In the recent case of ITC Limited v. Arpita Agro Products Private Limited and Ors. (2024 SCC OnLine Del 7075), the Delhi High Court examined key issues surrounding intellectual property rights assignments, trademark infringement, and contractual obligations. The plaintiff, ITC Limited, a leading FMCG producer, had acquired the trademarks NIMYLE and JOR-POWR from the first defendant in 2018 for INR 1 billion (USD 11.8 million) under an asset purchase agreement and brand assignment agreements. These agreements transferred full rights to the trademarks while imposing a time-limited non-compete clause on the defendants, barring them from using confusingly similar marks or trade dress.
In 2023, ITC discovered the defendants marketing a floor cleaner under the brand POWRNYM, which bore striking similarities to NIMYLE and JOR-POWR. Alleging trademark infringement, passing off, and unfair competition, ITC sought a permanent injunction. The court’s analysis focused on whether POWRNYM infringed ITC’s trademarks under the Trade Marks Act, 1999. ITC argued that the mark was phonetically, visually, and structurally similar to its registered trademarks, creating a likelihood of consumer confusion. The court applied the established test of deceptive similarity, emphasizing the overall impression on an average consumer.
The court found POWRNYM deceptively similar to ITC’s marks, ruling that the use of “POWR” and “NYM” was a deliberate attempt to leverage ITC’s goodwill. Beyond the mark, the defendants had copied the distinctive trade dress associated with ITC’s NIMYLE brand, including bottle shape, label design, and color scheme. The defendants’ argument that “NYM” referred to neem, a key ingredient in their product, was dismissed. The court held that even if neem was an ingredient, the combination of POWR and NYM resulted in a mark that deceptively resembled ITC’s trademarks. The defendants’ attempt to register POWRNYM further evidenced their intent to create a derivative mark, violating contractual obligations.
The court also addressed passing off, applying the test laid out in Kaviraj Pandit Durga Dutt Sharma v. Navaratna Laboratories, which requires proof of goodwill, misrepresentation, and likelihood of damage. ITC demonstrated the significant goodwill of its NIMYLE brand, with sales exceeding INR 40.8 billion over five years. The use of POWRNYM and identical packaging constituted misrepresentation aimed at misleading consumers into believing the product was associated with ITC. The court noted the similarity in trade channels, target consumers, and retail outlets, increasing the potential for confusion.
Regarding contractual obligations, ITC contended that the defendants breached the assignment agreements by adopting a mark confusingly similar to NIMYLE and JOR-POWR. While the non-compete clause had expired, the agreements’ perpetual prohibition on using deceptively similar marks remained enforceable. The court upheld this clause, stating it protected the assignee’s interests in the intellectual property. By adopting POWRNYM, the defendants violated both the letter and spirit of the agreements.
This judgment reinforces the principles of trademark protection, particularly in cases of deceptive similarity. The court’s decision underscores the importance of honoring intellectual property assignments and safeguarding consumer interests, especially in the FMCG sector, where brand recognition plays a pivotal role. Businesses attempting to bypass intellectual property laws through deceptively similar marks, especially when bound by contractual obligations, are unlikely to succeed.
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