Introduction
In trademark law, goodwill refers to the intangible value a brand builds through its reputation, which shapes consumer trust and loyalty. It embodies the public’s perception of a mark as a symbol of quality, dependability, or uniqueness. This concept is central to passing off claims, which protect unregistered trademarks from being misrepresented by others. Indian Courts have consistently emphasized that for a passing off action to succeed, the claimant must prove that such goodwill exists within India’s borders, highlighting the importance of local consumer recognition over international fame.
This foundational principle was recently reaffirmed by the Division Bench of the Delhi High Court in the case of VIP Industries Ltd. v. Carlton Shoes Ltd.[1]. The Court delivered a significant verdict upholding the primacy of territorial goodwill over global reputation, while also holding that goodwill attaches to the mark as a whole, not just to a specific category of goods. The decision has far-reaching implications for brand owners, particularly those seeking to diversify across product categories, and marks an important milestone in the evolution of Indian trademark jurisprudence.
Factual background
Carlton Shoes Ltd. contended that the mark ‘CARLTON’ was originally adopted in the United Kingdom in 1992 by Mr. Baljit Virk, who derived the name from his son, Mr. Carljit Virk. The company, Carlton Shoes Ltd. was incorporated in the United Kingdom in 1992 by Mr. Baljit Virk followed by the incorporation of Carlton Overseas Pvt. Ltd. in the year 1993, in India. The mark, ‘CARLTON’ was registered in India on 6 May 1994, for ‘leather and imitations of leather and classes animal skins hides trunks and travelling bags umbrellas parasols and walking sticks whips harness and saddlery’ and was used in the same year. However, the company Carlton Shoes Ltd. primarily sold goods such as shoes, footwear, etc., under the mark ‘CARLTON’.
On 10 October 2019, Carlton Shoes Ltd. received a cease-and-desist notice from VIP Industries Ltd. In the said legal notice, VIP Industries Ltd. alleged that Carlton Shoes Ltd. intended to use the CARLTON mark for bags and similar products, despite VIP Industries Ltd.’s continuous use of the mark for such goods since 2006. VIP Industries Ltd. claimed Carlton Shoes Ltd. was attempting to ride on the goodwill and reputation VIP Industries Ltd. had built around the CARLTON brand.
VIP Industries Ltd. further asserted that it was the registered proprietor of the mark, ‘CARLTON’ originally through its predecessor CARLTON International PLC, since July 26, 1995, for ‘umbrellas and parasols, articles of luggage, brief cases and attache cases, suitcases, bags, bags for campers, bags for climbers, beach bags, game bags, handbags, rucksacks, school bags, school satchels, shopping bags, handbags, haversacks, wallers, purses, pouches, sling bags for carrying infants, tool bags, travelling bags, trunks and vanity cases (unfitted), articles of leather and of imitation leather’ and subsequently on its own account since April 21, 2006, for ‘bags, suit cases, brief cases, carry-ons and travelling bags’ in Class 18. Carlton Shoes Ltd. issued replies to the cease-and-desist notice on 16 October 2019, and 25 November 2019, clarifying that it was, in fact, the prior registered proprietor of the ‘CARLTON’ trademark in Class 18 as early as 6 May 1994.
Carlton Shoes Ltd. swiftly responded to the cease-and-desist notice by filing a suit of infringement and passing off before Single Judge of the Delhi High Court [2] on 21 December 2019, alleging that VIP Industries Ltd.’s use of the CARLTON mark infringed Carlton Shoes Ltd.’s registered trademark and amounted to passing off. Carlton Shoes Ltd. also sought a permanent injunction to restrain VIP Industries Ltd. from using the mark for any goods. Alongside the suit, Carlton Shoes Ltd. filed an application[3] seeking interim relief under Order XXXIX Rules 1 and 2 of the Civil Procedure Code, 1908.
VIP Industries Ltd. filed a cross suit [4] inter alia seeking an injunction against Carlton’s use of trademarks ‘CARLTON LONDON’ and formative marks for Class 18 goods and claimed proprietorial rights over the mark ‘CARLTON’ by virtue of an Assignment Agreement dated March 25, 2004, under which CARLTON International PLC assigned the trademarks along with goodwill vesting therein, to VIP Industries Ltd. The applications were heard together due to common questions of law and facts. VIP Industries Ltd. also submitted that the adoption of the mark, ‘CARLTON’ dated back to 1980 when Raxvale Ltd. adopted the mark, ‘DIPLOMAT CARLTON’ in the United Kingdom, followed by the adoption of the mark, ‘CARLTON’ in 1986. On 4 December 1989, the company was renamed from Raxvale Ltd. to Carlton International PLC. The mark, ‘CARLTON’ was granted registration in India under the name of Carlton International PLC for Class 18 goods encompassing bags, etc., subsequently, VIP Industries Ltd., acquired the intellectual property rights in the mark, ‘CARLTON’ from Carlton International PLC vide Assignment Agreement. The goodwill associated with the mark, ‘CARLTON’ for luggage was claimed to have existed since 1980, when Raxvale Ltd. commenced its use in United Kingdom. According to VIP Industries Ltd., they commenced the use of the mark, ‘CARLTON’ in India on May 24, 2004, in relation to luggage, bags, etc.
Establishing prior use by VIP Industries Ltd.
VIP Industries Ltd. placed on record promotional and advertising material of their predecessor- in- title, Carlton International PLC, in support of their claim of transborder reputation. However, the documents produced failed to substantiate that such promotional material was widely published or circulated in India, or that Indian customers were aware of the same. The promotional evidence did not indicate the presence of Carlton International PLC, in the Indian market prior to 2004.
Although certain advertisements and price lists submitted by VIP Industries Ltd. dated back to 1980s and 1990s, there was no accompanying material to establish awareness amongst the customers in India during that period. Further, no commercial documents were placed on record to evidence any sales in India by Carlton International PLC, under the mark, ‘CARLTON’.
The Single Judge observed that VIP Industries Ltd’s reliance on advertisements and sales figures appeared to be a misleading effort to establish use prior to Carlton Shoes Ltd. The relevant test pertains to goodwill and reputation generated under the mark, ‘CARLTON’ and not merely the reputation of VIP Industries Ltd. It was required to demonstrate that they had actual customers and sales within India for goods such as bags and other allied items in Class 18 under the mark, ‘CARLTON’, prior to Carlton Shoes Ltd. VIP Industries Ltd. failed to prove the presence of its mark, ‘CARLTON’ within the Indian boundaries.
VIP Industries Ltd. placed reliance upon articles, advertisements and sales invoices relating to goods offered under the mark, ‘CARLTON’. However, none of these documents could establish its use of the mark prior to Carlton Shoes Ltd. The Court, therefore held that Carlton Shoes Ltd. was ‘first in the Indian market’, in respect of bags and other allied goods falling in Class 18 under the mark, ‘CARLTON’.
Establishing prior use by Carlton Shoes Ltd.
Carlton Shoes Ltd. successfully substantiated its claim of prior user through documents including, (a) sales invoices from the year 2003 onwards issued by various different malls, with some invoices dating between years 2003 to 2005, (b) a certificate reflecting sales figures and revenues generated under the mark, ‘CARLTON’ in India between 1993 and 2018. (c) articles published on prominent magazines and newspapers widely published and circulated in India, with the earliest promotional material for bags dating back to March, 2004. (d) evidence of presence on major e-commerce platforms in India, (e) VAT registration certificates from the year 1993 onwards, (f) master data of production under the mark, ‘CARLTON’ from the year 2003 onwards and (g) consumer complaints from the year 2016 onwards demonstrating actual confusion amongst consumers mistaking VIP Industries Ltd. products for those of Carlton Shoes Ltd. ’s products.
Findings and observations of the Single Judge of the Delhi High Court
The Single Judge observed that both, VIP Industries Ltd. and Carlton Shoes Ltd., held registrations of the mark ‘CARLTON’ in Class 18. Consequently, as per Section 28(3) of the Trade Marks Act, 1999 (‘Act’), neither party could maintain an infringement action against the other. Further, the Court found VIP Industries Ltd. failed to establish the transborder reputation of the mark, ‘CARLTON’ in India prior to 2004. On the other hand, Carlton Shoes Ltd. successfully proved the existence of goodwill in respect of the mark, ‘CARLTON’ in India at least since 2003, preceding VIP Industries Ltd. use. Accordingly, the Court held Carlton Shoes Ltd. was the prior user of the mark, ‘CARLTON’ in India.
The Court further observed that VIP Industries Ltd. entered the Indian market under the mark, ‘CARLTON’ much after Carlton Shoes Ltd., with the knowledge of its prior presence and goodwill in relation to bags. By adopting a mark that was phonetically identical and visually similar for similar goods, VIP Industries Ltd. created a likelihood of confusion among unwary purchasers, leading them to believe that its goods originate from the bags as sold by Carlton Shoes Ltd.
The Single Judge opined that Carlton Shoes Ltd. made out a case for grant of interim injunction against VIP Industries Ltd. Accordingly, VIP Industries Ltd. was restrained from marketing, selling or offering to sell bags and other allied goods falling in Class 18 bearing the trade mark ‘CARLTON’. Aggrieved by the ruling, VIP Industries Ltd. instituted an appeal before Division Bench of the Delhi High Court, challenging the grant of the interim injunction application by Carlton Shoes Ltd.
Findings and observations of the Division Bench
The Single Judge held that neither VIP Industries Ltd. nor Carlton Shoes Ltd. could maintain an action of infringement against each other, in consonance with Section 28(3) of the Act. Additionally, Section 30(2)(e) of the Act excludes from infringement, the use of a trademark by its registered proprietor, by virtue of the registration and protects such use from any injunctive attempt sought by any third party. The Division Bench subsequently upheld the said findings of the Single Judge.
The Court reiterated that the protection and preservation of the intellectual property in a trademark are territorial in nature. The protection afforded against trademark infringement, as enshrined in Section 28(1) of the Act and Section 2(2) of the Act, extends only to the territory of India.
The Division Bench observed that the Single Bench correctly held that to sustain a claim passing off, the claimant must establish the existence of goodwill and reputation in India, along with evidence showing that such goodwill has been diluted due to the defendant’s actions. The territorial existence of goodwill and reputation, therefore, must be clearly demonstrated.
The Division Bench clarified that even if the goodwill ultimately attaches to the goods or services in connection with which the mark is used, such goodwill is inherently linked to the mark or name itself, rather than to the goods or services per se.
As long as the claimant’s mark carries goodwill, it is entitled to protection against passing off, and against any third party using the same or deceptively similar mark, which could mislead consumers into believing that the defendant’s goods and services originate from the plaintiff.
The Court held that where a plaintiff seeks to establish goodwill in a territory where it alleges the tort of passing off to have been committed, in relation to a mark that is otherwise used outside such territory, the plaintiff must demonstrate the actual percolation of reputation and goodwill of the mark within that territory. It is not necessary for the plaintiff to maintain an office in the said territory, however, it must be shown that the customers within that jurisdiction have purchased the plaintiff’s goods or availed of its services rendered under the mark. It is insufficient merely to establish that the plaintiff’s customers, while abroad, were customers of its goods and services.
The plaintiff must be present through its mark in the territorial jurisdiction of the defendant’s country. Existence of a real market in that country is not essential. Such presence may be merely by reputation, for instance, where the mark is extensively advertised within the defendant’s country. Passing off occurs when the defendant uses the plaintiff’s mark to misrepresent their goods or services those of the plaintiff.
Trans- border issues arises when the plaintiff is situated outside the territorial jurisdiction where the defendant operates. If the plaintiff’s mark commands such a degree of goodwill or reputation that it has percolated into the defendant’s territory and is well-known, then the defendant would still be seeking to exploit the reputation of the mark. This is because, when consumers within the defendant's jurisdiction are aware of the plaintiff’s mark even though it is primarily used outside the territory, they may presume, upon seeing the defendant’s use of the mark that the plaintiff has now established a presence there.
The Court cited that Burger King till a decade or so, had no presence in India but enjoyed a significant global reputation. Many consumers in India, were aware of the Burger King’ existence. Therefore, if at the time, an entrepreneur in India opened up a Burger King outlet, before the brand’s official entry into India, such conduct could also amount to passing off, given Burger King’s strong global reputation that had percolated into India through promotional material, advertisements, and media exposure. In such a scenario, the onus shall lie on Burger King to prove that its global reputation had percolated into India, thereby establishing trans-border goodwill and reputation. Accordingly, the Division Bench concurred with the Single Judge’s finding that the existence of goodwill and reputation must be shown to exist in India and in the absence of evidence of territorial goodwill would be insufficient to sustain a claim of passing off. Therefore, the key criteria for assessing a claim of passing off remains ‘prior use in India’. However, mere prior use alone may not suffice unless the plaintiff can also establish that such prior use led to the accumulation of goodwill and reputation in the mark that it seeks to protect.
The Division Bench held that there was no factual or legal irregularity in the findings of the Single Judge and that prior to the 2004, the mark, ‘CARLTON’ as used by VIP Industries Ltd. for any goods did not possess any reputation or goodwill in India.
The Division Bench concurred with the Single Judge that it was implausible for VIP Industries Ltd. to have been unaware of Carlton Shoes Ltd. prior use the mark. ‘CARLTON’ since 1993, which had also been registered for Class 18 since 1986. Accordingly, the Division Bench found no ground to interfere with the Single Judge’s finding that VIP Industries Ltd.’s adoption of the mark, ‘CARLTON’ for travel luggage in 2006 was not innocent but deliberate.
Conclusion
The decision opines that goodwill belongs to the mark itself, not merely the goods. The Delhi High Court made it clear that a mark’s reputation in India must be demonstrated and proven, and that mere global presence does not confer goodwill within India. A brand’s global reputation, no matter how prominent, cannot substitute for domestic goodwill in passing off claims. This principle reinforces the idea that Indian consumers’ perception is paramount, and foreign brand owners must actively cultivate and demonstrate their mark’s reputation within the country to seek enforcement in India.
[The authors are Consultant and Senior Associate in IPR practice at Lakshmikumaran & Sridharan Attorneys]
[1] 2025 SCC OnLine Del 4620
[2] CS (Comm) 730/2019
[3] IA 18443/2019
[4] CS(COMM) 52/2020
