Bank fails to stop firm from transferring logos

Commentary

By Wahome Thuku

When you launch a new product in the market, you ought to be keen to also register its trademark. The two are completely different processes.

Drugs, for example, are registered under the Pharmacy and Poisons Act. Rules under that law prohibit anyone from importing, manufacturing for sale or selling any drug in Kenya unless it has been registered and a certificate issued for it.

On the other hand, trademarks are registered under Trade Marks Act.

This registration is not mandatory but the person registered as proprietor of a trademark gets exclusive right to use it. Again, evidence of that ownership is by a certificate of registration. In February 2008, a pharmaceutical company Sonal Holdings (Kenya) secured a loan of Sh30 million from Guardian Bank. The loan was secured by a debenture of the company’s property and assets and guaranteed by among others, the director, Paresh Kumar Keshavji.

Part of the company’s assets under the debenture was intellectual properties in 21 popular pharmaceutical products. The company defaulted in payments and legal disputes arose.

On September 23, 2010, Mr Kumar wrote to the Pharmacy and Poisons Board (PPB) transferring ownership of the 21 products from Sonal Holdings (Kenya) to another company Sonal Pharma (K) Ltd.

The board wrote back acknowledging and accepting the transfer. On July 12, 2011, the bank filed a suit at the High Court in Nairobi seeking injunction restraining Kumar and the two companies from dealing in any way with trademarks of the 21 products. It also sought orders to compel the firms to transfer all trademarks back to Sonal Holdings (K) Ltd.

null and void

Through lawyer Ochieng Oduor, the bank claimed the transfer without their consent was in breach of the debenture hence illegal, null and void. It amounted to fraudulent dealing with the products, the bank argued.

The bank submitted as evidence numbers issued after registration of the drugs by PPB.

In response, the two companies denied legal ownership of the products, saying they belonged to an Indian company. They also argued that Guardian Bank had not proved existence of any trademarks for the 21 products under the Trade Marks Act. There was no evidence that Sonal Holdings (Kenya) was ever registered as the owner of such marks or had transferred them to anyone.

The firms produced evidence showing that some of the trademarks were in fact owned by other companies. One drug, Nexamol caplets (Kaluma strong tablet) was registered by the board as number 18589 owned by Naxpar EA Ltd but its trademark number 62463 was owned by Miraj Enterprises Ltd and assigned to Dallo International Pharma Ltd.

Chestone tablet was registered by the board as number 20327 but trademark number 62462 belonged to Miraj Enterprises and assigned to Dallo International Pharma.

The bank had produced numbers for registration under the Pharmacy and Poisons Act and not registration of the trademarks. The companies had raised this with the bank but it did not bother to amend its court papers. Sonal Pharma (K) claimed it had only been appointed by Naxpar Pvt of India on August 27, 2010 to market and distribute the products in Kenya.

That was why Kumar had written to PPB over the changes. They denied actual ownership. They claimed the bank had been mistaken as to the existence of the trademarks of the drugs. Guardian Bank described this denial as dishonest.

Presiding Judge Alfred Mabeya acknowledged that the debenture covered every kind of property legally in the name of Sonal Holdings (Kenya), including all the pharmaceutical products under its name or in which it has beneficial interest.

It was also clear that Sonal Holdings (Kenya) was the recognised owner of the 21 pharmaceutical products in question. It had the right to import, manufacture, package and distribute them. That was why the company sought and obtained the board’s permission to transfer the ownership to Sonal Pharma (K).

mandatory injunction

"The registration of such drugs with the board gave the first defendant proprietary interest in those pharmaceutical products thereby making them assets or undertaking that was secured under the debenture," Judge Mabeya ruled.

After further analysis of the facts, the judge ruled that indeed the rights of Guardian Bank had been breached in the said transfer of ownership of the products. And there were special circumstances in the case to warrant giving a mandatory injunction, contrary to contestation by the two companies.

Mabeya ruled that Sonal Holdings and by extension Mr Kumar had breached Section 291 of the Penal Code by transferring ownership of the 21 products to Sonal Pharma (K).

"The actions of all the defendants were meant to steal a match against the plaintiff (Guardian Bank)," the judge said. "They are surely in a position of advantage, which they have obtained in an irregular manner."

But there was the next problem. The bank had asked the court to restrain the two companies and their agents from transferring or dealing with the ownership of trademarks and to retransfer them back to Sonal Holding (Kenya).

The judge had no doubts that evidence produced in court by the bank was for registration of the drugs under the pharmacy and poisons rules and not under the Trade Marks Act. There was no evidence before him that the trademarks were owned by any of the two Sonal companies.

"If the orders are granted as sought, it may well be in futility in that it is not clear whether the trademarks are owned by any of the defendants," Mabeya concluded. "If they are owned by third parties, then the court would have made those orders in vain."

He said if the bank had asked for orders in relation to the ownership of the products under the Pharmacy and Poisons Act, they would have properly been issued.

Now that the bank had asked for orders against trademarks, the court could not amend the case for it. "I have come to the regrettable conclusion that the plaintiff’s notice of motion cannot succeed," the judge ruled.

With that, the suit filed by Guardian Bank was dismissed. The bank was ordered to pay cost of the suit to the two companies.

— The writer is a court reporter with the Standard Group

Email: [email protected]

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