Transfer of trade marks: assignment, transmission, licensing and registered users

1. Definitions

• Assignment (s.2(1)(b)): an assignment in writing by act of the parties concerned.
• Transmission (s.2(1)(zc)): transmission by operation of law, devolution on the personal representative of a deceased person, and any other mode of transfer not being assignment. It covers succession, insolvency and amalgamation.
• Permitted use (s.2(1)(r)): use of a registered mark by a registered user, or by a person other than the proprietor and registered user with the consent of the proprietor in a written agreement, in relation to goods or services with which the proprietor remains connected in the course of trade.

2. Assignment and transmission (ss.37–45)

Power to assign. The registered proprietor has power to assign the mark and give effectual receipts for consideration (s.37), subject to the rights of others appearing on the register.

What can be assigned. A registered mark is assignable and transmissible with or without the goodwill of the business, and for all or some of the goods or services for which it is registered (s.38). An unregistered mark is also assignable with or without goodwill (s.39), a change from the 1958 Act, which allowed an unregistered mark to be assigned only with the goodwill of the business. The change follows TRIPS Article 21, which requires that the owner of a registered mark may assign it with or without the transfer of the business to which it belongs.

Limits. Because a split in ownership can mislead buyers, the Act forbids assignments that would create confusing parallel rights:

1. An assignment is invalid if, as a result, exclusive rights to use identical or similar marks for the same or similar goods or services would subsist in more than one person and use by them would be likely to deceive or cause confusion (s.40), though the Registrar may certify that the assignment is acceptable having regard to the circumstances.
2. An assignment that would create exclusive rights for different parts of India is invalid unless the Registrar approves it, for example where the goods are sold in separate markets (s.41).
3. Where a mark used in a business is assigned without the goodwill, the assignment does not take effect unless the assignee applies to the Registrar within six months for directions on advertisement and advertises it as directed (s.42). The advertisement tells the public that the source behind the mark has changed.
4. Associated marks can be assigned only as a whole (s.44), and certification marks only with the consent of the Registrar (s.43).

Registration of title (s.45). A person who becomes entitled by assignment or transmission must apply to the Registrar to register his title. Until it is registered, the document is not admitted in evidence of title except by direction of the court (s.45(3)).

3. Licensing: from registered users to permitted use

A licence leaves ownership with the proprietor and allows another to use the mark. Older English law saw licensing as dangerous: if the mark indicated the proprietor's goods, use by a licensee seemed deceptive. The Trade Marks Act, 1938 (UK) and the Trade and Merchandise Marks Act, 1958 (India) met this with the registered user system: use by a registered user under a recorded agreement was deemed to be use by the proprietor, because the proprietor retained control.

The 1999 Act keeps registered users (ss.48–55) but no longer makes registration necessary for a licence:

• The proprietor and the proposed user apply jointly to the Registrar with the written agreement, particulars of the relationship and the degree of control the proprietor will exercise (s.49).
• Permitted use by a registered user is deemed to be use by the proprietor for all purposes that require use, such as defending against removal for non-use (s.48(2)).
• A registered user may sue for infringement in his own name if the proprietor, called upon to do so, refuses or neglects to take proceedings within three months (s.52).
• The right of a registered user is personal: it is not assignable or transmissible (s.54).
• Registration of a registered user may be varied or cancelled, for example where the user has used the mark in a way likely to deceive or the proprietor has ceased to control quality (s.50).

Because “permitted use” in section 2(1)(r) also covers use by an unregistered licensee under a written agreement, a licence need not be registered for the licensee's use to count as the proprietor's use. Registration now matters chiefly for the right to sue and for evidence of control.

4. Trafficking and quality control

Trafficking means dealing in a mark as a commodity in its own right, without a real connection in the course of trade between the proprietor and the goods. It was a ground for refusing registered user applications under the 1958 Act. In American Home Products Corporation v. Mac Laboratories Private Limited, 1985 INSC 218, the Supreme Court explained that the purpose of the registered user provisions was to allow licensing without trafficking, and held that a proprietor may register a mark with the intention of using it through a registered user, so long as there is a genuine connection in the course of trade. Quality control is that connection: the proprietor must be able to ensure that goods under the mark meet his standards.

In Gujarat Bottling Co. Ltd. v. Coca Cola Co., 1995 INSC 441, the Supreme Court considered a franchise agreement under which the bottler used the proprietor's marks under its control. It held that a negative covenant not to deal in competing goods during the term of the agreement was not a restraint of trade under section 27 of the Contract Act. The case shows how far modern licensing of marks runs on contract: control over the licensee's production and trade is written into the agreement rather than supplied by the statute.

5. Comparative note

• UK (Trade Marks Act, 1994): marks are assignable with or without goodwill; there is no registered user system; a licence must be in writing; registration of a transaction protects against a later conflicting interest; an exclusive licensee may be given the right to sue.
• US (Lanham Act §10): a mark may be assigned only with the goodwill of the business; an assignment “in gross” is void. A licensor who fails to control quality grants a naked licence and may lose the mark by abandonment (Dawn Donut Co. v. Hart's Food Stores, Second Circuit, 1959).
• EU (Regulation 2017/1001): the EU mark may be transferred separately from the undertaking, for some or all goods, and licensed for all or part of the EU, exclusively or not; a licensee who breaches the quality terms of the licence may be sued by the proprietor for infringement.

How this is examined

Short notes on “assignment of trade marks”, “registered users” or “assignment without goodwill”, or a 16-mark question on transfer of trade marks. For the essay, take the definitions, sections 37 to 45 with the limits in list form, the registered user and permitted-use provisions, the trafficking principle with American Home Products, and close with the US comparison.