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This article is written by Rebecca Dias, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from Lawsikho.com. Here she discusses “Family owned trademarks after the split- a shared dilemma.”

Introduction

Trademark is an important asset for one’s entity. It gives people a symbol to expect a certain standard, quality or experience. Therefore, people relate this symbol to certain experiences. If the entity does not protect and monitor its use, it jeopardises customer loyalty. That is a sin no business wants to commit. It may greatly affect the brand perception and business activities of the entity

Hence, to the benefit of various stakeholders, it is essential to protect and preserve how and when the Trademark of an entity is used. In practice, protecting and establishing rights over a Trademark isn’t that simple. The core of this problem is that humans have complex relations throughout their lives. These complexities increase even more when such relations are severed. Family businesses approximately contribute over 70 to the Gross Domestic Product of many developing and developed countries according to Farhad Forbes, the global chairman of Family Business Network. It, therefore, becomes imperative that assets are protected through the process of separation.

In this article, I’ve discussed the manner in which a Trademark is treated when the family that has ownership to it splits.

Meaning

A “Trademark” according to the Indian Trademarks Act, 1999 (“the Act”) refers to such mark which is characterised by its graphical representation. Further, such mark can be distinguished among those of other goods and/or services. It inter-alia includes the shape, colour or combination thereof

Trademark infringement

The registered proprietor can exercise the right to guard the Trademark against infringement, provided it is duly renewed in the appropriate time and manner. It is also to be noted that maintenance of an acquired trademark is as important as the registration.

In the landmark case of Exxon Mobil Corporation v. Exoncorp Private Ltd., the Hon’ble Court held that, it doesn’t matter if the services are distinct if the Trademark is well-known, it will still constitute as infringement. 

To constitute infringement, the trademark must have been used. Further, if the essential characteristic of such Trademark is captured other differences such as packaging or manufacturer etc. does not matter.

Even using a registered Trademark through minuscule manipulation would not validate unauthorised use.

Family business and the Trademark

A “family business”, is an entity that is characterised by its root stemming from a family member/s and whose benefits are highly concentrated within members of such a family. This includes ownership by the members and/or managing its affairs. The essence of the business is to create an interest in the business for the benefit of all members in the family. Examples of families include the Ambanis, Waltons Jindals, and Munjals. The family in the course or in pursuance of their trade acquire certain intellectual properties inter-alia Trademarks. They invest a lot of resources to generate and build goodwill and customer loyalty over time. 

It is therefore only prudent to assume that in the event of division, dispute may arise. When the family business splits, this impact, among other things, the use and assignment of the Trademark. More often than not, the fight for the Trademark leads to disputes that drain a lot of resources of the family.

Trademark dispute

The Hon’ble High Court of Madras in a judgement held that, disputes among and/or between family members related to Trademark are to be dealt with and treated as family disputes. In this matter it was alleged by Mr. P .Sivanantham that the firm Narasu’s Coffee Company infringed on the trademark Narasu’s which belonged to him. The Hon’ble Court held that this trademark exclusively belonged to the firm.

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Joint ownership   

Generally, joint ownership refers to deriving benefits accruing from exploitation of a thing being shared through a mutually agreed relationship.

As per Section 2(zb), “Trademark” means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours

On a reading of the definition of “Trademark”, it is clear that the Act envisages the ownership of trademark being of a single person. Such construction is enforced by the fact dilution means essentially losing the differential and exclusivity bestowed by obtaining a trademark.  

Further, under Section 24(1) of the Act, it is noted that registration of two or more person is not permitted where they use or propose to use a Trademark independently or jointly thereof subject to sub-clause (2).

Under sub-clause (2) if the relationship between such persons mentioned above is such that between such parties no one is entitled to use the Trademark unless it follows:

  • one for all principle; or
  • the goods and/or services associated with such a mark is such that it is rooted in the interest of the parties to such registration in the trade.

Such persons may then be registered as joint proprietors of the mark and be treated under the Act as though the right to such mark is vested in one person.

In the case of Parle Products v. Parle Agro, the  Hon’ble  High Court of Bombay ruled that “Parle” belongs to the principle banner and that its use by members of the family in the course of their business does not constitute as lacking bona fides or misleading. The name “Parle” was part of their corporate name and Trademark on the products both the parties to the suit. The Hon’ble Court also emphasised that Parle Agro has to make it clear that its products were not manufactured by the Parle Products.

In SRF Foundation v Shri Ram Education Trust, the Hon’ble Court in the field of trademark litigation recognised the doctrine of shared goodwill and common family legacy. It held that both the parties to the suit were rooted in a common lineage being so both have common rights over the Trademark and one cannot exclude the other from using the Trademark.

It further ruled in favour of the benefit from the use of the Trademark by all the heirs unless the contrary is shown which excludes the other heirs. Thus, a single member of the family cannot get exclusive ownership of the Trademark.  Lastly, all such heirs who adopted the Trademark and garnered reputation and goodwill shall, prima facie, have equal rights to the Trademark.

Exclusivity and assignment of Trademark under an agreement or Memorandum of Understanding (MoU)

In 2006, Reliance Industries Ltd created waves in corporate India as one of the most famous family business splits being between the two brothers. They inter-alia executed a Trademark Management Agreement which included terms such as:

  • Both could use the Reliance name and the logo. 
  • Rights to the Trademark of business that were not reserved under any agreements would belong to that party who commences the business first.

Hence, if there is a split in the family business the family owned trademark can be appropriately divided according to an instrument that specifically grants right over the Trademark. This pre-emptive step saves time, effort and cost. 

Conclusion

Operating a successful family business that stands the test of time is no easy feat. But when separating from the pact, survival becomes the prime focus. Earned wealth especially goodwill and trademark need to be protected. It is always preferred that an instrument captures the outcome of such division so that litigation avoided as far as possible. When family business splits, its Trademark is jointly enjoyed by all the members subject to inter-alia non-interference with the goods and/or services of the other members. 

But, its arrangement can get complicated as such businesses are generational hence, further complexities may arise in the passage of time. In addition to this as businesses may licence the Trademark which may dilute its use thereby losing out on the exclusivity associated with it. But if terms of adoption and use is clearly outlined it can be beneficial to all the parties if so, joint ownership is a viable option. The family can still collectively maintain the standards and brand image associated with the Trademark. 

In contrast to this, family owned Trademark can also be assigned to a single faction of the family. It is therefore not necessary that the Trademark has to be jointly owned. Lastly, to avoid infringement as far as possible due to the use or misuse of the Trademark it is essential to take pre-emptive steps can draw agreement to address such events.

References

  1. Mahendra & Mahendra Paper Mills Ltd. vs. Mahindra & Mahindra Ltd. 2001 Supp (5) SCR 225.
  2. https://www.businesstoday.in/opinion/interviews/family-businesses-contribute-over-70-to-india-gdp-says-farhad-forbes-of-family-business-network/story/378135.html.
  3. Section 2 (zb), Trademarks Act, 1999.
  4. Section 28 of the Act has to be read in consonance with other provisions of the Trademarks Act, 1999.
  5. Kaviraj Pandit Durga Dutt Sharma v. Navratna Pharmaceutical Laboratories, AIR 1965 SC 980.
  6. Section 29 (5) of the Trademarks Act, 1999.
  7. Greaves Cotton Limited Vs. Mohammad Rafi and Ors., 180 (2011) DLT 749.
  8. Narasus’s Coffee Company Vs Narasu’s Roller Floru Mill, O.S.No.291 of 2007.
  9. Section 2(zb), Trademarks Act, 1999.
  10. 2009(3) BomCR379.
  11. (2016) 182 PLR3.
  12. Succession in Family-owned Businesses: The Case of Reliance Industries-India, Manohar Singh James A. Goodrich Atkinson Graduate School of Management Willamette University.

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