The Delhi High Court recently held that in a passing off action under trademark law, goodwill must be established within India and in the specific category of goods for which protection is sought.
A Division Bench of Justices C Hari Shankar and Ajay Digpaul said that "worldwide goodwill” is irrelevant unless accompanied by evidence of “territorial goodwill and reputation."
The Court made this finding while upholding an interim injunction restraining VIP Industries Ltd from using the mark “CARLTON” for travel bags and rejecting its claim of prior trans-border reputation inherited from its UK-based predecessor.
“The existence of goodwill and reputation has to be shown to exist in India and worldwide or global goodwill and reputation, sans any evidence of territorial goodwill and reputation, will be insufficient to succeed in a claim of passing off," the Court made it clear.
The dispute arose between Carlton Shoes Limited (CSL) which held Indian trademark registration for "Carlton" in Class 18 effective May 6, 1994, and VIP Industries Limited, which acquired Carlton International PLC's trademark portfolio through assignment in 2004.
CSL commenced commercial use of the Carlton mark in India from 1994 primarily for footwear while VIP claimed luggage-specific usage from 2004-2006 based on its acquisition of international rights.
Both parties possessed valid concurrent registrations for identical marks in Class 18, creating a unique legal scenario where statutory infringement remedies were unavailable under Section 28(3) of the Trade Marks Act, 1999.
This forced resolution through common law passing off principles rather than registered trademark rights.
The controversy crystallized in October 2019 when VIP issued a cease-and-desist notice alleging that CSL's planned expansion into luggage would constitute passing off of VIP's established goodwill. CSL responded by filing a suit seeking permanent injunction against VIP's use of the Carlton mark while VIP counter-sued.
A single-judge granted interim injunction to CSL while dismissing VIP's interim plea.
The single-judge restrained VIP from marketing Class 18 goods under Carlton trademarks.
VIP challenged this decision before the Division Bench.
In its judgment, the Court reinforced the territorial limitations of trademark rights and rejected VIP's trans-border reputation claims that formed the cornerstone of its legal strategy.
"Mere priority of user in India may not be sufficient to sustain a claim of passing off unless the plaintiff ascertaining the claim is able to establish that such prior user has resulted in accumulation of goodwill and reputation in the mark that it seeks to assert," the Court held.
Applying the Supreme Court's precedent in Toyota Jidosha Kabushiki Kaisha v Prius Auto Industries Ltd, the Court found that VIP's promotional materials from the 1980s-1990s lacked evidence of Indian circulation, sales invoices predated only to 2006, and even those invoices omitted Carlton branding.
The Court noted that VIP's earliest documented Indian sales occurred well after CSL's established 1994 commencement, undermining any priority claims based on international usage.
The Court clarified that goodwill in passing off actions resides in the trademark itself rather than its use for specific product categories.
"Though, in every case, the name or mark would undoubtedly be used for providing goods are rendering services, the goodwill has to reside in the name or mark per se," the Court held.
It also rejected VIP's argument that CSL's goodwill in footwear could not protect against luggage use, stating that "goodwill either exists or it does not exist" without degrees or categories.
CSL established territorial goodwill through documentation spanning over two decades of commercial use.
"Carlton, on the other hand, is 'first in the Indian market' in respect of bags and allied goods falling under class 18 sold under the trademark CARLTON," the Court found based on sales invoices from 2003-2005, certified revenue figures from 1993-2018, VAT registrations from 1993, and media coverage in major publications.
The Court noted CSL's presence across 24 retail outlets and consumer complaints from 2016 showing market confusion between VIP and CSL products.
Thus, the Court dismissed VIP Industries' appeals and upheld the injunction restraining VIP from using the Carlton mark for Class 18 goods.
VIP was represented by Senior Advocate Akhil Sibal with advocates Nishad Nadkarni, Ankur Sangal, Ankit Arvind, Aasif Navodia, Khushboo Jhunjhunwala, Shaurya Pandey, Rakshita Singh and Ridhie Bajaj from Khaitan & Co.
Carlton was represented by Senior Advocate Sandeep Sethi and advocates Peeyoosh Kalra, CA Brijesh, Ishith Arora, Sumer Dev Seth and Simranjot Kaur.
[Read Judgment]