top of page
Search

JB Pharma’s Contract: In Light of The Trademark Act 1999

Abstract:

The author discusses the company JB Pharma contracting a trademark licensing agreement with Novartis to distribute and promote the ophthalmology brands in 1089 Cr. This paper also presents the legislative and judicial standing concerning quality control provisions associated with trademark licensing in India. The paper attempts to weigh and critique the feasibility of the alternatives available to the court in deciding the outcome of a finding of naked licensing, keeping in mind the consequences of each action, and attempts to suggest solutions for the same. The trademark proprietor has to ensure the consistency of quality in the good or service, and if any failure to meet terms and conditions they shall forfeit the trademark. The purpose of a trademark is to promise goods or services of consistent quality. This paper analyzes the legal provisions of trademark laws to protect consumers in trademark licensing.

 

Introduction

In everyday language, a "license" is commonly understood as the authorization granted by a property owner to a potential user, allowing them to utilize the owner's property under specified conditions, if any. This definition has been broadened to encompass the realm of trademark licensing over the years. The global perception of trademark licensing has undergone a significant transformation, shifting from negative criticism to being recognized as an essential practice in the present era. Certainly, it refers to a legal situation in which a trademark owner grants a license of their trademark to another entity without establishing or enforcing sufficient quality control and standards regarding how the licensee uses the trademarks. This situation is often described interchangeably as 'licensing in gross' or 'bare licensing’.


A similar procedure was done by JB Pharma on December 29, 2023, when it shook hands with Novartis and entered into a pact to distribute and promote ophthalmology brands at 1089 Cr. At its meeting on December 19, 2023, the board of directors endorsed the ratification of a trademark license contract for a portfolio of specific ophthalmology brands with Novartis Innovative Therapies AG. The agreement is perpetual for the Indian market and will take effect in January 2027, according to a regulatory filing from JB Pharma. On the financial details of the agreement, JB Pharma said that they would divide the payments into two parts. One 964 Cr it will pay, excluding applicable taxes, stamp duty, and working capital, for the trademark license agreement to Novartis Innovative Therapies AG, Switzerland. The remaining 125 crore, excluding applicable taxes, stamp duty, and working capital, will be paid to Novartis Healthcare Pvt Ltd.


The legal foundation for the concept of trademark licensing is firmly established in Indian law. According to Section 2(r) of the Trademarks Act, 1999, the 'permitted use' of a registered trademark involves its utilization by either a 'registered user’ or 'a person besides registered proprietor and a registered user,'. This arrangement is based on a written licensing agreement with the proprietor after the trademark's registration, outlined in Clause (i) and (ii) respectively. Section 48 of the Trade Marks Act addresses the entities involved in the licensing process, specifically mentioning a registered 'proprietor' and a registered 'user.


About JB Pharma

J.B. Chemicals and Pharmaceuticals Ltd. serves as the leading entity within the 'Unique' group of companies. Mr. J.B. Mody established the company in collaboration with his two brothers, Mr. D.B. Mody and Mr. S.B. Mody. The core activities of the company involve the production of bulk drugs, intermediates, and formulations, as well as ayurvedic and herbal preparations. In the preceding year, the company introduced several new formulations to the local market and expanded its Bulk Drugs operations, attributing the growth to its research and development efforts.

Image Source: http://surl.li/pmvmw


Importance of Trademark

Section 46 stipulates that the rejection or withholding of permission for the registration of a trademark should not be based solely on the grounds that the applicant does not currently use or have plans to use the trademark. The Registrar can approve the registration if certain conditions are met. These conditions include the formation and registration of a company under the Companies Act, 1956, with the intention of assigning the trademark to that company for use.


This provision aligns with the decision in the case of American Home Products Corporation v. Mac Laboratories (P) Ltd, where an application for rectification was rejected because the proprietor intended to use the mark through a registered user. In such cases, the tribunal may request the applicant to provide security for the costs of any related opposition or appeal proceedings. Failure to provide such security may result in the application being treated as abandoned.


In interpreting the term 'use’, Indian courts, as seen in J N Nicholas Ltd v Rose and Thistle, clarify that it goes beyond actual physical sales. Even mere advertisement, without the existence of the goods, can be considered a form of 'use' of the mark.


Registration of Trademark

A trademark provides the right to safeguard the identity of a business. Upon submission of the application to the trademark office, the initial examination focuses on verifying the accuracy of factual details, ensuring that files are in the correct class and contain accurate information. Upon acceptance of the trademark application, the registrar publishes the mark in the Trademark Journal, displaying the trademark name or symbol, or both. This publication invites objections, and if none are received, the application is accepted and marked as 'Registered.


It's crucial to note that trademark registration is not permanent. Trademark laws stipulate that a registered trademark must undergo renewal every ten years. The Delhi High Court, in the case of Rob Mathys India v Synthes Ag Chur , has established that in certain situations, the relationship between a licensor and a licensee may itself indicate a sufficient level of control. This is particularly evident when the licensor specifies that the licensee can only manufacture goods in accordance with prescribed stipulations and quality standards.


Consequently, this differing treatment of common-law and registered licensees may result in discordance when compared to the legal stance articulated in Gujarat Bottling Co., where it was asserted that a common-law license should be subject to the same restrictions as the registered use of a trademark.


Conclusion

Given the expanding consumer base, increasing incomes, and the rapid pace of goods in the market, it is evident that licensing will remain a key strategy for firms aiming to grow. The legal framework must adapt to this reality. To establish trademark invalidation as a legitimate legal consequence of naked licensing, there is a need for legislative provisions that ensure public awareness of the cancellation of registration. This communication could occur through channels such as advertising. The possibility of trademark invalidation could potentially result in unregulated passing off, posing a more significant threat to the quality control of the affiliated mark, as elucidated.

 

References:

  • Trademark Act, 1946

  • American Home Products Corporation v. Mac Laboratories (P) Ltd, 1986 AIR 137, 1985 SCR Supl. (3) 264

  • J N Nicholas Ltd v Rose and Thistle, AIR 1994 Cal 43, 98 CWN 216

  • Rob Mathys India Pvt. Ltd. v Synthes Ag Chur (1997) 17 PTC 669.

  • Dawn Donut Co. v Hart’s Food Stores Inc. 267 F.2d 358.

 

*This article is authored by Dishti Garg, Student of Symbiosis Law School, Noida and reviewed by Shreya Doneriya, Student of Symbiosis Law School, Noida.


Comments

bottom of page