SUBJECT – INTELLECTUAL PROPERTY RIGHTS

TOPIC – REGISTRATION AND LICENSING OF

TRADEMARKS: LIMITATIONS ON TRANSFER OF
GOODWILL

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 RESEARCH METHODOLOGY

A. Aims and objectives

The main aim and objective of this project is to learn about Trade mark, its objectives
and functions, and also about the various grounds of refusal of registration and its connection
with goodwill.

B. Statement of Problem
In this project, the problem is, to understand what Trademark is and what its functions
are, and also to understand how it is related to goodwill and what happens when they get
transferred

C. Research Questions
i. What is Trade mark?
ii. What are the objective and functions of Trade mark?
iii. When can registration of Trade mark be refused?
iv. How is a goodwill transferred

D. Hypothesis
From this project I have understood what Trade mark is and what it does, without which there
would be chaos, and its limitations on transfer of goodwill.

E. Method of Research
The methodology I have opted in completion of my project topic is doctrinal research
methodology

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Contents
Acknowledgement ................................................................... Error! Bookmark not defined.
Research Methodology .............................................................................................................. 2
A. Aims And Objectives ...................................................................................................... 2
B. Statement Of Problem ..................................................................................................... 2
C. Research Questions ......................................................................................................... 2
D. Hypothesis....................................................................................................................... 2
E. Method Of Research ....................................................................................................... 2
Introduction ................................................................................................................................ 4
Trademark .............................................................................................................................. 4
Objectives Of Trademark Law ............................................................................................... 5
Functions Of Trade Mark ....................................................................................................... 6
Refusal Of Registration Of Trade Mark ................................................................................... 7
Grounds For Refusal Of Trade Mark ..................................................................................... 7
Absolute Grounds For Refusal Of Trade Mark: ................................................................. 8
Relative Grounds For Refusal Of Trade Mark ................................................................. 10
Limitations And Transfer Of Goodwill ................................................................................... 11
Goodwill ............................................................................................................................... 11
Trademark & Goodwill: Separable Or Inseparable.............................................................. 12
Assignment Procedure.......................................................................................................... 13
Conclusion ............................................................................................................................... 15
Bibliography ............................................................................................................................ 16

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INTRODUCTION

Trademark
A trade mark includes any word, name, symbol, configuration, device, shape of goods,
packaging, combination of colours or any combination thereof which one adopts and uses to
identify and distinguish his goods from those of others.

According to section 2(1)(zb), a "trade mark" means:

A mark capable of being represented graphically and which is capable of distinguishing

the goods or services of one person from those of others and may include shape of goods,
their packaging and combination of colours, and

(i) in relation to Chapter XII (other than section 107), a registered trade
mark or a mark used in relation to goods or services for the purpose of indicating
or so as to indicate a connection in the course of trade between the goods or
services, as the case may be, and some person having the right as proprietor to use
the mark; and
(ii) (ii) in relation to other provisions of this Act, a mark used or proposed
to be used in relation to goods or services for the purpose of indicating or so to
indicate a connection in the course of trade between the goods or services, as the
case may be, and some person having the right, either as proprietor or by way of
permitted user, to use the mark whether with or without any indication of the
identity of that person, and includes a certification trade mark or collective mark.

There are three essentials of trade marks: (i) it should be a mark; (ii) it should be
capable of being represented graphically; and (iii) it should be capable of distinguishing the
goods or services of one person from those of others."1

1
Ahuja.V.K, Law relating to intellectual property rights, 263, (3rd Ed. LexisNexis)

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Objectives of Trademark Law
The trade mark law primarily serves two important purposes: (i) it protects the public
from confusion and deception by identifying the source or origin of particular products as
distinguished from other similar products; and (ii) it protects the trade mark owner's trade and
business as well as the goodwill which is attached to his trade mark. 2 In Cadbury India
Limited v. Neeraj Food Products, the Delhi High Court observed that the spirit, intendment
and purpose of the trademark legislation is to protect the trader and consumer against
dishonest adoption of one's trademark by another with the intention of capitalizing on the
attached reputation and goodwill3

2
Kislay Kumar, Trademark Meaning Objective and Infringement,(Nov.27, 2019, 8:38PM),
https://www.setindiabiz.com/learning/trademark-meaning-objective-and-infringement/
3
Ahuja.V.K, Law relating to intellectual property rights, 262, (3rd Ed. LexisNexis)

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Functions of trade mark
A trade mark normally performs following functions:

(i) It identifies the goods of one trader and distinguish them from goods sold by
others;
(ii) it signifies that all goods bearing a particular trade mark come from a single
source;
(iii) it signifies that all goods bearing a particular trade mark are of an equal level of
quality, and
(iv) it acts as a prime instrument in advertising and selling the goods.

The main functions of a trade mark are, therefore identification, source, quality and
advertising.4

4
Ahuja.V.K, Law relating to intellectual property rights, 262, (3rd Ed. LexisNexis)

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REFUSAL OF REGISTRATION OF TRADE MARK

Grounds for refusal of Trade Mark

The Trade Marks Act, 1999 lays down absolute grounds and relative grounds for
refusal of registration of trade marks under the act. Baring a few exceptions, the absolute
grounds for refusal or registration refuse the registration absolutely whereas the relative
grounds for refusal are applicable only when there already exists a trade mark, in comparison
to which the new trade mark is not registrable.5

5
RK Dewan & Co - Dr Mohan Dewan, Grounds for refusal of registration of trade mark, (Nov 29, 2019,
9:35PM), https://www.lexology.com/library/detail.aspx?g=26e3d590-7347-4e7b-8d5d-d03f3228d4da

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Absolute grounds for refusal of Trade Mark:
The trademarks that are:

 Incapable of distinguishing the goods/services of the applicant with those of others;

 or may serve in trade to designate kind, quality, purpose, value, geographical origin;
 or have been commonly used in the current language or established practices of trade;

shall not be registered.

Exception: If before the date of application, the mark has acquired distinctiveness by
use or it is a well-known mark, it cannot be denied registration.

A Mark shall not be registered as a Trade Mark if it causes:

 Confusion or deceives the public; or

 Hurts religious susceptibilities of class/ section of citizens of India; or
 Comprises/contains scandalous/obscene matter which is against the morality of the
public; or
 Is prohibited under the Emblems and Names Act, 1950

3-Dimensional Mark or Shape of Goods

These may be registered as a trademark. However, the Act states that a Mark shall not
be registered as a Trade Mark if:

 it consists exclusively of the shape of goods itself or the shape of goods necessary to
obtain a technical result; or
 The shape which adds substantial value to the goods- the shape should have visual
appeal to add value and not be of a functional nature to fall within the purview of this
provision.
 The nature of goods or services in relation to which trademark is used or proposed to
be used shall not be a ground of refusal of registration.

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 Chemical element/compound:

No word which is the name of a chemical element/ compound (not mixture) or which is
declared by the World Health Organization and notified by the Registrar of Trade Marks as
an international non-proprietary name / deceptively similar to such names shall be registered
as a trade mark. Even if the aforementioned word has acquired distinctiveness as a trademark
it still cannot be registered as a trademark.6

6
RK Dewan & Co - Dr Mohan Dewan, Grounds for refusal of registration of trade mark, (Nov 29, 2019,
9:55PM), https://www.lexology.com/library/detail.aspx?g=26e3d590-7347-4e7b-8d5d-d03f3228d4da

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Relative grounds for refusal of Trade Mark
1. Except in case of honest concurrent use, a Trade Mark shall not be registered if:
 There is a likelihood of confusion for the public because the trademark being
applied for is identical with an earlier trademark and the goods/ services of the
two marks are similar; or,
 The trademark being applied for is similar to an earlier trademark and the
goods/ services of the two marks are identical.

2. Passing off or Copyright Infringement:

A trademark shall not be registered if its use is liable to be prevented by virtue of law of
Passing off orLaw of Copyright.

3. Earlier Trade Mark:

The term “Earlier Trade Mark” for the purpose of ‘Relative Grounds for Refusal of
Registration’ by the Indian Trade Mark Office means a Registered mark or a convention
application (from a citizen of a country/group of countries with which India has a treaty/
agreement) for which the date of application was earlier than the trademark sought to be
registered.

4. Living or Recently Deceased Person:

If an application for registration is in respect of a trademark which falsely suggests a

connection with a living person or a person who died within 20 years prior to the date of
application,then the Trade Mark Registrar may, prior to proceeding with the application,
require the applicant to furnish consent in writing of such living person; or legal
representative of the deceased person. The Registrar may refuse to proceed with the
application if such consent is not furnished.7

7
RK Dewan & Co - Dr Mohan Dewan, Grounds for refusal of registration of trade mark, (Nov 29, 2019,
10:12PM), https://www.lexology.com/library/detail.aspx?g=26e3d590-7347-4e7b-8d5d-d03f3228d4da

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LIMITATIONS AND TRANSFER OF GOODWILL

Goodwill

Goodwill is also an intangible asset which cannot be easily defined. In the words of
Lord Macnaghten, in case of Commissioner of Inland Revenue v Muller & co's Margarine
Ltd can be described as "it is a thing very easy to describe, very difficult to define. It is the
benefit and advantage of the good name, reputation and connection of a business. It is the
attractive force which brings in customers. It is the one thing which distinguishes an old
established business from a new business at its first start. The goodwill of a business must
emanate from a particular centre or source. However widely extended or diffused its
influence may be, goodwill is worth nothing unless it has power of attraction sufficient to
bring customers home to the source from which it emanates."

Goodwill of a trademark is local in character and divisible like in case of business of a

brand situated in different countries. In every country business holds a separate goodwill
related to the particular brand although some part of that goodwill is dependent upon the
overall working of the business around the world. Business of a brand may be closed in a
particular country but closing of that business would not affect the overall goodwill of the
business. While the element of goodwill may be based primarily on earnings, such factors as
the prestige and renown of the business, the ownership of a trade or brand name, and a record
of successful operation over a prolonged period in a particular locality, also may furnish
support for the inclusion of intangible value. This shows that goodwill is inclusive of brand
value and based on number of other factors. While trademark get its value from goodwill
associated with products or services.8

8
Himanshu Sharma, Role of goodwill in transfer of trademark, (Nov 29, 2019, 11:34PM),
http://www.mondaq.com/india/x/310330/Trademark/Role+Of+Goodwill+In+Transfer+Of+Trademark

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TRADEMARK & GOODWILL: SEPARABLE OR INSEPARABLE

In case of assignment with goodwill, assigner transfer absolute rights i.e. all the rights
and values associated with trademark which give absolute authority to transferee to control,
to sell or to improvise or change the quality or structure or completely stop the services of
such products. It is basically that transferor is replaced by transferee in terms of authority,
control & rights & after assignment transferor is completely barred from using such
trademark associated with any products & services in kind. Whereas trademark assigned
without goodwill means the right to use trademark associated with the specific products or
services of transferor is transferred to the transferee & rest of the goodwill lies with
transferor. Accordingly, transferee can use such trademark for specific products & services as
per agreement unless and until it is likely to deceive or create confusion it does not create
multiple rights in the same goods or services or if they are associated with each other.9

In Associated Electronics & Electrical Pvt. Ltd. v. DCIT , Income Tax Appellate
Tribunal held that trademark and goodwill are two different concepts and transfer of
trademark does not mean transfer of goodwill. Therefore, both Goodwill and trademark are
different assets.

Similarly in Kwality Biscuit v. Assistant CIT, Bangalore4Income Tax Appellate

Tribunal court held that right to manufacture biscuits was independent, separate and distinct
right from right to market, distribute and sell biscuits under the brand name 'kwality', That
means right to manufacture is still with assignor and will continue in the same business but
under different brand name. Trademark and goodwill is separable.10

9
Himanshu Sharma, Role of goodwill in transfer of trademark, (Nov 29, 2019, 11:54PM),
http://www.mondaq.com/india/x/310330/Trademark/Role+Of+Goodwill+In+Transfer+Of+Trademark
10
Sujay Dixit , Passing off & the Concept of Goodwill , (Nov 30, 2019, 10:08AM),
http://www.legalservicesindia.com/article/227/Passing-off-&-the-Concept-of-Goodwill.html

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ASSIGNMENT PROCEDURE

To assign the trademark, application under sec 45(1) of the Act shall be required to be
filed with the Registrar of Trademark and shall be made either in form TM 24(by assignee
only) or TM 23 (if applied by assignor & assignee both) with duly stamped original
documents or attested copies of instrument. The important points that needs consideration are
as follows:

1. When application is made for transfer of trademark along with goodwill, it must
contain a statement by assignor stating that all the rights vested in trademark with rights to
use, sell, assign, transfer, modify, delete or stop such or any kind of products or services in
respect of that trademark are completely transferred to assignee with no reservation. The
Assignment deed should specifically include the clause related to transfer of goodwill along
with trademark and it should also mention the amount of consideration for the transfer.

2. If the application is made for transfer of trademark without goodwill, then

assignment agreement should state that assignor has reserved his rights in respect of such
trademark in particular goods or services & has not absolutely transferred the trademark in all
goods or services. This means that assignor & assignee both can use the same trademark but
in dissimilar goods or services. The assignee has to apply to the Registrar for his direction for
publication of the assignment within six months from the date of assignment otherwise same
would be treated as null. After being satisfied with all the conditions the Registrar would
allow the assignment to be advertised for the public. After publication the assignee will apply
for the registration of assignment and leave a copy of direction of Registrar for the
publication together with a copy of publication at the Trademark Office. After considering all
the facts and circumstance the Registrar may allow the assignment and enter the particular in
the Register.11

3. An affidavit for no legal proceeding pending against the trademark assigned from the
assignee or its representative shall also be required to be filed for the assignment.

11
Sujay Dixit , Passing off & the Concept of Goodwill , (Nov 30, 2019, 10:12AM),
http://www.legalservicesindia.com/article/227/Passing-off-&-the-Concept-of-Goodwill.html

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 As the registration of trademark is optional, likewise the registration of assignment is
also optional and non registration of assignment does not affect the validity of assignment but
registration of assignment would be a valid proof in case of dispute related to the trademark.12

12
Sujay Dixit , Passing off & the Concept of Goodwill , (Nov 30, 2019, 10:12AM),
http://www.legalservicesindia.com/article/227/Passing-off-&-the-Concept-of-Goodwill.html

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CONCLUSION

So in the end, it can be stated that the transfer of proprietary rights in trademark is
similar to any other asset, the difference, however, comes in reference to the goodwill
attached to it. It is the goodwill which creates the value of a trademark and in the
contemporary period same is also a separable part of trademark. Goodwill provides
bargaining power in the hand of the seller and therefore same is been recognized under the
law in reference to the transfer of rights in a trademark. A trademark which is transferred
with goodwill will get much higher value in comparison to the trademark which is transferred
without goodwill.

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BIBLIOGRAPHY

BOOKS:

Ahuja.V.K, Law relating to intellectual property rights, (3rd Ed. LexisNexis)

WEBSITES:

https://www.setindiabiz.com

https://www.lexology.com

http://www.mondaq.com

http://www.legalservicesindia.com

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