Guest Post: Exide v. Exide: Too much Exidement?

Our regular guest blogger, Arun Mohan, a practising IP lawyer before the Madras High Court has sent us this very interesting post analysing in detail the recent Exide judgement of the Delhi High Court and its implications for Indian businesses. The case took fifteen years to come to a resolution and even that happened only after one set of lawyers were changed by one of the parties. It helped that the presiding judge was Justice Valmiki Mehta, an exceptional judge known for his 'no-nonsense' attitude in the Delhi High Court. I think this judgment is a very interesting case and highlights some of the challenges of the Indian market. 

Exide v. Exide: Too much Exidement? 

By Arun Mohan

The Delhi High Court has passed another interesting order under the 1958 Act on the issues arising between the domestic and international proprietors of marks. The judgment can be accessed over here.

The facts in the case briefly put are: 

a. An American company (ESBC) was incorporated in the year 1888 and a subsidiary UK company (CESCO) in the year 1891 to manufacture and sell Exide batteries. 

b. In 1947, due to competition issues the cord between the two companies was snapped and the UK company became the individual proprietor of the mark in the UK. 

c. Around such period, CESCO set up factory in India and became proprietor of the mark EXIDE in India. 

d. CESCO also set up 2 group companies in India through which it manufactured and sold batteries. 

e. CESCO and its group companies was taken over by one M/s Chloride Group Limited. 

f. M/s Chloride Group Limited assigned the rights in the mark EXIDE to the plaintiff herein in 1978 and the TM registry records were amended in 1980 to reflect the same. 

The defendant herein is the successor of the American company ESBC, which sought to market EXIDE batteries in India vide a joint collaboration with Tudor Batteries, Spain. The defendant was undisputedly the owner of the EXIDE marks in several countries. The defendant sought to enter the market in or about 1995 citing various governmental barriers as “special circumstances” i.e. it did not abandon the mark as per the Hardie Trading case, to explain its delayed entry and its continued right over the mark EXIDE in India. The plaintiff moved to restrict them from doing the same in 1997. 

The first claim made by the defendant was that of suppression and fraud committed by the plaintiff before the TM Registry. This Order held that such suppression, even if proven would not interfere with the substantive rights of a proprietor and also that Civil Courts do not have jurisdiction to decide on the validity of a mark when a prayer is made for infringement by a registered proprietor. In coming to this conclusion the Court also considered that the defendant had not moved the IPAB till date to challenge the plaintiff’s registration and nor had it sought stay of proceedings under Sec 111. Therefore, the Court held the validity of the plaintiff’s marks to be final. 

In examining whether the defendant company did in fact give a “common law license” to the plaintiff, and if whether the plaintiff’s rights were relatable to the defendant, the Court refreshingly considers relevant commercial scenarios viz., 

a. The defendant did not have any controlling stake over the plaintiff or its predecessors after the split between the UK and US companies. 

b. The defendant never received any consideration from the plaintiff as royalty 

The Court observes that the American company would not have allowed its “most valuable” property to vest with the plaintiff without any control, and therefore there can be no common law license inferred. This observation recognises just how important trademarks are to companies, and that companies if serious about their marks, would be vigilant in maintaining their rights. 

In deciding on special circumstances, the Court observed that there were no direct or indirect bars to import of batteries, and neither was the same demonstrated by the defendant for the purpose of qualifying as ‘special circumstances’. The Court further observed the lacunae in providing financial analysis and statements by the defendant for establishing such special circumstances. 

The Court also held that there was no question of acquiescence by the plaintiff, as the defendant did not sell any goods in India nor did any special circumstances exist. 

The order concludes holding unequivocally in favour of the plaintiff stating that customers and trade would associate EXIDE batteries only with the plaintiff and its predecessors, and it is therefore entitled to injunct the defendants from selling EXIDE batteries in India. 

This judgement is rather simple, stating that the plaintiff being the prior user of the mark in India and the defendant failing to establish any relationship, would be entitled to an order of injunction against the defendants, irrespective of the defendants rights in other countries. Such orders deciding in favour of the Indian proprietor vis-a-vis international proprietors are not unusual and I have worked on a few myself including in this case available over here. 

The fly in the ointment comes in the recent DB order of the Delhi High Court in the Samsung case. The Court therein allowed the sale of imported Samsung products subject to appropriate disclaimers and representations. Could that order be extended to this case? What would be the consequences if I were to import genuine Exide batteries from America, and disclaim that these are imported batteries and have no relation to the Indian company? As per this order, it would appear to be an infringement, whereas the Samsung order offers a glimmer of hope. I do hope this gets appealed to see a further judicial consideration of this issue as such simplistic dichotomy of trademark rights between India and the rest of the world is no longer commercially relevant. The Court also did not consider the trans-border reputation of the defendant, which strangely enough does not appear to have been even argued by the defendant. I would have imagined that this would be the cornerstone of their argument. The case also overlooks the trade’s view of the mark, and most of the conclusions seem to be based on arguments and pleadings. What this case does immediately do is to shake up all holding companies into reviewing their terms with their subsidiaries, distributors and licensees in India.