9911796707
TMI Blog1998 (7) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... place of business is located at Houston, Texas (hereinafter, for short, the group of "Baker" or "Baker Hughes" companies collectively shall be referred to as "Baker" or "Baker Hughes"). The second plaintiff is the parent company of the first plaintiff and is stated to own the trade mark Baker. The first defendant, Mr. Hiroo Khushalani, is the chief executive officer and managing director of the second defendant. The second defendant Baker Oil Tools (India) Private Limited is a company incorporated in India under a certificate of incorporation dated February 13, 1985. In 1982 the first defendant had discussions with Bakerline, a Baker Oil Tools Company, Texas, U.S.A. (a division of Baker International Ltd.), for floating a joint venture company in India for the manufacture of oil field equipment and products. On May 13, 1982, the first defendant wrote a letter to Bakerline, in confirmation of their discussions, in which it was stated, inter alia, that Baker Oil Tools or any of its subsidiary companies will have 40 per cent, equity participation in the capital structure of the joint venture company which was intended to be set up in India by the first defendant as its promoter. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equal instalments. On December 21, 1984, the first defendant, as the sole proprietor of Miraksha Associates, and Baker International Limited, Baker Oil Tools (U.K.) Division entered into articles of agreement (for short "basic agreement"). The "basic agreement" provided, inter alia, for the incorporation of a company in India under the name "Baker Oil Tools (India) Private Limited" or such other name as may be decided by the parties for the purpose of establishing a new industrial undertaking at Gurgaon, Haryana, for the manufacture of oil field equipment based on the technical know-how to be made available by Baker Oil Tools (United Kingdom) Limited. In accordance with the letter of approval of foreign collaboration, the "basic agreement" fixed the shares of the first defendant and "Baker" in the proposed Indian company, Baker Oil Tools (India) Pvt. Ltd. While the share of the first defendant was fixed at 60 per cent., the share of "Baker" was fixed at 40 per cent. Clause 8.3 of this "basic agreement" provided that if the shareholding of "Baker" fell below 40 per cent., the Indian company would not be entitled to retain the word Baker in its corporate name and the former would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various clauses of the "technical know-how agreement" (for short "the first addendum"). It also deleted clause 10(b) of the "technical know-how agreement" as per the requirements of the Government of India. But on May 15, 1985, itself a supplementary agreement between Baker Oil Tools (India) Private Limited and Baker Oil Tools (United Kingdom) Limited was also executed for giving effect to clause 10(b) of the technical know-how agreement, as if the clause had not been deleted by the first addendum, to the extent possible and for reinstating the same, if lawfully feasible. Thereafter on September 30, 1985, the first defendant, of the first part ; Baker International Limited, Baker Oil Tools (U.K.) Division of the second part and Baker Oil Tools (United Kingdom) Limited of the third part entered into articles of agreement (for short "the second addendum") whereby Baker International Ltd., Baker Oil Tools (U.K.) Division undertook to supervise the performance of obligation by Baker Oil Tools (United Kingdom) Limited under the "technical know-how agreement" as amended by the first addendum thereto. Subsequently, on November 18, 1985, the first defendant, Baker International Limited, B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were represented by one Mr. Jim Smith. He voted in favour of the resolution for insertion of the contents of clause 8.3 of the "basic agreement" in the articles of association of the second defendant. However, the first defendant and his associates holding 60 per cent. of the shares of the second defendant voted against the resolution. Thus the motion to include the provisions of clause 8.3 in the articles of association of the second defendant stood defeated. On February 15, 1995, the plaintiff after obtaining the permission of the Government of India sold its shares to White Horse Trading Limited, a company incorporated in Hong" Kong, though the offer of the latter to buy the shares had been accepted by the former on October 17, 1994. On February 15, 1995, itself the first plaintiff through Baker Oil Tools Asia Pacific, a division of Baker Hughes (Singapore) Pvt. Ltd., a subsidiary of the second plaintiff, called upon the second defendant by means of a notice to alter its corporate name by omitting the word Baker therefrom. The second defendant while acknowledging the receipt of the said notice by its letter dated March 15, 1995, categorically declined to accede to the demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the second defendant came to an end. The second defendant cannot be allowed to pass off its goods as the goods of the plaintiffs by retaining the word Baker as part of its corporate name. J. M. Mukhi, learned counsel for the defendants, on the other hand, vehemently argued that the second defendant has a right to use the word Baker as part of its corporate name. He also pointed out that the second defendant has been using the said name for more than a decade. Learned counsel highlighted the fact that the "technical know-how agreement" overrides all other agreements by virtue of clause 21 thereof which declares that the "technical know-how agreement" shall constitute the only valid and binding agreement between the parties. Thus it was argued that the "basic agreement" is a dead letter and clause 8.3 thereof is of no avail to the plaintiffs for urging" that the second defendant has lost the right to use the word Baker in its corporate name. It was further submitted that the "basic agreement" was not furnished to the first defendant by the first plaintiff and consequently the same was not sent to the Government of India for approval as required by law. The only agreement which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t were drafted in England at the instructions of the first plaintiff by its solicitors and in order to conform to the conditions of approval of the Government of India for the joint venture, the contents of clause 8.3 were not incorporated therein. He invited my attention to the affidavits of Thomas Mac-Cormack and James D. Green, former employees of the plaintiffs, to show that the plaintiffs appointed Grindlays Bank Limited to prepare the memorandum and articles of association of the second defendant. It was also submitted that the plaintiffs have no proprietary right in the word Baker and there are hardly any purchasers in India for the items manufactured by the plaintiffs. According to learned counsel, in India the word Baker is being associated with the products of the second defendant, an Indian company and not with the products of the plaintiffs. He also disputed the contention of learned counsel for the plaintiffs that the plaintiffs have acquired transborder reputation. Learned counsel for the defendants contended that no interim mandatory injunction can be granted to the plaintiffs as they have not established any prima facie case and even the balance of convenience does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical know-how agreement" deals with the meaning of the expressions "know-how" or "technical know-how". This clause reads as follows : "In this agreement, unless the text otherwise requires and if written in capital letters or with initial capital letters, the following expressions shall have the meaning's ascribed to them hereunder, namely : . . . (b) 'know-how' or 'technical know-how' shall mean the technical information, data, drawings, specification, designs, revisions and documentation relating to the products that may be in Baker's possession or under Baker's control on the effective date. This shall also include secret and non-secret know-how, technical data, drawings, documentation, designs, revisions and other particulars and information relating to the production and manufacture of products all provided that such know-how is possessed and/or controlled by Baker on the effective date of this agreement, and which is more particularly described in Schedule 2 hereunder written. (c) 'know-how documents' shall mean data, drawings, technical manuals, designs, revisions and such other information or know-how as may be in writing or in visual form required in connection with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be extended to the Indian company by "Baker" ; stipulation of the Indian company that it shall keep the technical know-how a secret and will not disclose the same to any person other than its employee or licensee or sub-licensee or employee of the sub-licensee, the sale of the products, force majeure, assignability and termination of the agreement and the terms of the agreement governing the law of conciliation and arbitration, and modification of the agreement, etc. The agreement also declares that the arrangements made under it shall not constitute a partnership or a joint venture between the Indian company and "Baker". Besides, a specific reference needs to be made to clauses 21 and 24 of the "technical know-how agreement". Clause 21 provides that failure of either party to the agreement at any time to enforce any other terms, provisions and conditions of this agreement shall not be construed as a waiver of the same or of the rights of either party to enforce the same on any subsequent occasion. Clause 24 of the agreement declares that the agreement will enure for the benefit of the Indian company when formed. Thus this agreement deals with financial and technical matters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the company and notices. Moreover it contains clause 8.3 which is subject of much controversy between the parties. This clause reads as follows : "In the event of Baker holding" less than 40 per cent, of the paid-up equity capital of the said company, if the word 'Baker' is part of the name of the said company, the said company shall not be entitled to retain the said word as part of its name ; the intention being that the said word shall be used as part of the name of the said company by virtue of the permission of Baker and that the said company shall have no property interest in the said word ; and if Baker so requires the said company shall change its name to a name not including the word 'Baker' or any similar word. If Baker so desires, the parties shall ensure that Baker and the said company shall enter into an agreement in a form and substance satisfactory to Baker so as to ensure observance and implementation of this condition by the said company." Thus, this clause stipulates that in case the holding of the first plaintiff falls below 40 per cent, of the paid-up equity capital of the Indian company, the latter shall not be entitled to retain the word Baker as par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that BOT U.K. will fully comply with such obligations." Thus, while the "basic agreement" (referred to in clause (A) above) deals with the subject of incorporation of the Indian company, the "technical know-how agreement" (referred to in clause (B) above) concerns the transfer of technical know-how by "Baker" to the Indian company. Subsequent to the second addendum, the first defendant ; Baker Oil Tools (United Kingdom) Limited ; and Baker International Limited, Baker Oil Tools (U.K.) Division entered into an agreement dated November 18, 1985, (called "novation agreement") whereby Baker International Ltd., Baker Oil Tools (U.K.) Division undertook to perform the obligations of Baker Oil Tools (United Kingdom) Limited under the "technical know-how agreement" as amended by the first addendum and the second addendum. This agreement also highlights the difference and distinction between the "basic agreement" and the "technical know-how agreement" just in the same manner as is done in the second addendum to the "technical know-how agreement". When clause 21 of the "technical know-how agreement" speaks of the "technical know-how agreement" to be the only valid and binding agreement be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first defendant to apply to various Government authorities in this country for obtaining their approvals in respect of this agreement as well as the "technical know-how agreement" and for obtaining all statutory approvals and consents required in connection with any matter pertaining to the project. This plea of the defendants, which is based on the alleged lapse of the first defendant in carrying out his obligations under clause 4.2 of the "basic agreement", is being used as a shield to ward off the effect of clause 8.3 thereof. Thus, the first defendant is taking advantage of his own wrong which cannot be countenanced in law and must be disapproved. As regards the submission of the defendants that the "basic agreement" being a dead letter was not furnished to the defendants by the plaintiffs, it seems to me that the submission is not well founded. In case the agreement was not furnished to the defendants or the same was a dead letter' there would have been no need to refer to the agreement in addendum I, addendum II and the novation agreement. Moreover, it should not be forgotten that the "basic agreement" and the "technical know-how agreement" were executed simultaneously on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial, but one thing is clear that the articles of agreement between the parties dated November 18, 1985 (novation agreement), whereby Baker International Limited, Baker Oil Tools (U.K.) Division assumed the responsibility for financial equity participation and technology transfer to the second defendant, not only alluded to the factum of the execution of the "technical know-how agreement" but also specifically referred to the execution of the "basic agreement". The relevant portion of the "novation agreement" along with clause 1 thereof, under which Baker Oil Tools (U.K.) Division took over the obligations of Baker Oil Tools (U.K.) Limited under the "technical know-how agreement", is extracted below : "(a)On December 21, 1984, HK (Hiroo Khushalani) and Baker (Baker International Limited, Baker Oil Tools (U.K.) Division) entered into articles of agreement relating to the incorporation in India of a company to be named Baker Oil Tools (India) Private Limited (such articles of agreement being hereinafter referred to as 'the articles of agreement') ; (b)On December 21, 1984, HK and BOT U.K. (Baker Oil Tools (United Kingdom) Limited) entered into articles of agreement relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1985 respectively have been taken on record in terms of Department of Industrial Development, SIA Letter No. FC : 147(83)/Comp/ SCS, dated 6-4-1984, as amended vide letter No. FC : 147(83)/Comp/ SCS, dated 4-2-1986. 2. This issues with the concurrence of Ministry of Finance (Department of Economic Affairs) vide their U. O. No. 122 of 1985-FI&T, dated 4-2-1985. 3. Kindly acknowledge receipt. Yours faithfully, (Sd.) R. L. Sidhu, Under Secretary to the Govt. of India." From this letter it is apparent that the Government of India was apprised not only of the technical know-how agreement but was also made aware of the "basic agreement". It is not the case of the second defendant that the Government of India raised any objection to the effect that the "basic agreement" was not presented before it or the same was not approved by it and, therefore, was illegal and not operative between the parties, being contrary to the provisions of FERA and to the conditions laid down in its letters of April 6, 1984. It appears to me that the only clause in the "basic agreement" which could attract the provisions of the FERA is clause 5.1, as it allowed the first plaintiff to acquire 40 per cent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the second defendant, it appears to me that the "basic agreement" was adopted and acted upon by the second defendant. The second defendant having taken the benefit of the "basic agreement" cannot be heard to say that the same was not adopted by it. If the same was not adopted by the second defendant, the question that arises is as to how it was using the trade name Baker as part of its corporate name. Prima facie it appears to me that the trade name Baker belongs to the plaintiffs which fact would be evident from the further analysis of the matter detailed in the latter part of the judgment. Obviously the permission to the second defendant to use the trade name Baker as part of its corporate name flowed from the "basic agreement". The allotment of shares of the second defendant to the first plaintiffs is also as per the "basic agreement". There is also nothing to show that the first defendant paid any consideration in the form of money to the first plaintiff for reaching an agreement, incorporated in clause 8.3 of the "basic agreement", permitting the Indian company on its incorporation to use the word "Baker" as part of its corporate name till such time as the shareholding of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by section 28(1)(c). Any promise made by the user of the trade mark to the owner thereof which would affect or concern the flow of foreign exchange would be regarded a consideration under section 28(1)(c) for the use of the trade mark. Where, however, permission has been granted by the owner to a registered user for the use of the trade mark and the said permission does not require the registered user to do anything which affects the inflow or outflow of the foreign exchange, then such an agreement or arrangement would not come within the purview of section 28(1)(c) of the Act." Learned counsel for the defendants, however, submitted that the defendants not only paid royalty to the plaintiffs for acquiring the right to manufacture certain items of oil field equipment and to trade in them, but the royalty also included payment for acquiring the right to use the goodwill associated with the mark and name Baker. To substantiate the argument he placed reliance on the letter of Baker Hughes (Singapore) Pte. Ltd. dated October 27, 1994, addressed to the second defendant, and clauses 7(A), 2(A), 2(B) and 4(A) of the "technical know-how agreement". On going through the letter of Baker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to use the trade mark "Baker" or for any promise on the part of the defendants to do or abstain from doing anything with reference to the adoption of the word Baker in the corporate name of the Indian company affecting the foreign exchange resources of the country. Thus, no case has been made out for the application of section 28(1)(c) of the Foreign Exchange Regulation Act as it existed on the relevant date. Even clause 12 of the annexure to the "letter of approval of foreign collaboration" dated April 6, 1984, does not render clause 8.3 of the "basic agreement" a nullity. Clause 12 of the said annexure reads as follows : "Foreign trade names will not ordinarily be allowed for use on the products for internal sales although there is no objection to their use on products to the exporters." Strictly speaking the above clause deals with the use of foreign trade names on the products and not with the use of foreign trade names as part of the corporate names of the Indian companies. As the clause suggests ordinarily the Government of India will not allow foreign trade names to be used on the products for internal sales. But there is no embargo on the use thereof if the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a foreign trade mark/trade name by allowing the Indian party to the use thereof without the requisite permission from its owner. The Government of India before allowing an Indian party to use the foreign trade mark/trade name will certainly satisfy itself about the existence of a user agreement. It would be unreasonable to hold that when a foreign trade name/trade mark is being used by an Indian company without the permission of the one to whom such trade mark/trade name belongs, it can be treated as an Indian trade name or trade mark and it cannot be assumed that the Government of India gave permission to the use thereof treating it as an Indian trade name or trade mark. In the instant case clause 8.3 of the "basic agreement" permitted the use of the name "Baker" to the second defendant but permissive use thereof could continue as long as the shareholding of the first plaintiff was not reduced below 40 per cent, of the share capital of the second defendant. The clause mandates that once the shareholding of the first plaintiff dips below 40 per cent, the second defendant would be precluded from using the name Baker as part of its corporate name. It prima facie appears to me that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding screws, plates, wires, etc., and was being used in India since 1979. The first plaintiff licensed the second plaintiff to use the trade mark AO/ASIF in relation to the above said goods in this country. In 1977 a "collaboration agreement" was executed between the plaintiffs, being represented by Dr. Robert Mathys and Reinhold Mathys on the one hand and the defendant being represented by M. P. Dhawan and S. M. Dhawan on the other. Pursuant to the collaboration agreement the defendant-company was incorporated. Under the collaboration agreement the defendant was permitted to use the trade mark AO/ASIF in relation to the above said products which were being supplied by the plaintiffs. By letter dated June 24, 1992, the plaintiffs revoked the "collaboration agreement" with the defendant. The plaintiffs issued a notice to the defendant requesting it not to use the trade mark of the plaintiffs. The defendant did not desist from using the trade mark. The plaintiffs thereupon filed a suit for passing off against the defendant and also moved an application for interim relief. This court while accepting the application of the plaintiffs for interim relief observed that once the collabo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. Learned counsel in support of his submission relied upon a decision of the Supreme Court in V. B. Rangaraj v. V. B. Gopalakrishnan [1992] 73 Comp Cas 201 . He also submitted that the corporate veil of the company can only be lifted where the company is a party to the fraud or where it has evaded taxes. Since no case of fraud or loss to the Revenue has been made out by the plaintiffs the principle of lifting of corporate veil cannot be invoked by them. It is not necessary to consider the question whether a case has been made out for lifting of the corporate veil of the second defendant as, for the reasons already stated in the earlier part of the judgment, I am prima facie of the opinion that the second defendant had adopted the "basic agreement" and had acted upon it. Even if the contents of clause 8.3 of the "basic agreement" have not been incorporated in the articles of association, it does not in any manner affect the right of the plaintiffs to ask the second defendant to stop the use of the name Baker by deleting the same from its corporate name as with the name Baker is attached the goodwill of the business belonging to the plaintiffs. I fail to see how the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of association of the company. The private agreement between the shareholders imposing restrictions on the transfer of shares was clearly contrary to the articles of association of the company which placed no restriction on their transfer. Under section 82 of the Companies Act the transfer of shares is left to be governed by the articles of association of the company. In these circumstances, the Supreme Court held that the private agreement was not binding on the shareholders and the company. In the instant case the private agreement is not contrary to the articles of association of the company. The articles of association of the company do not at all deal with the subject of grant of permission by the first plaintiff to the second defendant for use by the second defendant of the name Baker in its corporate name and the matters connected therewith. The articles of association are silent on the subject. Therefore, clause 8.3 of the "basic agreement" remains unaffected by the memorandum and articles of association of the company. Even section 36 of the Companies Act would not be available to the defendants for being pressed into service as it binds the company and the members there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has been discontinued then, even though he may intend to resume it sometime, it is a matter of fact and degree at what point he should be treated as no longer having any goodwill in that business or in respect of any name attached to it ... 2.89." The above would show that assignment of goodwill in a business in favour of the assignee can take place by conferring on the assignee exclusive and total right to carry on the business belonging to the assign or. In the instant case I have not been persuaded to hold that there is prima facie evidence to show that the second defendant acquired exclusive and total right to carry on the business as a whole belonging to the plaintiff. The transaction did not constitute a transfer of the business or goodwill of the first plaintiff to the second defendant, rather it was only a transaction in the nature of a transfer of technical know-how from the first plaintiff to the second defendant with permission from the former to the latter to use Baker as part of its corporate name till the happening of a particular event. As already seen, clause 8.3 of the "basic agreement" stipulates that in case the holding of the first plaintiff falls below 40 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing without admitting that the "basic agreement" was not binding on the second defendant even then the plaintiffs will be entitled to interim injunction as the second defendant is passing off its goods and business as those of the plaintiffs by using the word Baker in its corporate name despite the fact that the plaintiffs have proprietary right over the name Baker and the goodwill attached thereto. It was pointed out that the word Baker is being used by the plaintiffs and its associate companies all over the world for a long time. The second defendant was not entitled to use the word Baker in its corporate name after the first plaintiff had sold its share in the second defendant. Once the first plaintiff snapped its ties with the second defendant the continued use of the word Baker in the corporate name of the second defendant cannot be permitted. On the other hand, learned counsel for the defendants contended that in this part of the world the plaintiffs have not earned any goodwill or reputation associated with the word Baker. The plaintiffs do not have any proprietary right in India in the trade name or trade mark Baker. The name/mark Baker is not distinctive of their goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name to show that it was a "Baker" group of companies and this was done to cash on the goodwill associated with "Baker". The trade name Baker is distinctive of the plaintiffs and the second defendant has no right to continue the use of the same after the termination of the licence created by clause 8.3 of the collaboration agreement. There is good authority for the proposition that after the licensor has terminated the licence of the licensee to use its trade name, the licensee has no right to continue the use thereof. In the issue of October, 1995, of "Fortune", a magazine having circulation in this part of the world, the following observations were made with regard to "Baker Hughes" : "This oil field well equipment and services company holds number one and number two market share position in almost everything it does including oil field drilling and drill-bit production." The fact that "Baker" is known in this sub-continent is apparent from the various purchase orders and agreements of sale between various divisions of "Baker", on the one hand, and companies transacting business in oil field equipment, on the other. Such purchase orders and agreements exist at pages 3.019, 3.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... region and acquires a transborder or overseas or extraterritorial reputation not only through import of goods but also through dissemination of information about them. It is also recognised that the information of the goods of a foreign trader and its trade mark can be available at a place where goods are not marketed and consequently not being used. A trade mark of a foreign trader in respect of a product need not be associated with the actual use of the product in order to establish reputation. The principle laid down in this case was upheld by the Supreme Court in appeal against the above decision of the Division Bench of this court (see N. R. Dongre v. Whirlpool Corporation [1996] 7 JT 555 (SC)). While upholding the decision of the Division Bench of this court, the Supreme Court held as follows (page 566) : "The mark/name 'Whirlpool' is associated for long, much prior to the defendants' application in 1986 with the Whirlpool Corporation--plaintiff No. 1. In view of the prior user of the mark by plaintiff No. 1 and its trans-border reputation extending to India, the trade mark 'Whirlpool gives an indication of the origin of the goods as emanating from or relating to the Whirlpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t expressing its view held as follows : "It is necessary to note that the goodwill is not limited to a particular country because in the present days, the trade is spread all over the world and the goods are transported from one country to another very rapidly and on extensive scale. The goodwill acquired by the manufacturer is not necessarily limited to the country where the goods are freely available because the goods though not available are widely advertised in newspapers, periodicals, magazines and in other medias. The result is that though the goods are not available in the country, the goods and the mark under which they are sold acquires wide reputation. Take for example, the televisions, and video cassette recorder manufactured by National, Sony or other well known Japanese concerns. These televisions and V.C.Rs are not imported in India and sold in open market because of trade restrictions, but is it possible even to suggest that the word 'National' or 'Sony' has not acquired reputation in this country. In our judgment, the goodwill or reputation of goods or marks does not depend upon its availability in a particular country." Learned counsel for the defendants pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no guarantee against likely confusion. In some case, however, it is also possible that such a purchaser after having been misled into an initial interest in a product manufactured by an imitator discovers his folly, but this initial interest being based on confusion and deception can give rise to a cause of action for the tort of passing off as the purchaser has been made to think that there is some connection or nexus between the products and business of two disparate companies. This view finds support from various decisions gathered in section 20.12 of the Filing Instructions 1988, Fall Cumulative Supplement from Callmann "Unfair Competition, Trademarks and Monopolies". This section reads as under : "But even apart from the doctrine of greater care, if the manner of purchasing becomes routine, the possibility of confusion can arise notwithstanding the expertise of the purchasers (Layne Western Co. v. Fry 174 F Supp 621 (CCPA 1960)). The mere fact that all the customers are discriminating technicians does not by itself insure against confusion ; being skilled in the relevant art does not necessarily preclude confusion if the similarity between the marks is great (Wincharger Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of "initial confusion" held as follows : "In short, the harm to Mobil is the likelihood that potential purchasers will think that there is some connection or nexus between the products and business of Pegasus Petroleum and that of Mobil. 'Such initial confusion works an injury to (Mobil)'. see Grotrian, Helfferich, Schulz Th. Steinweg Nachf v. Steinway and Sons 365F. Supp. 707 (1973); 523 F. 2d at 1342 ; 186 USPQ at 445." In Lois Sportswear, U.S.A., Inc. v. Levi Straus and Co. 230 USPQ 831 (CA2 1986), the Court of Appeal, second circuit, held as follows : "The eighth and final factor--the sophistication of relevant buyers-does not, under the circumstances of this case, favour appellants. The district court found, and the parties do not dispute, that the typical buyer of 'designer' jeans is sophisticated with respect to jeans buying. Appellants argue that this sophistication prevents these consumers from becoming confused by nearly identical back pocket stitching patterns. On the contrary, we believe that it is a sophisticated jeans consumer who is most likely to assume that the presence of appellee's trademark stitching pattern on the appellants' jeans indicates so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an initial interest, a potential Steinway buyer may satisfy himself that the less expensive Grotrian-Steinweg is at least as good, if not better, than a Steinway. Deception and confusion thus work to appropriate defendant's goodwill. This confusion, or mistaken beliefs as to the companies' interrelationships, can destroy the value of the trademark which is intended to point to only one company (American Drill Busing Co. v. Rockwell Manufacturing Co. 342 F. 2d 1922 ; 52 CCPA 1173 (1965)). Thus, the mere fact that purchasers may be sophisticated or discriminating is not sufficient to preclude the likelihood of confusion. 'Being skilled in their own art does not necessarily preclude their mistaking" one trademark for another when the marks are as similar as those here in issue, and cover merchandise in the same general field' (Id)." Having regard to the above discussion prima facie I am of the opinion that the word Baker occurring in the corporate name of the second defendant suggests its connection or nexus with "Baker", which depicts a wrong picture as from February, 1995, "Baker" has terminated its relation with the defendants. The continuance of the word Baker as part of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with the plaintiff, the court will readily infer the likelihood of the damage to the plaintiff's goodwill not only through loss of sales but also through loss of exclusive use of his name or mark in relation to the particular goods or business. In para. 5.04 it is observed as follows : "5.04. If a defendant is in direct competition with the plaintiff, the court will readily infer the likelihood of damage to the plaintiff's goodwill, not merely through loss of sales but also through loss of the exclusive use of his name or mark in relation to the particular goods or business concerned, on evidence of the plaintiff's reputation in the goods or business and a relevant misrepresentation by the defendant in relation to the same or similar goods or the same or a similar business." Reverting to the case in hand, it can be readily inferred that when a purchaser of the oil field equipment comes to know that the name Baker is no longer the sole preserve of the plaintiffs and can be used even by a company which is not associated with the plaintiffs, his confidence in the products of the plaintiffs is likely to receive a setback. A buyer who was being attracted to the products of the plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith "Baker" in the past, that knowledge of the buyers can affect their judgment and competence leading to varying degrees of confusion─ initial, partial or total. Even a discerning consumer could fall prey to confusion. A situation cannot be legitimised where a company which extends its technical know-how to another company, is made to lose its corporate name to the company to which technical know-how is extended. A licensee permitted to use the trade name of the licensor on its goods cannot claim to continue the use of the same even after the cancellation of its licence by the licensor. In the event of a contrary view the international trade and commerce will receive a set back and will undermine the faith of the trading community in the country where such acts are condoned. It was also contended by learned counsel for the defendants that after the establishment of the second defendant there is hardly any sale of the products of the plaintiffs in this country. Learned counsel urged that since the plaintiffs are not carrying on business in India, they cannot bring an action for passing off. The argument is not well founded. In Calvin Klein Inc. v. International Apparel Syndi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff's goods or services. Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that the goods or services offered by him are the goods or services of the plaintiff. Thirdly, he must demonstrate that he suffers or, in a quick time action, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendant's misrepresentation that the source of the defendant's goods or service is the same as the source of those offered by the plaintiff . . ." In Kaviraj Pandit Durga Dutt Sharma v . Navaratna Pharmaceutical Laboratories, AIR 1965 SC 980, the Supreme Court commenting on the characteristics of an action for passing off observed that the action for passing off is a common law remedy and in substance an action for deceit where a person passes off his own goods as those of anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al damage to his business or be useful to summarise and dismiss some of the most persistent. Most importantly, the misrepresentation in passing off need not be made fraudulently or with any intention to deceive ; 'calculated' in Lord Diplock's speech in Advocaat ( B. V. Erven Warnink v. J. Townend and Sons (Hull) Ltd.) [1979] 2 All ER 927 (HL); [1979] AC 731 means likely rather than intended. The only continuing importance of fraud is for its evidential value. The misrepresentation need not be to the effect that the defendant's goods or business are those of the plaintiff; and as two partial corollaries of this, passing-off is not confined to misrepresentations in the nature of trade mark infringement, and the misrepresentation may be such as to be actionable by a potentially large but determinate class of plaintiffs. Finally, the oddly durable fallacy that the plaintiff and defendant must in some sense share a common field of activity may be regarded as obsolete. The presence or absence of a common field is no more than a matter of degree and inference." In B. V. Erven Warnink v. J. Townend and Sons (Hull) Ltd, [1979] 2 All ER 927 (HL), Lord Diplock identified five characteristi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) causing damage to the plaintiff. In Reckitt and Colman Products Ltd. v. Borden Inc. [1990] 1 All ER 873, the trinity of characteristics for invoking the remedy for tort of passing off was applied. In this case the respondent had been manufacturing and supplying domestic products including preserved lemon juice. The respondent marketed the lemon juice in plastic squeeze containers under the brand name "Jif" in the United Kingdom. Until the 1970s the respondents were substantially the only supplier in the United Kingdom of lemon juice packed in squeeze bottles. The appellants (Borden Inc) were carrying on business in the U.S.A. for manufacturing food products including preserved lemon juice. In the U.S. market the juice was being marketed under the brand name "ReaLemon". The mark was registered in the U.S. This was also marketed in plastic squeeze containers of lemon colour but of a shape resembling the familier (Mills) hand grenade. Subsequently, the appellants Borden Inc. decided to market the juice in U.K. in lemon shaped plastic squeeze containers. It was the contention of the respondents that this was done by the appellants to pass off their goods as the goods of the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod or means and which leads or is likely to lead the purchaser into believing that the goods or services offered by the defendant are the goods and services of the plaintiff, or that the goods and services offered by the defendant are the result of its association with the plaintiff ; (3)The plaintiff has suffered or is likely to suffer damage due to the belief engendered by the defendant's representation. Prima facie the plaintiffs have been able to establish the above ingredients. As already pointed out, the plaintiffs have acquired goodwill attached to the name Baker which is part of the corporate name of the plaintiffs and its associate companies. Thus, prima facie, the first ingredient for invoking the action for passing off is satisfied. In so far as the second ingredient is concerned, ex facie the same also stands established. After the first plaintiff had sold its shares in the second defendant-company, it ceased to have any relationship with the latter. The continued use of the word Baker by the second defendant is likely to engender the belief in the purchasers that the second defendant is associated with the plaintiffs and the goods and services offered by the defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "technical know-how agreement". In any event there was no question of suppression of "technical know-how agreement" as the "basic agreement" at various places speaks of the "technical know-how agreement". Therefore, the defendants are not right in their submission that the plaintiffs had suppressed the "technical know-how agreement". As regards the submissions of learned counsel for the defendants that the plaintiffs concealed the fact that the memorandum and articles of association of the second defendant were drafted at England under their (plaintiffs') instructions and this was done to cover up the fact that they were/themselves instrumental in not incorporating the contents of clause 8.3 of the "basic agreement" in the articles of association so as to prevent the "basic agreement" from falling foul of the provisions of the FERA and the "letter of intent" and the "letter of approval of the foreign collaboration", I am of the opinion that the submission does not advance the case of the defendants as clause 8.3 of the "basic agreement" does not violate any of the provisions of the FERA or any of the mandatory terms of the letter of intent or letter of approval of foreign collabor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make submissions and statements according to their own lights. Therefore, I find no substance in the said allegations of the defendants. Since I am of the opinion that the plaintiffs had not concealed any material facts, therefore, the authorities cited by the defendants are of no avail to them. Having regard to the above discussion I am of the view that the plaintiffs have established a strong prima facie case for grant of interim relief. The balance of convenience also lies in their favour. In case the interim injunction is refused to the plaintiffs they are likely to suffer damage to their goodwill and award of compensation in the circumstances of the case will not be an adequate relief to them. It was also contended on behalf of the defendants that the plaintiffs are guilty of acquiescence and laches, and, therefore, no relief should be granted to them. I am unable to agree with the submission of learned counsel for the defendants. The plaintiffs moved the instant suit immediately after it had disinvested its shareholding in the second defendant-company in February, 1995, and a notice was given to the second defendant to cease and desist from using the name Baker in its co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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