Trademark Registration Doesn’t Obliterate Prior Common Law Rights Established Through Actual Use & Accrued Goodwill In Market: Delhi HC

The Delhi High Court said that the Trademark registration while offering statutory benefits, does not obliterate prior common law rights established through actual use and accrued goodwill in the market.

The Court said thus in a lawsuit filed by Dongguan Huali Industries Co. Ltd., seeking a permanent injunction to prevent defendants from utilizing the trademark ‘HUALI’.

A Single Bench of Justice Sanjeev Narula enunciated, “The status of Defendant No. 1 as the registered owner of the “HUALI” trademark does not negate the Plaintiff’s ability to pursue a passing off action. The trademark registration does not confer immunity from challenges, particularly when allegations of passing off are substantiated by evidence of prior use. The registration, while offering statutory benefits, does not obliterate prior common law rights established through actual use and accrued goodwill in the market.”

The Bench noted that the defendants’ subsequent adoption of the identical ‘HUALI’ trademark for identical goods and services is evidently a dishonest attempt to deceive consumers into believing that their products are associated with or originate from the plaintiff.

Advocate Varun Goswami represented the plaintiff while Senior Advocate Chinmoy Pradip Sharma represented the defendants.

In this case, the defendant had obtained statutory rights in the trademark ‘HUALI’ by registering the same and the plaintiff asserted that it was the prior user of the ‘HUALI’ trademark. The plaintiff challenged the validity of the defendant’s registration and argued that in view of its prior usage rights, such registration does not diminish its entitlement to protect its trademark under the common law principles of passing off.

Established in the year 1995 and incorporated in China, the plaintiff specialised in the research, development, production, and sale of decorative composite materials. Over the decades, the plaintiff expanded its market presence to several countries worldwide, including, inter alia, in China, India, Russia, and Taiwan. In India, reinforcing the commitment to secure the rights, the plaintiff filed for registration under the Trade Marks Act, 1999.

The High Court after hearing the contentions of the counsel observed, “Under these circumstances, the Defendants’ subsequent adoption of the identical “HUALI” trademark for identical goods and services is evidently a dishonest attempt to deceive consumers into believing that their products are associated with or originate from the Plaintiff. This mala fide intent is further underscored by the Defendants’ reliance on documents that, as previously detailed, are ex facie forged and fabricated. This pattern of questionable conduct not only reflects a deliberate strategy to exploit the Plaintiff’s established market reputation but also threatens significant financial and reputational damage to the Plaintiff.”

The Court added that the potential for consumer confusion created by such deceitful practices is substantial, likely leading to dilution of the plaintiff’s brand equity and diversion of sales, thereby inflicting irreparable harm on the plaintiff’s business.

“… the Court finds that the Plaintiff has made out a prima facie case in their favour for grant of interim injunction. In case no interim injunction is granted in their favour, they would suffer irreparable harm; the balance of convenience also lies in favour of the Plaintiff and against the Defendants”, it concluded.

Accordingly, the High Court disposed of the application and restrained the defendants from manufacturing, selling, exporting, offering for sale, advertising/ displaying, directly or indirectly, their products, and allied goods under the ‘HUALI’ trademark.

Cause Title- Dongguan Huali Industries Co. Ltd. v. Anand Aggarwal and Ors. (Neutral Citation: 2024:DHC:4878)

Appearance:

Plaintiff: Advocates Varun Goswami, Yogesh Goel, Sahil Agarwal, Hritik Chaudhary, and Aryan.

Defendants: Senior Advocate Chinmoy Pradip Sharma, Advocates Ashish Choudhary, Dhruv Surana, Arya Hardik, Irfan Haseeb, Krishnajyoti Deha, and S. Bhattacharya.

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