Delhi High Court Upholds ITC's Trademark Injunction Against Arpita Agro

Background: In 2023, ITC Limited (“ITC”), a leading FMCG company, found itself in a legal dispute with Arpita Agro Products Pvt. Ltd. (“AAPPL”) concerning the use of the trademark “POWRNYM” for floor cleaning products. ITC had earlier acquired exclusive rights over the trademarks “NIMYLE” and “JOR-POWR” from AAPPL in 2018 through an Asset Purchase Agreement and Brand Assignment Agreement valued at ?100 crores. The agreements also involved the transfer of associated intellectual property, including copyright over label designs and derivative marks. Additionally, AAPPL was bound by a non-compete agreement, restraining it from re-entering the floor cleaning segment for four years.

Facts of the Case: AAPPL manufactured and sold products under the mark "NIMYLE" from 1996 to 2018. Post the non-compete period's expiration in 2023, AAPPL introduced its new product under the mark "POWRNYM." ITC filed a suit alleging that AAPPL’s new mark was deceptively similar to ITC’s earlier brands and that the product’s packaging imitated ITC’s trade dress, thereby misleading consumers. Consequently, an interim ex-parte injunction was granted by the single-judge bench of the Delhi High Court, restraining AAPPL from using the “POWRNYM” mark.

Key Issues Considered

1. Grounds for Interference with the Impugned Order The Division Bench considered whether AAPPL had presented sufficient grounds to interfere with the interim injunction.

2. Trademark Infringement and Passing Off The primary question was whether the mark "POWRNYM" was deceptively similar to "NIMYLE" and "JOR-POWR." Additionally, the court assessed whether AAPPL’s actions violated the contractual agreement, specifically the clause prohibiting the use of trademark resembling the assigned marks.

3. Delay in Filing Suit and Non-Use Argument AAPPL argued that ITC delayed legal action, as their application for "POWRNYM" was published in 2021, and ITC only acted in 2023. Furthermore, AAPPL questioned ITC's rights over "JOR-POWR" due to its alleged non-use.

Court’s Analysis and Findings

1. Trademark Infringement The Court concluded that "POWRNYM" was a composite mark derived from "JOR-POWR" and "NIMYLE," designed to mislead consumers. The Court dismissed AAPPL's defense of independent creation, noting the intentional similarity. The non-derivative clause in the agreement prevented AAPPL from adopting deceptively similar marks.

2. Passing Off Applying the "trinity test"goodwill, misrepresentation, and damage the Court held that ITC had substantial goodwill in "NIMYLE." The use of "POWRNYM" could mislead consumers and potentially damage ITC's reputation and market share.

3. Trade Dress Similarity The Court observed that AAPPL's packaging closely resembled ITC’s "NIMYLE" product, further affirming the deceptive imitation.

4. Expiry of Non-Compete Clause While AAPPL was free to enter the floor cleaning segment after the non-compete clause expired, it was not entitled to adopt a deceptively similar trademark that could cause consumer confusion.

5. Delay in Legal Action The Court rejected AAPPL’s argument regarding the delay, noting that ITC took prompt action upon discovering the actual market presence of "POWRNYM" in 2023.

Court’s Decision:The Delhi High Court upheld the interim injunction, reinforcing that businesses cannot circumvent trademark assignments by modifying or combining previously assigned marks. The final judgment will be made after a full trial.

Conclusion

The judgment underscores several critical points

(a) Combining elements of assigned trademarks to create a new mark may still constitute infringement.

(b) Packaging and trade dress are integral to consumer perception and can substantiate passing-off claims.

(c) The non-use of a trademark does not automatically weaken the owner’s right to enforce it.

(d) Competition must be fair, avoiding misleading tactics or leveraging another's established goodwill.

This decision acts as a crucial precedent, emphasizing the importance of adhering to trademark assignment agreements and engaging in ethical branding practices