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Registration and Licensing of Trademarks: Limitations On Transfer of Goodwill
Registration and Licensing of Trademarks: Limitations On Transfer of Goodwill
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RESEARCH METHODOLOGY
B. Statement of Problem
In this project, the problem is, to understand what Trademark is and what its functions
are, and also to understand how it is related to goodwill and what happens when they get
transferred
C. Research Questions
i. What is Trade mark?
ii. What are the objective and functions of Trade mark?
iii. When can registration of Trade mark be refused?
iv. How is a goodwill transferred
D. Hypothesis
From this project I have understood what Trade mark is and what it does, without which there
would be chaos, and its limitations on transfer of goodwill.
E. Method of Research
The methodology I have opted in completion of my project topic is doctrinal research
methodology
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Contents
Acknowledgement ................................................................... Error! Bookmark not defined.
Research Methodology .............................................................................................................. 2
A. Aims And Objectives ...................................................................................................... 2
B. Statement Of Problem ..................................................................................................... 2
C. Research Questions ......................................................................................................... 2
D. Hypothesis....................................................................................................................... 2
E. Method Of Research ....................................................................................................... 2
Introduction ................................................................................................................................ 4
Trademark .............................................................................................................................. 4
Objectives Of Trademark Law ............................................................................................... 5
Functions Of Trade Mark ....................................................................................................... 6
Refusal Of Registration Of Trade Mark ................................................................................... 7
Grounds For Refusal Of Trade Mark ..................................................................................... 7
Absolute Grounds For Refusal Of Trade Mark: ................................................................. 8
Relative Grounds For Refusal Of Trade Mark ................................................................. 10
Limitations And Transfer Of Goodwill ................................................................................... 11
Goodwill ............................................................................................................................... 11
Trademark & Goodwill: Separable Or Inseparable.............................................................. 12
Assignment Procedure.......................................................................................................... 13
Conclusion ............................................................................................................................... 15
Bibliography ............................................................................................................................ 16
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INTRODUCTION
Trademark
A trade mark includes any word, name, symbol, configuration, device, shape of goods,
packaging, combination of colours or any combination thereof which one adopts and uses to
identify and distinguish his goods from those of others.
(i) in relation to Chapter XII (other than section 107), a registered trade
mark or a mark used in relation to goods or services for the purpose of indicating
or so as to indicate a connection in the course of trade between the goods or
services, as the case may be, and some person having the right as proprietor to use
the mark; and
(ii) (ii) in relation to other provisions of this Act, a mark used or proposed
to be used in relation to goods or services for the purpose of indicating or so to
indicate a connection in the course of trade between the goods or services, as the
case may be, and some person having the right, either as proprietor or by way of
permitted user, to use the mark whether with or without any indication of the
identity of that person, and includes a certification trade mark or collective mark.
There are three essentials of trade marks: (i) it should be a mark; (ii) it should be
capable of being represented graphically; and (iii) it should be capable of distinguishing the
goods or services of one person from those of others."1
1
Ahuja.V.K, Law relating to intellectual property rights, 263, (3rd Ed. LexisNexis)
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Objectives of Trademark Law
The trade mark law primarily serves two important purposes: (i) it protects the public
from confusion and deception by identifying the source or origin of particular products as
distinguished from other similar products; and (ii) it protects the trade mark owner's trade and
business as well as the goodwill which is attached to his trade mark. 2 In Cadbury India
Limited v. Neeraj Food Products, the Delhi High Court observed that the spirit, intendment
and purpose of the trademark legislation is to protect the trader and consumer against
dishonest adoption of one's trademark by another with the intention of capitalizing on the
attached reputation and goodwill3
2
Kislay Kumar, Trademark Meaning Objective and Infringement,(Nov.27, 2019, 8:38PM),
https://www.setindiabiz.com/learning/trademark-meaning-objective-and-infringement/
3
Ahuja.V.K, Law relating to intellectual property rights, 262, (3rd Ed. LexisNexis)
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Functions of trade mark
A trade mark normally performs following functions:
(i) It identifies the goods of one trader and distinguish them from goods sold by
others;
(ii) it signifies that all goods bearing a particular trade mark come from a single
source;
(iii) it signifies that all goods bearing a particular trade mark are of an equal level of
quality, and
(iv) it acts as a prime instrument in advertising and selling the goods.
The main functions of a trade mark are, therefore identification, source, quality and
advertising.4
4
Ahuja.V.K, Law relating to intellectual property rights, 262, (3rd Ed. LexisNexis)
6
REFUSAL OF REGISTRATION OF TRADE MARK
5
RK Dewan & Co - Dr Mohan Dewan, Grounds for refusal of registration of trade mark, (Nov 29, 2019,
9:35PM), https://www.lexology.com/library/detail.aspx?g=26e3d590-7347-4e7b-8d5d-d03f3228d4da
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Absolute grounds for refusal of Trade Mark:
The trademarks that are:
Exception: If before the date of application, the mark has acquired distinctiveness by
use or it is a well-known mark, it cannot be denied registration.
These may be registered as a trademark. However, the Act states that a Mark shall not
be registered as a Trade Mark if:
it consists exclusively of the shape of goods itself or the shape of goods necessary to
obtain a technical result; or
The shape which adds substantial value to the goods- the shape should have visual
appeal to add value and not be of a functional nature to fall within the purview of this
provision.
The nature of goods or services in relation to which trademark is used or proposed to
be used shall not be a ground of refusal of registration.
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Chemical element/compound:
No word which is the name of a chemical element/ compound (not mixture) or which is
declared by the World Health Organization and notified by the Registrar of Trade Marks as
an international non-proprietary name / deceptively similar to such names shall be registered
as a trade mark. Even if the aforementioned word has acquired distinctiveness as a trademark
it still cannot be registered as a trademark.6
6
RK Dewan & Co - Dr Mohan Dewan, Grounds for refusal of registration of trade mark, (Nov 29, 2019,
9:55PM), https://www.lexology.com/library/detail.aspx?g=26e3d590-7347-4e7b-8d5d-d03f3228d4da
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Relative grounds for refusal of Trade Mark
1. Except in case of honest concurrent use, a Trade Mark shall not be registered if:
There is a likelihood of confusion for the public because the trademark being
applied for is identical with an earlier trademark and the goods/ services of the
two marks are similar; or,
The trademark being applied for is similar to an earlier trademark and the
goods/ services of the two marks are identical.
A trademark shall not be registered if its use is liable to be prevented by virtue of law of
Passing off orLaw of Copyright.
The term “Earlier Trade Mark” for the purpose of ‘Relative Grounds for Refusal of
Registration’ by the Indian Trade Mark Office means a Registered mark or a convention
application (from a citizen of a country/group of countries with which India has a treaty/
agreement) for which the date of application was earlier than the trademark sought to be
registered.
7
RK Dewan & Co - Dr Mohan Dewan, Grounds for refusal of registration of trade mark, (Nov 29, 2019,
10:12PM), https://www.lexology.com/library/detail.aspx?g=26e3d590-7347-4e7b-8d5d-d03f3228d4da
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LIMITATIONS AND TRANSFER OF GOODWILL
Goodwill
Goodwill is also an intangible asset which cannot be easily defined. In the words of
Lord Macnaghten, in case of Commissioner of Inland Revenue v Muller & co's Margarine
Ltd can be described as "it is a thing very easy to describe, very difficult to define. It is the
benefit and advantage of the good name, reputation and connection of a business. It is the
attractive force which brings in customers. It is the one thing which distinguishes an old
established business from a new business at its first start. The goodwill of a business must
emanate from a particular centre or source. However widely extended or diffused its
influence may be, goodwill is worth nothing unless it has power of attraction sufficient to
bring customers home to the source from which it emanates."
8
Himanshu Sharma, Role of goodwill in transfer of trademark, (Nov 29, 2019, 11:34PM),
http://www.mondaq.com/india/x/310330/Trademark/Role+Of+Goodwill+In+Transfer+Of+Trademark
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TRADEMARK & GOODWILL: SEPARABLE OR INSEPARABLE
In case of assignment with goodwill, assigner transfer absolute rights i.e. all the rights
and values associated with trademark which give absolute authority to transferee to control,
to sell or to improvise or change the quality or structure or completely stop the services of
such products. It is basically that transferor is replaced by transferee in terms of authority,
control & rights & after assignment transferor is completely barred from using such
trademark associated with any products & services in kind. Whereas trademark assigned
without goodwill means the right to use trademark associated with the specific products or
services of transferor is transferred to the transferee & rest of the goodwill lies with
transferor. Accordingly, transferee can use such trademark for specific products & services as
per agreement unless and until it is likely to deceive or create confusion it does not create
multiple rights in the same goods or services or if they are associated with each other.9
In Associated Electronics & Electrical Pvt. Ltd. v. DCIT , Income Tax Appellate
Tribunal held that trademark and goodwill are two different concepts and transfer of
trademark does not mean transfer of goodwill. Therefore, both Goodwill and trademark are
different assets.
9
Himanshu Sharma, Role of goodwill in transfer of trademark, (Nov 29, 2019, 11:54PM),
http://www.mondaq.com/india/x/310330/Trademark/Role+Of+Goodwill+In+Transfer+Of+Trademark
10
Sujay Dixit , Passing off & the Concept of Goodwill , (Nov 30, 2019, 10:08AM),
http://www.legalservicesindia.com/article/227/Passing-off-&-the-Concept-of-Goodwill.html
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ASSIGNMENT PROCEDURE
To assign the trademark, application under sec 45(1) of the Act shall be required to be
filed with the Registrar of Trademark and shall be made either in form TM 24(by assignee
only) or TM 23 (if applied by assignor & assignee both) with duly stamped original
documents or attested copies of instrument. The important points that needs consideration are
as follows:
1. When application is made for transfer of trademark along with goodwill, it must
contain a statement by assignor stating that all the rights vested in trademark with rights to
use, sell, assign, transfer, modify, delete or stop such or any kind of products or services in
respect of that trademark are completely transferred to assignee with no reservation. The
Assignment deed should specifically include the clause related to transfer of goodwill along
with trademark and it should also mention the amount of consideration for the transfer.
3. An affidavit for no legal proceeding pending against the trademark assigned from the
assignee or its representative shall also be required to be filed for the assignment.
11
Sujay Dixit , Passing off & the Concept of Goodwill , (Nov 30, 2019, 10:12AM),
http://www.legalservicesindia.com/article/227/Passing-off-&-the-Concept-of-Goodwill.html
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As the registration of trademark is optional, likewise the registration of assignment is
also optional and non registration of assignment does not affect the validity of assignment but
registration of assignment would be a valid proof in case of dispute related to the trademark.12
12
Sujay Dixit , Passing off & the Concept of Goodwill , (Nov 30, 2019, 10:12AM),
http://www.legalservicesindia.com/article/227/Passing-off-&-the-Concept-of-Goodwill.html
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CONCLUSION
So in the end, it can be stated that the transfer of proprietary rights in trademark is
similar to any other asset, the difference, however, comes in reference to the goodwill
attached to it. It is the goodwill which creates the value of a trademark and in the
contemporary period same is also a separable part of trademark. Goodwill provides
bargaining power in the hand of the seller and therefore same is been recognized under the
law in reference to the transfer of rights in a trademark. A trademark which is transferred
with goodwill will get much higher value in comparison to the trademark which is transferred
without goodwill.
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BIBLIOGRAPHY
BOOKS:
WEBSITES:
https://www.setindiabiz.com
https://www.lexology.com
http://www.mondaq.com
http://www.legalservicesindia.com
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