The Hindu Business Line : Protecting retail brands

The emergence of major retail brands is a significant new phenomenon in the Indian economic scenario. Some of the emerging retail brands include Pantaloons, Shoppers' Stop, Crossroads, Culture Shop, Big Bazaar and In Orbit.

Reliance could well acquire the status of one of the most well known retail brands as it forays into retailing agricultural produce. These developments require new strategies for protection of retail brands, which are often the most important assets of retail operators. Protection of retail brands is necessary not only to sustain existing operations but also to generate new profit avenues through licensing of retail brands.

Trademark protection of retail brands is crucial. Until recently, trademark registration was only available for goods and not for service marks. This was a major disadvantage for retail brands as retailing is essentially a rendering of services and hence no adequate protection through registration was available for retail brands.

Now, under the Trademarks Act, 1999, apart from trademarks, it is also permissible to register service marks. Accordingly, it is imperative to register retail brands as a service mark under the relevant Class 35 of the Trademark Rules.

Registering brands is a skilful art requiring expert advice and a great deal of thoughtful planning and strategising. It is no longer a routine matter. Merely registering the retail brand for `retail services' is not good enough; and for enforceability reasons, a careful trademark expert will advise that the registration should also specify the goods in respect of which the retail services are to be rendered. Sometimes, the services offered under the retail brand are not limited to retailing of goods but the retail outlet concerned also offers under one roof different kinds of services (which may be described as `retailing of services' in contradiction to retail services pertaining to sale of goods) and also often brings together various branded businesses under its roof. These aspects should also be covered in the application for retail brand registration.

From the brands' point of view, several aspects of retailing need understanding. Some retail operators may only sell or render retailing services in relation to third party branded products. In this situation, registration of the retail brand should only be as a service mark in respect of retail services. Many retail operators, apart from offering retailing services, place their own brand along with the manufacturers' brand in their retail outlets. Another variant is that the retail operators purchase unbranded products and sell them under their own brand. In the latter two cases, registration of the retail brand must be done not only as a service mark but also as a trademark in relation to the relevant goods to which the retail brand is applied.

There have been several Indian manufacturers who sell their wares through their own retail outlets (for example, the well known manufacturers of clothing, Raymond and Bombay Dyeing, jewellery manufacturers such as InterGold, Orra, Tanishq and watch manufacturers such as Timex). Most of these manufacturers have registrations of their brands in respect of goods but seldom register their brands for retail services rendered under that brand.

Such non-registration can cause serious difficulties. For example, in one case pertaining to Raymond, an unauthorised retail shop was selling several brands of clothing, including Raymond textiles. This shop had put up a `Raymond' signboard at the entrance suggesting that it was an outlet authorised by Raymond. Raymond was not able to prevent such use — the court ruled that the retail shop owner was entitled to use `Raymond' on its signboard as he was selling genuine Raymond clothing too. If Raymond had a retail brand registration, i.e., registration for Raymond for rendering retail services in respect of clothing, then it is likely that it may have been able to prevent use of its mark on the signboard on the basis of infringement of its service mark registration.

Foreign brands in relation to retail trading

Until the beginning of 2006, the government policy prohibited foreign investments in the retail trade sector, the effect of which was that major international retailers were prohibited from setting up their retail operations in India. A recent liberalisation measure with regard to foreign direct investment in the retail trade sector is directly linked with trademarks. Now, with government approval, foreign direct investment up to 51 per cent is permitted in retail trade of a `single brand' product'.

The retail trade operations in ventures having foreign investment up to 51 per cent are required to sell products under a single brand only and the same brand should be in use internationally. Further, the product categories should be approved by the government. Finally, the products should be branded during the manufacturing process.

But the term `single brand' is not defined. Probably, retailers such as Wal-Mart and Tesco whose products carry different brand names of various manufacturers will not qualify as retailers entitled to set up shop in India. On the other hand, companies like Levis, and the manufacturers of Rolex, Omega, Parker, Mont Blanc and Chanel, which want to set up retail operations in India would qualify for a licence for foreign direct investment. Also, it should be noted that foreign retail companies which purchase products from various manufacturers and then brand such purchased products (on selection basis) would not qualify for a licence for establishing retail operations as their products would not be branded during the manufacturing process.

(The writer is Partner, DSK Legal.)

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