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Kamat Hotels (India) Limited vs Royal Orchid Hotels Limited


Kamat Hotels (India) Limited vs Royal Orchid Hotels Limited And Another, Judgment delivered on 5 April, 2011

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

NOTICE OF MOTION NO.2552 OF 2008

IN

SUIT NO.2224 OF 2008

Kamat Hotels (India) Limited ….Plaintiff. vs.

Royal Orchid Hotels Limited and Another …Defendants. …..

Dr. Virendra Tulzapurkar, Senior Advocate with Mr. Virag Tulzapurkar, Senior Advocate, Mr. Vinod Bhagat, Mr. Punit Jani, Mr. Dhiren Karania, Mr. Suryank Rao i/b G.S. Hegde and V.S. Bhagat for the Plaintiff.

Mr. Venkatesh R. Dhond with Mr. Nikhil Krishnamurthy, Mr. Rashmin Khandekar, Mr. Sunil Patel i/b M/s. Sunil & Co. for Defendant No.1. ……

CORAM : DR.D.Y.CHANDRACHUD, J.

5 April 2011.

ORAL JUDGMENT (PER DR.D.Y. CHANDRACHUD, J.) :

1. The suit has been instituted for infringement and passing off. The Plaintiff carries on the business of conducting hotels and restaurants and has a food catering business. The Plaintiff is the owner and proprietor of the trade mark “the Orchid” which is used upon and in relation to a Five Star hotel belonging to the Plaintiff. The essential and prominent feature of the mark is the word “Orchid”. According to the Plaintiff in or around December 1995, it conceived and adopted the mark from the name of a flower for use upon and in relation to its hotel which was then under construction at Mumbai. The construction of the first phase of the hotel was PNP 2 NMS2552.sxw

complete in 1996. Commercial operations commenced in phases from January 1997. Hence, the Plaintiff claims use of the mark continuously since January 1997. The hotel, which is called The Orchid is stated to be the first Ecotel hotel in Asia. The word ‘Ecotel’ is recognized as a hallmark of environmentally sensitive hotels. Authority to use the mark Ecotel is a culmination of a certification programme undertaken to enable industries in the hospitality area to enhance their value through environmental initiatives. The work mark “The Orchid” has according to the Plaintiff acquired goodwill and reputation both in the city of Mumbai and elsewhere. Apart from claiming common law rights in the mark as a result of continuous use since January 1997, the Plaintiff has also claimed an entitlement as a proprietor of the mark under the provisions of the Trade Marks Act 1999.

2. Prior to the statutory recognition of service marks in 2003 the Plaintiff, in the manner, the Court is informed, that was then prevalent obtained registration of the mark in various classes under the Act. On 30 May 1997 the Plaintiff obtained registration of the mark in Class 16 which inter alia relates to paper and stationary. Registration was obtained also on 30 May 1997 in relation to Class 29 (food items), Class 30 (coffee, tea and sugar), Class 31 (agricultural, horticultural and forestry products) Class 32 (beer, mineral and aerated water) and Class 33 (wines and spirits). After service marks came to be statutorily recognized, the Plaintiff applied for the registration of its mark in Class 42 (hotels, bar and restaurants, catering, holiday camp services, hotel reservations, providing of food and drinks and temporary accommodation). Registration was granted to the Plaintiff PNP 3 NMS2552.sxw

on 17 September 2007. The registration relates back to 19 May 2004.

3. The case of the Plaintiff that the mark has been utilized since 1 January 1997 is buttressed by a certificate of a Chartered Accountant. Revenues for the period from 1 January 1997 to 31 December 1998 were Rs.18.72 Crores. The revenues rose to Rs.96.27 Crores for the financial year 2007-08. Publicity expenses for the period 1 January 1997 to 31 December 1998 were Rs.67.05 lacs which increased, during the financial year 2007-08 to Rs.2.91 Crores. Invoices for the advertisements issued have been relied upon by the Plaintiff. The Plaintiff has placed reliance on certificates and awards which demonstrate a commitment to quality in the hospitality industry. An Ecotel certificate was issued to the Plaintiff on 12 May 1997.

4. Some time in March 2004 the Plaintiff claims to have learnt that the Defendant had applied for registration of two trade marks, Royal Orchid and Royal Orchid Hotels in Class 16, for paper and paper articles and other stationary goods. In November 2005, the Plaintiff claims to have learnt of an application by the First Defendant for the registration of these two marks in Class 42. The First Defendant had submitted an application on 22 June 2004, which was advertised in the Trade marks Journal of 15 June 2005 which according to the Plaintiff was available to the public on 20 October 2005. The First Defendant had in its application claimed use from 3 November 1999. The application of the First Defendant was rejected on 29 June 2009. An appeal has been filed before the appellate authority.

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5. On 12 January 2006, the First Defendant issued a red herring prospectus for a public issue of shares. The prospectus made the following disclosure in regard to Hotel Royal Orchid : “Hotel Royal Orchid

This is our flagship hotel owned by us and was set up in 2001 on land leased from the Karnataka State Tourism Development Corporation (“KSTDC”). Hotel Royal Orchid is a premium business hotel targeted towards the upscale business traveller and provides all the amenities and comforts which a business customer requires. The hotel has been granted a ‘three-star’ classification in February 2003 by HRACC, Government of India.” (emphasis supplied)

Similarly, the prospectus contains the following statement in regard to Royal Orchid Harsha :

“Royal Orchid Harsha

Royal Orchid Harsha was the first hospitality venture of Mr. Chander K. Baljee. Royal Orchid Harsha is targeted towards the economy business traveller and caters to middle level and junior level executives. In the year 2001, Royal Orchid Harsha came into our fold when the property was leased to us.” (emphasis supplied)

The unequivocal representation of the First Defendant was that the hotel was set up in 2001 and it was in 2001 that the hotel came into the fold of the First Defendant when the hotel was leased to it.

6. On 13 January 2006 the Plaintiff published an advertisement on its own behalf in response to the IPO of the First Defendant recording the contention of the Plaintiff that the use of the mark Royal Orchid by the First Defendant constitutes passing off in respect PNP 5 NMS2552.sxw

of the Plaintiff’s common law rights in the mark “Orchid”.

7. The First Defendant submitted a further application for registration of the mark “Royal Orchid Harsha” which was published in the Trade mark Journal of 1 September 2007. Use of the mark was claimed since 10 July 2005. Similar applications were submitted by the First Defendant for the registration of the mark “Royal Orchid Central” (claiming use from 10 July 2005), for Hotel Royal Orchid (claiming use from 25 August 2005) and for the marks Royal Orchid Hotels and Royal Orchid Metropole (claiming use from 10 July 2005). There was a disclaimer in respect of the use of the word “Royal”. In May 2008 an industry publication for the Indian hotel industry contained inter alia information about the First Defendant. However, according to the Plaintiff the publication refers to the registered office of the Plaintiff and to its key managerial personnel. This according to the Plaintiff shows that the mark of the First Defendant is deceptively similar to the mark of the Plaintiff.

8. The suit for infringement and for passing off was instituted in 2008. On the Defendants questioning the jurisdiction of this Court a preliminary issue under Section 9-A of the Code of Civil Procedure 1908 was framed. This Court held that it has jurisdiction to entertain and try the suit.

Submissions

9. On behalf of the Plaintiff it has been submitted that – (i) The essential feature of the mark belonging to the Plaintiff is Orchid, with a device of a flower. The mark of the First PNP 6 NMS2552.sxw

Defendant consists of the word Orchid as its central feature together with the device of the flower. The mark of the First Defendant is almost identical and a case of infringement has been made out;

(ii) The only defence, if any, that the Defendant can have to an action for infringement must be founded either on (1) acquiescence or delay; or in the alternative (2) a prior use of the mark. In the present case, there is no acquiescence or delay on the part of the Plaintiff, which has consistently opposed the use of the mark Orchid by the First Defendant. As regards the defence of prior use, the Plaintiff has used the mark “Orchid” since January 1997 and the registration of the mark dates back to May 2004. The use of the mark by the First Defendant from 3 November 1999 (as stated in the application for registration in Class 42) can furnish no defence whatsoever under Section 34 of the Trade Marks Act 1999, because that use is after the use by the Plaintiff commenced; (iii)The alleged use of the word “Orchid” by the First Defendant has no basis or foundation in fact or in law because (a) Under Section 34 the use must be in respect of goods and services for which the Plaintiff is registered; (b) It must be commercially continuous use. The name of the First Defendant was changed on 10 April 1997 to Royal Orchid Hotels Limited, but this does not amount to a commercial use of the mark since the hotel started functioning only in 2001; (c) In any event, the use of the mark Orchid was not by the First Defendant or by its predecessor-in-title. In order to avail of the benefit of Section 34, the First Defendant must establish how it has become a PNP 7 NMS2552.sxw

successor-in-title in respect of the mark and the business in which it is used. Upon this there is no disclosure whatsoever by the First Defendant. The First Defendant does not become the successor-in-interest merely on taking a hotel on lease. The First Defendant cannot claim to be a successor of Hotel Harsha which was owned and run by Hotel Stay Longer Private Limited (HSPL); (d) All the sales figures of the First Defendant are from 2001. Any use after the commencement of use by the Plaintiff in 1997 cannot furnish a defence under Section 34; (e) The registration of the Plaintiff is in Class 42. Even if the statement of fact of the First Defendant were to be accepted, naming a room in a hotel by the word “Orchid” for identifying a particular place does not constitute the services of a hotel, bar and restaurant or a catering service. In any event, except for a stray advertisement and an in house pamphlet, there is no evidence of actual use by the First Defendant. The extent and value of the services has not been stated;

(iv)There is no acquiescence on the part of the Plaintiff. The Plaintiff obtained knowledge of the use of the mark by the First Defendant in March 2004. The Plaintiff obtained registration of its mark in October 2007 following which it was entitled in law to institute a suit for infringement. The suit was filed in 2008. The true test is whether it can be inferred that the Plaintiff has encouraged the First Defendant to use the mark and build up investment in circumstances that would render its conduct fraudulent. No such case can be established by the First Defendant.

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10. On behalf of the First Defendant, it has been submitted that – (i) The Plaintiff has come to Court with a carefully structured false case. The Plaintiff had in fact not lodged any objection in March 2004 where the First Defendant had sought registration in Class 16. Even after the public issue of the First Defendant in January 2006 the Plaintiff did not espouse any legal remedies; (ii) The Managing Director of the Plaintiff was present in a function in March 2006 where an award was presented to the General Manager of the First Defendant. The business of the First Defendant together with the use of the mark “Orchid” was reported in the print media both within the hospitality industry and outside since June 2001;

(iii)The Plaintiff’s case of the adoption of the mark and commencement of business in January 1997 is doubtful because the material indicates that the business of the hotel had commenced on 27 September 1997;

(iv)The First Defendant obtained a confirmation of the availability of the name with the word “Orchid” from the Registrar of Companies on 25 April 1996. A board resolution was passed on 30 September 1996; Form 23 was lodged on 4 April 1997 and a fresh certification of incorporation was issued to the First Defendant on 10 April 1997. This would indicate that the First Defendant had since April 1996 conceived of the use of the mark “Orchid”. If the case of the Plaintiff on the use of its mark from January 1997 fails, the use of the mark would be from September 1997. In the meantime, in April 1997 there was a change in the name of the First Defendant to incorporate the word “Orchid”. Though prior to 2001, there is no evidence PNP 9 NMS2552.sxw

of commercial use by the First Defendant of the mark, the First Defendant was in the process of setting up a hotel. The First Defendant bonafide adopted the name in April 1997. The documentary material of 1999 would indicate that the First Defendant was corresponding with its bankers and the hotel eventually commenced in 2001;

(v) The material on the record would indicate that Hotel Harsha had an ‘Orchid room’ on 30 December 1990;

(vi)In sum and substance the contention of the First Defendant is that- (a) This is not a case of a dishonest adoption of the mark; (b) The delay on the part of the Plaintiff is one factor which the Court will take into account; (c) Serious triable issues arise including who had used the mark first; (d) The Plaintiff has tried to improve upon its case; and (e) The enterprise of the First Defendant is well entrenched and the balance of convenience must therefore rest with the First Defendant.

Registration and defence of prior use

11. The Trade Marks Act 1999 incorporates specific provisions for the consequence of registration. The remedy of infringement is available upon registration. Under sub-section (1) of Section 27 no person is entitled to institute any proceeding to prevent, or to recover damages for the infringement of an unregistered trade mark. Sub- section (2), however, saves the right of action for passing off of goods or services and the remedies in respect thereof. Under sub -section (1) of Section 28 the registration of a trade mark, if valid, furnishes to the registered proprietor the exclusive right to the use of the mark “in relation to the goods or services in respect of which the PNP 10 NMS2552.sxw

trade mark is registered” and to obtain relief in respect of infringement in the manner provided by the Act.

12. Section 34 of the Act provides for the saving of vested rights in the following terms :

“34. Saving for vested rights – Nothing in this Act shall entitle the proprietor or a registered user of registered 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 –

(a) to the use of the first-mentioned trade mark in relation to those goods or services by the proprietor or a predecessor in title of his; or

(b) to the date of registration of the first-mentioned trade mark in respect of those goods or services in the name of the proprietor of a predecessor in title of his,

whichever is the earlier, and the Registrar shall not refuse (on such use being provided) to register the second mentioned trade mark by reason only of the registration of the first-mentioned trade mark.”

13. Essentially, what Section 34 provides is a defeasance of the right of the proprietor or registered user of a registered trade mark, in a certain specific eventuality. That eventuality is where another person is using a trade mark identical with or nearly resembling a registered trade mark in relation to goods or services in relation to which that person or a predecessor-in-title has continuously used that trade mark. Before the protection under Section 34 can be availed of, the conditions which are spelt out in Section 34 must demonstrably exist. In order to facilitate analysis, it would be convenient to break PNP 11 NMS2552.sxw

down Section 34 into its component elements :

(i) Section 34 commences with a non obstante provision which gives it overriding force over the other provisions of the Act; (ii) The effect of Section 34 is that a proprietor or registered user of a registered trade mark is disabled from interfering with or restraining the use by any person of a trade mark identical with or resembling it;

(iii)The use by the other of a trade mark identical with or nearly resembling the registered trade mark must be in relation to goods or services in relation to which that person or a predecessor-in-title has continuously used that trade mark; (iv)The use by the other must be from a date prior (a) to the use of the first mentioned trade mark in relation to those goods or services by the proprietor or a predecessor-in-title; or (b) to the date of registration of the first mentioned trade mark in respect of those goods or services, in the name of the proprietor or a predecessor-in- title of his, whichever is earlier.

14. Section 34 carves out an exception and creates an overriding provision which within the sphere of its operation prevents a proprietor or registered user of a registered trade mark from interfering with the use of an identical trade mark or a mark which nearly resembles the registered mark. Section 34 in consequence provides for a defeasance of the statutory entitlement which flows from the registration of a trade mark. Before such a consequence ensues the conditions which Parliament has enacted must be fulfilled. The most fundamental requirement is four fold. Firstly, the use by a PNP 12 NMS2552.sxw

person of a mark which is identical to or nearly resembles a registered trade mark must be in relation to those goods and services for which the first mentioned mark has been registered. Secondly, the use that is postulated by Section 34 is a continuous use of the trade mark. Thirdly, in order to avail of the protection the trade mark must be used by the proprietor or by his predecessor-in- interest. Fourthly, the mark in respect of which protection is sought must have been used from a date prior to the use of the registered trade mark or the date of registration of the registered trade mark whichever is earlier. Hence, as an illustration, if the user by the Plaintiff is prior to registration, then the use by the Defendant must be established to be prior to the use by the Plaintiff. If the Plaintiff has not used the mark prior to the date of registration, the use by the Defendant has to be prior to the date of registration of the Plaintiff’s mark. The use must be in respect of goods and services for which the Plaintiff’s mark is registered. The use has to be by the Defendant or by his predecessor-in-title. The use must be continuous. The expression “continuously used that trade mark” by Parliament has a specific connotation. The concept of continuous use emphasises that a right vests in a person when he puts his goods with the mark in the market. A use which is continuous is distinct from a use which is stray, isolated or disjointed. The notion of a continuous use establishes that a mere adoption of a mark is not sufficient. The legislation mandates that in order to avail of the benefit of Section 34 a test of a high order must be fulfilled which requires a commercially continuous use of the mark in relation to goods or services. Section 34 thus provides for specific requirements which relate to (i) the nature of the goods or services in relation to which PNP 13 NMS2552.sxw

the mark is used; (ii) the nature and character of use; (iii) the person who must use; and (iv) the date from which the mark should have been used. Section 2(2)(b) provides that in the Act, unless the context otherwise requires, any reference to the use of a mark is to be construed as a reference to the use of printed or other visual representation of the mark. Any reference to the use of a mark in relation to goods shall be construed as a reference to the use of the mark upon or in any physical or in any other relation whatsoever, to such goods. The Supreme Court has interpreted these words in the context of Section 46(1)(b) in Hardie Trading Ltd. v Addisons Paint and Chemicals Ltd1.

Analysis of facts

15. The distinctive feature of the mark of the Plaintiff is the word “Orchid” with the device of a flower. The first Defendant employs the same word – Orchid – with the device of a flower. Prima facie, the mark of the First Defendant is an infringing mark. The test to be applied can best be stated in the lucid exposition of Chagla C.J. in James Chadwick & Bros. Ltd. v. The National Sewing Thread Co. Ltd.2, speaking for the Division Bench : “What is important is to find out what is the distinguishing or essential feature of the trade mark already registered & what is the main feature or the main idea underlying that trade mark, & if it is found that the trade mark whose registration is sought contains the same distinguishing or essential feature or conveys the same idea, then ordinarily the Registrar would be right if he came to the conclusion that the trade mark should not be registered. The real question is as to how a purchaser, who must be looked upon as an average man of ordinary

1 AIR 2003 SC 3377.

2 AIR 1951 BOM 147.

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intelligence, would re-act to a particular trade mark, what association he would form by looking at the trade mark, & in what respect he would connect the trade mark with the goods which he would be purchasing. It is impossible to accept that a man looking at a trade mark would take in every single feature of the trade mark. The question would be, what would he normally retain in his mind after looking at the trade mark? What would be the salient feature of the trade mark which in future would lead him to associate the particular goods with that trade mark?”

16. The distinguishing or essential feature of the mark of the Plaintiff is the word Orchid together with the device of the flower. That is indeed the same distinguishing feature adopted by the First Defendant.

17. Now it is in this background that it would be necessary to evaluate prima facie whether the conditions which have been spelt out in Section 34 are shown to exist, in order to protect the vested right which the Defendant claims in the use of the mark. The First Defendant applied for registration of the mark on 22 June 2004. Both while applying for registration of the marks Royal Orchid and Royal Orchid Hotels, the First Defendant claimed use of the mark since 3 November 1999. Hence, the earliest use which the First Defendant claimed while seeking registration of the mark in Class 42 was from that date. Thereafter, the First Defendant claimed registration of different configurations of the mark in Class 42 in which the first use was claimed on 10 July 2005 and 25 August 2005. In the public issue of shares in January 2006 the First Defendant made certain disclosures in its red herring prospectus. The prospectus contains a statement that Hotel Royal Orchid was set up by the First Defendant PNP 15 NMS2552.sxw

in 2001 on land leased from the Tourism Corporation of the State of Karnatak. Royal Orchid Harsha was disclosed in the prospectus as the first hospitality venture of Chander K. Baljee and was disclosed to have come into the fold of the First Defendant in 2001 when the property was leased to it. The projected sales figures for the First Defendant which have been disclosed on affidavit are for the period from 2001 (reference may be made in this regard to Annexure 8 of Appendix I to ICICI’s report dated 23 April 1999).

18. On behalf of the First Defendant it has been submitted that the original name of the First Defendant which was incorporated on 3 January 1986 was Universal Resorts Limited. On 25 April 1996 the First Defendant obtained a confirmation from the Registrar of Companies of the availability of the present name, incorporating the word “Orchid”. The Board of Directors passed a resolution on 30 September 1996; Form 23 was filed on 4 April 1997 and a fresh certification of incorporation was issued on 10 April 1997.

19. In order to avail of the benefit of Section 34 of the Trade Marks Act 1999 the mere change of name of the First Defendant with effect from 10 April 1997 will not suffice. The First Defendant must demonstrate that the mark was utilized in relation to the goods and services for which the mark of the Plaintiff was registered and that the use of the First Defendant was prior to the registration, or as the case may be, the use of the mark by the Plaintiff. In this regard, reliance has been sought to be placed on behalf of the First Defendant on certain circumstances in the affidavits in reply to which it would now be necessary to turn. The first of those circumstances PNP 16 NMS2552.sxw

is the alleged adoption of the mark “Orchid” in respect of a banquet room at Hotel Harsha in Bangalore. In the Bangalore edition of the Times of India of 30 December 1990 there is a publication in respect of the Orchid room at Harsha Hotel. The next document is a report dated 23 April 1999 of the Zonal Manager in ICICI prepared in the context of a new project of the First Defendant. The report inter alia states that the First Defendant had been promoted by C.K. Baljee. Baljee had promoted a company by the name of Baljees Hotels and Real Estates Private Limited in 1973 and took over a Two Star Hotel, Hotel Harsha in Bangalore on an operational lease from Hotel Stay Longer Private Limited (HSPL). Baljee had since acquired the controlling interest in HSPL which owned Hotel Harsha. Counsel appearing on behalf of the First Defendant also purported to rely upon a letter addressed to the Joint Director of Town Planning at Bangalore on 16 September 1999 and a certificate dated 17 December 1999 issued by the Government of India in the Ministry of Commerce and Industry.

20. All these documents (save and except for the isolated advertisement of 1990) relate to the period after the Plaintiff had commenced the use of the mark “Orchid”. Those documents do not even prima facie establish a use, much less continuous use, prior to the date on which the Plaintiff had commenced the use of the mark. Significantly, the First Defendant has not disclosed any sales figures that would establish a continuous course of use of the mark “Orchid” prior to the date on which the Plaintiff commenced the use of the mark. There is merit in the contention which has been urged on behalf of the Plaintiff that the reference to a room in Hotel PNP 17 NMS2552.sxw

Harsha as being the Orchid room is not sufficient to establish within the meaning of Section 34 a continuous use by the First Defendant of the mark in relation to the goods and services for which the mark has been registered by the Plaintiff. But it is important to note that the First Defendant is unable to establish by any cogent documentary material the existence of such continuous use. Where a Defendant sets up a defence under Section 34, the consequence of allowing it is to dilute the protection granted to a proprietor of a registered mark. The Defendant must be held down to establish the requirements of Section 34 by cogent material which indicates continuous prior use. A single swallow does not make a summer. The Defendants have not established a crucial requirement of Section 34.

21. On the other hand, the case of the Plaintiff is that it commenced the use of the mark in January 1997. According to counsel appearing on behalf of the First Defendant the hotel of the Plaintiff at Mumbai opened to the public on World Tourism day on 27 September 1997, as is disclosed in the website of the Plaintiff. The Plaintiff has disputed this, contending that as a matter of fact pre-marketing activities had commenced in January 1997. But, whether the use of the mark by the Plaintiff commenced in January or in September 1997 is really besides the point because the material on the record is sufficient to indicate that the First Defendant commenced use of the mark much after the Plaintiff. Even taking the case of the First Defendant as it stands viz. that the change in its corporate name was brought into effect from April 1997, there is absolutely no material to indicate even prima facie that the First Defendant had used the mark in relation to the goods and services PNP 18 NMS2552.sxw

for which the mark of the Plaintiff was registered prior to the use by the Plaintiff. Counsel appearing on behalf of the First Defendant adverted to the Hotel and Restaurant Guide of 2002 (a publication of November 2001), to an article in the India Today of 30 July 2001 and in the Business Times of 8 June 2001. Evidently all the documentary material that is produced on behalf of the First Defendant relates to a period much after the commencement of the use of the mark by the Plaintiff. By the time that the First Defendant commenced the use of the mark, the Plaintiff had established a substantial reputation of its own as is evident from its sales and revenue. The annual revenues of the Plaintiff for the period from 1 January 1997 to 31 March 2008, as disclosed in the certificate of the Chartered Accountant dated 3 July 2008 were as follows :

Period Annual Revenue

(in Rs. Crores)

01.01.1997 to 31.12.1998 18.72 01.01.1999 to 31.03.2000 50.94 01.04.2000 to 31.03.2001 52.28 01.04.2001 to 31.03.2002 42.92 01.04.2002 to 31.03.2003 42.27 01.04.2003 to 31.03.2004 45.96 01.04.2004 to 31.03.2005 51.69 01.04.2005 to 31.03.2006 64.03 01.04.2006 to 31.03.2007 79.02 01.04.2007 to 31.03.2008 96.27 Total 544.13

22. On the other hand, the projected total income of the First Defendant as disclosed in Annexure 8 to the ICICI report dated 23 PNP 19 NMS2552.sxw

April 1999 (which is relied upon in the affidavit of the First Defendant’s Company Secretary of 2 March 2011) shows a total income of Rs.19.1 Million for 2001; Rs.71.1 Million for 2002; Rs.93.9 Million for 2003 and eventually Rs.176.5 Million for 2008. Prima facie, there is therefore no cogent material to indicate that the First Defendant had a prior use so as to substantiate a defence under Section 34.

23. The next component of Section 34 is that the use must be by the First Defendant or by a predecessor-in-title. In this regard the contention of the Plaintiff is that Harsha Hotel and Convention Center was run by an Indian company – Hotel StayLonger Private Limited (HSPL). The First Defendant, it is urged has failed to discharge the burden of establishing even prima facie how it become the successor-in-title of HSPL. Now as already noted earlier, the red herring prospectus of the First Defendant of January 2006 discloses that Harsha Hotel came into the “fold” of the First Defendant in the year 2001 when the property was leased to the First Defendant. This according to the Plaintiff belies the claim which is made by the First Defendant in an affidavit filed in August 2008 in response to the Motion where it is averred that the First Defendant “adopted the mark Orchid room in respect of its banquet hall” in one of its hotels Royal Orchid Harsha (then known as Hotel Harsha) at Bangalore in January 1992. The First Defendant claims to have adopted the mark Orchid in relation to cutlery in 1992 and catering services in 1993. The submission which was urged by the Plaintiff was that the mere taking of the hotel on lease did not make the First Defendant an assignee of the mark, and the ICICI report would indicate that Hotel PNP 20 NMS2552.sxw

Harsha was owned and run by HSPL.

24. During the course of the hearing of the Motion and after counsel appearing on behalf of the First Defendant had concluded his submissions, an affidavit in reply was filed of 19 March 2011 of Chander K. Baljee, the Managing Director of the First Defendant. Annexed to the affidavit is a deed of assignment made on 17 March 2011 between Baljees Hotels and Real Estates Private Limited, the First Defendant and HSPL as the confirming party. Under the assignment the mark “Royal Orchid” has been assigned to the First Defendant. The affidavit explains that Baljees Hotels and Real Estates Private Limited (BHREPL) was incorporated on 16 April 1970. The share holding was held entirely by the deponent of the affidavit and his spouse. HSPL is stated to be a wholly owned subsidiary of the BHREPL. The First Defendant was incorporated on 3 January 1986 and was then known as Universal Resorts Limited. The original shareholding was held by the deponent and the members of his family. However, following the public issue of 2006, 43.67% of the share capital of the First Defendant is owned by the deponent; 18.94% by BHREPL and 36.33% by others. The affidavit states that on 4 January 1973 the erstwhile partnership firm of Baljees executed a lease with HSPL for taking over the property where Hotel Stay Longer was situated. The hotel was renamed as Hotel Harsha. From 4 January 1973 the partnership firm managed the hotel and was the owner of the business and goodwill. Subsequently, the company called Baljees Hotels and Real Estates Private Limited (BHREPL) acquired the equity of HSPL and the property of Hotel Harsha is leased to the First Defendant since 15 September 2005. The deed of PNP 21 NMS2552.sxw

assignment of the mark “Royal Orchid” has been executed on 17 March 2011, it is stated, to obviate any technical objections.

25. Learned Counsel appearing on behalf of the Plaintiff has had serious objections to the manner in which an affidavit has been tendered on behalf of the First Defendant after pleadings in the Motion were complete and arguments of counsel appearing on behalf of the First Defendant were also concluded. Learned Counsel submitted that the purported deed of assignment is a contrived attempt to set up a defence. In the interests of justice, I consider it appropriate to allow the affidavit to be taken on record. As a matter of fact, submissions have thereafter been heard on behalf of the Plaintiff in response to the affidavit and an affidavit in reply dated 22 March 2011 has also been filed by the Plaintiff. In my view, it is not necessary for this Court at the interlocutory stage to render a finding on whether the First Defendant is in fact the successor-in-title in respect of the mark “Royal Orchid” as contended. Even on the assumption that this is so, the Court has come to the conclusion prima facie that the use of the mark by the First Defendant is subsequent to the commencement of use by the Plaintiff. Hence, that requirement of Section 34 does not stand fulfilled. By 2001 when the First Defendant commenced the use of the mark, the revenues of the Plaintiff for the year 2000-01 were Rs.52.28 Crores. The Plaintiff had established a significant amount of goodwill and reputation in the mark. Exhibits E-1 to E-26 of the Plaint are the awards secured by the Plaintiff in the hotel industry. Therefore, on an evaluation of the material prima facie it is evident that the First Defendant has failed to establish a defence within the meaning of Section 34. PNP 22 NMS2552.sxw

26. In Amaravathi Enterprises v. Karaikudi Chettinadu3 a Division Bench of the Madras High Court held that a defendant seeking to set up a defence of prior use under Section 34 must prove the volume of sales. The Division Bench held that when a defence of prior user is taken the burden lies on the trader or manufacturer who raises it to prove the continuous usage of the trade name. The volume of sales and promotional expenditure assumes significance. The reason is that the statutory presumption under Section 28 loses its significance once prior user under Section 34 is established. Similarly, in Veerumal Praveen Kumar v. Needle Industries (India) Pvt. Ltd.4 a Division Bench of the Delhi High Court held that the defendant must establish that in relation to particular goods there is a course of trading and that a goodwill connecting the trader with the goods by reason of the trade mark under which the goods are marketed has resulted. Following this line of authority, a Division Bench of the Delhi High Court in Pioneer Nuts and Bolts Pvt. Ltd. v. Goodwill Enterprises5 held that mere advertisements in a newspaper can hardly constitute proof of a use of a mark from that date. Likewise the grant of a telegraphic address, or soliciting of business, or the receipt of trade enquiries do not themselves satisfy the legal requirement of the defendant having to show that it used the marks earlier than the Plaintiff did, in relation to goods for the purpose of Section 34.

27. In Indo-Pharmaceutical Works Private Limited v.

3 2008 (36) PTC 688 (Madras)

4 2001(21) PTC 889 (Delhi).

5 2009(41) PTC 362 (Delhi).

PNP 23 NMS2552.sxw

Pharmaceutical Company of India6, a learned Single Judge of this Court held that the evidence led by a party seeking to establish continuous prior user will be required to be considered in the context of the nature of the product, the type of sales, the territory within which it is sold and the scale of manufacture of the party. Once continuous prior use is established, the person who establishes such use secures absolute protection and immunity whereunder the proprietor of a registered trade mark becomes disentitled to restrain or interfere with the use by a prior user although such subsequent use may be far more extensive than the prior use which such party may have established. Hence, the learned Single Judge was of the view that there is warrant for requiring such prior use to be established by clear and cogent evidence.

Acquiescence

28. Acquiescence is one facet of delay. In Power Control Appliances v. Sumeet Machines Private Limited7 the Supreme Court held that if the Plaintiff stands by knowingly and lets a defendant build up an important trade until it has become necessary to crush it, the Plaintiff would be stopped by his acquiescence. If the acquiescence in the infringement amounts to consent, it would be a complete defence to the action. However, the acquiescence must be such as would lead to the inference of a licence sufficient to create a new right in the defendant8. The principle which must guide the grant or refusal of an interlocutory injunction, where the Defendant either disputes the title of the Plaintiff to the mark or contends that

6 1977 BLR 73

7 (1994) 2 SCC 448.

8 paragraph 26 page 457.

PNP 24 NMS2552.sxw

the Plaintiff is not entitled to relief by reason or acquiescence or delay have been formulated thus by the Supreme Court : “Where the defendant disputes the plaintiff’s title to the mark or contends that the plaintiff is not entitled to relief by reason of the acquiescence or delay or other estoppel or of the defendant’s concurrent rights, the Court will be guided by the balance of inconvenience which may arise from granting or withholding the injunction as well as the justice of the cause after considering all the circumstances in the suit. In other words, where the plaintiff’s title is disputed or the fact of infringement or misrepresentation amounting to a bar to the action or some other defence is plausibly alleged upon the interlocutory motion, the Court in granting or refusing the interim injunction is guided principally by the balance of convenience that is by the relative amount of damage which seems likely to result if the injunction is granted and the plaintiff ultimately fails or if it is refused and he ultimately succeeds.

….. It is necessary that an application for interlocutory injunction should be made immediately after the plaintiff becomes aware of the infringement of the mark. Improper and unexplained delay is fatal to an application for interlocutory injunction. The interim injunction will not be granted if the plaintiff has delayed interfering until the defendant has built up a large trade in which he has notoriously used the mark.”

29. The Supreme Court reaffirmed the principles which were enunciated in American Cyanamid Co. v. Ethicon Limited9 by the House of Lords which were as follows :

“If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark on a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an 9 (1975) 1 All ER 504.

PNP 25 NMS2552.sxw

established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.”

30. The Supreme Court similarly, reaffirmed the principle formulated by Mr. Justice M.N. Venkatachaliah (as the Learned Chief Justice then was) in Wander Limited v. Antox India Private Limited10. In Wander the Supreme Court observed that the interlocutory remedy is intended to preserve in status quo, the rights of parties which may appear on a prima facie case. The Court would place in the scale as a relevant consideration whether the Defendant has yet to commence his enterprise or whether he has already been doing so in which latter case considerations some what different from those that apply to a case where the Defendant is yet to commence his enterprise are attracted.

31. In Bal Pharma Ltd. v. Centaur Laboratories Pvt. Ltd.11, Mr. Justice B.N. Srikrishna (as His Lordship then was) held that “in order to deny an interlocutory injunction, the delay must be such as to have induced the defendant or at least to have lulled him into a false sense of security to continue to use the trade mark in the belief that he was the monarch of all that he surveyed.” In D.R. Cosmetics Pvt. Ltd. v. J.R. Industries12 the test which was adopted was that “the principle which underlies the concept of acquiescence is that a person who sits by indolently when another is invading his right cannot be heard to complain when by his acts and conduct he leads the other to substantially after his position.” The Court of

10 1990 Supp SCC 726.

11 2002(24) PTC 226.

12 2008 (38) PTC 28 (Bom.)

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Appeal in the U.K. has adopted a broad test in Habib Bank v. Habib Bank13 of “whether in all the circumstances it would be unconscionable to allow the claimant to maintain his claim”.

32. Counsel appearing on behalf of the Plaintiff, while placing reliance on a judgment of a Division Bench of this Court in Express Bottlers Services Pvt. Ltd. v. Pepsico Inco.14 submitted that it has been held that “it is only in unusual circumstances that the balance of convenience should play a part in a matter where the Plaintiff is the owner of a registered trade mark”. This judgment has been followed by a learned Single Judge in Poddar Tyres Ltd. v. Bedrock Sales Corporation Ltd.15 (See also the judgment of a Single Judge in Biochem Pharmaceutical Industries v. Biochem Synergy Limited16.)

33. The judgments upon which reliance has been placed on behalf of the Plaintiff do not support the contention that considerations of the balance of convenience are alien to an action for infringement. Such a proposition cannot indeed be accepted in view of the law laid down by the Supreme Court in Power Control Appliances. The judgment of the Supreme Court in Wander Limited has been reiterated in Mahendra and Mahendra Paper Mills Limited v. Mahindra and Mahindra Limited17. The same principle was reiterated by the Supreme Court in Khoday Distilleries Limited v. Scotch Whisky Association18.

13 (1982) R.P.C. 1

14 (1991-PTC-296)

15 AIR 1993 Bombay 237.

16 1998 PTC (18).

17 (2002) 2 SCC 147/

18 (2008) 10 SCC 723.

PNP 27 NMS2552.sxw

34. In the present case, for the reasons which have been noted earlier, this Court has prima facie arrived at a determination that (i) The Plaintiff is the registered proprietor of the mark “Orchid” in Class 42; (ii) The registration of the mark dates back to 19 May 2004 when the application for registration was made; (iii) The Plaintiff had commenced the use of the mark in January 1997 or at any rate in September 1997 in relation to the business of its hotel, Hotel Orchid in Mumbai; (iv) The use of the mark by the First Defendant Orchid infringes the mark of the Plaintiff, coupled with the use of the device of a flower; (v) The First Defendant has not shown any cogent material whatsoever to even prima facie support the case that there was a continuous use by the First Defendant of the mark “Orchid” prior to the use by the Plaintiff in relation to the goods and services for which the mark of the Plaintiff has been registered; and (vi) The defence under Section 34 has not been established.

35. The material on the record does not establish that the Plaintiff had acquiesced in the use of the mark by the Defendant. The presence of the Managing Director of the Plaintiff at an award even in March 2006 when an award was conferred on the First Defendant does not constitute acquiescence. This pertains to 2006, which is after the date of knowledge of the Plaintiff of the First Defendant and its activities as narrated in the plaint. (Reference may be made in this context to the affidavit in rejoinder dated 4 September 2008 of the Plaintiff). The facts as they have emerged from the record would indicate that the First Defendant applied for the registration of the mark “Orchid” in Class 42 on 22 June 2004. This was advertised in PNP 28 NMS2552.sxw

the trade mark journal on 15 June 2005 which become available on 20 October 2005. An opposition was lodged by the Plaintiff following which the application of the First Defendant was rejected on 29 June 2009. An appeal has been filed against that decision. When the First Defendant came out with its public issue in January 2006, the Plaintiff had issued a public notice in opposition on 12 January 2006. The mark of the Plaintiff was registered in October 2007 at which point the Plaintiff became entitled to file a suit for infringement. The suit was lodged in 2008. The Defendants questioned the jurisdiction of this Court to entertain and try the suit. A preliminary issue in regard to jurisdiction was required to be framed under Section 9-A of the Code of Civil Procedure 1908 and decided even before the Notice of Motion for interim relief could be heard. The preliminary issue was framed by a learned Single Judge on 17 June 2010. On 1 February 2011 a Learned Single Judge held that this Court has jurisdiction to entertain and try the suit. It was only thereafter, in view of the provisions of Section 9-A, that the Motion for interim relief could be heard on merits. No case of acquiescence on the part of the Plaintiff has been established at this stage. In Schering Corporation v. Kilitch (Co.) Pharma Private Ltd.19 a Division Bench laid down the following principle :

“Once it is established that there is visual and phonetic similarity, and once it is established that the Defendants adoption of the trade mark is not honest or genuine, then the consideration of any plea as to delay must be on the basis of a consideration whether there has been such delay in the matter as has led the Defendants to assume that the Plaintiffs have given up their contention and/or whereby the Defendants have altered their position so that it would be inequitable to grant interim relief to stop them from using the trade mark until the 19 1994 IPLR 1

PNP 29 NMS2552.sxw

suit is decided?”

Moulding the relief

36. In deciding upon the nature of the relief which is to be granted, the Court is guided by the binding principles which have been enunciated by the Supreme Court in the judgments in Wander (supra) and in Power Control Appliances (supra). The Plaintiff has prima facie established a case of infringement of its mark by the Defendants. The Defendants have not prima facie established a defence under Section 34 or on the ground of acquiescence. Having said this, a relevant consideration which must weigh in this case is that by the date on which the Plaintiff instituted proceedings in 2008, the First Defendant had commenced business. In the affidavit in reply which has been filed by the First Defendant in response to the Motion, in August 2008, it has been stated that the First Defendant was operating, managing or running eleven hotels in India under the name of Royal Orchid with sales in excess of Rs.140 Crores. In determining upon the grant of an injunction, the Court can and should make a distinction between a business which has already commenced and a situation where the Defendant is yet to commence business. The judgment in Wander delivered by the Supreme Court does regard this as a relevant consideration. The First Defendant, it must also be noted, has filed proceedings for the rectification of the mark of the Plaintiff which are pending. At this stage, the balance of convenience would require the Court to mould the relief in such a manner that while on the one hand the First Defendant is protected against a damage which may result to its existing PNP 30 NMS2552.sxw

enterprise which has a substantial turnover and reputation, the First Defendant should at the same time not be permitted to commence any new hotel or line of business with a mark that infringes the registered mark of the Plaintiff. As regards the existing hotels and business the First Defendant shall maintain accounts. Parties will be at liberty to move the Court again after the application made by the First Defendant for rectification of the mark of the Plaintiff is decided. The present order will ensure, in terms of the judgment of the Supreme Court in Wander, that the interlocutory remedy preserves in status quo the rights of parties which may appear on a prima facie case.

37. The Notice of Motion is accordingly made absolute in terms of prayer clause (a) with the clarification that the injunction so granted shall not operate in respect of the hotels and business which have already commenced prior to the date of this order. In other words, the injunction in terms of prayer clause (a) shall restrain the Defendants from making any infringement in respect of any new hotel or new line of business to be set up hereafter.

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