Trademark Remedies under the Companies Act, 2013

The erstwhile Companies Act, 1956 provided for certain trademark remedies under Sections 20 and 22. Section 20 spelt out the criteria for names which were deemed “undesirable” for registration as company names and Section 22 provided the mechanism for rectification of a company name. A more rationalized framework for rectification is available under Section 16 of the current Companies Act, 2013.

Extracted below is Section 16 of the 2013 Act:

16. (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 makes default 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.

From the provision, it is clear that while Clause (b) of sub-Section (1) allows only a registered proprietor of a trademark to apply to the Central Government for rectification of the name of a company whose name is identical to or “too nearly resembles” the registered trademark, the remedy under Clause (a) is not limited to a registered proprietor of a trademark. In other words, a company whose name is not a registered trademark too could invoke Clause (a) to seek rectification of the name of another company whose name is identical or too nearly resembles its own. This is an additional expeditious remedy to a suit for passing off if the trademark is used as a company name by a third party.

The remedy under Clause (a), which was available even under Section 22 of the erstwhile 1956 Act (albeit through a circuitous procedure), has probably been provided for in recognition of and as a counterpart to the action for passing off available to owners of unregistered trademarks under the Trademarks Act, 1999. That said, it is to be borne that while Clause (b) permits a registered proprietor of a trademark to apply for rectification of a company's name even if the former does not use the registered trademark as a company name, the remedy under Clause (a) is available only if both the applicant for rectification and the company against whom rectification is sought, use the trademark as company names. In this sense, the remedy under Clause (a) is narrower. On the positive side, while under Clause (b) a registered proprietor is required to make an application for rectification within three years of incorporation or registration or change of name of the company with respect to whom the rectification is sought, there appears to be no such limitation period under Clause (a).

The rule that corresponds to Section 16 is Rule 8 of the Companies (Incorporation) Rules, 2014 (which came into force on April 1, 2014) that enumerates detailed criteria to be mandatorily considered in deeming a proposed company name undesirable for registration under the Companies Act. Interestingly, Rule 8(2)(a) also deems undesirable a name which includes a trade mark that is subject of an application for registration under the Trademarks Act, 1999, unless the consent of the applicant for trademark registration has been obtained and produced by the promoters of the company.

Rule 8(2)(b), among other things, also bars a proposed company name which:

A. is identical with or too nearly resembles the name of a limited liability partnership 

B. resembles closely the popular or abbreviated description of an existing company or limited liability partnership

C. is identical with or too nearly resembles the name of a company or limited liability partnership incorporated outside India and reserved by such company or limited liability partnership with the Registrar of Companies under Section 4 of the Act (read with Rule 9)

D. is identical to the name of a company dissolved as a result of liquidation proceeding and a period of two years have not elapsed from the date of such dissolution

E. is identical with or too nearly resembles the name of a limited liability partnership in liquidation or the name of a limited liability partnership which is struck off up to a period of five years

F.  is generic to the trade

G. contains only the name of a continent, country, state, city

Clearly, Section 16 and Rule 8 seem designed to provide expeditious alternatives to suits for trademark infringement and passing off in so far as the use of marks as company names in concerned. I haven’t thus far come across an order passed by the Central Government in an application under Section 16 and I am not sure orders passed under Section 22 of the erstwhile 1956 Act were or are available on the website of the Ministry of Corporate Affairs. If they are not, they ought to be made available because it is important to know the quality of reasoning adopted by the Ministry in allowing or rejecting such applications. I request readers to share any such orders that they may be aware of.