Determination of Transborder Reputation of Trademarks

Introduction:

Trans-border Reputation follows the common law Universality Doctrine wherein the reputation associated with a brand transcends the jurisdiction from which it originates to other countries where it may not be in use. This marks a shift from the hard-line Territoriality Principle which states that the right to a trademark can only be protected in the territory in which it is registered. In today’s globally integrated world, where knowledge can be defused efficiently through various modes of communication, the reputation of a product/service can easily transcend territorial limits due to promotions, advertisements, commercial publicity, and its market presence. This may give rise to the protectability issue of unauthorized use of the brand’s reputation, often raising confusion and misleading the consumers. Therefore, against this backdrop, many countries have started to afford protection to those well-known marks [1]whose reputation has spilt over to other countries.

The Indian judiciary has recognized the Trans-border Reputation of well-known marks, in combination with the ‘First in the market’ approach, whereby countries afford protection to the brand which can prove that it was first to use anywhere in the world, and thereafter gained reputation. This concept was recognized by the Supreme Court in the case of N.R. Dongre v. Whirlpool Corporation[2]where the Court held that “in today’s world, a product, and the trademark under which it is sold in other countries cannot be stated to have no reputation or goodwill in places where it is not available. Its knowledge and awareness, as well as critical evaluation and appraisal, extend beyond the geographical location in which it originated”.[3]Likewise, in a later case, Milmet Oftho Industries & Ors v. Allergan Inc[4] the Supreme Court observed that the mere fact that the plaintiff was not using the mark in India would become irrelevant when they were the first to use it in the world market. However, this came with a word of caution that Multinational Companies having no intention of coming to India or introducing their product therein, should be prohibited from throttling an Indian Company by permitting them to do business in India if the latter has genuinely adopted and developed the product and is the first in the market.

This position, however, has been altered with the single-judge bench judgment of the Supreme Court in the case of Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd.[5] (Toyota-Prius Case) in which the Court, while upholding the Territoriality Doctrine increased the threshold of proof of goodwill and reputation in Indian markets as an essential condition for Transnational Reputation of well-known marks. The present article seeks to analyse the impact of the case.

The Toyota-Prius Case:

Background

The Plaintiff, Toyota Jidosha Kabushiki Kaisha, a globally renowned automobile manufacturer incorporated in Japan launched the world’s first commercial hybrid car ‘Prius’ in Japan in 1997 and in countries like the USA, Australia etc. during 2000-2001. Prius Auto Industries on the other hand is a manufacturer and seller of auto parts and accessories in India since 2001. Toyota Prius was formally launched in India in 2010 and until 2009, it had not filed for registration of the mark ‘Prius’ in India.

Toyota filed a suit of permanent injunction against Prius Auto Industries before the single-judge bench of the Delhi High Court on the grounds that the latter was using the trademark ‘Prius’ without Toyota’s consent leading to the unfair advantage of their goodwill and reputation. The Court acknowledged the plaintiff’s contention w.r.t to the global reputation and prior use in other countries and held that they had a trans-border reputation even in India through advertisements in international magazines and on the internet although Prius Auto was the prior user and registered user of the mark in India, thereby granting them an ex-parte interim injunction from using the word ‘Prius’ w.r.t auto parts.

Thereafter, on an appeal before the Division Bench, the previous order was set aside. The Bench while upholding the territoriality doctrine observed that:

  1. Although the launching of ‘Prius’ model in 1997 was widely reported and advertised, its publication in print media was not trailblazing enough to impact the larger Indian audience, since only small news pieces of the launching of the product in Japan had been published in Economic Times.
  2. Also, between its launch and 2001, the internet had limited usage in India.
  3. Further, no substantial evidence was furnished by the plaintiff to prove that the relevant section of the public was misled by the usage of the mark ‘Prius’ by the defendants.

The decision of the Supreme Court

The decision of the Division Bench was further challenged before the Supreme Court. The major issues before the Court were:

  1. Whether Prius Auto Industries were guilty of passing off by using the trademark Prius for their products thereby harming the reputation of Toyota in the market?
  2. Whether the principle of universality be considered while assessing a claim of passing off?

The Court in the present case upheld the principle of territoriality as was argued by Prius Auto Industries and stated that if goodwill/reputation is not established in a particular jurisdiction (India), the question of examining passing off does not arise in that jurisdiction even though it has acquired sufficient goodwill in other jurisdictions. It is essential in a case of passing off to prove, goodwill, misrepresentation, and damage. The Court observed that although the mark of Toyota ‘Prius’ had acquired global reputation and goodwill much before Prius Auto Industries had used and registered the mark in India, Toyota failed to furnish adequate evidence that it had generated sufficient goodwill for its car under the mark ‘Prius’ prior to April 2001, the date of Prius Auto Industries’ use of the mark. Here, the Court undermined the evidentiary value of advertisements in automobile and international business magazines and well as availability of information in Wikipedia and Britannica, on account of limited online exposure in India at that particular time i.e., 2001. The Court further observed that once a party has succeeded in establishing goodwill in the jurisdiction in which it claims the opposite party is passing off its goods, the likelihood of confusion would be a more reliable and better test of proving passing off action than actual confusion in public.

Impact of the Toyota-Prius judgement:

Following the footsteps of the Toyota-Prius judgment, the Delhi High Court in the case of Keller Williams Realty, Inc. v Dingle Buildcons Pvt. Ltd. & Ors[6]denied interim relief to the plaintiff against an alleged infringement of their trademark. While upholding the principles of territoriality, the Court inter alia observed that the plaintiff has not been able to demonstrate spillover of its reputation and goodwill in India, except for producing e-mails from certain Indians expressing interest in becoming agents for the plaintiff in India. Furthermore, despite obtaining registration of its trademark in India, in 2012, with the intention to set up business therein, the plaintiff to date has no business operations in India and there are no rights in a trademark without use.[7] The Court also clarified that the test of universality as held in the Milmet Oftho case was applicable to the pharma-related trademarks industry since the field of medicines and drugs being of an international character does not require evidence of transborder reputation.

The decision of the Supreme Court in the Toyota-Prius has raised the evidential threshold for future passing off cases and a foreign plaintiff must now demonstrate, through convincing documented evidence, not only a transnational reputation but also substantial goodwill within India. While some argue that the decision has finally clarified the stance on the determination of trans-border reputation and would act as a protective shield to indigenous/domestic businesses, the author possesses certain reservations against the judgment’s impact. The Territorial Principle is considered significant under the Trademark Law. However, in contemporary times, with the advent of globalization whereby economies have opened up, transportation has become more sophisticated and media exposure is high, marks have achieved universal reputation and goodwill even in unchartered markets and are no longer confined by geographical territories. Therefore, in this regard, the Territoriality Principle for recognizing Well-Known Marks seems to be out of place.

So far as India is concerned, the Judiciary had accommodated the principle of Universality through the landmark cases of Whirlpool and Milmet Oftho which has comprehensively acknowledged that prior use in the world market would surpass forms of use. The Milmet Oftho Case, specifically, laid down a balanced approach for registration of Well-Known marks by prioritizing the doctrine of Universality, while at the same time cautioning companies to not register their marks if they have no intention to use it within India. However, the Toyota-Prius Case has altered the status quo by relying on a UK judgment (Starbucks v. British Sky Broadcasting[8]) which held that “a trader cannot complain of passing-off against him in any territory wherein he has no customers and nobody who is in trade relation with him”, instead of laying down the rationale behind its deviation from the settled precedent of the larger bench of the Supreme Court. Thus, the author contends that the judgment is per incurium in nature which would have some major implications such as:

  1. Non-recognition of a well-known mark of the brand in a foreign territory due to the high threshold for proving reputation would encourage squatters to misuse the trademarks to serve their own interests.
  2. Such a high threshold would also discourage foreign companies to operate in India thereby hampering the ease of doing business.
  3. In an era of technological advancement, where information can transcend boundaries with ease, the precedent in the Toyota-Prius judgment poses a challenge to determine the standards of evidence required to prove reputation and goodwill.

[1] As defined under Section 2(1) (zg) read with 11 (6), 11(9) of the Trademarks Act, 1999 and Rule 124 of the Trademark Rules, 2017.

[2] 1996 PTC (16) 583 (SC).

[3] Ibid.

[4] 2004 (12) SCC 624.

[5] (2018) 2 SCC 1.

[6] CS(COMM) 74/2019.

[7] Ibid.

[8] [2015] UKSC 31.

Summited by :

Sanjana Ganguly,

Intern_ CIPRA,

4th Year BBA LLB (Hons.)

Symbiosis Law School, Pune.

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