Law of Passing of in India

(Completed: 02.11.2015)

Introduction

Passing off is a common law tortious remedy which is available in a wide range of situations including protection of the rights in case of unregistered trademarks[1].

It refers to the species of unfair trade competition or of actionable unfair trading by which one person, through deception, attempts to obtain an economic benefit of the reputation, which the other has established for himself in a particular trade or business[2]. Article 10 (1) of the Paris Convention requires states to provide protection against unfair competition. Acts which create confusion regarding the establishment, goods or industrial and commercial activities of the competitor, making false allegations to discredit the same or making allegations to mislead the public are prohibited[3]. Passing off seeks to prevent only those trade misrepresentations that are injurious to a trader’s goodwill.

No person should be allowed to extract unauthorized benefits from the labour of another. Passing off is a remedy whereby a person is prevented from trying to wrongfully utilize the reputation and goodwill of another by trying to deceive the public through passing off his goods[4].

Trademark infringement is a violation of the exclusive rights granted to the owner or registered proprietor of a trademark under the Trade Marks Act, 1999. Passing off arises when an unregistered trademark is used by a person who is not the proprietor of the trademark in relation to the goods and services of the trademark owner. Statutory mechanisms protect the registered owner while common law grants protection to the goodwill of the honest concurrent prior user. Section 27(1) of the Trade Marks Act provides that no infringement action may be brought by an unregistered trademark holder while Section 27(2) specifically saves the remedy of a passing off action. These two systems are complementary, and in practice both actions are usually twinned, with neither remedy is superior or inferior in the same dispute[5].It is therefore an alternate remedy for a registered trademark owner and the only remedy for an unregistered trademark holder.

Origin

The origins of passing off actions are deeply rooted in tort law. The primary purpose was to prevent the deceit of the public. The rule that there is no property in a trademark apart from the business or trade in connection with which it is employed is a cardinal rule in trademark law[6].Goodwill is the proprietary right protected by a passing off action[7].In Millington v Fox, the court observed that when the plaintiffs had proper title to the trademark, they had the right to seek the court of equity’s assistance in enforcing the same[8]. However, Perry v Truefitt[9] indicated a shift away from the proprietary aspect, where the court observed that a man cannot sell his goods under the pretext that they are the goods of another man. The law thus developed as the common law doctrine of passing off in England and unfair competition in the United States[10]. Today it gives rise to wide ranging liability.

Application of English Decisions

India has inherited its common law traditions from the UK. Although, the decisions of the courts of the UK are in no way binding on the Indian courts, the principles and trends reflected in them are of strong persuasive value in India. Indian courts have constantly looked to the law in England to resolve disputes in intellectual property law. What would be considered a dissimilar mark in England may be considered a similar mark in India because the latter is a country where English words may sound phonetically same to many Indians in spite of differences in spelling[11]. Thus the English law cannot be applied strictly and in its entirety but it would still form an important interpretative tool.

Tests for passing off

Two tests for passing of are used in India. One has three ingredients while the other has five. Generally, the three essential ingredients required for a successful passing off action are proof of goodwill, misrepresentation and damage to good will which is the classical trinity test[12].

A trademark or trade dress may be so deeply associated with the source that the mark itself is attached to the goodwill and reputation of the source. Goodwill is generally considered to be territorial in nature. Transborder good reputation is generated due to intensive marketing, product placement and promotion. Moreover, media is accessible throughout the world. In India, transborder reputation is protected under certain circumstances. The concept of well known trademarks are recognized in India. For same, similar and closely related products, trademarks recognized in a foreign country may be protected in order to promote commercial morality, prevent consumer confusion and stop Indian traders from taking undue advantage of the reputation earned by foreign traders[13]. In Daimler Benz v Hybo Hindustan[14], the defendant, a garment manufacturer was restrained from using the mark of the plaintiff, a car manufacturer although their goods were dissimilar.

Misrepresentation is sine qua non of a passing off action. It can be understood as the use of the same or deceptively similar trademark or trade name which deceives about the source, nature or quality of the product. It must be a relevant misrepresentation about the source of the goods through any symbol like a trademark, name, get up, product shape etc.[15]. The real question in each case is whether, as a result of misrepresentation, there is a real likelihood of confusion of the public and consequent damage to the plaintiff[16]. The court must estimate the state of mind of the relevant section of the public and see if there is any likelihood of confusion.

Damage as an essential ingredient is understood as a loss of sales which is caused by a misrepresentation which successfully confuses the customer.

Its application can be seen in Yahoo! Inc v Akash Arora[17] where the court determined passing off in case of domain names using the test of the above three conditions.

In Ervin Warnik B. V. v. J. Townend & Sons (Hull) Ltd.[18], five characteristics of passing off were recognized. The five essential elements were (1) misrepresentation by a trader in the (2) course of trade (3) to prospective customers of his or ultimate consumers of goods and services supplied by him which is (4) calculated to injure the business or goodwill of another trader and which (5) causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so. The Supreme Court followed this criteria in several cases including the landmark decision of Cadila Healthcare, Ltd. v. Cadila Pharm., Ltd.[19].

In Laxmikant V. Patel v. Chetanbhai Shah[20], the court held in a special leave petition found that fraud is not a necessary element and absence of fraudulent intention i.e. innocently using the same or similar trademark or trade name is not a defence but proof of fraudulent intention would assist the defendant in establishing a probability of deception, The fact that the plaintiffs business is confined to one part of the city does not result in denial of injunction in another part of the city[21].

Maintainability

The plaintiff must establish that a prima facie case exists by showing that there was actual or probable damage to the goodwill of the plaintiff’s business according to the test laid down in Erven Warnik. If the plaintiff fails to do the same, the passing off action would not be maintainable. The burden of proving that there is a likelihood of the defendant’s goods being passed off as the goods on the plaintiff also likes on the plaintiff[22].

The plaintiff is never required to prove knowledge, malice or fraudulent intent of the defendant to seek injunctory relief in a passing off action[23].

It is not necessary for the plaintiff to prove that the mark is used exclusively by him or for his goods. Champagne producers were entitled to restrain wine produced outside the Champagne District of France from being sold using the name Champagne although no one producer had exclusive right to use the word[24].

Jurisdiction

A passing off action may be initiated in the District Court or High Court in accordance with their territorial jurisdiction. It could be in the place where the plaintiff resides, plaintiff conducts business or where the cause of action arises.

Cause of Action

A cause of action would arise only when there is actual use of the impugned trademark so merely an application for registration or advertisement in a Trademark Journal would be insufficient grounds for approaching the court[25]. This is because such activities would not lead to damage of goodwill. The cause of action for passing off is complete as soon as a relevant misrepresentation is made which is likely to create confusion even if no actual deception and damage to the plaintiff takes place[26].

Mere delay in bringing a passing off action would not defeat the case of the plaintiff[27].

Honest concurrent prior user

A passing off action may be brought against a registered proprietor of a trademark. Although registration is conclusive proof of ownership of the trademark, registration cannot be pleaded by the defendant in a passing off action[28]. The rights of the honest concurrent prior user override those of the registered owner of the trademark. In NR Dongre v Whirlpool Corporation[29], an injunction was passed against a registered proprietor from using his registered trademark.

When a passing off action is brought against one who has registered the trademark as his own, the plaintiff must be a prior user, otherwise, the defendant would be in a position to claim infringement[30]. The plaintiff must be an honest concurrent prior user. He must also use the same continuously from a time prior to the registration of the trademark by the defendant. The burden of proving that there was prior and continuous use is on the plaintiff[31].

He must have used the trademark in good faith without deceiving consumers regarding the source of the product. Where both the defendant and the plaintiff were deceiving consumers by using the trademark of another, no cause of action can arises[32].

Development in India

The law of passing off in India has been crystallized by judicial interpretation. Therefore, it is imperative to look into case laws in order to chart out the course of general and recent developments.

Since it is necessary that the damage relate to the plaintiff’s goodwill, the two types to damage that are clearly recognized are under passing off are diversion of sales and injurious association[33]. Over the years the courts in England and India have widened the ambit of passing off actions on the insistence of plaintiffs. It has been extended to professional and non-trading activities as well[34].

In Larsen & Toubro v Lachmi Narayan Trades[35] the plaintiff used L&T in names of many of its subsidiaries. The defendant used LNT or ELENTE. The lower court granted an injunction restraining the defendants from using those deceptively similar names but permitted the use of LNT in extended explanatory form. The Delhi High Court on appeal decided that the use of LNT by the defendants was not bona fide and was likely to cause confusion. It was already proven that L &T had acquired a definite and distinct reputation among the buyers. In the same case, the court also noted that the test of field of activity was no longer applicable so the defendants could not use a mark phonetically similar to the plaintiffs even for those goods which the plaintiff did not produce[36].

The expanding horizons of passing off action is illustrated by Bata India Ltd v M/s Pyare Lal & Co.[37] where a passing off action was brought against a producer of dissimilar goods. The court elucidated a practical understanding of the consumers’ decision making during purchase. It observed that a lay customer would know that the name Bata refers to shoe manufacturers but would not know that Bata does not produce foam. The use of the name Bata to sell foam in indicative of intent and a passing off action would not be barred merely because Bata does not produce foam.

Interlocutory Relief

In Mahendra & Mahendra Paper Mills Ltd. v Mahindra & Mahindra[38] was the registered trademark of Mahindra &Mahindra and had also earned a reputation for a certain standard of good services. The defendant began a company with the name Mahendra & Mahendra Paper Mills Ltd. The court found a prima facie case of irreparable prejudice. The Supreme Court held that the trial court was correct in granting an interim injunction restraining the defendants from using the name Mahendra. The court also held that it was a well settled principle that when an interim injunction in a suit for passing off is sought, the court must decide whether there is a likelihood of confusion or deception, no witness is entitled to say whether that mark is likely to deceive or cause confusion and all factors likely to create deception or confusion must be considered in combination like the nature of the market, class of consumers, extent of reputation, trade channels, connection in course of trade and others[39].

The Supreme Court has found that in a passing of action it is usual and in fact essential for the plaintiffs to seek a temporary or ad interim injunction and once a prima facie case is made out the general practice of the courts is to grant a prompt ex parte injunction followed by the appointment of a Local Commissioner if necessary[40]. The plaintiff would be correct in approaching the Supreme Court if an injunction is not granted when a prima facie case is established because such a situation would fall within the ambit of the exceptions under which the Supreme Court admits Special Leave Petitions. A refusal to grant an interim injunction would lead to a failure of justice and cause irreparable harm to the plaintiff which cannot be undone at a later stage[41].

Dilution

Erosion of distinctiveness and dilution which have the potential to damage good will are also recognized under passing off. Dilution as an injury was developed in England particularly in a series of drinks cases[42]. In the Elderflower Champagne[43] case, the champagne producers opposed the use of the word champagne for a fizzy non-alcoholic drink. The court found that the real harm in this matter was not a loss of sales but rather the erosion of the uniqueness of the word champagne would occurs which would damage the exclusive reputation of the champagne houses their goodwill. When, dilution occurs, there is misrepresentation and there is a chance of consumer confusion regarding the commercial origin or quality of the goods. Erosion of distinctiveness is considered a type of damage to under passing off in some jurisdictions. The Indian Courts have been hesitant in considering dilution as a separate cause of action. In Caterpillar Inc. v Mehtab Ahmed & Ors.[44], the defendant was using marks identical to the plaintiffs in the footwear manufactured by it. The court observed that dilution did not have to be supported by consumer confusion. It found that the only object of the defendant for using the plaintiff’s mark was to deceive the consumers. Also, it held that the plaintiff had a right to protect its mark, reputation and goodwill from and risk of dilution in the act of passing off by the defendants. Moreover, for well-known trademarks, the likelihood of confusion is not relevant in passing off actions but rather the unauthorized use which would lead to erosion of the goodwill, reputation and distinctiveness of the plaintiff.

In several cases after Caterpillar, the courts have held that consumer confusion is a prerequisite for a passing off action. Therefore, the law with regard to dilution has not been consistent.

Industrial Design Passing Off

A passing off action may be brought with respect to designs provided the action contains the necessary ingredients to maintain such a proceeding[45]. A holder of a registered design may alternatively institute a suit against a defendant who is also in possession of a registered design. However a composite suit of infringement and passing off action would not lie[46].

The remedy of passing off is also available in the case of designs. Mere copying however is not passing off a design because there is no monopoly unless there is registration of the design. The defendant must also make a false representation that the article which he is selling is made by the plaintiff[47].

Reverse passing off

Reserve passing-off occurs where the defendant markets the plaintiff’s product as his own. A wholesaler or retailer removes or obliterates the original trademark without authorization before reselling the goods[48]. The original trademark owner’s products are acquired by the competitor who sells those goods claiming that they are his own and thus increasing its goodwill while reducing the original trademark owner’s sales. It may be through express or implied manner[49]. In express reverse passing off, the competitor would replace the original trademark with his own while reselling it while in implied passing off, the product would be sold unbranded[50]. In both cases, credit is denied to the original trademark holder after its first sale to the competitor who is taking advantage of the same.

In Sheila Mahendra Thakkar & Ors. v Mahesh Naranji Thakkar[51], the appellant changed the main ingredient in his  product sold with which the product being sold was actually of the same composition as the product with a different brand name which was assigned to the respondent and the court had to determine if that was passing off. The court considered the leading English cases on reverse passing off. The court observed the following:

In the present case, the appellant is in effect selling the product Vandevi Powder (Yellow) which legitimately belongs to the respondent… [Which]… is to perpetuate a misrepresentation on public… First, there will be a direct loss of business of the respondent. Secondly, there will be damage caused to the reputation of the respondent’s brand… [Because]… the appellant is wrongly generating the goodwill of his product which is in fact the product of the respondent. Prospective customer here is not left to perceive the difference between the two products. He is persuaded to buy a product under the name Vandevi Superfine Powder which is in fact a different product i.e Vandevi Powder (Yellow) which belongs to the respondent. This action on the part of the appellant clearly falls within the ambit of tort of passing off[52].

Domain Name

Domain names come within the purview of mark under the Trade Marks Act. A passing off action for a domain name may be brought in the same manner and fulfilling the same conditions as a passing off action for a trade mark or trade name. In Yahoo! Inc v Akash Arora the court recognized that a very alert vigil is necessary and a strict stance must be adopted to prevent passing off of domain names because they are easily accessible across the globe[53].  The plaintiffs claimed that its website was registered with Network Solutions Incorporated two years before the defendant’s website and Yahoo was its registered trademark in several countries outside India.  The Court has also observed that domain names hold an important position in e-commerce in Dr. Reddy’s Laboratories Ltd. v Manu Kosuri[54]. Here, the defendants ran a business of registering domain names and then selling them. The court granted a permanent injunction restraining the defendants from using the trademark or domain name drreddyslab or any other deceptively similar domain name.

 

Analysis

The impact of passing can be felt on businesses entities and consumers alike. The law of passing off in India is a boon to its growing commerce and industry. It allows an effective remedy for those producers who do not have a registered trademark as well as an alternate remedy to registered trademark owners. The interest of the public is protected too. When consumers develop an association with a source they trust and its mark, it incentivises other entrants and competitors in the market to bank on or take advantage of the goodwill associated with that mark. Passing off seeks to stop such deception.

There is a palpable risk that trademarks would be used to protect monopolies and restrictive trade practices. In those sectors which are dominated by monopolies, it helps to further the life of the monopoly and quash new entrants from riding on their goodwill. Law leans towards the plaintiff since the Indian courts as seen above take a very broad view of what amounts to misrepresentation. This makes it more likely for the monopolist with deep pockets to trample out competition.

The most notable feature of passing off actions in India is the court’s liberal approach towards granting ex parte injunctions. Indian Courts are generally wary of passing far reaching orders in the ex parte stage. In fact, the Anton Piller relief has never been popularized in India. However, the granting of ex-parte injunction when a prima facie case has been made out seems to be the rule and not the exception.

India has remain firmly rooted from the common law traditions from which passing off evolved, constantly referring to judgements made by English courts, but it has grown and flourished in light of realities and challenges unique to the nation.

Bibliography

Statutes

Article 10 (1) of the Paris Convention as amended in 1979

Section 27(1), (2) and 34 of the Trade Marks Act, 1999

Cases

A.G. Spalding v A.W. Gamage Ltd., (1915) 32 RPC 273

Bata India Ltd v M/s Pyare Lal & Co., AIR 1985 All 42

Bollinger, J. Costa Brava Wine Co. Ltd., (1959) 3 All ER 800

Cadila Health Care Ltd. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 73

Caterpillar Inc. v Mehtab Ahmed & Ors., (2002) 99 DLT 678

Daimler Benz v Hybo Hindustan., 1993 SCC OnLine Del 605

Dr. Reddy’s Laboratories Ltd. v Manu Kosuri, (2001) 58 DRJ 241

Heinz Italia and Anr. v Dabur India Ltd (2007) 6 SCC 1

Honda Motors v Charanjit Singh, (2002) 101 DLT 359

Kemp and Company & Ors. v Prima Plastics Ltd., 2000 PTC 96 113

Larsen & Toubro v Lachmi Narayan Trades., ILR (2008) 2 Del 687

Laxmikant V. Patel v. Chetanbhai Shah, (2002)3 SCC 65

Mahendra & Mahendra Paper Mills Ltd. v Mahindra & Mahindra, (2002) 2 SCC 147

Mohan Lal v Sona Paint & Hardware, (2013) 200 DLT 332 (FB)

National Sewing Thread Co Ltd v James Chadwick and Bros Ltd, (1953) SCR 1028

NR Dongre v Whirlpool Corporation, AIR 1985 Del 300

Ramdev Food Prod. Pvt. Ltd. v. Arvindbhai Rambhai Patel & Ors., AIR 2006 SC 3304

Reckitt & Colman Products Ltd. v. Bordan Incorporation, (1990) RPC 341 (HL)

Sheila Mahendra Thakkar & Ors. v Mahesh Naranji Thakkar, (2003) 5 Bom CR 491

Supriya Prabhu v Janus Remedies, (2008) 36 PTC Bombay

Tattinger v Allbev, [1994] 4 All ER 75

Wander Ltd. and Anr. v Antox India P. Ltd., (1990) SCC 727

Yahoo! Inc v Akash Arora, (1999) 78 DLT 285

Books

S. Gopalkrishnan and T.G. Agitha, Principles of Intellectual Property (1st ed., Eastern Book Company, Lucknow, 2009)

V.K. Ahuja, Intellectual Property Rights in India 1 (1st ed., Lexis Nexis Butterworths Wadhwa, Nagpur, 2012)

Articles

Dev Gangjee, The Polymorphism of Trademark Dilution in India 7(1) Transnational Law and Contemporary Problems 611 (2008)

Frank I Schechter, The Rational Basis of Trademark Protection 40 (6) 813 Harvard Law

Review (1927).

Suman Naresh, Passing Off Goodwill and False Advertising: New Wine in Old Bottles 45(1) The Cambridge Law Journal 97(1986)

William M Borchard, Reverse Passing Off-Commercial Robbery or Permissible Competition, 67 The Trademark Reporter 1 (1977)

 

[1] N. S. Gopalkrishnan and T.G. Agitha, Principles of Intellectual Property 504 (1st ed., Eastern Book Company, Lucknow,2009)

[2] Wander Ltd. and Anr. v Antox India P. Ltd., (1990) SCC 727 ¶16

[3] Article 10 bis (2)

[4] Ramdev Food Prod. Pvt. Ltd. v. Arvindbhai Rambhai Patel & Ors., AIR 2006 SC 3304 ¶ 50

[5] Dev Gangjee, The Polymorphism of Trademark Dilution in India 7(1) Transnational Law and Contemporary Problems 611 612 (2008)

[6] Frank I Schechter, The Rational Basis of Trademark Protection 40 (6) 813 822 Harvard Law Review (1927).

[7] A.G. Spalding v A.W. Gamage Ltd., (1915) 32 RPC 273

[8] 3 Myl. &C 338 (1838)

[9] (1842) 48 ER 749.

[10] Schechter, supra note 6 at 820

[11] Cadila Health Care Ltd. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 73 94

[12] Reckitt & Colman Products Ltd. v. Bordan Incorporation, (1990) RPC 341 (HL)

[13] Rob Mathys India Pvt Ltd v Synthes Ag Chur, (1997) 17 PCT 669

[14] 1993 SCC OnLine Del 605

[15] Suman Naresh, Passing Off Goodwill and False Advertising: New Wine in Old Bottles 45(1) The Cambridge Law Journal 97 99 (1986)

[16] Honda Motors v Charanjit Singh, (2002) 101 DLT 359

[17] 1999 SCC OnLine Del 133

[18] (1979) 2 All ER 927 932

[19] Supra note 11

[20] (2002)3 SCC 65

[21] Id. ¶ 8

[22] National Sewing Thread Co Ltd v James Chadwick and Bros Ltd, (1953) SCR 1028

[23] Naresh, supra note 15 at 102

[24] Bollinger, J. Costa Brava Wine Co. Ltd., (1959) 3 All ER 800

[25] V.K. Ahuja, Intellectual Property Rights in India 1 607 (1st ed. Lexis Nexis Butterworths Wadhwa, Nagpur, 2012)

[26] Naresh, supra note 15 at 103. See Spalding v Gamage (In this matter, a passing off action was brought by the manufacturers of sporting goods whose competitors acquired some of their waste footballs of inferior quality and advertised them under the plaintiffs name. Although no actual sales had taken place, the court held the plaintiffs were entitled to nominal damages)

[27] Heinz Italia and Anr. v Dabur India Ltd., (2007) 6 SCC 1 ¶ 16 (Court held that since Glucon D and Glucose D were phonetically similar it amounted to passing off)

[28] Section 27 (2), Trade Marks Act, 1999

[29] AIR 1985 Del 300

[30] Section 34, Trade Marks Act, 1999

[31] Ahuja, supra note 25 at 582

[32] Supriya Prabhu v Janus Remedies, (2008) 36 PTC Bombay

[33] Gopalkrishnan, supra note 1 at 505

[34] Ahuja, supra note 25 at 584

[35] ILR (2008) 2 Del 687

[36] Id. at ¶ 12. See also Sunder Parmanad Lalwani and Ors v. Caltex (India) Ltd., AIR 1969 Bom 24 (The court held that there existed a likelihood of confusion between Caltex watches and Caltex petrol)

[37] AIR 1985 All 42

[38] (2002) 2 SCC 147

[39] Id. at ¶ 16 (This was not an exhaustive set of principles)

[40] Laxmikant, supra note 20 at ¶ 13

[41] Laxmikant, supra note 20 at ¶ 17

[42] Gangjee, supra note 5 at 616

[43] Tattinger v Allbev, [1994] 4 All ER 75

[44] (2002) 99 DLT 678

[45] Mohan Lal v Sona Paint & Hardware, (2013) 200 DLT 332 (FB) ¶ 34

[46] Id. at ¶ 36

[47] Kemp and Company & Ors. v Prima Plastics Ltd., 2000 PTC 96 113

[48] William M Borchard, Reverse Passing Off-Commercial Robbery or Permissible Competition, 67 The Trademark Reporter 1 (1977)

[49] Id. at 2

[50] Id.

[51] (2003) 5 Bom CR 491 (The two parties were supposed to trade in nine types or qualities of Vandevi each according to the deed to dissolution)

[52] Id. at ¶ 17

[53] (1999) 78 DLT 285 ¶ 13 (Yahoo brought a passing off action against the defendants who launched a website called yahooindia)

[54] (2001) 58 DRJ 241

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