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This article is written by Arkadyuti Sarkar who is pursuing a Diploma in Intellectual Property, Media & Entertainment Laws from Lawsikho.

Introduction

Intellectual Property is the pivotal ingredient of modern business. It creates a sound challenge in the market; thus resulting in the more adequate build-up of all the items by the producer and brokers.

Trademarks are an example of one such intellectual property. It includes any word, name, image, or any mix, used, or expected to be used, in business for the purpose of recognizing and distinguishing the items of one producer or dealer from the merchandise counterfeited or sold by others and to display the quality of the products. Therefore, a trademark is a brand name and is an imprint or image used for differentiating the products or services of one from those of others. The trademark proprietor can prevent the utilization of comparable or indistinguishable marks beforehand by the competitors if such checks can result in perplexity. By this, comparatively low-quality substitutes are prevented from supplanting great quality ones.

A trademark not only prevents a business from unfair competition in the market but also helps in protecting the goodwill which the business has created, associated, and developed with its commodities over time. Trademark continues with a business even after the life of the trademark owner comes to an end. Such Trademarks gets inherited by the family of the owner.

Family Trademark

A “Trademark” according to the provisions of the Indian Trademarks Act, 1999, refers to such marks that are characterized by its graphical representation. Moreover, such marks are distinguishable among those of other Commodities. It is inter-alia inclusive of the shape, color, or combination thereof. 

Trademarks that are utilized by an individual for his family businesses, where the possession of the same lies with every individual family member, are known as family trademarks. Many trademark suits that are documented in relation to the family trademarks are usually sibling rivalries desirous of cashing upon the goodwill of the trade name which has been acquired through years of hard work by their ancestral members.

Family trademarks are a collection of trademarks that:

  • possess common characteristics that are recognized by all,
  • possess distinctiveness and difference, and
  • Can be utilized with the goal that the purchasing consumers perceive the regular trademark to show that the trademark proprietor is the source of the merchandise or services.

There are certain benefits associated with the building up Family trademarks:

  • each progressive trademark causes the reinforcement of the first or the root brand.
  • each progressive trademark is increasingly promptly acknowledged and unique in nature.

Family Trademarks are all about the reinforcement of a specific brand than creating an approximately related collection of trademarks. They can be an incredible way of reinforcing and growing a brand if the proprietor acquires them and utilize them properly.

Disputes Arising In Relation To Family Trademarks

A dispute occurs when an inherited Trademark undergoes division between 2 or more family members who are separated from each other. Each of them claims to be the lawful owner of such a trademark and hence a conflict breaks out regarding the use of the trademark by such family members.

The fundamental object of a trademark is preventing the business from its competitors and also preserving the uniqueness of the associated commodities. In such a situation, the question arises whether such distribution among various family members will result in the dilution of the value of such inherited family trademark.

The courts on various occasions have observed that all the family members owning the trademark possess a lawful right to use the inherited mark and no single heir or family member possesses an exclusive right to use such mark unless any contrary appears. It has been viewed that as there is an absence of a malafide intention of any family member or heir to harm or to affect the business under the family trademark nor to deceive the public by using such an inherited family trademark.

All the heirs are the lawful owners of the trademark and no such associated right is claimable by any of them against the other. The apex court has further held that preserving the peace and tranquility of family must be mandatory and family arrangement should be undisturbed as far as possible. The peace, amity, and family harmony are restorable if the family arrangement is adhered to and respected.

Family business and the Trademark

A “family business”, means an entity characterizable by its root sprouting from the family member/s and whose benefits are highly concentrated within such family members. This includes the ownership by the members and/or management of its affairs. The essence of the business is the creation of a business interest in benefitting all the family members. Examples of such families in India include the Ambanis, Tata, Adanis, and Jindals.

The family in the course of their business acquire certain intellectual properties inter-alia Trademarks. They also cause the investment of huge resources so as to generate and develop goodwill and customer loyalty over time. 

Therefore, it is only prudent to assume that in an event of division, a dispute may arise. In the event of the split of the family business, the use and assignment of the Trademark are affected besides other things. More often than not, the family disputes pertaining to the Trademark can drain a lot of resources of the family.

Constitution of Family

The next obvious question arising in such a situation is the constitution of a family in the cases of an inherited family trademark who are entitled and are the lawful owners of such inherited trademark.

In the case of Kale & Ors. Vs. Deputy Director of Consolidation and Others, the court held that the term “family” has to be appreciated in a broader sense so as to include not only close relations or legal heirs but even the ones who may have some form of antecedent title, a semblance of a claim, or even if they have a spec succession so that the future disputes never arise and the family instead of fighting claims inter se and wasting time, money and energy on such fruitless or futile litigation is capable of devoting its attention to more constructive work in wider societal interests. Moreover, any dispute occurring due to an inherited family trademark must be regarded as a family dispute rather than a Trademark dispute.

In Parle Products v. Parle Agro, the  Honorable  High Court of Bombay held that “Parle” belongs under the principle banner and therefore its use by family members in pursuance of their business does not amount to be malafide or misleading. The name “Parle” was held to be a part of their corporate name and therefore the Trademark is on the products of both the parties to the suit. The Court further observed that Parle Agro has to clarify that its products were not produced by the Parle Products.

In the case of SRF Foundation v Shri Ram Education Trust, the Honorable High Court of Delhi while observing the doctrine of shared goodwill and common family legacy, went on to hold that both the parties to the suit have roots in a common lineage and thus both have the common rights over the Trademark and so one cannot exclude the other from using it.

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

In the year 2006, Reliance Industries Ltd generated waves in India’s corporate domain as one of India’s most famous family business was divided between the two brothers, Anil Ambani and Mukesh Ambani. They inter-alia executed a Trademark Management Agreement which contained terms such as:

  • Both could use Reliance’s name and the logo. 
  • Rights associated with the Trademark of business that was unreserved under any agreement would belong to that first commencer party of such business.

Hence, during the split of a split in the family business, the family-owned trademark can be divided into appropriation in accordance with an instrument that has specifically granted right over such mark. This pre-emptive step is a great saver of time, effort, and cost.

Conditions When Trademark is Non-Transferable

Distribution of Inherited family trademark takes a separate path where the family members have a rivalry with each other, in such scenarios joint ownership is unallowed and an injunction has to be granted. The court held that the joint proprietors must use such mark in a joint manner for universal benefit. It is unusable in rivalry and to compete with one another.

Conclusion

Running a successful family business withstanding the test of time is not an easy task. However, during the separation from the pact, survival becomes the prime focus. Gained wealth, especially the goodwill and trademark requires protection. It is always preferable that an instrument captures all the possible outcomes arising from such division so as to avoid litigations as far as possible. During the split of a family business, its Trademark benefits are jointly enjoyed by all the members subject to inter-alia non-interference with the commodities of the other members. 

However, its arrangement can become marred with complexities as such businesses are generational hence, further complexities may arise in the passage of time. Additionally, the businesses may license the Trademark that may result in the dilution of its use, thereby losing out on the exclusivity associated with it. However, if the terms of adoption and use is clearly specified, it can be beneficial to all the associated parties if so, joint ownership is a viable option. The family can still collectively maintain the standards and brand image associated with the concerned Trademark. 

Contrarily, a family-owned Trademark is also assignable to a single faction of the family. It is therefore unnecessary that the Trademark has to be jointly owned. Last but not the least, for avoiding the infringement as far as possible resulting from the use or misuse of the Trademark it is essential to take pre-emptive steps that can draw agreement to address such events.

References

  1. https://iiprd.wordpress.com/2020/05/28/family-trademark/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedIn-integration
  2. https://blog.ipleaders.in/family-owned-trademarks-after-the-split-a-shared-dilemma/#Introduction

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