IP nerds and bike enthusiasts (brownie points if you are both!) will recall the controversy around Yezdi motorbikes between Boman R Irani and the Official Liquidator (OL) of Ideal Jawa (India) Ltd. over the mark ‘Yezdi’. Amidst the continuing hype around the revival of the famous Jawa and Yezdi bikes, people were wondering: Who actually holds the right over the bike name Yezdi?
Irani’s father had established Ideal Jawa which sold the famous motorbike. However, the company later went into liquidation. It terminated its manufacturing facilities and the usage of the Yezdi mark in 1996 and officially wound up in 2001. In the meantime, Mr Irani (a non-executive director of Ideal Jawa) had been running a website http://www.yezdi.com and filed for trademark registrations for certain marks of Yezdi around 2013-14. This was because Ideal Jawa’s registrations over the mark had expired around 2007-08. As per the facts mentioned in the DB judgment, Irani got one of these marks as a consequence of a settlement deed between him and one Mr. Amit Soni in 2015. Once Mr Irani got the registrations, the OL wrote to the Trademark Registry challenging the grant of these certificates. In 2018, Irani licensed the marks to Classic Legends, a company he had incorporated with Mahindra and Mahindra for a revival of Yezdi Bikes. And thus arose the question: Who owns the trademarks?
The Single Judge Bench (SB) of Karnataka HC had sided in favour of the OL. Readers can refer to Pravertna’s blogpost on the decision. The Division Bench (DB) however, recently reversed SB’s findings and held Mr Irani to be the owner of the marks. I will discuss the Court’s approach in reaching this outcome. My intention is to stick to the trademark law aspects of the decision and only refer to the company law issues if needed.
The DB’s judgment is a fascinating look at how trademarks are perceived as objects of protection by courts and the desired actions that are expected from an owner to maintain their entitlement over the same. A more thorny issue however, was the question of goodwill abandonment; the SB and DB’s contrasting positions on it demonstrate the difficulties in reaching a conclusive answer as to when goodwill gets abandoned.
Dear OL, How Did You Not Know?
For the DB, the fatal blow to OL’s case was this: the company had not used the trademarks since 1996 and the registrations had expired between 2007 and 2008. There had been no efforts by the OL to renew them. If this was not enough, there existed a more glaring omission: when the assets of the company were sold off to Mr. Aquil Qureshi of M/s. Premier Iron and Metal Industries, these trademarks were not part of either the Valuation Report or the public notice issued by Ideal Jawa’s secured creditor. These circumstances led the DB to conclude that the company had abandoned the trademarks. Let me explain the registration angle more concretely.
Section 25 of the Trade Marks Act explains the process of removal and restoration of marks. Before the expiration of the mark, the registry has to send notice in the prescribed manner to the proprietor with the necessary details [Section 25(3)]. Moreover, sub-section (4) allows the proprietor to make an application for the restoration of the removed mark within one year from the expiration of the last registration. Arguments were raised as to the non-compliance with Section 25(3) since the notice had been sent to the company’s trade mark agent. The DB however, refused this contention by referring to Rule 21 of Trade Marks Rules 2002 that allows for service of documents upon the agent to be a valid one. Additionally, no application for restoration had ever been filed by the OL. For the DB, the OL was in a sufficient position to protect the company’s assets, including these trademarks, since it had access to all records and books of account and had statutory powers under the Companies Act 1956. Its repeated ignorance of the trademarks’ existence is what undergirded the DB’s decision in Mr. Irani’s favour.
The SB had taken a different approach to the issue of abandonment. It also investigated the question from two dimensions: the statutory issue of removal and restoration under Section 25 of the Trade Marks Act and the abandonment in terms of destruction of goodwill. On the former, it held the notice sent to the agent as not being in fulfilment of the requirements of Section 25(3). Arguendo, even if the argument of statutory removal was accepted, the SB held that common law rights in the mark would subsist in favour of the company. There was no abandonment either prior to or even after the winding up of the company. The SB’s decision also involved a purposive element since it noted the need for the company’s assets (including these trademarks) to be used for the benefit of creditors, workmen, and shareholders. Just because some property was left out of the valuation report doesn’t mean that it’s not the company’s; the OL and the company court have the duty to identify it.
Before proceeding, I also want to mention the scattered discussion in the judgment on Section 47 of the Trade Marks Act. The provision deals with the removal of marks on the ground of non-use for which an application has to be preferred. Section 47(3) in particular creates an exception to removal on grounds of special circumstances, such as legal restrictions on the use of marks (the winding up procedure seems to have been referenced as a possible example of this situation in the ruling). Yet the inclusion of this provision in the ruling may have been avoided since no such Section 47 application had been made at all.
Spectre of Goodwill-There Yet Not There
Both the decisions on the issue of goodwill display somewhat of a counterintuitive situation. Mr Irani had acknowledged that goodwill was subsisting in the Yezdi marks. His submissions were sought to be used by the opposing parties to further their case. Resultantly, the SB accepted Irani’s submissions on goodwill in order to hold the company to be the holder of the marks. A common man, on being asked the source and origin of Yezdi, will point to the company. Mr. Irani’s initiative of starting Classic Legends was possible only because of the subsisting goodwill that belonged to Ideal Jawa. On the contrary, the DB ruled in Mr. Irani’s favour by rejecting the existence of goodwill in the mark. With the termination of business activities, non-use of the mark, and the expiry of registration, no goodwill existed anymore. Mr. Irani’s claim over the marks arose out of the statutory registration procedure and had to be protected accordingly.
Goodwill is a notoriously ambiguous concept and a concrete definition remains desired. One popularly used version comes from the Muller & Co Margarine case, which defines it as ‘the attractive force that brings in custom’, ‘it is the benefit and advantage of the good name, reputation, and connection of a business’. It is this hazy nature of goodwill that complicates the associated issues that arise in various legal scenarios. The DB continuously referred to the ‘goodwill in the mark’ as having been erased because of the long period of non-activity of the company’s business. However, passing off as a legal cause protects the goodwill of the company generally (Wadlow). There is still confusion over whether courts are understanding trademarks to be mere representations of a company’s goodwill or the marks as themselves being imbued with goodwill. Jonathan Griffiths’ work has addressed this aspect in the English context. So what was the DB thinking when it was referring to goodwill? Definitional confusions aside, I see the DB attempting to follow the established law on abandonment of goodwill, although it could have been more elaborate. A case for goodwill destruction becomes stronger with a definitive abandonment of the business. The longer the business is left un-resumed, the higher the dwindling of goodwill. Also, the survival of residual goodwill is proportionate to the initial amount of it that existed. The original proprietor can stake a claim for passing off on the ground that the company retains a residual goodwill to which the name is attached. Ultimately, courts often say that the decision boils down to specific facts, thus providing sufficient leeway for judicial discretion.
The SB’s decision had referenced the continuing popularity of the mark and the willingness of fans to restore the Yezdi brand. Would that be goodwill or mere reputation that the SB unintentionally tried to protect? ( Two concepts that have been understood to be different, since goodwill is a legal property, whereas reputation is a matter of fact) And if goodwill does exist, who would you give credit to for its existence? One can praise Mr Irani for having continued running that website for keeping Yezdi alive. Or it might be the fandom of the bikes that sustained it. In fact, Professor Ng has argued that the law should not protect this ‘substantive’ conception of goodwill (that pertains to the attractiveness and positive perception of the brand) and should instead limit itself to what she calls structural goodwill (public recognition of the goods’ origin or association with a certain trader/company).
The Yezdi controversy, in my view, is a convoluted scenario where the registration/non-registration of marks was an easier issue to decide. It is the ‘goodwill and unregistered mark’ facet that poses difficulties owing to the conceptual uncertainties around goodwill. Courts in the future have to consider issues like: what does it mean for a company to stay in business? Would the need for utilization of assets for a statutory process (winding up for instance) amount to a sufficient threshold for the existence of that mark (and its associated goodwill)? Which actors contribute to the generation and sustenance of goodwill, and does it accrue to the trademarks solely?