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13 July 2015
The erstwhile Companies Act 1956 provided remedies for trademark infringement under Sections 20 and 22. Section 20 set out the criteria for names which were deemed "undesirable for registration" as company names and Section 22 provided mechanisms for rectification of a company name. A streamlined framework for rectification is now available under Section 16 of the Companies Act 2013.
Below is an extract from Section 16 of the 2013 act:
"(1) If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which—
(a) in the opinion of the Central Government, is identical with or too nearly resembles the name by which a company in existence had been previously registered, whether under this Act or any previous company law, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of three months from the issue of such direction, after adopting an ordinary resolution for the purpose;
(b) on an application by a registered proprietor of a trade mark that the name is identical with or too nearly resembles to a registered trade mark of such proprietor under the Trade Marks Act, 1999, made to the Central Government within three years of incorporation or registration or change of name of the company, whether under this Act or any previous company law, in the opinion of the Central Government, is identical with or too nearly resembles to an existing trade mark, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of six months from the issue of such direction, after adopting an ordinary resolution for the purpose.
(2) Where a company changes its name or obtains a new name under sub-section (1), it shall within a period of fifteen days from the date of such change, give notice of the change to the Registrar along with the order of the Central Government, who shall carry out necessary changes in the certificate of incorporation and the memorandum.
(3) If a company defaults in complying with any direction given under sub-section (1), the company shall be punishable with fine of one thousand rupees for every day during which the default continues and every officer who is in default shall be punishable with fine which shall not be less than five thousand rupees but which may extend to one lakh rupees."
It is clear that while Section 16(1)(b) allows only the registered proprietor of a trademark to apply to the central government for rectification of a company name that is identical to or too closely resembles the registered trademark, the remedy under Section 16(1)(a) is not limited to the registered proprietor of a trademark. In other words, a company whose name is not a registered trademark could invoke Section 16(1)(a) in order to seek rectification of a company name that is identical to or too closely resembles its own. The owner of an unregistered trademark which is used as a company name may use Section 16(1)(a) as an additional remedy to a passing-off suit if a third party uses the trademark as its company name.
The remedy under Section 16(1)(a) – which was available under Section 22 of the 1956 act (albeit through a circuitous procedure) – was likely provided for in recognition of, and as a counterpart to, the remedy for passing off available to owners of unregistered trademarks under the Trademarks Act 1999. While under Section 16(1)(b) a registered proprietor must apply for rectification within three years of incorporation, registration or the infringing company's name change, there appears to be no such limitation period under Section 16(1)(a).
Rule 8 of the Companies (Incorporation) Rules 2014 (which came into force on April 1 2014) sets out the criteria for determining whether a proposed company name is unregistrable under the Companies Act. Interestingly, Rule 8(2)(a) also deems a name which includes a trademark that is the subject of an application to register a name under the Trademarks Act 1999 unregistrable, unless the applicant for trademark registration has consented.
Among other things, Rule 8(2)(b) also prohibits the registration of a proposed company name which:
The provision and rules are designed to provide expeditious alternatives to trademark infringement and passing-off suits, insofar as the use of a trademark as a company name is concerned. No central government decisions under Section 16 or the erstwhile Section 22 have been reported. It would be helpful if these decisions were made public, so that interested parties could determine whether Section 16 is worth considering as an alternative to protracted judicial proceedings.
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