IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : TRADE MARK MATTER

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1 IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : TRADE MARK MATTER IA Nos /2007 (O.39 R.4 CPC) & 8664/2007 (O.39 R.1&2 CPC) in CS (OS) No. 1393/2007 IA Nos /2007 (O.39 R.4 CPC) & 8667/2007 (O.39 R.1&2 CPC) in CS(OS) No. 1394/2007 IA No /2007 (O.39 R.4 CPC) & 8671/2007 (O.39 R.1&2 CPC) in CS(OS) No. 1395/2007 Reserved On : Date of decision : OLD NAVY (ITM) INC. & ORS. {CS (OS) No. 1393/2007} GAP (ITM) INC. & ORS. {CS (OS) No. 1394/2007} BANANA REPUBLIC (ITM) INC. & ORS. {CS (OS) No. 1395/2007} PLAINTIFFS Through : Mr. Sudhir Chandra, Sr. Adv. with Mr. Rajendra Kumar, Ms. Latha Nair & Ms. Priya Rao, Advocates. - V E R S U S - DEEPA SUREKHA & ORS DEFENDNATS Through : Mr. V.P. Singh, Sr. Adv. with Mr. Rajiv Bansal, Advocate. SANJAY KISHAN KAUL, J.

2 1.The plaintiffs in the three suits have filed similar claims alleging infringement and passing off in respect of registered trademarks GAP, Old Navy and Banana Republic in respect of apparels. Further, it is the case of the plaintiffs that the defendants have also adopted the trading style of GAPL, which incorporates in its entirety the registered trademark GAP. 2.The plaintiffs claim their rights in these trademarks and vast sales running into billions of dollars all over the world. It is the case of the plaintiffs that the defendants are causing parallel importation of the goods under the said three trademarks, which were manufactured several seasons ago by or on behalf of the plaintiffs, but are no longer in use and were intended for sale in a specific country. 3.The plaintiffs claim that they have an elaborate system in place which controls and regulates further dealings in their discontinued / discarded / out of fashion products by providing that these be taken off the main and primary channel of distribution and sales and dispose off through secondary channels strictly in accordance with the laid out procedure and regulatory mechanism. One such regulatory directive in force is stated to be the requirement that the original labels stitched to the apparels be removed before they are disposed off through the secondary channels of distribution. The plaintiffs allege that the defendants are importing / distributing and marketing the discontinued apparels of the plaintiffs from sources not authorized by the plaintiffs and stitching to these apparels labels / price tickets of their own manufacture being the plaintiffs registered trademarks. A representation is, thus, made to the public of these products bearing all the three trademarks being of the plaintiffs though they are not part of the current inventory of the plaintiff s products resulting in untrue and misleading representation to the public at large, thus, constituting a false trade description. 4.The plaintiffs state that the apparels and the products are sold throughout the world by retail stores operated by the plaintiffs or by their franchisees pursuant to specific agreements for the retail sale to the public of these products. These retail stores are maintained and operated in a manner consistent with the integrity and prestige of the trademark and are required to be built and decorated using only fixtures and supplies approved by the plaintiffs. The stores are also subject to inspection by the plaintiffs periodically. The public in turn also accepts very fine quality retail services while purchasing the products under the trademarks. The defendants are alleged to be importing the apparels under the trademark without the consent of the plaintiffs either express or implied. 5.The plaintiffs along with the suits filed applications for interim injunctions and in terms of the orders passed on , interim orders were granted in favour of the plaintiffs. Interim orders were based on the allegation that the defendants were carrying out sale of the discarded and obsolete stocks under the brand-name of the

3 plaintiffs without the authority of the plaintiffs and were also indulging in counterfeiting of some products. A further order passed was for appointment of Local Commissioners to visit the different premises of the defendants and to seize the offending goods. The Local Commissions were executed. 6.The defendants were served and moved applications for vacation of the interim injunction. 7.The present order will dispose off the applications for injunction and the applications for vacation of injunction in all the three suits. 8.It is the case of the defendants that the plaintiffs have not come with clean hands before this Court and are guilty of concealment of material facts. The garments are stated to be imported by the defendants from one Alatoobi International Trading LLC, Dubai, UAE being surplus, over-runs garments sold by the plaintiffs themselves. These goods by virtue of the particular age, quality, type and style are not suitable for the markets they were originally intended and produced for and are, thus, categorized as surplus, over-runs or excess inventory. The plaintiffs are stated to have formed a separate unit to deal with the sale of these particular garments. It is alleged that there is a GAP Inc. Excess Inventory Programme in terms whereof Gabana Distribution Ltd. was appointed as the distributor to sell first quality, seconds, over-runs and rejected goods outside USA including India. Gabana in turn entered into an Agreement with Roots Ready Made Garments (for short, RRMG ) to resell the said garments in India. RRMG was authorized to further sell the goods to third-parties who assigned rights to sell the goods in India to Alatoobi International Trading LLC from whom the plaintiffs acquired the goods. It is, thus, stated that the goods are original apparels of the plaintiffs, which have been sourced by the defendants through proper channels and such business was being carried on by the defendants for the last two years. These goods were meant to be sold only in the Indian market as per the Agreement. There is stated to be proper documentation for the said goods, which have been filed. 9.The defendants state that the label attached to the original price ticket depict the maximum retail price, discounted retail price, year of import and the name of the importer. As per the mandatory requirements under the Indian Law, the goods are also sold in the bag supplied by the plaintiffs and are even sold on hangers sent by the plaintiffs. The goods are stated to be sold in the original condition without any tampering. The defendants claim that they have also their own products under the trademark GAPPLE and the garments sold under the said trademark are being alleged by the plaintiffs to be counterfeited goods. 10.In this behalf, it will be relevant to refer to the affidavit of Mr. Brain Noel Woodword dated filed along with the plaint. Mr. Woodword of the plaintiff company is an expert in identification of such counterfeited products and allegation about such tampering and counterfeiting has been made in respect of

4 product goods No. 0113, 0114, 0112 and The defendants claimed that the said garments are sold under the trademark GAPPLE and not as garments emanating from the plaintiffs. Insofar as its trademark GAPL are concerned, it is stated that the name of the stores of the defendants is 'Garments and Accessories Price Less', the abbreviation of which is GAPL. It is alleged that the said trademark is registered (subsequently stated not to be so during submissions as only an application for registration has been made). The goods are stated to be priced less than the price of the original goods being seconds / discontinued / excess product. The defendants allege that there is no similarity between the font of the logo GAP and the defendants GAPL. 11.The plaintiffs have responded to the aforesaid applications of the defendants and for the first time in response to the applications of the defendants, have come out with their arrangement with Gabana and have filed relevant documents in that behalf. 12.A perusal of the documentation filed by the parties shows that GAP Inc. had issued a letter dated confirming that Gabana Distribution Ltd. was authorized to purchase from GAP Inc. certain merchandise for resale of GAP Brand Merchandise into authorized retailers in India. Gabana in turn issued a letter dated to RRMG confirming the authority of RRMG to purchase from Gabana. The said letter so refers to Gabana s authority in pursuance to the letter dated RRMG in turn has entered into an Excess Inventory Distributor Agreement dated with Alatoobi and Alatoobi has in turn entered into a Retailer / Reseller Agreement with the defendants on The plea of the plaintiffs is that the Agreement dated requires Gabana to be responsible for complying with all conditions set forth in the Agreement and, thus, the Agreement was being filed by the defendants. 13.The plaintiffs claim that as per the terms of the Agreement dated , more particularly clause 9 thereof, the term of the Agreement was to expire on and, thus, the Agreement had expired by efflux of time. Clause 1(a) provided for prior consent and approval of the list of retailers by the plaintiffs and it is alleged that many such retailers were got approved by Gabana which included RRMG. It is, however, alleged that there was no authority ever granted to RRMG to resell any items to third-party in India in any manner and RRMG was only an authorized retailer for the territory of Qartar. 14.In any case, all arrangements are stated to have come to an end on The plaintiffs and Gabana have also gone into litigation before the United States District San Francisco involving a claim by Gabana and a counter-claim failed by GAP Affiliates relating to a new Distribution Agreement dated , which was also terminated by the Affiliates of the plaintiffs on The plaintiffs allege that the Agreements dated between RRMG and Alatoobi and dated between Alatoobi and the defendants can confer no

5 rights in the defendants since the Principal Agreement between the plaintiffs and Gabana expired on A reference has also been made by the plaintiffs to a Policy Handbook dealing with seconds, overruns and rejected goods, but learned senior counsel for the plaintiffs were not able to point out any specific incorporation of such a Handbook in the Agreement with Gabana. 17.In order to appreciate the rival contentions, some of the clauses of the relevant Agreement, have to be examined more closely. Learned senior counsel for the plaintiffs have strongly relied upon clause 1(d) of the Agreement dated , which reads as under :- 1. Appointment of Distributor (d Prior to offering any Authorized Goods for sale to any third party, Distributor shall apply for and obtain GIBV's written approval of each of its customers and each retail store location where Authorized Goods will be sold by each customer. Distributor shall apply for such approval by submitting to GIBV the information called for in Exhibit B attached hereto. GIBV shall have the right, i its sole discretion, to approve, disapprove or cancel at any time any Distributor customer and any retail store where any of Distributor's customers propose to sell or have sold Authorized Goods. Distributor shall notify GIBV promptly, in writing, if any customer approved by GIBV for the sale of Authorized Goods ( Authorized Retailer ) or retail store that has been approved by GIBV for the sale of Authorized Goods ( Authorized Store ) ceases to offer Authorized Goods for sale. 18.A reference has also been made to clauses 1(g), 2(a), which read as under :- 1. Appointment of Distributor (g) Neither Distributor nor any Authorized Retailer may promote, advertise, market or sell Authorized Goods in any manner other than those expressly authorized in this Agreement. Distributor and each Authorized Retailer are authorized to promote the Authorized Goods solely and exclusively with materials, if any, provided to Distributor by GIBV, in the manner specially authorized by GIBV. Distributor shall provide to each Authorized Retailer prior to it offering Authorized Goods for sale in any Authorized Store a copy of the advertising and selling restrictions listed in Exhibit C attached hereto, and Distributor shall monitor and bear responsibility for each Authorized Retailer's compliance with those restrictions. 2. Trademarks and Other Intellectual Properties.

6 (g) For purposes of this Agreement, the them GIBV IP Affiliates shall mean the following companies related to GIBV, which own the following non-u.s. Intellectual Properties, and/or any of their successors and assigns : (1) Gap Intellectual Properties : The Gap Inc., a Delaware Corporation; (2) Banana Republic Intellectual Properties : Banana Republic Inc., a Delaware Corporation; (3) Old Navy Intellectual Properties : Old Navy Inc., a Delaware Corporation. 19.It is relevant to note that clause 3 deals with sale of authorized goods to distributors and in terms of sub-clause (d), sales of authorized goods to distributors are final. The period of the Agreement is prescribed under clause 9(b) as under :- 9. Term (b) This Agreement shall expire on April 30, 2005, unless earlier terminated according to the provisions of this Agreement. 20.Exhibit A to the Agreement contains the territories, while Exhibit B is a proforma of Retail Store Approval Request Form to be forwarded to the plaintiffs. Exhibit D stipulates the terms for advertising and selling restrictions and some of the relevant terms are as under :- EXHIBIT C ADVERTISING AND SELLING RESTRICTIONS The following restrictions and prohibitions are applicable to all authorized retailers of goods ( Authorized Goods ) bearing the GAP, BANANA or OLD NAVY trademarks (the Trademarks ). 1. All Authorized Goods must be sold exclusively in Authorized Store You may not use the Trademarks except as placed in or on the Goods or promotional materials received from Distributor

7 8. You may not purchase for resale any goods bearing any of the Trademarks at any retail store or through any catalog, on-line store or other non-retail store vehicle. You may purchase Authorized Goods only from Distributor. 21.Insofar as the allegation made in the plaint by the plaintiffs that the labels of the goods had to be removed for such apparels in question, learned senior counsel for the plaintiffs has been unable to point out any such term in the Agreements, though it is stated that the same forms part of the Handbook. As noticed earlier, there is no reference to the Handbook in any of the Agreements. 22.The chain of authorization by which the defendants claim a right to sell the apparels starts from a letter dated issued by the plaintiffs making a reference to the Agreement dated and for the approval of the resale of the brand merchandise into authorized retailers in India. A sample of such letter is reproduced hereunder :- This letter confirms that pursuant to the terms of an agreement dated May 13th, 2003 (the Agreement), Gabana Distribution, Ltd. ( Distributor ) is authorized to purchase from Gap Inc. (and its subsidiaries, affiliates and divisions) certain merchandise to include first quality, seconds, overruns and rejected goods and is authorized to re-sell those items to third parties outside the United States under certain conditions and limitations. Specifically Gabana Distribution, Ltd. has been approved for resale of Gap Brand merchandise into authorized retailers in India. Gabana Distribution, Ltd. is responsible for complying with all the conditions set forth in the Agreement, including enforcement of re-sale and advertising restrictions. (emphasis supplied) 23.Gabana in turn issued a letter dated to RRMG in the following terms :- This letter confirms that pursuant to the terms of our mutual agreement, Roots Ready Made Garments is authorized to purchase from Gabana Gulf Distribution Ltd certain merchandise to include first quality, seconds, overruns, and rejected goods and is authorized to re-sell those items to third parties in India under certain conditions and limitations. Gabana Gulf Distribution Ltd. has been approved by Gap Inc on November 18th 2003, for resale of Brand merchandise into authorized retailers in India. Roots Ready Made Garments is responsible for complying with all the conditions set forth in the Agreement, including advertising restrictions. (emphasis supplied) 24.RRMG entered into the Agreement with Alatoobi on , which is stated to be after the original Agreement between the plaintiffs and Gabana had to come to an end as per the allegation of the plaintiffs. The Agreement is really a back-to-back Agreement between GAP and Gabana containing similar Annexures. Alatoobi in

8 turn entered into the Agreement dated on a similar back-to-back basis with the defendants (more specifically defendant No.3). 25.RRMG addressed a letter dated to Alatoobi making a reference to certain invoices and confirming that the goods mentioned in those invoices had been supplied to RRMG by GAP Inc. original and that none of the garments mentioned in the invoices had the labels removed. The second letter issued by RRMG dated was to the effect that the merchandise supplied consisted of GAP Excess Inventory which was purchased in 2003 from GAP through Gabana. At the stage when the merchandise was purchased, GAP was stated not to dispute the right of Gabana or RRMG s right to distribute the merchandise for retail sale in India. Even the carry bags, hangers and other POS material provided to Alatoobi along with the merchandise were stated to be supplied by GAP. 26.Learned senior counsel for the plaintiffs has made a grievance about the use of the trademarks GAPL and GAPPLE by the defendants and contended that the right to use of both these trademarks are not available to the defendants. Learned counsel referred to the provisions of Section 29(5) of The Trade Marks Act, 1999 (hereinafter referred to as the said Act), which reads as under :- 29. Infringement of registered trade marks. (5) A registered trade mark is infringed by a person if he uses such registered trade mark, as his trade name or part of his trade name, or name of his business concern or part of the name, of his business concern dealing in goods or services in respect of which the trade mark is registered. 27.Learned senior counsel also referred to the provisions of Section 30(1)(b) of the said Act, which reads as under :- 30. Limits on effect of registered trade mark. (1) Nothing in section 29 shall be construed as preventing the use of a registered trade mark by any person for the purposes of identifying goods or services as those of the proprietor provided the use -- (a) (b) is not such as to take unfair advantage of or be detrimental to the distinctive character or repute of the trade mark. 28.It is the plea of the learned senior counsel that since the plaintiffs are the registered owners of the trademark GAP, the use of the same as part of the trademarks of the defendants in GAPL and GAPPLE would be in clear violation of the provisions of Section 29(5) of the said Act and that the defendants are trying to take unfair advantage of/or are acting detrimental to the distinctive character or repute of the trademarks of the plaintiffs. 29.Learned senior counsel for the plaintiffs has also referred to the judgment of the Supreme Court in Midas Hygiene Industries P. Ltd. & Anr. Vs. Sudhir Bhatia & Ors., 2004 (28) PTC 121 to contend that in case of infringement of a trademark or

9 copyright, normally an injunction must follow and mere delay in bringing action is not sufficient to defeat the grant of injunction in such cases. 30.On consideration of the aforesaid submissions of learned counsels for the parties, the most important aspect is that the plaintiffs in their wisdom themselves entered into arrangements for disposal of the garments after the season as they were perceived as capable of sale in countries which may not be so sensitive to the current fashion. In the fashion industry every season garments of different designs and characters are placed in the market. There are possibly more sensitive or fashion conscious areas such as USA and Europe and once the season passes, it is found that a fresh set of garments having new designs ought to be made available for marketability and keeping the innovative reputation of the plaintiffs. There are those goods which by virtue of broad age, quality, type and style are not suitable for the markets for which they were originally entitled. The plaintiffs do not destroy these goods but, in fact, seek to realize the proceeds from the sale of such stock at a lesser price. 31.It is towards the aforesaid object that the GAP Inc. Excess Inventory Programme has been set up appointing Gabana Distribution Limited as the distributor to sell first quality, seconds, over-runs and rejected goods outside the USA. In the present case, Gabana in turn entered into an agreement with Alatoobi International Trading LLC. Thus, the goods sourced by the defendants are through proper channels and the documents filed show that they are meant inter alia for the Indian market. This is more than apparent in the letter dated of the plaintiffs quoted above. 32.The plaintiffs claim that the labels had to be removed but there is nothing pointed out in the agreement that Gabana was obligated to do so. This is an important aspect as if the plaintiffs were serious of labels being removed and the goods not being sold under their trademarks, they would have either removed the labels themselves or stipulated a special condition in that behalf in the agreements. 33.Furthermore, the plaintiffs failed to disclose the arrangement which they had with Gabana in the plaint. The answer to the specific query in this behalf by the learned senior counsel was that the plaintiffs were unaware of the sources of supplies to the defendants. The same cannot be accepted as a satisfactory answer. The plaintiffs claim that they have purchased goods from the defendants which were referred to their expert for identification as counterfeited products. Once it was found that there were a large number of goods which were not counterfeited, some endeavours should have been made to find the source of the same since the particulars of the manufacture and batch numbers are given in the price tag of the garments itself. The plaintiffs cannot be unaware of the arrangement they had made with Gabana and, thus, were duty bound to have found out about the same. The plaintiffs, quite contrary to the same, sought to represent as if they were totally unaware as to how

10 the defendants had improperly sourced the products of the plaintiffs. This clearly amounts to non-disclosure of material facts, if not concealment of the same. 34.Learned senior counsel for the plaintiff sought to emphasize on various clauses of the agreement dated with Gabana to contend that it was the duty and obligation of Gabana to have obtained the necessary approvals for sale of even these kinds of garments through approved retail shops of the plaintiffs. Coupled with that is the plea that the original agreement ceased to operate in April, 2005 and, thus, the subsequent arrangements would not bind the plaintiffs. 35.I am unable to accept the aforesaid plea for the reason that if Gabana was in breach of any obligation with the plaintiffs, that was an aspect between the said two parties. Not only that, once the goods are out of the hands of the plaintiffs, it cannot be said that even if the agreement with Gabana has ended, there is no right with any subsequent purchaser to deal with the goods. The terms of the agreement itself show that the sale is final under clause In view of the aforesaid, there is little doubt that the defendants had properly sourced the goods by reason of the plaintiffs having put the goods in the channel of sale and no grievance in that behalf can be made by the plaintiffs. 37.The further grievance of the plaintiffs, more specifically GAP, arises from the use by the defendants of the trademarks GAPL and GAPPLE. Learned senior counsel for the plaintiffs contended that especially when goods inter alia of GAP were being sold from the same shop, the chances of confusion for the purchasing public were even more. 38.Insofar as the use of the abbreviation GAPL is concerned, it is stated that the extended form of the same is 'Garments and Accessories Price Less'. Prima facie, it is reasonably plausible that with the nature of abbreviation of GAPL being used, the public may be deceived into assuming that the same is some form of the product GAP. It is in these circumstances that the learned senior counsel for the defendants fairly conceded, without prejudice to the contentions in the main suit, that the defendants will not use the abbreviated form of GAPL and remove all boards in that behalf. The defendants would, however, be entitled to use full form of 'Garments and Accessories Price Less'. 39.The position is little different insofar as the use of the trademark GAPPLE is concerned. No doubt, the alphabets of GAP form part of GAPPLE, but both in terms of the words and the phonetics of the same, it cannot be said that the purchasing public would be deceived into purchasing GAPPLE products assuming that of GAP even if GAP products are sold from the same shop. The chances of deception would be, in fact, less as the purchasing public would be able to clearly decipher that GAPPLE being a different word, the products are not of GAP. There is, however, some force in the contention of learned senior counsel for the plaintiffs that the writing style and the colour combination should not be the same. The signboards of

11 GAP are in white on a blue background and written in a particular style. Thus, I am of the considered view that though GAPPLE as a trademark can be used by the defendants, they will not use the trademark in the style of writing of GAP or with the same colour combination. 40.The last aspect relates to the allegation of counterfeited products made by the plaintiffs on the basis of the goods stated to be purchased from the defendants. This is in respect of goods No. 0112, 0113, 0114 and It is the case of the plaintiffs that these goods were examined by their expert, Mr. Woodword, who has opined that the same are counterfeited. The claim of counterfeiting of these products is seriously disputed by the defendants, who disown the said products which the plaintiffs claim to have originated from the defendants. In fact, the defendants state that the goods Nos. relate to plain T-Shirts being sold under the trademark GAPPLE and not the ones which the plaintiffs seek to produce which undisputedly are counterfeited. 41.The controversy is, thus, narrow as to whether these T-Shirts are plain T-Shirts sold under the trademark GAPPLE or are they T-Shirts being sold under the counterfeited trademark GAP. On a specific query being raised, no satisfactory answer is forthcoming in respect to the seizure which has taken place by the Local Commissioners. This is so since the goods were sealed as a whole and no bifurcation has taken place. 42.In order to put this controversy at rest, it would be necessary for a Local Commissioner to again visit the premises of the defendants, de-seal the goods and check up if the inventory of goods contain any of the counterfeited products. If the goods are being sold under the trademark GAPPLE and are plain T-Shirts, the goods cannot be seized. However, if the goods bearing the said Nos. have GAP written over them, the same are required to be resealed and kept in custody. 43.In order to facilitate this aspect, the sample produced in Court of goods No is labelled as 'X' on the alleged GAP label, No as 'Y' and No as 'Z'. The sample shown of the article which the defendants claim are theirs of goods No is labelled as 'A' to distinguish the same from the other goods. 44.In view of the aforesaid discussion, the following directions are issued :- (i) the interim orders dated stand vacated except to the extent provided hereinafter and the goods be desealed by the Local Commissioner appointed for the said purpose and be handed over to the defendants. (ii) the defendants will not use the abbreviated form of GAPL though they are entitled to use the full name 'Garments and Accessories Price Less'. (iii) the defendants can use the trademark GAPPLE, but not in the same writing style or the colour combination of white on blue as identified with GAP. (iv) the Local Commissioner to inspect the goods and in case any goods of articles No. 0112, 0113, 0114 and are found with the GAP written on them (as per

12 goods labelled as 'X', 'Y' and 'Z'), the same should be resealed, but if they are plain T- Shirts under the trademark GAPPLE (as per the goods labelled 'A'), the same be released for sale. (v) the defendants to file six monthly accounts in respect of goods with the trademarks in question. 45.Ms. Radhika Arora, Law Researcher, Delhi High Court, New Delhi (Mobile No ), who had earlier visited one of the premises, would visit the premises again to carry out the task in respect to the seized goods. The commission would be executed irrespective of the fact whether the goods were seized by her or by other Local Commissioner(s). The inspection in this behalf would be carried out by the Local Commissioner in the presence of the representative of the plaintiffs for the purpose of identification of the counterfeited products on at A.M. at the places where the seized goods are lying in Delhi and on at Mumbai. The fee of the Local Commissioner shall be Rs.15,000/- for Delhi and Rs.25,000/- for Bombay apart from airfare and out of pocket expenses to be borne by the plaintiffs. 46.In view of the fact that the plaintiffs failed to disclose their arrangement with Gabana and a complete injunction order was passed, I deem it appropriate to burden the plaintiffs with the costs of these applications quantified at Rs.10,000/- for each set of applications in each suit. 47.Needless to say that any observations made in this Order would not prejudice the trial in the main suit. 48.The applications stand disposed of in the aforesaid terms. Sd/- SANJAY KISHAN KAUL, J.

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