Background
For nearly four decades, a South Indian restaurant called Dakshin operated at the Welcomgroup Park Sheraton Hotel in Chennai, India — a hotel whose management was governed by an Operating Service Agreement (OSA) dated February 12, 1985, between ITC Limited (then the hotel’s management company) and Adyar Gate Hotels Limited (AGH), the hotel’s owner and principal financier. The Dakshin restaurant opened in 1989 and quickly built a strong reputation for authentic South Indian cuisine.
The OSA expired in March 2015, at which point ITC’s management of the hotel ceased. After the agreement ended, AGH continued to operate the Dakshin restaurant from the same hotel premises — now branded as the Crowne Plaza Chennai Adyar Park — without objection from ITC. The hotel building was eventually demolished in 2024, and AGH then opened a standalone Dakshin restaurant at a new location nearby.
ITC responded by filing a commercial suit in the Delhi High Court alleging that AGH’s continued use of the Dakshin name constituted trademark infringement, passing off, and copyright infringement. ITC sought an interim injunction to prevent AGH from using the mark. A single judge of the Delhi High Court refused the interim relief, finding no prima facie case in ITC’s favor. ITC appealed to the Division Bench.
The Court’s Holding
The Division Bench of Justice C. Hari Shankar and Justice Om Prakash Shukla dismissed ITC’s appeal and upheld the refusal of interim injunction. The court’s reasoning rested on three interconnected grounds.
First, the court found that ITC had not established prior goodwill in the Dakshin mark before the restaurant’s inception in 1989. Since both ITC’s and AGH’s claims to the mark traced back to the same original restaurant, the question became which party had built the more legally cognizable reputation over time. The court concluded that AGH, as the principal financier and property owner, had the stronger claim to the goodwill generated through the restaurant’s long-standing operations.
Second, the court invoked the doctrine of acquiescence. After the OSA expired in 2015, ITC did not contest AGH’s continued use of the Dakshin name for nearly a decade. It did not challenge AGH’s trademark registration through rectification proceedings. The Division Bench held that this protracted silence “amounts to tacitly allowing AGH to continue to use the mark till 2023 and, thereby, build up a reputation therein.” Having permitted AGH to invest in and expand the mark’s goodwill for so long, ITC could not now seek urgent injunctive relief to shut it down.
Third, on the copyright claim, the court found that ITC had failed to establish prima facie ownership of any protectable copyright in the Dakshin mark or associated creative works.
Key Takeaways
- Trademark rights under operating agreements must be clearly documented. When a licensor-style agreement expires, ownership of any marks associated with the business can become genuinely contested. Drafting the OSA to specify who owns goodwill generated during the agreement is critical.
- Acquiescence can defeat injunctive relief even for valid trademark claims. A mark owner who knows that a former partner or licensee is using its mark and does nothing for years may find the equitable remedy of injunction foreclosed, even if the underlying infringement claim might otherwise succeed.
- Hotel and hospitality sector IP requires particular vigilance post-agreement. The Dakshin dispute illustrates the difficulty of disentangling brand ownership from property ownership when a restaurant operates within a hotel over decades under a management agreement.
Why It Matters
The Dakshin dispute illustrates a recurring challenge in the hospitality industry: what happens to brand goodwill when a long-running management agreement ends? The ruling underscores that continuous and unchallenged commercial use of a mark — especially over decades — can build legally cognizable goodwill that may outweigh a former managing party’s claim to the name. The decision also serves as a reminder that acquiescence is a real and enforceable equitable doctrine in Indian trademark law: silence in the face of ongoing use is not a safe litigation strategy.
The case is significant for IP practitioners advising clients in the hotel, restaurant, and franchise sectors, where brand identity is often developed and maintained under management contracts that may eventually expire.
Identified via supplemental web search (source: LiveLaw).