Trademark disputes: how a startup's brand can be challenged

A trademark is a word, logo, name or sign that tells customers who makes a product or service. In India, the Trade Marks Act, 1999, governs it, and applications go to the Trade Marks Registry. The registry examines the mark, publishes it for objections, and registers it if nobody successfully opposes.

Registration gives the owner an exclusive right to use the mark for the listed goods and services, and a base to sue copycats. Even without registration, a business that has built a reputation can take action against passing off, but registration makes a case simpler.

A live case is Cult.fit, a fitness and wellness company preparing to list, where a co-founder of an earlier 2015 CULT business has asked the Madras High Court to cancel the trademark registration held by a Cult.fit subsidiary.

The Act offers two main routes. Section 47 allows removal of a mark for non-use. One ground is that the mark was registered without a real intention to use it, and another is that it has not been used for a continuous period of five years, with no good reason, before the application. Section 57 is wider. It allows a 'person aggrieved' to ask for cancellation or correction of an entry that was wrongly made or wrongly remains, for example because the mark was not eligible, or was adopted in bad faith.

Petitions often cite both sections together. The challenger must show an interest, and the owner can defend by showing use, or a reason for non-use.

• Section 47: removal for non-use or lack of intention to use.
• Section 57: rectification of wrongly entered or retained marks.
• Who can file: a person aggrieved, such as a rival, a former partner or an earlier user.

Until 2021 these matters went to the Intellectual Property Appellate Board (IPAB). The Tribunals Reforms Act, 2021 abolished the IPAB, and its pending cases were transferred to High Courts. Today, a rectification petition is generally filed before a High Court, and several High Courts, such as Delhi, Madras and Bombay, have intellectual property benches.

Courts commonly send notice to the owner, ask for replies and fix hearing dates. Interim orders may follow, though a hearing date alone says little about the outcome.

Timing matters. Delay in challenging a mark can weaken a petition, since courts look at how long the challenger knew of the registration. A long period of use by the owner, with advertising spend and a large customer base, also strengthens its position even if the mark was originally weak. In contrast, a mark that sits unused for years is exposed to a removal petition under section 47.

Because cases move slowly, many disputes are settled with a licence, coexistence agreement or payment. Such deals are usually disclosed in an IPO document if they are material.

Brand fights often come from the early days. Co-founders may split and each claim the name. A business may be sold or restructured, with a mark moved to a subsidiary, and later someone argues the transfer was invalid. Two companies may have used similar names in different cities before either registered.

Good housekeeping reduces the risk: register early in the correct classes, keep proof of continuous use, document any assignment of a mark in writing, and record transfers with the registry.

Founders reading a news story on a brand case should also note whether the registration is held by the listed entity or a related company. The answer shows who has the right to defend it and who bears the cost, and an IPO prospectus normally says so.

A company that files a draft red herring prospectus with SEBI must describe material litigation and risks under the ICDR rules. A challenge to the main brand can be material, since the brand is a core asset. The draft prospectus normally sets out the matter in the risk factors or in the section on legal proceedings, and SEBI can ask for more detail.

This is why a trademark case can surface in IPO coverage. The existence of a case does not mean the brand will be lost, but investors read it as a risk to price in. Courts can also decide the dispute during or after the offer.

Costs include legal fees, management time and, in the worst case, a forced rebrand with expensive marketing resets. If the owner is the one asserting rights, a win could stop a copycat. If the owner is the defendant, a loss could remove the registration, though common law rights from long use may survive.

Settlements are common, often a licence or a payment in return for withdrawal.

Registering a company with the Registrar of Companies does not give trademark rights. A company name only has to be unique among registered companies. A trademark is about what customers see in the market. A startup can have a lawful company name and still be told to stop using it as a brand if someone else holds an earlier right.

This is why founders are advised to search the trademark register and the market before choosing a brand, and to file the trademark application early.

Many groups hold their brands in a separate subsidiary and license them to operating companies. A transfer is called an assignment and should be written and recorded with the registry. Challenges sometimes focus on whether an old assignment was properly signed or whether the right person had the authority to make it.

For an IPO candidate, the chain of ownership of the brand is a core diligence item. Lawyers check each link, and a gap can be disclosed as a risk or cured before filing.

Look for the section named, the court, the stage (notice, interim order or final decision) and the next hearing date. A notice from the court is the start of a case. A claim of forged documents, if present, is a separate allegation that needs separate proof. Check what the company says in its reply.

This page is general information, not legal advice. For a real dispute, consult an intellectual property lawyer.