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Trademarks and their licensing to preserve the distinctiveness of the brand

Trademarks and their licensing to preserve the distinctiveness of the brand
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First Published: Sun, Jan 10 2010. 09 17 PM IST

Illustration: Shyamal Banerjee / Mint
Illustration: Shyamal Banerjee / Mint
Updated: Sun, Jan 10 2010. 09 17 PM IST
What is it about a brand that attracts people? All too often, even the most “sensible” of us will enter a shop with our minds already made up to buy a specific brand irrespective of a favourable price margin that another brand may offer.
Whether it’s that “cool” pair of sunglasses we see in the latest magazines or a pair of shoes, a restaurant, a car or that washing machine you have been saving up to buy, a brand seems to convey all the magic of a consumer’s fulfilled wish list, be it quality, distinctiveness or simply the ability to inspire envy as a “must-have” item very few can afford.
Illustration: Shyamal Banerjee / Mint
A major criterion for choosing a specific brand is the goodwill that the brand has. In simpler terms, it is the reputation that the brand is in fact “worth it”, whether it is purely in terms of quality or whether it is the brand’s perceived link to an aspirational lifestyle.
This reputation or goodwill is built over time by consistently providing excellent quality and various tangible and intangible “value-add” characteristics, which are identified by the consumer by means of trademarks.
The trademark under which the company is offering the product/services in the market provides the consumer the identifying mark through which the consumer can choose goods and services available in the market based on their perceived quality and other desirable features.
Accordingly, trademarks are the source identifiers/indicators which make an implied reference to the quality and reputation of the product.
In other words, a trademark is the link between the source and the product/service being offered in the course of trade. Given that the trademark is meant to distinguish goods or services made or provided by one person from those of another, a trademark cannot exist in vacuum and must be related to a set of such goods and services that are being provided in the market.
A trademark can exist in the form of a word, label, symbol or a device or all them together as a composite mark, or may even comprise of a smell, sound or taste.
As long as a proprietor of a trademark can prove that the mark is associated with the company alone, which is also the source of the trademark, and any use of the same by a third party is detrimental to its business interest or is bound to raise confusion among the public, the proprietor will be in a position to protect its rights in that particular mark.
These rights may comprise the common law right of “passing off” or the statutory right of infringement of registered trademark or both.
Passing off is a type of unfair trade competition, or what may be termed “actionable unfair trading”, through which one person, through deception, attempts to obtain an economic benefit of the reputation which another has established for himself in a particular trade or business. The action is regarded as an action for deceit.
The passing off action depends upon the principle that nobody has a right to represent his goods as the goods of somebody else.
Infringement, on the other hand, is a statutory right which a proprietor procures by way of registration of trademark.
The proprietor of a trademark may, of course, license the rights in the trademark to a third party, thereby permitting the third party to use its trademark in the course of trade.
This licensing is usually by way of an explicit contract. The term “permitted use” as defined under the Trade Marks Act, 1999, entails the use of the registered mark by a third party with the consent of the registered proprietor by way of a written agreement. It is to be noted that even where a trademark is unregistered, the common law recognizes the licensing of such unregistered trademark.
It should, however, be noted that such licensing should not result in causing confusion among the public or destroy the distinctiveness of the trademark being licensed. In order to achieve this, licensing of trademark by the proprietor of the mark should be subject to strict conditions and requirements so as to ensure that the link between the source of the trademark and goods or services on which the trademark is being used is maintained.
So far as a connection in the course of trade with the trademark continues to exist between the goods and the proprietor of the mark, the goodwill accruing out of such use shall get routed back to the licensor.
This link among adoption of certain other measures can be maintained by way of use of appropriate trademark signifiers, references to the extent that the mark is being used under licence, quality control and by maintaining and protecting the licensed trademarks against third parties by the licensor.
In the event that a licensor uses the trademark as a commodity without establishing a trade connection between the licensor and the products, the goodwill arising out of such use may accrue to the licensee. In such a situation and in case of a dispute between the licensor and the licensee, the licensee shall be able to challenge the validity of the licensed trademark submitting the plea that with the trade connection between the licensor and the licensed trademark is missing, the licensee has accrued rights over the trademark and the licensed trademark is now pointing towards two sources, which is forbidden under law.
Licensing of a trademark can be construed as a very effective business tool that can immensely help the proprietor of the trademark in expanding its existing business strategy, territory and even nature of business.
This aspect is very much prevalent in the case of joint venture companies and franchises alike, which are permitted to use trademarks under licence but under strict control and measures. The licensed trademarks can further be sub-licensed by the licensee.
In any case, special covenants should be inserted in every license agreement in order to ensure that the link between the trademark and the source is clear, without any ambiguity whatsoever.
This column is contributed by Anupam Pandey of AZB & Partners, advocates & solicitors.
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First Published: Sun, Jan 10 2010. 09 17 PM IST