1. This suit was brought by a Marwari firm of jute balers of the name of Jagarnath & Co. against the several members of two other firms of jute balers, viz., Moran & Co. and Hawarth & Co., asking for damages from the defendants on account of breaches of their covenants in respect of certain jute trade-marks of which the plaintiff firm are the owners, and Moran & Co. and Hawarth & Co. are the licensees and sub-licensees respectively, and for payment of royalty in respect of the trade-marks for the season 1912-13.
2. The defendants Cresswell, Smyth and Watson are members of the firm of Moran & Co., while the defendants Hannah and Smallwood are members of the firm of Hawarth & Co.
3. The plaintiff firm purchased seven trade-marks, of which four are in suit, from one Gokhul Chand Khettau, on 3rd April, 1908. The marks originally belonged to one S.C. Chatterjee, who carried on a jute-baling business. On his death the marks were assigned by his widow, as executrix of his will, and his heirs, as beneficiaries under the will, on 24th September, 1904, to Messrs. Landale and Morgan, with the good-will of the business for a sum of Rs. 75,000. The latter thereafter, on 26th September, 1904, assigned the trade-marks with the good-will of the business to Harsook Das Dooli Chand for a sum of Rs. 85,000. On 8th May, 1907, Dooli Chand transferred the trade marks with the good-will of the business to Gokhul Chand Khettau, for a consideration of Rs. 3,50,000, and he in his turn assigned the trademarks with the good-will of the business to the plaintiff firm in lieu of Rs. 1,90,000, on 3rd April, 1908.
4. On 24th September, 1910, Jagarnath & Co. gave a license in respect of four out of the seven trade-marks to Moran & Co. to use and employ the said marks for a period of one jute season, that is, up to 30th June 1911. On the expiration of that period a second license was obtained by Moran & Co. from Jagarnath & Co., by a deed of agreement dated 8th July, 1911, for a period of three jute seasons extending up to 30th June, 1914. The annual royalty for the use of the marks was fixed at Rs. 23,500, in instalments of Rs. 10,000,' Rs. 5,000, Rs. 5,000 and Rs. 3,500, payable on dates mentioned in the deed. The agreement purports to grant a license to Moran & Co. to use and employ the said four marks for a period of three years and to hold for the said period the good-will of the business of S.C. Chatterjee, the original baler of the marks, as far' as the said marks are concerned. The claim for damages in this suit is based on the stipulation contained in Clauses 4 and 7 of the deed. I quote the clauses hereunder:
Clause 4. The licensees do hereby undertake that the quality of jute packed under the trade-marks set forth hereunder in the schedule, respectively, shall at no time be inferior to the quality of the jute packed under any corresponding trade-mark which is included in the group of trade-marks which is recognised by the London Jute Association, and in which group that mark is, and of which groups the 3 S mark stands in the group which is known in the jute trade as the 'six marks group' of first marks, and shall at all times indemnify and keep indemnified the proprietors to the fullest extent from and against all losses, costs and damages and expenses which the proprietors may incur, suffer, sustain or be put to, by reason of or on account of the standard of the trade marks hereby licensed to the licensees having been lowered below the standard of any of the correponding marks of the group in which the mark is, or by reason of any breach on the part of the licensees or any persons working under them or any of their nominees, of any of the terms and conditions of these presents.
Clause 7. If at any time any of the marks set forth in the schedule hereunder shall be removed from the group of trade-marks recognised by the London Jute Association, in which the same now is, owing to the said marks having been used upon jute of inferior quality, or owing to the breach by the licensees or their nominees or assigns of any of the terms and conditions of the agreement or of any of the rules and regulations of the Calcutta or London Jute Association, or non-compliance with any of the requirements of the said Associations as regards the quality of jute to be packed under the said marks hereby leased or otherwise, then the licensees shall indemnify the proprietors by payment of all damages, costs, losses and expenses which they may suffer or incur by reason of the said marks having been removed from the group of marks in which the said trade-mark now is.
5. By an indenture dated the 1st March, 1912, Moran & Co., with the concurrence of Jagarnath & Co., transferred to Hawarth & Co. their rights in respect of the marks under their license, Hawarth & Co. agreeing on their part to pay the royalty and to perform and observe the convenants and stipulations contained in the license.
6. In 1911, some time prior to the 1st of July, the London Jute Association had issued a circular declaring their decision to adopt 'Association groups' with the object of encouraging the better and more regular baling of jute, in which were to be included those marks baled by Indians of which the quality had been as nearly as possible in accordance with the guarantee of the contract. By this circular the London Jute Association adopted or proposed to adopt seven groups of marks, viz.: Reds, Firsts, Daccas, Lightnings, Mangos, Hearts and Daisee. Of the 4 marks in suit, 4 S in a red circle, 3 S in a black circle, 3 S in a red circle, and 3 S in a heart were placed in the groups Reds, Firsts, Mangos and Hearts, respectively.
7. In 1912, by their circular dated 8th May, 1912, the London Jute Association finally decided on their 'Association groups' and retained only 6 instead of 7 groups, striking out the group Reds altogether, and in none of these 6 groups was any of the marks in suit included.
8. On the 29th June, 1912, Hawarth & Co., by their letter of that date gave notice to Jagarnath & Co. that in the events that had happened they would not carry out the contract signed by them. On 2nd July, 1912, Messrs. Leslie & Hinds, attorneys on behalf of Hawarth & Co. and Mo ran & Co., informed Jagarnath & Co. that neither of the two firms was bound by the agreement and that they declined to carry out the same.
9. The plaintiff firm maintain that Moran & Co. and Howarth & Co., or either of them, permitted jute of inferior quality to be packed under the marks or otherwise committed breaches of the Rules and Regulations of the London Jute Association, wherefore the said marks have been removed from their respective groups, and that by reason of such exclusion the marks have become practically valueless and the plaintiff firm have suffered heavy damages which they assess at Rs. 3,50,000. The plaintiff firm further claim that the defendants were bound by their agreements to pay to the plaintiff the royalty by the instalments mentioned in their deeds which they have not done.
10. The defendants Cresswell and Smyth aver that the marks in question are yet in the groups in which they were; that the groups mentioned in the deed of agreement have no reference to the groups adopted by the London Jute Association; that they are not in any manner responsible for the exclusion of the marks from the London Jute Association groups; that it is not true that the marks have become practically valueless; that they have not been guilty of any breaches of the agreement, nor have the plaintiff firm sustained any damages by reason of any act or default of the defendants; that the plaintiff Arm are not the legal proprietors of the marks; and that the agreement dated 8th July, 191.1, is illegal, invalid and void as being contrary to public policy.
11. The defendant Watson pleads that he is not liable to the plaintiff firm as he became a partner in the firm of Moran & Co. on 1st April, 1912, which was a long time after the agreement of 8th July, 1911; that there was no agreement between him and the plaintiff firm in respect of the marks; and that the agreement dated 8th July, 1911, is illegal, invalid and void as being contrary to public policy.
12. The defence of the defendants Hannah and Small-wood is substantially the same as that of the first two defendants.
13. The first question that I have to consider is whether the defendants can be allowed to deny the plaintiff's title. The contract between the owner of a trade-mark and his licensee is like a contract between a landlord and his tenant, and as between landlord and tenant so between licensor and licensee the former's right cannot be questioned by the latter.
14. In Clarke v. Adie (1877) L. R. 2 A. C. 423, which was a case of a patent, Lord Blackburn said: 'Although a stranger might shew that the patent is as bad as any one could wish it, the licensee must not shew that,' and in the same case Lord Cairns observed: 'So far as he is concerned he must stand here admitting the novelty of the invention, admitting its utility and admitting the sufficiency of the specification.' In an earlier case, Grover and Baker Sewing Machine Co. v. Millard (1862) 8 Jur. (N. S.) 713, Wood V. C. held that the fact of a patent having been found invalid at law in an action between the patentee and a third party, could not be set up against the patentee by his licensee in a suit upon the same patent. The licensee of a trade-mark is in the same position as the licensee of a patent. But it has been urged on behalf of the defendants that they having repudiated the contract the relation of licensor and licensee no longer subsists between the plaintiff and them. This proposition fails to take notice of the other party to the contract, whose concurrence to terminate the contract is as essential as that of these defendants. Here may be aptly quoted the words of Lord Esher, M. R., in Johnstone v. Milling (1886) 16 Q. B. D. 460, 467. 'When one party assumes to renounce the contract, that is, by anticipation refuses to perform it, he thereby, so far as he is concerned, declares his intention then and there to rescind the contract. Such a renunciation does not of course amount to a rescission of the contract, because one party to a contract cannot by himself rescind it, but by wrongfully making such a renunciation of the contract he entitles the other party, if he pleases, to agree to the contract being put an end to, subject to the retention by him of his right to bring an action in respect of such wrongful rescission.' In the present case the plaintiff firm are holding to the contract and therefore the parties must be treated as governed by a subsisting contract. So long as the plaintiff firm are excluded from claiming for infringement of their trade-marks against the defendants by reason of the license, their right cannot be brought under discussion at the instance of those that have the permission to use the trade-marks. The defendants as licensees and sublicensees are precluded from questioning the plaintiffs' right.
15. The next question to which I am asked to direct my attention is the validity of the agreements dated 8th July, 1911, and 1st March, 1912. The defendants object to these agreements on three grounds. First, that the marks in suit were originally the property of S. C. Chatterjee, whose skill in selecting jute secured for his goods a reputation that was associated with his name, and therefore his trade-marks, being personal, could not be assigned; secondly, that the license in respect of the trade-marks in question does not carry with it the good-will of the business of S. C. Chatterjee; and, thirdly, that the license, covering as it does only 4 out of 7 trade marks, must be invalid as there is no divisibility in trade-marks.
16. For the first objection, before it is ruled in the defendants' favour, the consideration arises if the trade-marks are so completely personal to S. C. Chatterjee as of necessity to import that the goods packed under them have been manufactured by him. In Honie v. Chavey 153 Mass. 592, the Supreme Court of Massachusetts expressed the principle involved here in the following terms: 'There may, no doubt, be cases where the personal skill of an artist or artisan may so far enter into the value of a product that a trade-mark bearing his name would, or at least might, imply that his personal work or supervision was employed in the manufacture; and in such cases it would be a fraud upon the public if the trade-mark should be used by other persons, and for this reason such a trade-mark would be held to be unassignable . . . . But, on the other hand, the usages of trade may be such that no such inference would naturally be drawn from the use of a trade-mark which contains a person's name, and that all that purchasers would reasonably understand is that goods bearing the trade-mark are of a certain standard kind or quality, or are made in a certain manner or after a certain formula, by persons who are carrying on the same business that formerly was carried on by the person whose name is in the trader-mark.' There is a long series of English decisions to the effect that the mere name of the maker will be deemed to be indicative rather of a business, in whosesoever hands it may be, than of an individual proprietor of it, and indeed the evidence on either side in this case is unambigious that these trade-marks are merely indicative of a certain standard of quality associated with the good-will of the business of S. C. Chatterjee. For the defence, reliance is placed on the provision of law that an agreement that is opposed to public policy is void. But ' public policy', it has been said, 'is always an unsafe and treacherous ground for legal decision', per Lord Davey in Janson v. Driefontein Consolidated Mines, Ltd. 19021 A. C. 484, 500, and Sir George Jessel remarked in Printing and Numerical Registering Company v. Sampson (1875) L. R. 19 Eq. 462, 465, 'it must not be forgotten, that you are not to extend arbitrarily those rules which say that a given contract is void as being against public policy, because if there is one thing which more than another public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts, when entered into freely and voluntarily, shall be held sacred and shall be enforced by Courts of Justice. Therefore, you have this paramount public policy to consider--that you are not lightly to interfere with this freedom of contract.' It is for the defendants to show that the agreements are opposed to public policy, and this they have failed to do.
17. The second objection is not borne oat by the deed of agreement dated 8th July, 1911, as it covers the trade-marks and the good-will alike. The 9th clause of the deed runs thus:
Clause 9. The licensees having paid the said royalty hereby reserved, and otherwise complying with and conforming to all the terms and conditions of this agreement, shall and may at all times during the said term peacefully and quietly use or employ or permit others to use or employ exclusively the said trade-marks, and to hold the good-will of the business of Surjoo Chandra Chatterjee, the original baler of the said marks, as far as any of the said marks are concerned, without lawful interruption or interference by the proprietors.
18. The third objection is also not tenable, in my opinion. The original baler, it is true, owned seven trade-marks in connection with his business, but it appears that the three marks that have not been the subject of the license have not been in use since the first assignment in 1904. Mr. (sic)Douetil; a witness for the defendants, has stated that the 4 marks in suit, known as the range of S marks, were being packed during the last 8 or 10 years While the other marks were never offered in such quantities as to make them noticeable; and Ramjidas, a member of the firm Of Jagarnath & Co., has in ,his deposition stated that from the date of the first assignment, 24th September, 1904, to the date of the first license to Moran & Co., 24th September, 1910, no jute was packed under the other three marks. No evidence has been tendered on behalf of the defence to shew that the three marks in question had not fallen into disuse, in the absence of such evidence, abandonment of the marks has to be held on the statements of Mr. Douetil and Ramjidas. In Lavergne v. Hooper (1884) I.L.R. 8 Mad. 149, 154, the learned Judges (Turner C.J. and Muttusami Ayyar J.) pointed out that as the right to a trade-mark might be acquired so it might be abandoned', and that as no length of time was required for the acquiring of a right to a trademark, to like manner, apart from statutory law, no length of time was required to constitute an abandonment. In the present case all, the circumstances point to the three marks having fallen into disuse, and I cannot hold that the four trade-marks in suit could not be dealt with-without the other three marks.
19. Apart from the view I have taken of the second and third objections, I do not think they can -be raised by a licensee against his licensor, because the consideration for the promise to pay the stipulated royalty is the permission to use the trade-marks, and so long as the two agreements afford an excuse for an infringement it is not open to the licensee to avoid his liability by such objections. Considerable stress has been laid on the authority of the case of British American Tobacco Co., Ld. v. Mahboob Buksh (1910) I.L.R. 38 Calc. 110, but the principles explained there have no application to the considerations that govern this case.
20. On behalf of the defendants Hannah and Small-wood, it was urged at the time the issues were framed that the plaintiff firm first verbally and then by recital in the agreement untruly represented in a manner not warranted by their information that they were the owners of the trade-marks, and thus by misrepresentation induced the agreement dated 1st March, 1912. No evidence of any misrepresentation has been adduced, and there is nothing in the deed itself that can be pointed out as untruthful. In this connection it has been argued by the defence that the assignments by Landale and Morgan to Harsook Das Dooli Chand and by the latter to Gokhul Chand Khettau were not valid, as when Landale and Morgan had the good-will and the marks assigned to them they were carrying on a jute-baling business of their own, and in their business the business and trademarks of Surjoo Chandra Chatterjee got so completely merged that they lost their identity, and thus the assignment of the 7 marks with Chatterjee's good-will, not being an assignment of the whole business of Landale and Morgan, was invalid. Similar argument has been pressed in respect of the assignment by Harsook Das Dooli Chand 10 Gokhul Chand Khettau. There is no authority for such a proposition nor does it appeal to me as sound. The evidence shows that-Landale and Morgan and Harsook Das Dooli Chand, on their respective assignments, treated the good-will with the trade-marks of S. C. Chatterjee as their property separate from their existing business. The several transactions of mortgage and reconveyance between them bear out this view.
21. For the reasons I have stated above, I hold that the agreements dated 8th July, 1911, and 1st March, 1912, are legal, valid and operative. I now come to. the plaintiffs' claim for damages. It is admitted on behalf of the defendants that the marks, though included In the ' Association groups,' proposed or adopted, in 1911, find no place in the 'Association groups 'in 1912, bat they say that their license has no reference to 'Association groups ' but to certain trade groups recognised but not established by the London Jute Association. A reading of Clauses 4 and 7 of the deed of agreement dated 8th July, 1911, bears out the defendants' contention. The trade had established certain groups of marks for their own facility and the London Jute Association merely recognised those groups, and it was not till 1911 that the Association decided to adopt groups of their own. The Association for their groups adopted the names given by the trade, but made certain alterations in their constitution. The marks in suit were in certain groups established by the trade, the mark 3 8. in a black circle being in Firsts that was commonly known as ' six marks group ' consisting of six marks only. The trade then extended the 6 marks into 8 marks and thereafter there existed the 6 marks group and 8 marks group contemporaneously. When the Association inaugurated or proposed their own groups in 1911, they included 10 marks in the group known as Firsts. Thus they never had any group consisting of 6 marks in the Firsts. The 4th clause of the deed clearly refers to ' six marks group' and it will be a stretch of meaning to construe it as referring to the Association's Firsts. The same Clauses 4 and 7 are found in the first license, the deed of agreement dated 24th September, 1910, and no one can say that in that deed 'Association groups' were meant, as in 1910 the Association had introduced no groups of their own at all. I am asked by the learned Counsel on behalf of the plaintiff not to construe the second license by reference to the first, but when the language 3 employed in the two licenses, is identically the same, the first license has a considerable bearing on the (second. For the plaintiff attempt has been made to A1 establish that since the inauguration of 'Association groups', the 6 marks group has ceased to be. In this however they have completely failed, as the evidence of Mr. Douetil and Mr. McLeod, who is the Chairman of the London Jute Association, leaves no room for doubt that the trade yet deals in 6 marks group, which exists side by side with Association groups. No evidence has been adduced by the plaintiff to show that the marks in suit have been removed from the trade groups in which they were. My view, therefore, is that the indemnity in the agreement does not relate to group or groups of marks established by the London Jute Association, and that the claim for damages is not sustainable. I may here mention that in no case could a claim for damages lie against the defendants Hannah and Smallwood, as nothing has been pointed against them that could lead me to hold that they are in any wise responsible for the removal of the marks even from the Association groups.
22. The defendant Watson pleads that he is not liable to the plaintiff, as he became a partner in the firm of Moran & Co. after the agreement, and there was no contract between him and the plaintiff. It is no doubt a rule of law that a person admitted as a partner into an existing firm does not by his entry become liable to the creditors of the firm for anything done before he became a partner, but an agreement by an incoming partner to make himself liable to creditors of the firm before he joined it may be established by indirect evidence. The Courts, it has been said, lean in favour of such an agreement and are ready to infer it from slight circumstances: see Ex parte Jackson (1790) 1 Ves. Jun. 131, Ex parte Peele (1802) 6 Ves. Jun. 602, 604, and Rolfe and the Bank of Australia v. Flower Salting & Co. (1865) L.R. 1. P. C. 27. The evidence in this case, however, appears to me not slight but cogent to fix the liability on all the members of the present firm of Moran & Co. The defendant Watson entered into partnership with Cresswell and Smyth in the firm with the knowledge of the liability to Jagarnath & Co. in respect of the jute marks, and in the deed of partnership dated 18th October, 1911, by which he became a partner, the language employed in; Clause 12 of that deed leaves no doubt in my mind that' he is equally liable to the plaintiff firm, though he may be entitled to be indemnified by Cresswell for any demands that he may have to satisfy in respect of these marks. The deed of agreement dated 8th July, 1911, by which Messrs Moran & Co. were licensed to use the trade-marks, clearly mentions all the present and future members of that firm on whom the agreement would be binding, and it was with this knowledge that Watson entered into partnership of that firm. The defence set up by him was undoubtedly not in his mind when a letter dated 15th August, 1912, was addressed by Messrs. Moran & Co. to the plaintiff firm. That letter contains the following significant passage:
We also give you notice that we are advised,, as you have already been informed by our solicitors, Messrs. Leslie and Hinds, that we are in no way -liable to you under either of the agreements relating to the 3 S mark, and in fact under Section 65 of the Indian Contract Act you are bound to repay us the: amounts you have obtained from us in terms of the agreements which, we are now advised, are void.
23. In connection with the above passage it has to be remembered that at the date of the above letter Mr. Watson was a member of the new firm of Moran & Co., and he in conjunction with his partners was laying claim by this letter to a refund under Section 65 of the Contract Act. If he had entered the firm without the liability to the plaintiff firm I fail to see how the firm of Moran & Co., consisting of himself and Messrs. Cresswell and Smyth, could claim such a refund unless he had entered into the partnership burdened with liabilities of the old firm. This is also borne out by Clause 5 of the deed of partnership whereby all office furniture, books, fittings and moveable property belonging to the former firm of Moran & Co. become the property of all the three partners. I hold that Mr. Watson is equally liable to Jagarnath & Co.
24. My conclusion, therefore, is that the plaintiff firm are entitled to their royalty from all the five defendants, as claimed in the plaint, and the suit is decreed to that extent, while the claim to damages cannot be allowed and the suit to that extent is dismissed.
25. As regards costs, general cost's of suit are allowed to the plaintiff. The defendants are entitled to such costs of hearing as are occasioned by reason of joinder of claim for damages. They are further entitled to one day's costs for the adjournment occasioned by the failure of the plaintiff to disclose certain documents, in their affidavit of documents. The rest of the costs of the hearing the plaintiff firm are entitled to. I am asked by the learned Counsel for the parties to apportion the costs of hearing, as a reference to the Taxing Master will entail hearing expenses on them. All costs before the actual hearing are to be borne by the defendants. From the day the case was opened to- the day when the argument of the plaintiff was concluded there were 19 days of bearing. Of these, on an examination of the record, I assess four days to have been spent on account of the joinder of the claim for damages, and the costs of hearing of these days the plaintiff must pay to the defendants, while the latter must pay to the former the costs of 14 days of the hearing, the costs of one further day occasioned by the adjournment being payable to the defendants from the plaintiff. There will be the usual set-off between the parties. The defendants will get only one set of costs between them. The costs will be on scale No. 2.