitled to any relief. The learned Judge also came to the conclusion that Messrs. Eastern Clay Works Limited is only a subsidiary company and all the activities are controlled by the first respondent. He also came to the conclusion that even if Messrs. Eastern Clay Works Limited is considered to be a separate company under the Companies Act and therefore a separate legal entity, that by itself will not be sufficient to come to the conclusion that the first respondent-Company had not been using the trademark. He further said that even if the two Companies are different, the persons in control of both of them are the same, and the only point that has to be considered is, in such a case, whether the first respondent has any control over the activities of Messrs. Eastern Clay Works Limited. He also said that Eastern Clay Works Limited have always borne the name of Feroke Tile Works, which is admittedly one of the manufacturing divisions of the first respondent-Company. On the evidence adduced before the learned Judge, it was held that the tiles manufactured in that tile factory bearing the name Feroke Tile Works were always supervised by the directions of the first respondent-Company and under its immediate supervision. The learned Judge also came to the conclusion that all the tiles manufactured in Feroke Tile Works at all times since the first respondent became the owner of 'Umbrella' trade mark; have always indicated the origin as Feroke Tile Works. He further held that the arrangement between the first respondent-Company and Eastern Clay Works Limited can only be considered as licence to use the trade mark and also the name Feroke Tile Works. The user, i.e., Eastern Clay Works Limited has assured that they will protect the rights and shall take such action as to safeguard the first respondent's interest, and if they fail to do so, the user shall be liable to compensate the proprietors for any loss. Finally, the learned Judge held that Feroke Tile Works is an alias to Sudarsan Trading Company and 'Feroke Tile Works' appeared on all tiles, and, according, to Ex.D-5 agreement, the machinery and premises used for manufacturing tiles are that of Feroke Tile Works, and that all invoices and all advertisements involve and project the name of 'Feroke Tile Works', and even the bills of lading project, it is specifically stated that the tiles were manufactured by Feroke Tile Works. The learned Judge held that Eastern Clay Works Limited was merely performing the ministerial work of operating the machinery while the trade mark was used to indicate a connection in the course of trade between Feroke Tile Works and the goods. The learned Judge also came to the conclusion that the use of the mark can legitimately be said to be the use of the first respondent-Company and, therefore, the charge of non-user is not tenable and, therefore, cannot be accepted. The alternate contention of the first respondent-Company was also accepted in full by the learned Judge by holding that Eastern Clay Works Limited is a subsidiary of the first respondent-Company, and the relationship of holding and subsidiary companies brings in the inherent aspect of 'control', and that the agreements Exx.D-4 to D-6 spell out total control by the first respondent-Company. The learned Judge further held that the use of trade mark by Eastern Clay Works Limited can fairly be treated as user by the first respondent company. He also held that the first respondent-Company still maintains its association with the goods and the first respondent has been using the trademark for export. He further held that the ample documentary and oral evidence adduced by the first respondent stands unrebutted, especially when there is lack of evidence on the side of the appellant.
7. It is against the said order of the learned Judge, this appeal is filed.
8. Before considering the merits of the appeal, let us consider the object of the Trade Marks Act and what are the rights of a person who gets his trade mark registered.
9. The object of the Trade Marks Act is to provide for registration and better protection of trade marks and for prevention of the use of fraudulent marks on merchandise. The Act is enacted to ensure that the registered proprietor of mark has a monopoly right to that mark. It deals with the precise nature of the rights which a person can acquire in respect of trade marks, the mode of acquisition of such rights, the method of transfer of such rights to others, nature of infringement of such rights and the remedies available in respect of thereof. There are provisions which lay emphasis on business integrity, legitimat trade and protection of goodwill established at great expense against exploitation. It aims to preserve the reputation of the trade marks built by honest use from being misappropriated by others and to prevent deception and fraud involved in passing off one's goods as that of another. The protection exists neither for the idea nor design nor duplication nor physical manifestation of the goods; it only prevents others from claiming or misrepresenting that goods or services are produced by you when they are actually produced by them. Thus, market reputation of quality, reliability, goodwill etc., is sought to be protected.
10. When a person gets his trade mark registered, he acquires valuable rights by reason of such registration. Registration of his trade mark gives him the exclusive right to the use of the trade mark in connection with the goods in respect of which it is registered and if there is any invasion on this right by any other person using a mark which is the same or deceptively similar to his trade mark, he can protect his trade mark by an action for infringement in which he can obtain injunction, damages or an account of profit made by the other person. The purpose of the Act is thus, to protect the interest of the proprietors of the registered trade marks and the rights and duties created in relation to the registration are in relation to the rights of the individual owners. The Act does not seek to create any right in a general sense.
11. As has been held in General Electric Co. v. The General Electric Co. Ltd. (1972)2 All. E.R. 507 (at pages 518 and 519), the right of property in a trade mark has special characteristics. The relevant portion of the said decision reads thus:
The right of property in a trade mark had special characteristics. One, which it shared with patents and with copyright, was that it was a monopoly, that is to say, it was a right to restrain other persons from using the mark. But it was an adjunct of the good-will of a business and incapable of separate existence dissociated from that goodwill. To be capable of being the subject-matter of property a trade mark had to be distinctive, that is to say, it had to be recognisable by a purchaser of goods to which it was affixed as indicating that they were of the same origin as other goods which bore the same mark and whose quality had engenered goodwill. Property in a trade mark could therefore only be acquired by public use of it as such by the proprietor and was lost by disuse. The property was assignable, transmissible and divisible, but only along with the goodwill of the business in which it was used.
In the same decision, it is further said thus:
A right of property of this character calls for an accommodation between the conflicting interests of the owner of the monopoly, of the general public as purchasers of goods to which the trade mark is affixed and of other traders.
The interest of the general public requires that they should not be deceived by the trademark. It ought not to tell a lie about the goods. Two main kinds of deception had been the subject of consideration. These were misrepresentation (a) of the character of the goods to which the trade mark was attached, and (b) as to their origin, i.e., that they were the product of some other manufacturer.
12. In this case, the appellant has sought for removal of the name of the first respondent from the Register of the second respondent on the grounds mentioned in paragraph 7 of the petition. Even though various grounds have been mentioned, the only ground that survives for consideration is, ground (e) in paragraph 7 which reads thus:
Only the registered user is entitled to maintain a suit against the petitioner herein and inasmuch as M/s. Eastern Clay Works is not the registered user of the Trade Mark in question, the petitioner, as the aggrieved person, is entitled to maintain the above petition for rectification in terms of Section 56 of the Trade and Merchandise Marks Act, 1958.
13. It has been held in American Home Products Corporation v. Mac Laboratories Pvt. Ltd. that the burden of proof to substantiate the case of non-user is on the person who alleges the same. The relevant portion reads thus:
Under both these clauses the burden of providing that the facts which bring into play Clause (a) or Clause (b), as the case may be, exists is on the person who seeks to have the trade mark removed from the Register. Thus, where there has been a non-user of the trade mark for a continuous period of five years and the application for taking off the trade mark from the Register has been filed one month after the expiry of such period, the person seeking to have the trade mark removed from the Register has only to prove such continuous non-user and has not to prove the lack of a bonafide intention on the part of the registered proprietor to use the trade mark at the date of the application for registration. Where, however, the non-user is for a period of less than five years, the person seeking to remove the trade mark from the Register has not only to prove non-user for the requisite period hut has also prove that the applicant for registration of the trade mark had no bona fide intention to use the trade mark when the application for registration was made.
14. The only documents that have been filed by the appellant are Exx.P-1 to P-10. Ex.P-1, certified copy of the plaint in O.S.No. 3 of 1982, on the file of District Judge, Trichur. Ex.P-2 is a complaint filed by the first respondent-Company before the Chief Judicial Magistrate, Trichur, against the appellant, for making use of its registered trade mark. Exx.P-3 to P-10 are the Annual Reports of the first respondent-Company. Exx.P-11 and P-12 have nothing to do with the appellant. They relate to the petition filed by another company which was also jointly tried along with this Petition by the learned Judge. No oral evidence was adduced by the appellant. As against the said documentary evidence, on the side of the first respondent, Exx.D-1 to D-16 were marked and M.Os. 1 to 3 were also produced. Oral evidence was also adduced by the first respondent by examining D.W.1, one of its Officials.
15. One of the main contentions that has been raised by the learned Counsel for the appellant is that on the basis of the alleged admission by the first respondent itself, it has to be held that Messrs. Eastern Clay Works Limited is making use of the registered trademark and it is also contended that there is no assignment or transfer of the said trademark to Messrs. Eastern Clay Works Limited, and at the same time, when the first respondent is not making use of the same, an inference has to be drawn that the first respondent is not using it for more than five years and the alleged manufacture before the institution of the proceeding and the user of the trade mark by Messrs. Eastern Clay Works Limited is unauthorised. It is its case that by permitting the user by Messrs. Eastern Clay Works Limited without any transfer or assignment of the business or its goodwill, the 1st respondent is guilty of trafficking and, therefore, its name is liable to be removed.
16. The said contention is answered by the first respondent stating that originally the trade mark was registered in the name of Messrs. Madura Company Limited and later in the name of Faroke Tile Works, Calicut, South India, and it registered its Trade Mark under No. 2763 in Part A of the Register on 27.9.1942 in Clause 19, in respect of bricks and tiles, roofing tiles, ceiling tiles, ventilators, skylites, all being made from clay or fire-clay materials and thereafter the first respondent-Company purchased the entire rights of Madura Company Limited including the trade mark. The same was also recognised and registered from time to time, and the subsequent proprietor's name was entered in the Registers from 23.4.1967 by virtue of a deed of assignment dated 23.8.1968 and thereafter the trademark was also renewed from time to time. To substantiate the same, in the typed set of papers filed by the appellant itself, the following can be seen. The certificate of Registration was issued only to Madura Company Limited on 29.7.1942 and thereafter its registration was renewed for a period of 15 years from 29.7.1949. We further find that during this period, the registered proprietor's name was altered from Madura Company Limited, as Faroke Tile Works and thereafter the registration was renewed for a period of seven years from 29.7.1964. We further find that the first respondent-Company was entered as subsequent proprietor as on 29.4.1967 and the registration was renewed for a period of five years from 29.7.1972 and it was further renewed on 21.8.1978 and again we find that the registration was renewed from 29.7.1985, and, on the date of the petition for removal of the name, the said renewal was subsisting. So, one thing that makes it clear is that from 29.7.1942 onwards, the trade mark continued and was being renewed from time to time. The relevancy of the above facts is to consider the scope of Section 32 of the Act wherein it is said that the registration shall be valid in all respects unless the three grounds in that Section are proved. Taking into consideration the provisions of Section 32 of the Act, the learned Judge has held that the appellant has no case under Section 32 of the Act and, therefore, he can invoke only Clause (b) of Section 46 (1) of the Act. That part of the finding by the learned Judge was not challenged by the learned Counsel for the appellant. Therefore, we need consider only the scope of Section 46(1)(b) of the Act and whether the finding of the learned Judge requires interference.
17. In his book in 'Intellectual Property' by W.R. Cornish, at page 470, the learned author has considered the circumstances under which the name can be removed from the Register. The learned Author has taken into consideration the various decisions of the English Courts for the said purpose, and said thus:
Among the earlier decisions disapproving of licensing, the most difficult is Bowden Wire v. Bowden Brake. The House of Lords treated a trade mark licence as inherently deceptive in leading the public cither to believe that goods bearing the mark were its proprietor's when they were not, or that the mark had come through use to indicate the licensee, not the proprietor. That case must now be read in light of the Lords' decision in "GE" Trade Mark: A mark will be expungcable for subsequent deceptiveness only if its proprietor has been guilty of blameworthy conduct sufficient to render it disentitled to protection in a court of justice. Possibly the Bowden case, if indeed it has any relevance to the law under the 1938 Act, supports the following proposition; where the proprietor of a mark permits another to use it without retaining any power to control the products that are to bear the mark, and there are no countervailing explanations to excuse this, the mark will become liable to removal. This might, for instance, be so if both licensor and licensee continued to produce similar goods under the mark without any quality supervision by the former of the latter, or even if the owner made no real effort to enforce a quality control agreement. On the other hand, there are decisions upholding marks in the following circumstances, which in essence were treated as involving no blame: allowing a retailer to use the name of the supplier of goods on other goods during a period when the supplier was prevented from supplying his own; and allowing a British importing agent to use his foreign manufacturer's mark on goods which he himself made in Britain, the intent being to keep the business alive even though imports were prevented by the war. A fortiori it might now be said that there is nothing blameworthy in unregistered licensing under conditions of quality control, as in the cases already mentioned.
18. In M/s. J.N.N. Nichols (Vimto) Limited v. Rose and Thistle and Anr. a Bench of that Court held that 'the use of the mark does not postulate actual sale of the goods bearing such a mark. 'Use' can be in any form or way and does not necessarily mean and imply actual physical sale and even mere advertisement without having even the existence of the goods can be said to be a use of the mark'. In paragraph 20 of the Reports, the Bench has further held thus:
...In Halsbury's Laws of England (4th Edition; Paragraph 111) it has been stated" whether there has been bona fide use sufficient to prevent a trade mark from being taken off the register depends first on whether there has been use and secondly whether that use was a bona fide. The paragraph goes on to record that the motive necessary to constitute bona fide use is not easy to define and it is settled that bona fide is not used in contra-distinction to mala fide what is required is that the use must be genuine, as judged by commercial standards, and if the primary purpose is not to trade under the mark but merely to validate the registration, the use is not bona fide.
19. In American Home Products Corporation v. Mac Laboratories Pvt. Ltd. , the Supreme Court has considered the scope of
Section 46 (1) of the Act and also what is meant by trafficking under Trade Mark law. In paragraph 37 of the judgment, their Lordships said that 'As the registration of a trade mark confers such valuable rights upon the registered proprietor thereof, a person cannot be permitted to register a trade mark when he has not used it in relation to the goods in respect of which it is sought to be registered or does not intend to use it in relation to such goods.' The reason for not permitting such trade marks to be registered was thus stated by Romer, J. in In re the registered Trade Marks of John Butt and Co. and In re Carter's Application for a Trade-Mark (1898) 2 Ch. D.432, 436 : S.C. 15 R.P.C. 262, 266:
...One cannot help seeing the evils that may result from allowing trade-marks to be registered broadcast, if I may use the expression, there being no real intention of using them, or only an intention possibly of using them in respect of a few articles. The inconvenience it occasions, the cost it occasions, is very large, and beyond that I cannot help seeing that it would lead in some cases to absolute oppression, and to persons using the position they have obtained as registered owners of trade-marks (which are not really bona fide trade-marks) for the purpose of trafficking in them and using them as a weapon to obtain money from subsequent persons who may want to use bona fide trademarks in respect of some classes in respect of which they find those bogus trade-marks registered.
[Italics supplied as in the Original Reports]
20. Their Lordships further accepted the definition given by Dillon, L.J. for the word 'trafficking' which is extracted in that judgment in paragraph 38 thus:
To get a trade mark registered without any intention to use it in relation to any goods hut merely to make money out of it by selling to other the right to use it would be trafficking in that trade mark. In Re American Greetings Corpn. 's Application (1983) 2 All.E.R. 609, 619 Dillon, L.J. said in the Court of Appeal:
Trafficking in a trade mark has from the outset been one of the cardinal sins of trade mark law. But there is no statutory definition of trafficking, and one may suspect that, as with usury in the middle ages, though it is known to be a deadly sin, it has become less and less clear, as economic circumstances have developed, what the sin actually comprehends.
Trafficking must involve trading in or dealing with the trade mark for money or money's worth but is is not all dealing with a trade mark for money that is objectionable, since it has always been accepted that it is permissible to sell a trademark together with the goodwill of the business in the course of which the trade mark has been used.
[Italics supplied as in Original Reports]
In the same case, Lord Brightman In the House of Lords (1984)1 All.E.R. 426, 433 summed up the position in law thus:
My Lords, although as a matter of ordinary English, trafficking in trade marks might mean the buying and selling of trademarks, it seems obvious that it is to have a more specialised meaning in a trade mark context. I have no quarrel with the definitions suggested by the Assistant Registrar and by Sir Denys Buckley, but perhaps one further attempt on my part may not be out of place. The courts have to group for some means of delineating the forbidden territory, and different modes of expression may help to indicate boundaries which are not and cannot be marked out with absolute precision. To may mind, trafficking in a trade mark context conveys the notion of dealing in a trade mark primarily as a commodity in its own right and not primarily for the purpose of identifying or promoting merchandise in which the proprietor of the mark is interested. If there is no real trade connection between the proprietor of the mark and the licensee or his goods, there is room for the conclusion that the grant of the licence is a trafficking in the mark. It is a question of fact and degree in every case whether a sufficient trade connection exists. We have no hesitation in accepting the meaning given to the expression "trafficking in a trade mark" by Dillon, L.J. and Lord Brightman.
21. In this connection, it is also worthwhile to note how their Lordships understood the scope of Section 46(1) of the Act. It was held, 'The object underlying Section 46(1) is to prevent trafficking in trade marks. This is, in fact, the object underlying all trade mark laws. A trade mark is meant to distinguish the good made by one person from those made by another. A trade mark, therefore, cannot exist in vacuo. It can only exist in connection with the goods in relation to which it is used or intended to be used. Its object is to indicate a connection in the course of trade between the goods and some person having the right to use the mark either with or without any indication of the identity of that person.
22. The learned Counsel for the first respondent relied on Ex.D-4 to D-6 to prove its connection with Messrs. Faroke Tile Works and also Eastern Clay Works Limited. To substantiate this contention as to how far it is connected in the course of trade between the goods and its relationship with those companies, it is said that Messrs. Faroke Tile Works is only one of its manufacturing units and Messrs. Eastern Clay Works Limited is only one of its subsidiary companies and all its activities in the manufacture of tiles are controlled by it. The quality control is undertaken by the first respondent-Company by its various acts and to prove the intention behind Exx.D-4 to D-6, D.W.1 also has been examined.
23. The learned Counsel for the appellant contended that the oral evidence of D.W.1 cannot be made use of interpret Ex.D-4 to D-6 and the same is barred under Sections 91 and 92 of the Indian Evidence Act.
24. The said contention cannot be accepted. Only that part of the evidence which goes contrary to or varies from the terms of Ex.D-4 to D-6 cannot be relied on under Sections 91 and 92 of the Evidence Act. If the evidence of D.W.1 is in consonance with the terms of those documents, and it proves the intention of the parties, that can be relied on for the purpose of proving the real nature of the transaction. Under Section 46 of the Trade and Merchandise Act, the 'intention' of parties at the time of executing it is relevant. As has been held in American Home Products Corporation v. Mac Laboratories Pvt., Ltd. , intention is a state of mind. No person can make out the state of mind of another person. None the less, the Courts are often called upon to determine the state of mind of a person. Courts can only do so by deducing the existence of a particular state of mind from the facts of a case. Section 14 of the Evidence Act was also relied on for the said purpose.
25. When we consider the state of mind, the question as to whether the transaction intended is allowed by law or whether it is prohibited is also relevant. It is in this connection, we have to consider the definition of Trade Mark' under the Act. It is defined thus:
The first legislation in India on Trade Marks was Act 5 of 1940, which adopted in Section 2(1)(i) of the Act, the wording of the U.K. Act, 1938 reads as follows:
Trade mark means a mark used or proposed to be used in relation to goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and some person having the right either as proprietor or as registered under, to use the mark whether with or without any indication of the identity of that person.
The successor Act in India of 1958 (the present Act) also adopts a similar wording in Section 2(1)(v)(ii) as follows:
"Trade Mark" means in relation to the other provisions of this Act a mark used or proposed to be used in relation to goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and some person having the right either as proprietor or as registered user to use the mark whether with or without any indication of the identity of that person and includes a certification trade mark registered as such under the provision of Chapter VIII.
From the above definition it is clear that a Trade mark' is to show that the mark indicates a connection in the course of trade between the proprietor of the mark and the goods and the identity of the manufacturer who owns or who is the proprietor of the mark are of no relevance. It is further clear from the definition that if the proprietor of the mark associates himself with the goods in the course of the production, that will be sufficient for the purpose of the Act. In this connection, it is also relevant to consider the passages of Dr. S. Venkateswaran on Trade Marks 1963 Edition (page Nos.37 and 309), which are as follows:
Connection in the course of trade - The expression "connection in the course of trade" covers a wide range, e.g. manufacturer, importer, or vendor as wholesaler, middleman or retailer or a person who selects or handles commercially the goods in any other way. The nature of the connection in the course of trade is left undefined in the Act so as to include all categories, except certification, and provide for new trading relationships as new business methods are involved. As the goods pass on their way to the market through successive trade hands in the course of trade they may receive a succession of trade marks each indicative of the particular person's trade connection with the goods. Thus, a dyer or finisher or bleacher of textile goods may apply for registration of the trade mark even though the goods themselves have never been his property. But the use of a mark merely in ephemeral or purely transitory operation such as the repair of stocking or laundering, docs not constitute trade mark use and such mark cannot, therefore, be registered under the Act. Marks which are not used in the course of trade, e.g. those used by Schools, private clubs, insurance companies and members of the learned professions, or as lottery tickets, football coupons, telegraphic and house address do not come within the statutory definition of a trade mark. It is immaterial that the function performed by the owner of the mark on the goods or the name of the proprietor is not known to the public....
A trade mark gives an indication of the trade source from which the goods come, or the trade hands through which they pass on their way to the market. The trade connection of the person in relation to the goods may be that of a manufacturer, or selector or vendor of goods. A salesman on commission basis who is a selector of the goods and could reject them if they arc of bad quality or are badly packed, could by virtue of dealing with or offering for sale, claim proprietary rights in a trade mark, and obtain valid registration. Again a dyer or bleacher may use a proper trade mark on goods dyed or bleached by him provided that the process of dyeing or bleaching takes place in the course of manufacture or finishing of the goods and before the goods reach the market....
26. Kerly - 12th Edition (paragraphs 2-15) has also dealt with the same wherein the learned Author has said thus:
There is nothing in the Trade Marks Act... which requires a proprietor of a registered trade mark to refrain from introducing modifications or variations in the goods to which he applies his mark or in the manner in which they reach the market. If he should find it convenient to transfer manufacture from one locality to another or procure his supplies from sub-contractors, or arrange for assembly of completed articles by some one of his choice in lieu of doing it himself, these and a vast number of other possible changes in procedure are his sole concern. His mark only becomes vulnerable in this connection if he permits its use in a manner which is calculated to deceive or cause confusion.
It is in accordance with current business practice that an entrepreneur may do no more than organise the putting of goods upon the market, and yet may cause them to be marked with his mark. It is submitted that the wording of the present Act is wide enough for that to be used of the mark by him as a trade mark, provided that the purpose of its use is indeed to show that the goods are his and he retains control over the use made of the mark.
Thus a proprietor of a mark who does not himself manufacture the marked goods not apply the mark, but who retains for himself either the power to control the activities of the trader who actually applies the mark (as where that trader is a subsidiary company of the proprietor), or the power to ensure compliance with manufacturing specifications or standards of equality that he lays down is sufficiently connected in the course of trade with the goods to which the mark is applied to be properly registered.
The current insistence on control by the proprietor has little logic to it. What matters is that the proprietor is willing by authorising use of his mark, to put his reputation behind the goods. How he satisfies himself that the goods are suitable for this should no more concern the law of trade marks, than the worship practices of a manufacturing proprietor do....
2.17: Sale on commission
A market salesman, even if he uses the mark on goods sold on commission, could obtain a valid registration under the old Act and could no doubt also do so under the present Act, notwithstanding that he never actually owns the goods. Naturally though if he buys habitually from a single source difficult questions may arise whether the mark really indicates his goods, or those of his supplier, or those connected with both, compare the cases on importers' marks.
2-18: Finishers, conveners, etc.
Persons who execute work on goods which are never their own property, such as dyers or finishers, often have trade marks of their own applied to the goods before they reach the market. Under the present Act such parties are entitled to registration of such trade marks. Even where the owners of the mark does buy and resell the goods, the reputation in the mark may belong to the operation performed on them and not to the trade channels through which they are marked. In such cases, registration as a service mark may be easier to secure; but in view of the possible objection that such marketing of the goods is not, in relation to a service mark, use as a service mark, it could well be sound practice to insist upon a trade mark registration too.
27. We may also note that while considering the scope of 'registered user', the Supreme Court held thus in the decision reported in American Home Products Corporation v. Mac Laboratories Pvt. Ltd. :
In our opinion, to enable the proprietor of a trade mark who has got it registered on the ground that he intends to use the trademark to avail himself of the fiction created by Section 48(2), he must have had in mind at the date of his application for registration some person to whom he intends to allow the use of the trade mark as a registered user. This would eliminate all chances of trafficking in a trade mark. If an applicant for registration did not have at the date of his application for registration a particular registered user in view, he cannot be said to have had a bona fide intention to use the trade mark and in such an event he cannot resist an application made under Clause (a) of Section 46 (1) of the 1958 Act.
28. On the above said settled position of law, let us consider whether the first respondent in this case has committed anything against the provisions of law so as to make its name liable to he removed from the register of the second respondent. Ex.D-4 to D-6 fully explain the same, and the other documents also clarify the position that the first respondent is a holding company and Eastern Clay Works Limited is only a subsidiary. Every activity is controlled by the first respondent in the manufacture and sale of the goods registered under the trademark. Ex.D-14 is the Memorandum and Articles of Association of Sudarsan Clay Products Limited and the same is a Subsidiary of Sudarsan Trading Company. From the said Exhibit, it can be seen that the first respondent has nominated the Directors of Sudarsan Clay Products Limited, and likewise Sudarsan Clay Products Limited is the holding Company of Eastern Clay Works Private Limited by virtue of major share held by the former of the shares of the latter. Various Annual Reports from 1981 onwards have been filed in this case to establish the above fact. - vide Ex.D-12 series. It is further seen that Ex.B-14 is the Memorandum of Articles of Association of Sudarsan Clay Products. The name has been changed to Messrs. Sudharsan Clay and Ceramics Limited and Certificate was issued by the Registrar of Companies, Kerala, under Section 23 (1) of the Companies Act. The Company is also incorporated is clear from the Certificate of Incorporation No. 2794 of 1973, and it is a limited Company. Ex.D-14 provides for the appointment of Board of Directors and it says that the number of Directors would be not less than three nor exceed fifteen. Only the nominees of the Board of Directors of Sudarsan Trading Company Limited shall be eligible to be the Directors of the Company so long as the Company is the subsidiary of that Company. Taking into account the provisions of Section 4 (1) of the Act, it cannot be doubted that Messrs. Sudharsan Clay and Ceramics Limited is a subsidiary to the first respondent-Company, and likewise, the Eastern Clay Works Limited is also a subsidiary to the same.
29. In this connection, we may also take note of the decision reported in Pioneer Electronic Corporation and Anr. v. Registrar of Trade Marks (1978) R.P.C. 716 wherein the High Court of Australia followed the decision reported in G.E. Trade Mark case, (1969) R.P.C. 418 and held thus:
Cross, L.J., after examining the cases, concluded that the authority given by the United States parent company in respect of the G.E. trade mark to its United Kingdom subsidiary to use the registered mark was open to no objection because the use by the subsidiary might fairly be considered as user by the parent itself and because the licensing of the mark, whether registered or not, did not deprive it of the character of a trade mark provided that the owner of the mark retained a sufficient connection in the course of trade with the mark and the goods bearing it.
30. In the matter of a Trade Mark "Radiation" 47 R.P.C. 37 it was held thus:
Now I think that I ought to treat this question as a practical one, just as I must so treat the question of distinctiveness of a Trade Mark - See In re Reddaway's Application (1927)44 R.P.C. 27 at page
36. If the associated Companies here concerned, although trading separately, had been branches of a single Company or firm, the Head Office of which controlled the branches in the same way as the applicants controlled their associated Companies, there is, I think, no doubt that a Trade Mark could properly be held by the Company or firm as a whole, and I think that, treating the question as a practical one, I ought not to say that the form or constitution of the "Radiation" group of Companies is such as to prevent the applicants from holding a Trade Mark which indicates the connection of the whole group of Companies with the goods to which it is applied. The Mark "Radiation" in this case becomes in effect the House Mark of. the whole group, in addition to which each associated Company (or Branch) may properly use its own individual Marks.
31. When once it is established that the Eastern Clay Works Limited is a subsidiary to the first respondents-Company, the further question that arises is, whether Exx.D-4 to D-6 were executed in connection with the trade and whether the first respondent-Company retains control over the trademark. In his oral evidence, D.W.1 has also stated that the first respondent-Company shall always and at all times exercise proper control and supervision with regard to standards and quality, specification and the like, concerning the tiles manufactured in Faroke Tile Works. It is further proved in this case that the tiles manufactured by Eastern Clay Works Limited always bore the name 'Faroke Tile Works', which is admittedly one of the manufacturing units of the first respondent-Company. The use of the mark by Messrs. Eastern Clay Works Limited was under the direct control and supervision of the first respondent.
32. It is contended by the learned Counsel for the appellant that by virtue of executing Ex.D-4, really the first respondent has assigned its rights over the trade mark without the goodwill, and, therefore, it is entitled to get the relief sought for. the said contention cannot be accepted for two reasons. Ex.D-4 by itself is only one of the documents executed on the same day. Exx.D-5 and D-6 are also parts of Ex.D-4, and all these will have to be read together. By virtue of these documents, it is seen that the first respondent first executed a lease of the buildings and by another document, the raw materials, machineries and stock-in-trade were also leased to the subsidiary company, and along with the same, Ex.D-4 is also executed. In Ex.D-4, it is specifically provided that the user of the trademark will be permitted only so long as the lease of the machinery and the building continues. So, by reading the entire documents together, it is clear that it is along with the business, the trade mark is also allowed to be used and Ex.D-4 by itself has no legs to stand. Even if we read Ex.D-4 separately from the other documents, it cannot be said that the first respondent-Company has acted against the provisions of the Act and that it has the intention to make use of the trade mark. If we read Ex.D-4 alone, it is clear that what is permitted is only in the nature of licence. In M/s. Gujarat Bottling Co. Ltd and Ors. v. The Coco Cola Co. and Ors. their Lordships of the Supreme Court
considered a similar question and held that a registered proprietor is not prevented from giving a licence to third person. The relevant portion of the said decision reads thus:
...The use of the trade mark can also be permitted de hors the provisions of the Act by grant of licence by the registered proprietor to the proposed user, Such a licence is governed by common law. Such licensing of trade mark is permissible provided (i) the licensing does not result in causing confusion or deception among the public; (ii) it does not destroy the distinctiveness of the trade mark, that is to say, the trade mark, before the public eye, continues to distinguish the goods connected with the proprietor of the mark from those connected with others; and (iii) a connection in the course of trade consistent with the definition of trade mark continues to exist between the goods and the proprietor of the mark.
If that be so, even if we read Ex.D-4 separately from Exx.D-5 and D6, it cannot be said that the first respondent has acted in such a way as to entitle the appellant to get relief in this case. Even if the first respondent has given a licence de hors the provisions of the Act, if the three conditions mentioned in the decision of the Supreme Court M/s. Gujarat Bottling Co. Ltd v. The Coca Cola Co. , are not satisfied, the appellant will not be entitled to get a relief.
33. A reading of Ex.D-5 and D-6 will show that Messrs. Eastern Clay Works Limited have assured that they shall protect the rights and shall take such action as may be necessary to safeguard the first respondent's interest. If further shows that a document was executed pursuant to a general body meeting of the company wherein it was decided to lease the business Faroke Tile Works Limited became the custodian of the said assets. The first respondent has retained its right to inspect the stock of raw materials, stores and spare parts handed over to the manufacturer at any time during the working hours. It also has retained the right to terminate the contract during the period of lease without assigning any reason whatsoever, and Messrs. Eastern Clay Works Limited is duty-bound to return such machineries to the first respondent forthwith. The said clause read along with Ex.D-4 shows that the right to use the trade mark shall run concurrently with the lease of the building and machinery. In Ex.D-6, the parties have described themselves as owner and manufacturer. The first respondent declares himself as the owner and Messrs. Eastern Clay Works Limited has described itself as the manufacturer.
34. It is further clear from the various advertisement and invoices, namely, Exx.D-13 and D-11 that the first respondent is still making use of the trade mark Faroke Tile Works as only one of its manufacturing units and Messrs. Eastern Clay Works Limited is only making us of the same for the purpose of the first respondent, under its guidance.
35. While we consider the application for rectification or removal, the court is also entitled to exercise its discretion in coming to the conclusion whether the name is liable to be removed. For the said purpose, the Court can rely on the long period between Ex.D-4 and the date of institution of the proceeding. Even though more than 12 years have elapsed form the date of execution of Ex.D-4, the appellant was not in a position to cite even one instance to show that the customers got confused regarding the identity of the goods. The trademark was registered in the year 1942 and till date, it remains in the Register without any complaint. No other circumstances have been proved or alleged by the appellant that the continuation of the name of the first respondent in the Register of the second respondent in so far as the Trade Mark is concerned, will amount to trafficking or that it will be against public policy.
36. Under the above circumstances, we do not feel that it is proper on the part of this Court to grant the relief sought for by the appellant herein.
37. The learned single Judge has considered both facts and law in their proper perspective, and has rightly declined to grant the relief to the petitioner, appellant herein. We do not find any ground to interfere with the order of the learned single Judge.
38. In the result, the order of the learned single Judge is confirmed. This O.S. appeal is dismissed with costs.