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Ranjan Narula Associates


The new mantra "Sell in India" to protect your brand
In the intensely fought litigation between the parties involving use of identical PRIUS mark/name, Supreme Court fired the final salvo on 14th December 2017 by holding that it is necessary to establish local goodwill and reputation of the trade mark to sustain an action for passing off. The court affirmed the decision of two judge bench of Delhi High Court and dismissed the appeal filed by Japanese automobile manufacturer even though it was prior adopter and registered proprietor of PRIUS mark internationally. The ruling is likely to have significant impact on cases based on common law remedy of passing off. In particular those that have been instituted only on the basis of prior adoption or use globally.

Facts in brief

Toyota filed a suit against Prius Auto Industries and Others (hereinafter referred to as the 'Respondents') in 2009 claiming that Toyota was the prior user of the trade mark PRIUS globally and the goodwill and reputation of the mark extended to India. Toyota objected to use of PRIUS as a trade mark, trade name and company names by the Respondents.

Toyota launched the world's first hybrid car named PRIUS in Japan in 1997 and in other countries during the year 2000-01. PRIUS mark was registered in Japan since 1990 and in various other countries such as U.K., Australia and USA. In India, Toyota's application for PRIUS mark in class 12 was filed in the year 2009 on proposed to be used basis and is pending registration. PRIUS car was launched in India in the year 2010. This news clippings relating to launch of Toyota's PRIUS car in Japan was also covered in the Economic Times newspaper ( a national daily covering financial news in India), in 1997.

On the other hand, Prius Auto Industries was a supplier of auto accessories and obtained registration of the marks and in class 12 for auto parts and accessories in India in the year 2002. PRIUS mark was used since 2001. The Respondents claimed that they were first in India to manufacture add on chrome plated accessories and their attempt was conceptualized as 'pehela prayas' (Hindi word meaning first attempt). On looking for a catchy word in the dictionary which could'describe the first attempt 'Pehla Prayas' they found PRIUS word which meant 'to come first'. The firm 'Prius Auto Industries' was registered with sales tax authorities in 2001 and 'Prius Auto Industries' was incorporated in the year 2006.

Decisions passed by Delhi High Court

The single judge observed that PRIUS mark of Toyota had acquired trans-border reputation and restrained the Respondents from using PRIUS mark. This decision was appealed before the two judge Bench (Division Bench), which over ruled the decision of single judge by ruling that Toyota failed to establish trans-border reputation of its PRIUS trade mark in India as of 2001. Aggrieved by the decision, Toyota filed an appeal before the Supreme Court challenging the decision passed by two judge bench allowing Respondents to use its PRIUS trade mark.

Issue

The key issue before the Supreme Court was whether use of identical PRIUS trade mark/ trade name by the Respondents for automobile spare parts amounts to passing off their products as those of Toyota thereby causing injury to the reputation of Toyota in the market. Both sides made extensive submissions in support of their case. The Court observed that:
  1. the trade mark law is territorial in its operation. Toyota's PRIUS mark had acquired goodwill and reputation worldwide much prior to use and registration of PRIUS in India by the Respondents. However, on applying the principle of territoriality, there must be evidence to show that Toyota's PRIUS mark had acquired goodwill and reputation in the Indian market as well.

  2. even though the launch of Toyota's 'PRIUS' car was covered as a news article in the Economic Times in 1997, it did not establish goodwill of PRIUS mark in India. Further, taking into account limited exposure of internet in India in 2001, it can be inferred that Toyota's PRIUS mark failed to establish goodwill or reputation in the Indian market.

  3. acquisition of goodwill and reputation in one territory will not ipso facto result in spillover of reputation of such trade mark in another territory as well (the principle of trans-border reputation).

  4. The suit was filed in the year 2009. The delay in filing the action is not explained. Toyota allowed Respondents to use registered PRIUS mark for a long period.
Our analysis of the decision passed

The decision has turned upside down the trend of protecting foreign brands on the basis of knowledge and reputation of the mark in India. As per the ruling, the owner of foreign marks in passing off cases will now have to establish that the trade mark has acquired goodwill and reputation in India. Merely being honest adopter, first in the market, knowledge of the trademark in India among consumers prior to the adoption by the defendant will not be enough.

The Apex Court has watered down the decisions passed in Milmet Oftho and Whirlpool case.

In the case of Milmet Oftho Industries v Allergan, Inc. (decision dated 7th May 2004) brought on the basis of passing off, Supreme Court held that it is not necessary for proprietor of the mark to establish goodwill and reputation in the mark locally/ India. The court held 'The mere fact that the Respondents have not been using the mark in India would be irrelevant if they were first in the world market'. The requirement to establish goodwill and reputation in the Indian market laid down by the recent ruling of Supreme Court is a far-reaching change.

In the case of N.R. Dongre vs. Whirlpool Corporation (decision dated 30th August 1996), Supreme Court held that advertisement of a trade mark without the existence of the goods in the local market is use of the trade mark in the said local market.

The issue of unexplained delay in initiating the court action also went against Toyota. In the Whirlpool case, the Court ignored the plea of delay raised against Whirlpool Corporation (original owner of WHIRLPOOL mark) for belated filing of the suit in 1994 even though they lodged opposition in 1989.

There are several cases that are pending based on International reputation and 'spill over' of reputation in India. All of these will feel the tremors of this ruling.

Key learnings from the judgment

The ruling has laid down additional criteria to be fulfilled to succeed in passing of cases i.e. establishing goodwill and reputation of a mark in India. Thus we have gone back to doctrine laid down by the UK courts that reputation and goodwill of the mark is established by its use locally. It seems the ruling does not take into account that the world is more connected today with internet, social media and various other platforms. Thus insisting on local use by way of sale of products does not seem to take the business and social realities into account. Further it also ignores the fact that India was a closed market for many years and we have slowly and gradually opened various sectors for investment. Further post 1991 the successive government has pursued the policy of liberalizing economy to attract foreign direct investment. Thus a host of factors can contribute to knowledge and reputation of a mark without actual sales including but not limited to travel to overseas destinations by Indians for business and leisure, advertising of products not only on internet but also through magazines, satellite television etc. large expatriate population in countries where products are sold.

To sum up in order to succeed in a passing off action use globally without any connection to India may not work.
 
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