The Supreme Court (SC) in its decision of 5 October 2015, in the matter of Neon Laboratories Ltd. v Medical Technologies Ltd and Ors (Neon Laboratories case), noted that "[T]he "first user" rule is a seminal part of the [Trade Marks] Act" and passed an order based upon the said principle, while deciding a trade mark dispute. In the present article, we aim to discuss the SC's interpretation of Section 34 of the Trade Marks Act, 1999 (TM Act) and the application of "first user" rule in the Neon Laboratories case.

The facts of the said case are as follows: the Plaintiff-Respondent, Medical Technologies Ltd (MTL) is engaged in the business of manufacturing and marketing of pharmaceutical products. MTL had been using the mark 'PROFOL' since the year 2000 and its predecessor-in-title had commenced use of the same in April 1998. When the Defendant-Appellant, Neon Laboratories Ltd (Neon) introduced the same generic drug under the trade mark 'ROFOL', MTL filed a suit for passing off. The suit was filed on 17 July 2005 before the Trial Court seeking injunction, damages and accounts of profits on the grounds that the trade mark 'ROFOL' is identical and deceptively similar to the trade mark 'PROFOL' of MTL. It is pertinent to note that Neon had filed an application for registration of the mark 'ROFOL' on 19 October 1992, the registration whereof had been granted only on 14 September 2001. However, Neon commenced use of the said trade mark only from 16 October 2004, i.e., twelve (12) years after applying for the same.

To summarise:

  • October 1992 – Neon filed application for registration of the mark 'ROFOL'
  • April 1998 – MTL's predecessor-in-title commenced use of the mark 'PROFOL'
  • September 2001 – Neon's application for the mark 'ROFOL' was granted registration
  • October 2004 – Neon started using the mark 'ROFOL'

On account of prior use of the trade mark 'PROFOL', the Trial Court granted an injunction in favour of MTL in the passing off suit, which was later affirmed by the Ld Single Judge of the High Court of Gujarat at Ahmedabad in appeal. Aggrieved by the order passed by the Ld Single Judge of the High Court of Gujarat, Neon filed an appeal before the SC.

The SC summarised the legal issue before it in the following words: "The legal nodus is whether the prior registration would have the effect of obliterating the significance of the goodwill that had meanwhile been established by the Plaintiff-Respondents. Would a deeming provision i.e. relating registration retrospectively prevail on actuality-competing equities oscillate around prior registration and prior user." Accordingly, the SC was considering whether the prior registration (which retrospectively relates back to the date of filing of application) would prevail over actual use of a mark.

To answer the above legal question, SC delved in Section 34 of the TM Act and stated:

"This Section palpably holds that a proprietor of a trade mark does not have the right to prevent the use by another party of an identical or similar mark where that user commenced prior to the user or date of registration of the proprietor. This "first user" rule is a seminal part of the Act. While the case of the Plaintiff-Respondents is furthered by the fact that their user commenced prior to that of the Defendant-Appellant, the entirety of the Section needs to be taken into consideration, in that it gives rights to a subsequent user when its user is prior to the user of the proprietor and prior to the date of registration of the proprietor, whichever is earlier. In the facts of the case at hand, the Defendant/Appellant filed for registration in 1992, six years prior to the commencement of user by the Plaintiff-Respondents. The Defendant-Appellant was, thus, not prevented from restraining the Plaintiff-Respondents' use of the similar mark PROFOL, but the intention of the Section, which is to protect the prior user from the proprietor who is not exercising the user of its mark prima facie appears to be in favour of the Plaintiff- Respondents."

The SC held that since MTL had prima facie supported with proof that the user of the trade mark 'PROFOL' commenced well before the use of the trade mark 'ROFOL' of Neon, it is entitled to a temporary injunction, basis "first in the market" test and therefore the decision of Trial Court, as affirmed by the Gujarat High Court, was reasonable and judicious.

While interpreting Section 34 (which interpretation is reproduced above), the SC made a broad statement of "first user" rule being a seminal part of the TM Act, and basis that: (a) added the condition of "proprietor who is not exercising the user of its mark"; and (b) expanded the scope of the said provision by overlooking the phrase "whichever is earlier". However, the said interpretation by the SC appears to go against the plain wording of the provision and the intention of the legislature.

Firstly, Section 34 of the TM Act does not mention anything about non-use of the mark by the registered proprietor, as a requirement for entitling a party to protection offered thereunder.

Secondly, the said provision clearly states that a party qualifies for protection thereunder, if the use of the mark by such a party pre-dates, the earlier of (i) date of first use of registered proprietor's trade mark and (ii) date of registration of the registered proprietor's trade mark. Accordingly, on applying the provision to the present case, it is evident that the date of first use of the mark 'PROFOL' by MTL (April 1998) is not prior to the date of registration of Neon's trade mark 'ROFOL' (which retrospectively relates back to the date of filing of application i.e. October 1992) and hence, MTL does not meet the conditions set out under Section 34 for seeking protection thereunder. The SC's interpretation thus appears to have made the phrase "whichever is earlier", as appearing in the said provision, completely otiose.

The legislature has in its wisdom after considering both "use" and "registration" of a trade mark by a registered proprietor, provided for the protection available under Section 34 to the prior user. If the legislature had intended to only compare the user claims of the prior user and the proprietor, it would not have incorporated clause (b) of Section 34 (which mentions that the use of prior user should be prior than the date of registration of registered proprietor's/registered user's trade mark), and, equally importantly, not needed to use the phrase "whichever is earlier". Thus, Section 34 has to be read in its entirety and whether a party is entitled to protection under the said provision or not, is to be examined on the basis of both the conditions provided under clauses (a) and (b). The SC, by extending the protection under Section 34 to a party whose user of the mark was later than the date of registration of the registered proprietor's mark, appears to have gone against the express language of the statute and the legislative intent.

It is noteworthy, that the SC itself noticed this requirement under Section 34 and stated in the judgment, "The question to examine, then, would be whether prior user would have to be anterior to the date of application or prior to the user by the Defendant-Appellant. In other words, the question before the Court would remain whether the situation on the date of application for registration alone would be relevant, or whether the developments in the period between this date and the date of grant of registration would have any bearing on the rights of the parties. All these considerations will be cast into a curial cauldron to be appreciated by the Court before which the suit is being contested." The SC however, still went ahead and opined that protection under Section 34 would be available to MTL. In view of the express language of Section 34, condition mentioned under clause (b) and use of the words "whichever is earlier", the protection under Section 34 should not have been extended to MTL, even at an interim stage.

If the "first user" rule as intended to be implemented by the SC in the Neon Laboratories case, i.e. only the date of use of the marks by the two parties is to be compared or that the relevant date under sub-clause (b) should be the date on which the trade mark is "actually entered in the register" (a phrase that finds mention in Section 47 of the TM Act), is to be given statutory force, then this requires an amendment to Section 34 of the TM Act by the legislature.

It must be noted that the present article is restricted to a discussion on the "first user" rule as interpreted by SC under Section 34 of the TM Act in the Neon Laboratories Case, and not a discussion on other aspects/ grounds which were considered by the SC in the said case while passing the order.

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