NEON LABORATORIES LTD.versusMEDICAL TECHNOLOGIES LTD. & ORS.

                         [2015] 10 S.C.R. 684



A                   NEON LABORATORIES LTD.
                                    v.
              MEDICAL TECHNOLOGIES LTD. & ORS.
                    (Civil Appeal No.1018 of 2006)
B                         OCTOBER 5, 2015
        [VIKRAMAJIT SEN AND SHIVA KRITI SINGH, JJ.)
          Trade Marks Act, 1999 - Passing off- First in the market
    test - Suit for injunction damages and account for profit by
C   respondent no 1 against appellant on the basis of a/legation
    of passing off - Respondent's case that in 1998 its
    predecessor-in-title introduced generic drug ROFOL and
    began marketing under the name PROFOL and after
    amalgamation of respondent no. 1 with predecessor-in-title
D   in 2000, respondent no. 1 became the owner of the trademark
    PROFOL and has been using it since then, when it also
    applied for its registration and that the appellant had been
    using the mark ROFOL which is similar to its mark PROFOL
    - Appellant's case that it filed application for registration for
E   its trademark ROFOL in 1992 and the same was granted in
    2001, however, it commenced its user from 2004 onwards -
    Trial court granted temporary injunction against appellant
    which was upheld by the High Court- On appeal, held: Three
    factors relevant to an interim order-prima facie case, balance
F   of convenience and an irreparable loss in favour of
    respondents. Since the respondents have supported with
    proof that they had already been using their trademark well
    before the attempted user of an identical or closely similar
    trademark by the appellant, they are entitled to temporary
G   injunction, in light of 'first in the market' test- Thus, the order
    passed by the High Court upheld.
         Dismissing the appeal, the Court
      HELD: 1.1 Section 34 of the Trade Marks Act, 1999
H palpably holds that a proprietor of a trade mark does not
                                   684
        NEON LABORATORIES LTD. v. MEDICAL                      685
               TECHNOLOGIES LTD.

have the right to prevent the use by another party of an       A
identical or similar mark where that user commenced
prior to the user or date of registration of the proprietor.
This "first user" rule is a seminal part of the Act. While
the case of the respondents is furthered by the fact that
their user commenced prior to that of the appellant, the       ·B
entirety of the Section needs to be taken into
consideration, in that it gives rights to a subsequent user
when its user is prior to the user of the proprietor and
prior to the date of registration of the proprietor,
whichever is earlier. The appellant filed for registration     C
in 1992, six years prior to the commencement of user by
the respondents. The appellant was, thus, not prevented
from restraining the respondents' use of the similar mark
PROFOL, but the intention of the Section, which is to          D
protect the prior user from the proprietor who is not
exercising the user of its mark prima facie appears to be
in favour respondents. [Para 7] [692-F-H; 693-A-B]

     1.2 Had the appellant commenced user of its
trademark ROFOL prior to or even sin:rnltaneous with or        E
even shortly after the respondents' marketing of their
products under the trademark PROFOL, on the
appellant being accorded registration in respect of
ROFOL which registration would retrospectively have            F
efficacy from 19.10.1992, the situation would have been
unassailably favourable to it. After applying for
registration of its trademark ROFOL in 1992, the
appellant took no steps whatsoever in placing its
product in the market till 2004. It also was legally           G
lethargic in not seeking a curial restraint against the
respondents. This reluctance to protect its mark could
well be interpreted as an indication that the appellant had
abandoned its mark at some point during the twelve y1!!ar
interregnum between its application and the                    H
686         SUPREME COURT REPORTS                [2015) 10 S.C.R.


 A commencement of its user, and that in 2004 it sought to
   exercise its rights afresh. It would not be unfair or
   fanciful to favour the view that the appellant's delayed
   user was to exploit the niche already created and
   built-up by the Respondents for themselves in the
 B market. The 'first in the market' test has always enjoyed
   pre-eminence. [Para 9) [693-F-H; 694-A-C]

           1.3 Since the respondents have alleged, and have
      prima facie supported with proof, that they had already
 C    been using their tra.demark well before the attempted
      user of an identical or closely similar trademark by the
      appellant, the former would be entitled to a temporary
      injunction, in light of the 'first in the market' test.
      Respondents have made out a prima facie case. The two
 D    other factors in an interim injunction, namely the balance
      of convenience and an irreparable loss, are both in favour
      of the respondents, given the potential loss of goodwill
      and business they could suffer should an injunction be
      denied. The appellant has been injuncted from using the
 E    mark ROFOL since 2005, after having launched products
      bearing the mark only in the previous year, so the
      balance of convenience is in favour of allowing the
      injunction to continue. The decision of the trial court, as
 F    affirmed by the first appellate court, is reasonable and
      judicious, and does not suffer from perversity by any
      dialectic that the appellant may proffer. [Para 10, 11) [695-
      F-H; 696-A-C]

           Wander Ltd. v. Antox India P Ltd. 1990 Supp SCC
 G         727; N.R. Dongre v. Whirlpool Corporation (1996)
           5 sec 714:1996 (5) SuppL SCR 369; Mi/met
           Oftho Industries v. Allergan Inc. (2004) 12 SCC
           624: 2004 (2) Suppl. SCR 586; S. Syed Mohiden
           v. P Sulochana Bai (2015) 7 SCALE 136 -
 H
           referred to.
         NEON LABORATORIES LTD. v. MEDICAL                        687
                TECHNOLOGIES LTD.

                   Case Law Reference                             A
  1990 supp sec 727                   referred to. Para3
  1996 (5) Suppl·. SCR 369            referred to. Para 9
  2004 (2) Suppl. SCR 586             referred to. Para 9
                                                                  B
  (2015) 7 SCALE 136                  referred to   Para 9
   CIVIL APPELLATE JURISDICTION: Civil Appeal No.
1018 of2006.

    From the Judgment and Order dated 19.12.2005 of the C
High Court of Gujarat at Ahmedabad in Appeal from Order
No. 361 of2005.

   Ravikesh K. Sinha, Uday B. Dube, Sunil Nair for the
Appellant.                                                        D

    C.A. Sundaram,Akhil Sibal, Y. J. Trivedi, M. K. Choudhary,
Namita Choudhary, Jatin Trivedi, Ashutosh Kumar, Aditya Kr.
Choudhary, Yu_dhisha Bhardwaj, Himanshu Setia, Sushant
Singh, Rohini Musa, Zafar lnayat, Abhishek Gupta, Pradeep E
Chhindra, Anisha Gupta, S. K. Verma for the Respondent.

    The Judgment of the Court was delivered by

      VIKRAMAJIT SEN, J. 1. This Appeal assails the
Judgment dated 19.12.2005 of the Learned Single Judge of F
the High Court of Gujarat atAhmedabad, who returned the
opinion that the Trial Court had rightly granted an injunction in
favour of the Plaintiffs (Respondents before us) till the disposal
of the suit.
                                                                   G
     ·2 Briefly stated, the Plaintiff-Respondents 1 & 2 had filed
a suit for injunction, damages and account of profits. The
Plaintiff-Respondents are engaged in the business of
manufacture and marketing of pharmaceutical products and
                                                                  H
688         SUPREME COURT REPORTS                   [2015] 10 S.C.R.


A     medicinal preparation, and as pleaded by them, have acquired
      high reputation and goodwill in the market. Hematal Biologicals
      Ltd. or Core Health Care Ltd., the predecessor-in-title of
      Plaintiff-Respondents is stated to have introduced the
      molecular preparation and generic drug "Propofol" in India, in
 B    respectQfwhich an application had been filed before the Drug
      Controller of India on 22.4.1998. Product Permission was
      received on 2.5.1998 from the Commissioner of Food and
      Drugs Control Administration. It has been pleaded that the
      predecessor-in-title of Plaintiff-Respondent No.1 had coined
C     and invented the trademark PROFOL in April 1998 and not
      applied for registration of the said trademark on 24.5.1998 in
      Class V. However, it seems to us that this claim may not find
      acceptance inasmuch as PROFOL is almost an anagram of
 D    and is phonetically almost indistinguishable from the molecular
      compound, namely "Propofol". In our opinion, to claim
      exclusivity of user, the trademark should normally partake of a
      new creation, or if an existing word, it should not bear
      descriptive characteristics so far as the product is concerned,
 E    nor should it be of an extolment or laudation. It would be
      surprising if exclusivity is given to marks such as 'bestsoap'
      etc. Having said this, we must accept the reality that in the
      pharmaceutical industry it is commonplace that trademarks
      reproduce and resonate the constituent composition. While
 F    this aspect and feature may be a good ground for declining
      registration of the trademark, it may nevertheless remain a
      favourable detern::iinant in a passing-off action. So far as the
      subject trademarks are concerned, not only do their names
      constitute part of the generic drug "Propofol", but they are also
 G    so similar that even the concerned medical practitioner/
      anaesthesiologist could fail to discern the difference between
      them. It has been pleaded in the plaint that the said
      predecessor-in-title has been openly employing this mark since
      April 1998. After amalgamating with its predecessor-in-title
 H    on 17.2.2000, Plaintiff-Respondent No. 1 became the owner
        NEON LABORATORIES LTD. v. MEDICAL                               689
       TECHNOLOGIES LTD. [VIKRAMAJIT SEN, J.]

of the trademark PROFOL, and has been using it since 2000, A
when it also applied for its registration. Plaintiff-Respondent
No. 2 is a licensee of Plaintiff-Respondent No. 1. Or. coming
to learn that Defendant No. 1, the Appellant before us, had
introduced into market the same generic dru.g under the
trademark ROFOL, the Plaintiff-Respondents filed the present B
suit on 17. 7 .2005, on the predication that ROFOL is identical
and deceptively similar to the Plaintiff-Respondents' trademark
PROFOL. As is to be expected, the assertion in the plaint is
that the Defendant-Appellant is marketing and passing off its
products as that of the Plaintiff-Respondents.                  C

     3. This Court does not normally entertain appeals against
interlocutory orders. In the case of trademarks, however,
keeping in perspective the endemic delay in concluding cases/
suits in India because of the exponentially increasing docket           D
explosion, temporary ad interim injunctions are of far reaching
cons~quences, oftentimes effectively deciding the /is and the
disputes themselves. Possibly for this reason 'Leave' has
already been granted in the presentAppeal. However, it is now
well entrenched in our jurisprudence that the Appellate Court           E
should not flimsily, whimsically or lightly interfere in the exercise
of discretion by a subordinate court unless such exercise is
palpably perverse. Perversity can pertain to the understanding
of law or the appreciation of pleadings or evidence. We shall           F
restrictourselves to reference in Wander Ltd. v. Antox India P.
Ltd. 1990 Supp SCC 727, wherein it has been adumbrated
that the Appellate Court ought not to "reassess the material
and seek to reach a conclusion different from the .one reached
by the court below if the one reached by that court was                 G
reasonably possible on the material. The appellate court would
normally not be justified in interfering with the exercise of
discretion under appeal solely on the ground that if it had
considered the matter at the trial stage it would have come to
a contrary conclusion. If the discretion has been exercised by          H
690          SUPREME COURT REPORTS                    [2015] 10 S.C.R.


A     the trial court reasonably and in a judicial manner the fact that
      the appellate court would have taken a different view may not
      justify interference with the trial court's exercise of discretion".
      We shall be careful not to transgress these frontiers.

 B       4. Before granting an ad interim injunction, the Court in
    seisen of the litigation has to address its attention to the
    existence or otherwise of three aspects - (a) whether a prim a
    facie case in favour of the applicant has been established; (b)
    whether the balance of convenience lies in favour of the
 C applicant; and (c) whether irreparable loss or damage will visit
   ·the applicant in the event injunctory relief is declined. We shall
    cogitate on the first factor first - is the law favourable to the
    applicant.

 D          5. The primary argument of the Defendant-Appellant is that
      it had received registration for its trademark ROFOL in Class
      Von 14.9.2001 relating back to the date of its application viz.
      19.10.1992. It contends thatthe circumstances as on the date
      of its application are relevant, and on that date, the Plaintiff-
 E    Respondents were not entities on the market. However, the
      Defendant-Appellant has conceded that it commenced user
      of the trademark ROFOL only from 16.10.2004 onwards.
      Furthermore, it is important to note that litigation was initiated
      by Plaintiff-Respondents, not Defendant-Appellant, even
 F    though the latter could have raised issue to Plaintiff-
      Respondents using a similar mark to the one for which it had
      filed an application for registration as early as in 1992. The
      Defendant-Appellant finally filed a Notice of Motion in the
      Bombay High Court as late as 14.12.2005, in which it was
 G    successful in being granted an injunction as recently as on
      31.3.2012. We may reiterate that every High Court must give
      due deference to the enunciation of law made by another High
      Court even though it is free to charter a divergent direction.
 H    However, this elasticity in consideration is not available where
        NEON LABORATORIES LTD. v. MEDICAL                          691
       TECHNOLOGIES LTD. [VIKRAMAJIT SEN, J.]

the litigants are the same, since Sections 1O and 11 of the A
CPC would come into play. Unless restraint is displayed,
judicial bedlam and curial consternation would inexorably erupt
since an unsuccessful litigant in one State would rush to another
State in the endeavour to obtain an inconsistent orcontradictory
order. Anarchy would be loosed on the Indian Court system. B
Since the Division Bench of the Bombay High Court is in seisin
of the dispute, we refrain from saying anything more. The
Plaintiff-Respondents filed an appeal against the Order dated
31.3.2012 and the Division Bench has, by its Order dated
30.4.2012, stayed its operation.                                  C

       6. It may be reiterated that the Plaintiff-Respondents
asserts that their predecessor-in-interest had initiated user of
the trademark PROFOL in 1998, when it commenced
production thereof and Plaintiff-Respondents succeeded to the D
user of the mark upon amalgamation with their predecessor-
in-title in the year 2000. The position that emerges is that whilst
the Defendant-Appellant had applied for registration of its
trademark several years prior to the Plaintiff-Respondents,
(1992 as against 26.5.1998 at the earliest), the user thereof E
had remained dormant for twelve years. We can appreciate
that this passivity may be the result of research of the product
or the market, but the Defendant-Appellant will have to explain
its supineness through evidence. In this interregnum, the F
Plaintiff-Respondents had not only applied for registration but
had also commenced production and marketing of the similar
drug and had allegedly built up a substantial goodwill in the
market for PROFOL. The legal nodus is whether the prior
registration would have the effect of obliterating the G
significance of the goodwill that had meanwhile been
established by the Plaintiff-Respondents. Would a deeming
provision i.e. relating registration retrospectively prevail on
actuality - competing equities oscillate around prior
registration and prior user.                                        H
692        SUPREME COURT REPORTS                      [2015] 10 S.C.R.


A         7. Section 34 of the Trade Marks Act, 1999 (the Act)
      deserves reproduction herein:

           34. Saving for vested rights.-Nothing in this Act shall
           entitle the proprietor or a registered user of registered
 B         trade mark to interfere with or restrain the use by any
           person of a trade mark identical with or nearly
           resembling it in relation to goods or services in relation
           to which that person or a predecessor in title of his has
           continuously used that trade mark from a date prior-
 c            (a) to the use of the first-mentioned trade mark in
              relation to those goods or services be the proprietor
              or a predecessor in title of his; or
              (b) to the date of registration of the first-mentioned
 D            trade mark in respect of those goods or services in
              the name of the proprietor of a predecessor in title of
              his;
            ':"'hichever is the earlier, and the Registrar shall not refuse
          . (on such use being proved), to register the second
 E           mentioned trade mark by reason on:y of the registration
            of the first mentioned trade mark.

         This Section palpably holds that a proprietor of a trade
   mark does not have the right to prevent the use by another
 F party of an identical or similar mark where that user commenced
   prior to the user or date of registration of the proprietor. This
   "first user" rule is a seminal part of the Act. While the case of
   the Plaintiff-Respondents is furthered by the fact that their user
   commenced prior to that of the Defendant-Appellant, the
 G entirety of the Section needs to be taken into consideration, in
   that it gives rights to a subsequent user when its user is prior
   to the user of the proprietor and prior to the date of registratiofl
   of the proprietor, whichever is earlier. In the facts of the case at
   hand, the Defendant-Appellant filed for registration in 1992,
 H six years prior to the commencement of user by the Plaintiff-
        NEON LABORATORIES LTD. v. MEDICAL                        693
       TECHNOLOGIES LTD. [VIKRAMAJIT SEN, J.]

Respondents. The Defendant-Appellant was, thus, not A
prevented from restraining the Plaintiff-Respondents' use of
the similar mark PROFOL, but the intention of the Section,
which is to protect the prior user from the proprietor who is not
exercising the user of its mark prima facie appears to be in
favour of the Plaintiff-Respondents.                              B

      8 Section 4 7 of the Act is in the same vein and statutory
strain inasmuch as it postulates the possibility of a registered
mark being taken off the register on an application being made
by any aggrieved person, inter alia, on the ground that for a C
continuous period of five years and three months from the date
on which the trademark was registered, there was no bona
fide use thereof. In the case in hand, prima facie, it appears
that for over five years after a registration application was made
by the Defendant-Appellant, the mark was not used. Facially, D
the Act does not permit the hoarding of or appropriation without
utilization.of a trademark; nay the Defendant-Appellant has
allowed or acquiesced in the user of the Plaintiff-Respondents
for several years. The legislative intent behind this Section was
to ordain that an applicant of a trademark does not have a E
permanent right by virtue of its application alone. Such a right
is lost if it is not exercised within a reasonable time.

      9 We must hasten to clarify that had the Defendant-
Appellant commenced user of its trademark ROFOL prior to F
or even simultaneous with or even shortly after the Plaintiff-
Respondents' marketing of their products under the trademark
PROFOL, on the Defendant-Appellant being accorded
registration in respect of ROFOL which registration would
retrospectively have efficacy from 19 .10 .1992, the situation G
would have been unassailably favourable to it. What has
actually transpired is that after applying for registration of its
trademark ROFOL in 1992, the Defendant-Appellant took no
steps whatsoever in placing its product in the market till 2004. H
It also was legally lethargic in not seeking a curial restraint
694          SUPREME COURT REPORTS                     [2015) 10 S.C.R.


 A    against the Plaintiff-Respondents. This reluctance to protect
      its mark could well be interpreted as an indication that the
      Defendant-Appellant had abandoned its mark at some point
      during the twelve year interregnum between its application and
      the commencement of its user, and that in 2004 it sought to
 B    exercise its rights afresh. It would not be unfair or fanciful to
      favour the view that the Defendant-Appellant's delayed user
      was to exploit the niche already created and built-up by the
      Plaintiff-Respondents for themselves in the market. The 'first
      in the market' test has always enjoyed pre-eminence. We shall
 C    not burden this Judgment by referring to the several precedents
      that can be fou.nd apposite to the subject. In the interest of
      prolixity we may mention only N.R. qongre v. Whirlpool
      Corporation (1996) 5 SCC 714 and Milmet Oftho Industries v.
 D    Allergan Inc. (2004) 12 SCC 624. In Whirlpool, the worldwide
      prior user was given preference nay predominance over the
      registered trademark in India of the defendant. In Milmet, the
      marks of pharmaceutical preparation were similar but the prior
      user worldwide had not registered its mark in India whereas
 E    its adversary had done so. This Court approved the grant of
      an injunction in favour of the prior user. Additionally, in the recent
      decision in S. Syed Mohiden v. P. Sulochana Bai (2015) 7
      SCALE 136, this Court has pithily underscored that the rights
      in a passing-off action emanate from common law and not
 F    from statutory provisions, nevertheless the prior user's rights
      will override those of a subsequent user even though it had
      been accorded registration of its trademark. Learned counsel
      for the Defendant-Appellant has endeavoured to minimise the
      relevance of Whirlpool as well as Milmet by drawing the
 G    distinction that those trademarks had attained worldwide
       reputation. However, we think that as world shrinks almost to
      global village, the relevance of the transnational nature of a
      trademark will progressively diminish into insignificance. In
       other words, the attainment of valuable goodwill will have ever
 H     increasing importance. At the present stage, the argument in
        NEON LABORATORIES LTD. v. MEDICAL                             695
       TECHNOLOGIES LTD. [VIKRAMAJIT SEN, J.]

favour of the Defendant-Appellantthatwefind holds more water          A
is that in both Mil met and Whirlpool, as distinct from the case
before us, the prior user of the successful party predated the
date of application for registration of the competing party. The
question to examine, then, would be whether prior user would
have to be anterior to the date of application or prior to the        B
user by the Defendant-Appellant. In other words, the question
before the Court would remain whether the situation on the
date of application for registration alone would be relevant, or
whether the developments in the period between this date and
the date of grant of registration would have any bearing on the       C
rights of the parties. All these considerations will be cast into a
curial cauldron to be appreciated by the Court before which
the suit is being contested. In these premises, we cannot
conclude that a prima facie case has not been disclosed by            D
the Plaintiff-Respondents.

       10. Since we are confronted with the legal propriety of a
temporary injunction, we must abjure from going into minute
details and refrain from discussing the case threadbare, in·
order to preclude rendering the suit itself an exercise in futility E
and the decision therein a foregone conclusion. All that we
would say in the present Appeal is that since the Plaintiff-
Respondents have alleged, and have prima facie supported
with proof, that they had already been using their trademark F
well before the attempted user of an identical or closely similar
trademark by the Defendant-Appellant, the former would be
entitled to a temporary injunction, in light of the abovementioned
'first in the market' test. We find that the Plaintiff-Respondents
have made out a prima facie case. The two other factors in an G
interim injunction, namely the balance of convenience and an
irreparable loss, are both in favour of the Plaintiff-Respondents,
given the potential loss of goodwill and business they could
suffer should an injunction be denied. The Defendant-Appellant
has been injuncted from using the mark ROFOL since 2005, H
696          SUPREME COURT REPORTS                  [2015] 10 S.C.R.

A     after having launched products bearing the mark only in the
      previous year, so the balance of convenience is in favour of
      allowing the injunction to continue. In Milmet, this Court had
      taken note of the fact that the unsuccessful litigating party had
      in the duration of the litigation started using another mark, and
 B    found that this would prima facie assume significance in
      assessing "irreparable loss".

           11. For manifold and myriad reasons, we are of the opinion
      that the decision of the Trial Court, as affirmed by the First
 C    Appellate Court, is reasonable and judicious, and does not
      suffer from perversity by any dialectic that the Defendant-
      Appellant may proffer. The Appeal is accordingly dismissed,
      but with no order as to costs.

 D    Nidhi Jain                                     Appeal dismissed.