A look at the present Indian Trade Marks Act reveals that though reforms have been introduced in the law concerning ‘licensing of trademarks’, a similar thrust is lacking in the area of ‘assignment of trademarks’. As the law now stands, in the matter of licensing, the right in the trademark continues to be with the proprietor, whereas, in assignment there is a change of ownership of trademark.

A more liberalized approach ought to be taken with regard to the law relating to assignment. This is true especially with regard to brands and products that have been passed over from one enterprise to another not merely through an assignment deed, but vide other means also. The recent decision involving burn-healing cream “BURNOL” is an insight to the same.

In a dispute regarding the trademark “Burnol”, Poysha Power Generation Pvt. Ltd filed an application for permanent injunction restraining Doctor Morepen and Kare Labs Pvt. Limited from putting the same into use. The mark in issue had been assigned to the plaintiffs by defendant and for recovery of Rs. 24 Lakhs with interest towards royalty and fee payable by defendants to the plaintiffs for permitted use of the same, for the period 19th April 2004 to 30th April 2005.

The suit prayed for cancellation of the documents executed by the defendants on 19th April 2004, assigning the same to plaintiffs. They contended that the same were not to be acted upon and were not nominal documents.

Dr. Morepen, the defendants, stated that the mark was assigned to it by Reckitt Piramal Ltd, which was handed down through another company by Boots Company plc of England, manufacturers of a cream to cure burns. This handing down was executed vide an assignment deed, a technology transfer deed and a marketing know-how deed. A payment of Rs. 8.95 Crore in respect of all these documents was made.

In order to enhance business operations, Morepen Labs, a sister concern of Dr. Morepen, in September 2002 entered into an Inter Corporate Deposit (ICD) Agreement with Morgan for a sum of Rs. 5 Crore under stringent conditions. This loan was not repaid on or before the due date. The arbitration clause invoked by Morgan in May 2003, and during the pendency of the same, a memorandum of settlement was arrived at. Under this memo, additional guarantees for repayment were furnished, ultimately forming part of a consent Award.

Morepen Labs, failing to adhere to the repayment schedule, was faced with an Execution Petition filed by Morgan. A sum of Rs. 6.4 Crore was held to be due. In course of the retrieval of this sum, the two parties entered into an understanding whereby, post-dated Cheque worth Rs. 6 Cr would be handed over to Morgan. The agreement also included withdrawal of all cases initiated under the Negotiable Instruments Act by Morgan. The mark ‘BURNOL’ was also agreed to be pledged and would be discharged on payment of the decretal amount.

Dr. Morepen on the 19th of April, unconditionally assigned the mark ‘BURNOL’ to Poysha for a sum of Rs. 10 Lakhs. Several documents including a General Power of Attorney, transfer, technology and marketing know-how agreements were also handed out amongst which a letter by Dr. Morepen to Morepen Labs terminating the license agreement with respect to BURNOL held prominence. The termination of the manufacturing agreement with Kare and a permitted user agreement issued to Poysha were also included amongst the letters filed.

On the basis of these documents, Poysha claims to be the lawful assignee of the trademark BURNOL. On the expiry of this permitted user agreement Poysha filed for a permanent injunction restraining Dr. Morepen from its use. According to an application granted by the trade marks registry, Poysha was the registered holder of BURNOL. The payment of Rs. 20 Lakhs made by Poysha toward Dr. Morepen for the assignment of the trademark had not been encashed.

None of the parties brought to fore anything to suggest the nature or time of the negotiations made with regard to assignment of the mark to Poysha. The ICD Agreement, Arbitration Award and Execution Petition bring to the fore the dealings between Morgan and Morepen labs, sister concerns of Poysha and Dr. Morepen respectively.

The plaint filed suggested that several letters demanding payment of the monthly royalty of Rs. 2 Lakhs with interest were sent. Defendants denied the receipt of any such letters and hence had not complied with the same. In this regard, defendants opined that the documents assigning the mark were never drafted with the intention to be acted upon and that were not to be treated as normal documents. On the other hand, the plaintiffs stated that these documents were entitled to be acted upon. The expiry of the agreement as a permitted user, did not entitle the defendants to continue manufacture and marketing of BURNOL. Such continuance by Dr. Morepen and Kare was held to be an infringement of the trademark. Defendant’s contention with regard to its intention behind the executed documents was propagated to hold no good.

The Court held that the propositions canvassed by Poysha, supported by the decisions of the Supreme Court, could not be overlooked, yet a consideration of a plethora of decisions created an impression that it was possible for a party to contend that a document is a nominal document or not, provided it is shown that they intended to enter into an altogether different transaction and possessed an ulterior object.

In the course of deliberation, the Court held that it remained unclear as to why the trademark was assigned to the plaintiffs at a value, much lower than its present market value. In the absence of documents revealing the earlier transactions the Court reserved its comments. The Court held that the antecedent facts revealing the nature of transactions between Morgan and Morepen labs, revealed a story different from the plaintiff’s altogether. The Court also observed that it was strange on the plaintiff’s part to have refrained from taking any action with regard to the