Trademark rights in contracts bind parties even after business ends: Delhi High Court

The Delhi High Court on Thursday held that a party which has contractually acknowledged another’s trademark rights cannot subsequently claim bona fide adoption of a similar mark after the business relationship ends. .Dismissing two appeals filed by Newgen IT Technologies Limited, the Court upheld an interim injunction restraining the company from using the mark “NEWGEN” or the corporate name “Newgen IT Technologies Limited”, finding the adoption likely to cause confusion and amounting to infringement..The judgment was delivered by Justices Navin Chawla and Harish Vaidyanathan Shankar, who held that strategic timing can defeat acquiescence defenses in trademark disputes."The present case would necessarily have to be viewed in the context of the prior relationship between the parties. When viewed through that lens, the Appellant's adoption of the mark 'Newgen' does not appear to be either innocent or entirely bona fide.".Newgen Software, incorporated in 1992, has operated in software development with registered "NEWGEN" trademarks since 1999. In June 2023, VCARE InfoTech approached Newgen Software for a collaboration, resulting in a partnership agreement on July 12, 2023. Article 14 of this agreement explicitly acknowledged Newgen Software's exclusive rights over "NEWGEN" trademarks, with VCARE InfoTech recognising that any trademark use would arise only from the partnership. The dispute started when VCARE InfoTech changed its name to "Newgen IT Technologies Limited" in July 2024 while the partnership remained active..Following the name change, Newgen Software discovered that the appellant had filed for an initial public offering (IPO) under the disputed name. This prompted a cease-and-desist letter on September 15, 2024, terminating the partnership and demanding cessation of the infringing marks. Newgen Software subsequently filed a suit seeking permanent injunction.The trial court granted an ex-parte interim injunction, which was confirmed after hearing the appellant's vacation application. The appellant then challenged both orders before the High Court..Before the High Court, the appellant argued that it had used the “NEWGEN IT” mark internationally since 2017, that the respondent had acquiesced to this use over a period of 1.5 years, and that the injunction had caused serious prejudice to its business and IPO. It also alleged suppression of facts and argued that the term “Newgen” was descriptive and widely used in the public domain.The Court rejected these arguments, holding that the trademark acknowledgment in the partnership agreement was sufficient to defeat the appellant’s defence. “The Appellant’s adoption of the mark ‘Newgen’ does not appear to be either innocent or entirely bona fide,” the Court said..On the plea of acquiescence, the Court held that no such case had been made out, particularly since the defendant’s adoption of the NEWGEN mark in India occurred only after the end of the partnership. “Acquiescence is sitting by, when another is invading the rights and spending money on it. It is a course of conduct inconsistent with the claim for exclusive rights in a trademark, trade name etc. It implies positive acts; not merely silence or inaction such as is involved in laches.”The Court further observed that the trial court had correctly applied the three-part test for interim injunction - prima facie case, balance of convenience, and irreparable harm - and that no perversity had been shown..NewGen IT Tech was represented by Senior Advocates Rajiv Nayar and Malvika Trivedi, briefed by Anirudh Bakhru, Vaishali Mittal, Siddhant Chamola, Saurabh Seth, Prabhav Bahuguna, Pallavi Bhatnagar and Saijal Arora..Newgen Software was represented by Senior Advocates Sandeep Sethi and Ankit Jain, briefed by Advocates JV Abhay, Dhruv Grover, Abhineet Kalia, Riya Kumar and Rishabh Jain..Read Judgment.Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.