KVIC has slapped a Rs 525 cr notice on Fabindia for selling khadi-branded products without licence. But can a govt body trademark a generic product like khadi?

New Delhi: The confrontation between the Khadi and Village Industries Commission and garment retail chain Fabindia over the use of the trademark ‘khadi’ and the Khadi Mark in its products has raised the question if the government body is infringing on the “freedom to do business”.

Last week, KVIC – a statutory body under the government of India tasked with the planning, promotion, organisation and implementation of programmes for the development of khadi – demanded Rs 525 crore from Fabindia for causing “irreparable loss, harm and damage to the goodwill associated to the ‘khadi’ trademark” by using the trademark illegally.

It’s not a new battle. KVIC had first issued a notice to Fabindia in August 2015, listing the “violation of the regulations”. The regulations in question are the Khadi Mark Regulations, 2013, notified by the Union Ministry of Micro, Small and Medium Enterprises. They empower KVIC to grant ‘Khadi Mark’ registration and take royalty from any chain using the Khadi Mark in order to protect the interests of khadi artisans.

Fabindia has issued a statement calling the recent allegations “baseless”, and expressing its intent to defend itself “vigorously”. But it is now treading cautiously and exploring possible legal recourse.

A question of monopolising

But a section of the textile industry and trade experts who have followed the dispute closely, and who spoke on condition of anonymity because of the legal sensitivities involved, said the case is not as simple as it is being made out.

“It is a larger question of the freedom to do business in the country. Going by the KVIC’s logic, innumerable industries and designers will be deemed illegal,” a source said.

A top intellectual property rights expert agreed with the view. “The process of implementation of the 2013 regulations is riddled with arbitrariness,” said the expert who works for a global consulting firm but spoke on condition of anonymity as he is not authorised to speak to the media.

“To begin with, ‘khadi’ is a generic term to describe a certain kind of cloth. It is against the spirit of the Trade Marks Act, 1999, for a body – public or private – to monopolise its registration,” the expert said.

A source close to Fabindia called the notice “an attempt to monopolise the entire industry”. “The KVIC is a certifying body, it is okay for it to give out licences, but this move seems to suggest that it doesn’t just want to certify, but also be the only one selling khadi,” the source said.

“It is like the Darjeeling Tea Board saying that not only will we certify companies selling tea with the Darjeeling label, but we will be the only ones selling it.”

However, the KVIC insists the intention was not to monopolise, but follow government regulations. Satya Narayanan Das, secretary of the KVIC, said: “We have issued a notice to 178 organisations, Fabindia is just one of them. If they say that they are helping artisans by selling khadi, it has to be regulated through the KVIC.”

Not just khadi

According to the source close to Fabindia, the retailer had already stopped selling products with a ‘khadi’ tag in 2017, after talks between it and the KVIC for licences failed. However, the new legal notice, the source said, does not just pertain to khadi.

Section 20 of the notice, a copy of which ThePrint has seen, says Fabindia is continuing to “deceive the public” by selling products with the tag/label ‘handwoven’. “Isn’t the purview of KVIC limited to khadi products?” the source asked. “If they are going to certify everything that is handwoven, what happens to ikkat, jamdani, etc.?”

The KVIC regulations could be arbitrary for yet another reason, the IPR expert said. “How do you reconcile the rights of companies who had registered as producers of khadi before the regulations were put in place in 2013? The regulations are completely silent on the issue retrospective applications.”

KVIC’s Das, however, argued that any cloth that is labelled as ‘natural’ and not machine made, ‘handspun’ or ‘handwoven’, has to be licensed by the KVIC under government rules.

But Kritika Sahni, an intellectual property rights expert and advocate at Ajay Sahni & Associates, sees the whole episode as an example of government overreach.

“Khadi has been manufactured and sold since the pre-independence era. It is a generic term. The entire industry cannot suddenly be dictated by a government body,” Sahni said.

“Even the government is in conflict of interest here. The government-owned Khadi Gram Udyog is part of the KVIC and sells khadi. So here we have a scenario where the regulator has a branch selling the product it is supposed to regulate. Where is the transparency?”

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