The Kerly Impasse in Indian Trademark Law

Introduction 

Indian trademark law is structured upon a dual foundation: the statutory regime under the Trade  Marks Act, 1999 and the common law remedy of passing off, which the statute expressly  preserves.¹ While these two systems ordinarily function in harmony viz. registration conferring  exclusive statutory rights and passing off protecting goodwill generated through use, tensions  arise when both sets of rights vest in different parties in respect of the same mark and goods.  In such situations, neither party can assert complete dominance, resulting in a legal deadlock  commonly described as the “Kerly impasse”. 

The Delhi High Court’s decision in Thukral Mechanical Works v. PM Diesels Pvt. Ltd. (2026)  marks the first authoritative Indian recognition of this impasse. The Court not only  acknowledged its existence but also attempted to resolve it within the contours of Indian  trademark law, treating it as a genuine legal phenomenon rather than a theoretical anomaly.²  This judgment is therefore significant for its doctrinal clarity as well as its practical  implications. 

The Kerly Impasse 

The notion of the Kerly impasse originates from Kerly’s Law of Trade Marks and Trade  Names, which describes a scenario where two legally valid yet conflicting trademark rights  coexist. ³ Typically, one party secures registration of a mark but delays its commercial use,  while another party independently adopts and uses the same mark in the interim, thereby  generating goodwill sufficient to sustain a passing off claim. When the registered proprietor  eventually enters the market, both parties possess enforceable rights, one grounded in  registration and the other in goodwill, leading to a situation where each can restrain the other. 

The doctrinal basis of this impasse lies in the distinction between statutory rights and common  law rights. Registration does not create a trademark right but merely recognises it, as affirmed  by the Supreme Court in S. Syed Mohideen v. P. Sulochana Bai.⁴ Goodwill, on the other hand, is entirely a product of commercial use and market association.

Consequently, registration  cannot act as a defence against a passing off claim where goodwill has been established. 

English jurisprudence reinforces this approach. In Inter Lotto (UK) Ltd. v. Camelot Group plc,  the Court of Appeal held that goodwill in a passing off action must be assessed at the date of  the defendant’s actual use rather than the date of registration.⁵ This ensures that goodwill  accrued during a period of inactivity by the registered proprietor is legally recognised.

The  Kerly impasse thus reflects a structural feature of trademark law, where neither statutory rights  nor common law rights are inherently subordinate in all circumstances. 

Facts and Procedural Background 

The dispute in Thukral v. PM Diesels presents a complex factual matrix spanning several  decades and multiple proceedings. PM Diesels Pvt. Ltd. (PMD) held registration of the mark  “FIELDMARSHAL” since 1964 for diesel engines. Jain Industries obtained a separate  registration for “FIELD MARSHAL” in 1965 for centrifugal pumps and related goods but  never commercially exploited the mark. Thukral Mechanical Works later acquired this  registration from Jain Industries through assignment in 1986 and commenced use for centrifugal pipes.

Meanwhile, PMD had expanded its use of the mark to centrifugal pumps from around 1975  and had built substantial goodwill in that segment by the time Thukral entered the market. This overlap gave rise to extensive litigation. PMD instituted a passing off action, while Thukral filed an infringement suit. Rectification proceedings were also initiated and all matters were  eventually consolidated. 

Further, the Supreme Court in 2009 had already held PMD liable for infringement of Jain’s  registration, while leaving issues of passing off and prior user rights explicitly open.⁶ The  Division Bench thus confronted a situation where one party had been declared an infringer yet  sought to restrain the other based on prior goodwill, a classic illustration of the Kerly impasse. 

Statutory Framework

 

The Court’s reasoning rested on a careful interpretation of the statutory framework governing  trademark rights. Section 28 of the Trade Marks Act confers exclusive rights upon the  registered proprietor, including the right to seek relief against infringement.⁷ However, this  right is expressly made subject to other provisions of the Act, a qualification of considerable  importance. 

Section 27(2) preserves the remedy of passing off, making it clear that statutory registration  does not extinguish common law rights.⁸ The Court emphasised that a registered proprietor  may still be restrained in a passing off action where another party has established prior  goodwill. 

Section 34, which embodies the “first user rule,” protects prior users who have continuously  used a mark prior to the date of registration or the proprietor’s first use.⁹ However, the Court  clarified that this protection is limited in scope.  

Court’s Analysis and Decision 

The Division Bench resolved the dispute by allowing both sets of rights to operate  independently rather than subordinating one to the other. On the issue of passing off, the Court  held that goodwill of PMD must be assessed at the date when Thukral commenced use of the  mark. By that time, PMD had already established substantial goodwill through its use.  Accordingly, PMD succeeded in its passing off claim and Thukral was restrained from further  use of the mark in relation to centrifugal pumps. 

On the issue of infringement, the Court held that Thukral’s registration remained valid and  enforceable. The Supreme Court’s earlier finding of infringement against PMD was binding and the Court reaffirmed that goodwill acquired through infringing use cannot serve as a  defence. Consequently, PMD was also restrained from using the mark for centrifugal pumps. 

The outcome was that both parties were injuncted against each other in respect of the same  mark and goods, thereby giving concrete effect to the Kerly impasse. 

The Court also addressed the issue of assignment, clarifying that while statutory rights in a  trademark can be transferred, goodwill cannot be assigned unless it exists. Since Jain had never  used the mark, it had no goodwill to transfer to Thukral. As a result, Thukral’s passing off claim could not rely on inherited goodwill and had to be independently established through its own  use. 

Critical Evaluation 

The judgment is notable for its analytical rigour and its willingness to address an unresolved  question in Indian trademark law. Its interpretation of the statutory provisions is consistent with  established Supreme Court jurisprudence and reflects a sound understanding of the relationship  between statutory and common law rights. The adoption of a use-based approach to goodwill  is particularly commendable, as it aligns legal doctrine with commercial reality. 

However, the decision raises certain concerns. The most significant is the practical  consequence of mutual injunctions, which effectively result in a commercial deadlock. Neither  party can use the mark, leaving the dispute unresolved in practical terms. The Court did not  provide guidance on how such a deadlock should be addressed, nor did it direct any remedial  measures such as rectification proceedings. 

Additionally, the strict position that goodwill arising from infringing use cannot serve as a  defence, while doctrinally correct, may produce inequitable outcomes in cases where a party  has built substantial goodwill in good faith. This highlights a tension between legal principle  and commercial fairness that remains unresolved. 

Conclusion 

The decision in the given case is significantly important in Indian trademark jurisprudence. It  firmly establishes that infringement and passing off are independent causes of action that may  coexist, even where they produce conflicting outcomes. The judgment reinforces the principle  that goodwill arises from commercial use and cannot be displaced by mere registration, while  also affirming the limited scope of statutory protections for prior users. 

At the same time, the recognition of the Kerly impasse exposes a structural limitation within  trademark law. While the law can acknowledge competing rights, it does not always provide a  mechanism to reconcile them effectively. This suggests a need for further judicial development  or legislative intervention to address such deadlocks in the future. Despite these concerns, the judgment represents a significant step forward in clarifying the operation of trademark law in  complex scenarios involving competing rights. 

Author: Gursimar Kaur, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

Endnotes 

1. Trade Marks Act, No. 47 of 1999, Acts of Parliament, 1999 (India). 

2. Thukral Mechanical Works v. PM Diesels Pvt. Ltd., 2026 SCC OnLine Del 445 (India). 

3. DAVID KITCHIN ET AL., KERLY’S LAW OF TRADE MARKS AND TRADE NAMES  (16th ed. 2018). 

4. S. Syed Mohideen v. P. Sulochana Bai, (2016) 2 SCC 683 (India). 

5. Inter Lotto (UK) Ltd. v. Camelot Grp. plc, [2004] 1 W.L.R. 955 (C.A.) (U.K.). 6. Thukral Mechanical Works v. P.M. Diesels, (2009) 2 SCC 768 (India). 7. Trade Marks Act, No. 47 of 1999, § 28(1), Acts of Parliament, 1999 (India). 8. Id. § 27(2). 

9. Id. § 34; Neon Labs. Ltd. v. Med. Techs. Ltd., (2016) 2 SCC 672 (India).