Written by: Sunethra K. Reddy & Surabi Puhazhendi 
Trademark, which falls under the broad purview of Intellectual Property Rights (IPR), essentially comprises of recognizable signs, expressions, or designs enabling identification of products or services of various business organizations and legal entities. “Passing off” is a term commonly associated with the concept of trademarks and although similar to “infringements”, it helps protect the goodwill attached to both registered as well as unregistered trademarks. The authors in an attempt to differentiate the two, bring out the requirement of a higher burden of proof in the case of passing off. The research questions addressed in the article pertain to understanding what entirely constitutes the action of passing off and the elements that have to be proved in a court of law to claim the appropriate remedy. In the light of procedural uncertainties under the Trademarks Act, 1999 and the absence of statutory recognition, the article aims at tracing the judicial development relating to the act of passing off and seeks to bring out the difficulties faced by the courts in pronouncing judgments and awarding remedy. Additionally, it analyses the consistent efforts of the courts in developing a straitjacket solution by applying the common law principle of Torts. Conclusively, the paper summarises how an action under the tort of deceit has developed into a full-fledged branch in itself.
Unregistered trademark, Passing off, Trademarks Act, 1999
INTRODUCTION TO IPR
Intellectual Property Rights, more commonly referred to as IPR has become a concept of extreme relevance and increasing commonality as it has taken over the world recently. It largely covers creations of the mind such as symbols, images, inventions, artistic and literary works, and names that are commonly used in Commerce. It is the legal right that protects the various intangible creations, mentioned previously, by the human intellect. It enables the creator to have the sole or exclusive right over his creation or invention for a specific period of time to the disadvantage of others who may seek to take credit for the same. IPR thus facilitates a good and secured environment for enabling economic development against the backdrop of industrial development, economic growth, and promotion of healthy competition.
There are a number of common Intellectual Property Rights such as Patents, Copyright, Trademarks, Design, Database, Confidential Information, Industrial Indications, and Trade secrets. The primary aim of these rights is to protect the interests of both the innovators and the investors so that trade and commerce can flourish successfully.
A trademark essentially involves a word, a phrase, insignia, or a symbol that is recognizable. It is used to identify a product specifically and additionally, differentiate it from other similar products.It exclusively directs anybody who views it towards a pre-identified company and facilitates in pinpointing ownership of the brand. It supports orderly marketing as it prevents a second entrant from being an unfair beneficiary by appropriating a successful trademark. While demanding distinctiveness, there are certain boundaries on this aspect to prevent the rise of any form of confusion and to ensure uniqueness.
A well-known example of a trademark is the alphabet “S” stylized and written in a certain form as a logo and the specialized form of writing “Suzuki” which tantamount to the trademark of the renowned company associated with cars, popularly referred to as Suzuki.
Trademarks play an active role in providing consumers assurance and security by ensuring that their buying decision is based on a legally identified and valid product. Certain requisites under the broad term “distinctiveness” entail that the description should not be generic, geographic names should not designate a location, a surname with a potential of confusing the customers, or merely a descriptive phrase or a term like “freshness” associated with vegetables should be absolutely avoided.
Trademarks thus help in distinguishing the goods based on the entity that stands as their putative origin and not based on their market or commodity type. It does not represent like that of copyright, nor is it functional in the sense of a patent, it may be regarded as a supplement to the product, perhaps a semiotic and indexical relation that is dependent on the origin. It does an important role in helping the consumer distinguish and identify between two or more goods having similar quality and quantity.
The concept of “passing off”, often misconstrued with the concept of “infringement” falls under the broader ambit of the trademark. It is essentially a common law tort and is used to enforce unregistered trademark rights. It protects the creator and prohibits one from misrepresenting his goods or services as belonging to that of another. It was in the earlier period, restricted to simply the representation of the goods of one person as that of another, but it has undergone a lot of changes with the passage of time. It now extends to non-trading activities, professions, and even businesses and services.
By misrepresenting and causing confusion in the minds of the consumer, passing off is regarded as a form of unfair competition. There exist two categories broadly under the concept of passing off- the first category states a situation wherein the defendant, that is, the trader or a businessman has marketed his goods or his business in a method that gives rise to a false impression or a mistake in the minds of the consumers. He further shows that this setup has been undertaken under the authorization of the plaintiff, the person who has been wronged as his goods have been misrepresented, and that there persists some sort of business arrangement too. The objective behind this false pretense is to not just earn more money but also to benefit from the goodwill of another. In the second category, both the plaintiff and the defendant are involved in the business of selling the same product. The allegation against the defendant is that the naming, packaging, or description of the product is of extreme similarity to that of the plaintiff and subsequently causes confusion to the consumers who presume that the products of the plaintiff and defendant are one and the same.
EVOLUTION OF PASSING OFF
The law of Passing-Off has developed under the aegis of Trade Marks protection and is known by different names including passing off in the common law countries, unfair competition in the United States and a few other countries, and palming off, elsewhere in the world. Passing off dates back to the sixteenth century the United Kingdom and was introduced to prevent one person from misrepresenting his goods as that of the other. Since then, the law of passing off has undergone extreme changes and its scope has been expanded to meet the modern commercial environment.
The Indian tort of passing off is a combination of the law, as evolved in the united states and the common law countries, mainly the United Kingdom. It is, therefore, important to follow the evolution of passing off in these counties, in order to understand the position in India.
In the UK, the first case of passing off was recognized in 1580, in an unrecorded case, where a clothier claimed that he had acquired a reputation for his cloth and another clothier used his mark, with the mala-fide intention of deceiving the public, an action for recovery was upheld by Dodderidge, J. This judgment was echoed in the cases of Southern v. How and Dean v. Steel in the 1620’s. This was later extended in the 1742 case of Blanchard v. Hill, where it was held that the action should involve a fraudulent act, intended to draw away the customers of the plaintiff.
Right before the introduction of the Trade Marks Registration Act, 1875, Lord Langdale defined passing off and said that no man can sell his goods, under the pretense that they are the goods of another man in the case of Perry v. Truefitt. Half a decade later, the definition changed, in the landmark case of Montgomery v. Thompson, where it was held that passing off claims can be extended to place names if such place name became distinctive to the plaintiff. Similarly, the case of Reddawav (Trank) & Co. v. George Banham & Co. Ltd, further extended the scope of the doctrine to descriptive terms of all types and stated that even if such terms were associated with the plaintiff, in the minds of the general public. The Reddaway case also cleared that passing off is not recognized as a proprietary right, and so the action remained sui generis, whereby remedy lay, in cases of damage sustained due to misrepresentation of goods.
In the beginning of the 20th century, passing off was given a modern connotation in the Inland Revenue Commissioners v. Muller & Co.’s Margarine Ltd case, by establishing goodwill as a legal right and defined it as the benefit, advantage of the mark, name and the reputation of the business. Goodwill therefore became an essential aspect in cases of passing off. Moreover, in the landmark case of Spalding v. Gamage Ltd. the concept and meaning of misrepresentation was made flexible, removing the tort from all its previous restrictions. This meant it was now recognised as a property right, and therefore, fraud was no longer an essential element, making passing off, a strict liability common law economic tort.
The next important phase was in 1961, in the J Bollinger v. The Costa Brava Wine Co Ltd case. This further removed all the limitations in maintaining an action of passing off, so much so, that the validity of such extensions was questioned by a few justices in the UK. The case was relating to the use of the term ‘Spanish Champagne’ by the defendant manufacturer. The court held in favour of the plaintiff, despite the fact that innumerable producers had the right to use the term as they lived in the Champagne district. The case could therefore be interpreted to mean that it is not always necessary for the plaintiff to establish an association between the mark and his goods. The present law followed in the UK was laid down in the Rickett & Colman v. Borden, a 1990 case, which has substantially influenced the way passing off is addressed in courts in common law counties. (explained elsewhere in the paper)
Passing off, in the United States is called unfair competition, that is, it is unfair competition for a person to pass his goods, by using the trademark of another trader. The tort dates back to the 18th century and individual states started creating their own laws in the 1850s . The first fundamental decision was the Supreme Court case of Me Lean v Fleming, where the law of passing off was affirmed and the definition was laid down. The court, in Patridge v. Menck, held that if the plaintiff has an interest in his name or goodwill of his business and has adopted a particular mark, which indicates to the public that the goods containing the said mark are sold by him, he will have protection against a third person, thereby recognizing the concept of goodwill.
In the case of Boardman v. MeridonBrittannia (1868), the court said that an action for passing off depends upon the facts and circumstances of each case. The general yardstick laid down in the 19th century was that, if the marks or the ‘get-up’ of the defendant is such that it is likely to mislead the ordinary purchasing power and fraudulently mislead the public, it gives the plaintiff, equitable protection.
The scope of passing off had a set-back in the 1871 case of Canal Co. v. Clark, where the court refused to bring geographical marks within the ambit of passing off, although the plaintiffs were the first to use the mark. The court strongly opposed the claims of the plaintiff, reasoning that consumers will be affected, rather than protected if traders could have exclusive trademarks over such terms, creating a situation of monopoly. Similarly, the court refused to enjoin the defendants in the case of AmoskeagMfg Co. v. Spea and said that a generic name, which is merely descriptive of something cannot be protected as a legal right.
New aspects were introduced to passing off over the course of the 20th century and the aforementioned position changed. In the 1900 case of Elgin National Watch Co. v. Illinois Watch Co, Justice Fuller changed the interpretation and introduced the term ‘secondary use’. He said that if the defendant’s secondary use of the mark has been acquired, it would amount to a fraudulent act, which deceives the public. This was further expanded in the case of Buzbv v. Davis and Herring-Hall Marvin Safe Co. Case, where the plaintiffs had used the mark keystone exclusively for 19 years before the defendants entered. The court held that even though the mark is descriptive to a particular locality, the defendant’s use will lead to fraudulent secondary use.
The court in the Holeproof Hosiery Co. Case, concluded that whether the use of descriptive and generic terms amounts to passing off, depended on the presence of a fraudulent element. In this the court held that fraud was present and granted an injunction to the plaintiffs, because if the defendants wanted to carry on a bona-fide business, they would not have so closely imitated the plaintiffs’ method and marks.
The present position is similar and the claimant has to prove two things in the court. First is the distinctiveness of the mark and secondly, the courts must determine whether the defendant’s use is likely to cause confusion in the minds of the public. The courts have established a likelihood of confusion in the light of various factors, including the intent of the defendant. In the US, it is not necessary to register a trademark, in the case of unregistered ones, they are called common law trademark and can be enforced nevertheless, within the geographical area of the mark being used.
Passing off, as seen today has evolved over a period of time, is essentially an amalgamation of the common law principles as seen the UK and the law laid down and followed by courts in the USA. Ancient traders did not need protection as the products made by them were of superior quality. Example, the cloth of Dhaka, was a high-quality merchandise, produced in India, which was highly appreciated by foreigners, and could never be copied. However, with the entry of the East India Company, private traders and big merchants wanted monopoly and this sparked off the need for Trade Marks protection. Therefore, in the beginning of the 19th century, economic policies on the lines of ‘real world results’ and ‘likelihood of confusion’ started emerging.
In JuggilalKamalapat of Cawnpore and Ors. Case, even in the absence of Trademark registration of protection, the court granted an injunction against the defendant who used the lotus emblem of the plaintiff. Even though, on close examination, the design used by the defendant was actually a rose, not a lotus, the whole get-up created confusion and hence the court decided in favour of the plaintiff due to long use, even in the absence of a registered trademark. Moreover, the court, in J.C Eno Limited v. Vishnu Chemical Company, laid down that if a trader has acquired the exclusive right to use a mark in a particular language, the same right will extend against a person who uses the same mark in a different language. Therefore, as early as the year 1941, the defendant was restrained from using the term ‘Peacock’, when the plaintiff produced similar goods under the term ‘Mayur’.
Commercial India, even in the 20th century, struggled for the establishment of trademark protection. In 1935, Courtney Terral, the Chief Justice of Patna High Court, endorsed the demand made by Dr.S.Venkateswaran for trademark legislation. The first Trademark legislation was the Trade Marks Act, 1940. Even before this act was enacted, the plaintiff could file a suit under relevant provisions of the Indian Penal Code, 1860, the Indian Merchandise Marks Act, 1889 and English common law principles. What was essential to be proved was that there was public use of the plaintiff’ trademark, secondly, the defendant, wrongfully used the goodwill of the plaintiff to pass of his goods and finally, the defendant had used a mark, very similar to that of the plaintiff.
The position changed, when in the Bhagwan Das case, the court held that the only question to be addressed in an action for passing off was whether the misrepresented mark used by the defendants will cause confusion amongst the customers. The basic principle is that no one can represent their goods as being associated to someone else.
With respect to the statutes, until 1940, there were no provisions pertaining to trademarks or passing off in India, however, section 54 of the Specific Relief act, 1877 dealt with perpetual injunctions. The Bombay Hight Court case of Re Century Spinning & Manufacturing Co. Ltd Case, recognized the Specific Relief act and observed that the courts could utilise the power to grant injunction under section 54. This was later affirmed by the then Supreme Court, in the Commissioner of Income Tax Bombay Case.
The Trade Marks act, 1940, provided for registration of Trademark and gave the proprietor of the trademark, certain common law and statutory rights. This act was later modified and the Trade and Merchandise Marks, 1958 was introduced, which consolidates the Merchandise Marks act, 1889, relevant provisions of the Indian Penal code and the Criminal Procedure Code into one legislation. The latest and the current legislation on passing off is the Trade Marks act 1999. Although passing off is not defined under the act, section 27(2) provides that non-registration of a trademark will not affect the right of action against any person who passes off their goods, under the mark or name used by the plaintiff. Section 135 spells out the remedies as injunction, damages or account of profits.
ELEMENTS OF PASSING OFF
Keeping in mind the evolution, the House of Lords, in 1990, in the Reckitt & Colman vs. Borden case, gave passing off, a new dimension. This case laid down the classical trinity- Goodwill, Misrepresentation and Damages, which are the elements that the plaintiff will have to establish to maintain a cause of action. The court held that the plaintiff has to first establish the presence of goodwill or reputation attached to the goods or services offered by the plaintiff, and this goodwill is what creates a distinctive aspect in the minds of the public. Secondly, there must be a misrepresentation of the goodwill of the plaintiff, on the part of the defendant, which misleads the public to believe that goods offered by the defendant are associated to the plaintiff. Finally, the plaintiff must suffer some damage due to the misrepresentation by the defendant, which has led the public to believe that the plaintiff is the source for the defendant’s goods.
Following the House of Lords judgement, the Delhi Hight Court, in the case of Baker Huges Ltd v. HirooKhushalani also laid down the three elements for maintaining an action for passing off– Firstly, the plaintiff has goodwill in his goods/ name or mark; there is an intentional / unintentional misrepresentation, which causes confusion; and finally, the plaintiff is likely to suffer damage due to the misrepresentation. This has also been affirmed by the supreme court in the case of Laxmikant V. Patel v. Chetanbhat Shah.
The characteristics of passing off was given by Lord Diplock in multiple cases, the landmark one being the Erven Warnik B.V. v. Townend case. The characteristics are- misrepresentation; made by defendant in the course of trade; to prospective future customers; with the foreseeable consequence being injury to the goodwill of the plaintiff; which will cause actual damage to the business of the plaintiff. This was later re-affirmed in Indian context, by the Delhi High Court, in the case of ICC Development (International) Ltd. vs. Arvee Enterprises and in SakalainMeghajee vs. BM House (India) Ltd.
The first essential is for the plaintiff to prove that there is some goodwill attached to his trade name/ mark, in the minds of the purchasing public, which gives a distinctive identity to the plaintiffs’ goods. Lord Macnaghten defined goodwill as the advantage or benefit of the reputation and good name of the business. It is the attractive force that brings in customers. Such goodwill must be established in the minds of the purchasing public. It is necessary to establish goodwill because an action for passing off will lie only when there is damage done to the reputation of the plaintiff.
In a Karnataka High Court case of Deepam Silk International vs. Deepam Silks, held in favour of the plaintiff, as he had spent lakhs of money for a decade, gaining reputation and goodwill by advertising, and if the defendant used the trade name to pass off his goods, it amounted to a valid cause of action. In India, in cases of passing off, the law presumes damage for the plaintiff, if his goodwill has been interfered with. It is for the defendant to show otherwise.
The second element is that of misrepresentation, whereby the plaintiff needs to show that the defendant made a misrepresentation that the goods sold by him are in fact the goods sold by the plaintiff, which deceives the public. It was appropriately definedin the Advocaat case, that where a false representation/ suggestion made by the defendant that their business was associated or connected with each other, would likely damage the reputation and the goodwill of the plaintiffs’ business. It should be shown, in each case, that the defendant represented his goods to the public, by using the mark or get-up of the plaintiff, with the intention to deceive.
The final element is where the plaintiff has to show that he has suffered or is likely to suffer damage due to the defendants’ misrepresentation in deceiving the public to believe that the source of his goods is that of the plaintiff’s. In fact, damage, in most cases naturally flows from proving goodwill and subsequent misrepresentation. In the case of Walt Disney Productions v. Triple Five Corp, it was held that it is presumed that damage has been caused to the plaintiff and he is authorized to collect the cost of damage caused, if the first two element are satisfied.
- Goodwill Hunting In Passing Off
The article by prof. Saw Cheng Lim seeks to analyze and understand the application of two schools of thought which facilitates the interpretation of passing off action instituted by a foreign trader in the light of goodwill. The two schools being “hard line” and “soft line”, the author directs most of his attention and analysis towards the former and considers the judicial pronouncements of Canada, Australia, Singapore and United Kingdom. To state in simple terms, according to the hard line concept, the claimant is required to show that he has a business in the local limits and thereby customers too in the jurisdiction. However, the soft line approach specifies that the trader’s goodwill should not be largely dependent on territorial confines, but merely by paying heed to the facts of the case.
The question arises in the hard line approach and by considering Lord Neuberger’s judgement, the author explains that goodwill and reputation are not the same, reputation is easier to prove and will result in excessive protection. Passing off is a common law tort reliant on goodwill only. The analysis of the term goodwill brings to light that it is not merely sufficient for the claimant to prove that there exists a pool of people in the jurisdiction who happen to be customers only when they are abroad. The emphasis is on “happen to be” and thus to establish goodwill, they need to have customers inside the jurisdiction too and not become customers only when they visit overseas jurisdictions.
The ultimate test is whether the claimant’s business exists in substance, not limited to form. Whether the customers seek to patronise the establishment of the claimants and not just fortuitously. Therefore, in the current era of globalisation and advancing modes of communication and technology, there is a need to create exceptions to the hard line approach and ultimately an amalgamation of the two schools of thought will best facilitate the various courts in providing a well suited decision.
- Evolving contours of passing-off law: certain salutary developments
Introducing the concept of “Passing- off” as a simple truism that was stated two centuries back, the author explains how various aspects of this concept have evolved with time and the existence of multiple perspectives and opinions of the court in deciding matters pursuant to the same. The first topic deals with dishonesty as a head of challenge and much debate. By considering a myriad case laws, the author depicts how certain judges have been firm in stating that the very fact that there exists a confusion in the minds of the customers is indicative of the fact that the defendant, prima facie, has the intent to deceive and thereby the dishonest intention. J Graham may be quoted where he explains that the direct explanation for a trader adopting the claimant’s product arrangement is the improper motive to benefit from the established goodwill. While an alternate reasoning is that “dishonesty” is simply a state of mind, and thus there can be no preliminary presumption, but has to be proved through trial has legal backing too.
The next topic is regarding duplication of labels, one possible theory was the “side by side” comparison wherein if two products has similar trade dresses and the labels were almost similar with a difference largely existing only in the name, the label alone was sufficient to dismiss any form of deception. The name is inspired by a situation in which the two products are placed side by side, and if one looked at it and treated the two labels fairly, then there could be no deception at all. Another view to this is that the focus must be on similarities over dissimilarities and the confusion should be discussed from the eye of a man of reasonable intelligence and imperfect recollection. Thus, if a trader conveys maximum proximity to the claimant’s products and simply seeks to distinguish by affixing a non-identical label, then the law will presume that the defendant has driven upon the goodwill of claimant.
The situation regarding de facto monopoly over colours may be summarised by pointing that if a particular product has for long duration established distinctiveness through trade dress and particular colour combinations, then there is an inherent protection to monopolise the same. With respect to variations, any form of deception, however subtle it may seem, still tantamount to deception. Therefore, dealing with concept of misrepresentation, which finds a place in the trinity for passing off along with goodwill and damage, it may be concluded that this tort has been continuously developing and should aim at eroding any form of unfair commercial benefit that traders may seek to exploit.
The remedy under passing off comes under common law jurisdiction as opposed to infringement which provides for a statutory remedy. Thus, passing off has a broader remedy and finds its mention under Section 27 (2) of the Trade Marks Act, 1999 which explicitly provides that “Nothing in this Act shall be deemed to affect rights of action against any person for passing off goods or services as the goods of another person or as services provided by another person, or the remedies in respect thereof”. This provides an overriding effect to the tort of passing off and its common law remedies. Furthermore, Section 135 of the Trademarks Act specifies the various forms of reliefs that may be availed in case of infringement or passing off.
Injunction is one of the commonly granted reliefs in a suit for the tort of passing off and may be either perpetual or interlocutory in nature. Perpetual, also referred to as “final” injunction is usually granted after clearly establishing the existence of passing off, whilst interlocutory injunction is imposed during the course of the suit or until a particular decision has been sought and incorporates ex parte interim injunctions, Anton pillar order (inspection of the defendant’s premises to form an inventory of the materials, goods, documents etc.) and Mareva injunction (disposal of the defendant’s assets which does not impact the plaintiff’s capability to claim pecuniary remedies). The purpose of granting this relief is not merely for protection but also for prospective injuries. Most of the provisions with respect to injunction is contained in Sections 36- 42 of the Specific Relief Act, 1963, Order 39, Rules 1 and 2 along with Section 151 of CPC.
Another remedy offered by the court is the “order for an account”, wherein the defendant has to account for all the profits that arose from infringing or duplicating the marks or trade dress or any aspect which qualifies for passing off and is considered to have been an improper gain.
Damages, which is a commonly granted remedy cannot be exactly quantified but accounts for all losses to the business, trade, connections, reputation, and goodwill which occur directly and are immediate consequences of acts of the defendant. Under tort law, the purpose of damages is not punitive in nature but rather compensatory and should not be to take undue advantage, to make a profit or punish the other side. The Court may even permit the destruction or disposal of the incriminating material through an ex parte application.
The Indian tort of passing off is based, wholly on common law principles and the American law, with slight variations. The Indian trademark legislations are also modeled along the lined of the United Kingdom statutes. Under the common law principles, passing off was considered a personal right, where an action lay if fraud was proved. This is contrasted with the passing off under the law of equity, which is a propriety right, which doesn’t necessitate proof of fraud, an injunction would flow. India thus followed a fusion of common law and equity and the Supreme Court of Judicature reiterated that, due to such a fusion, both common law and equitable remedies were available for a case of passing off, and at present, it is classified as a tort.
The law of passing off has been expanded and its scope has been widened to include even descriptive and geographical terms in most legal systems, including India. It was originally based on intentional misrepresentation, but there were signs of flexibility, by the end of the 19th century. This change was pushed by the consuming public, and the changing trade and merchandise dimension. It was recognized, for the first time in 1580 and has now adapted to the global age of marketing, technology, and advertising. In the light of its expansion, the problem thus arises in maintaining a balance between the protection of the plaintiff trader and the protection of free competition.
The objective behind action for passing off and infringement is ultimately for the protection of goodwill, although they are two different concepts. Passing off has a broader ambit covering both registered as well as non registered trademarks, however, it is much harder to prove the same. Infringement is proved upon establishing deceptive similarity of the two products but in case of passing-off, additionally, confusion among consumers and potentiality of injury to the goods of the plaintiff is also necessitated. Furthermore, passing off also entails a wider remedy than that of infringement but has relatively harder remedies under the Criminal provisions. As far as the jurisdiction is concerned, a suit for infringement can be heard even by High Courts owing to Section 134 but a suit for passing off is governed by Section 20 of the Code of Civil procedure, 1908 which permits the suit to be heard in the place where the cause of action may arise or based on the residence of the defendant. Therefore, the action of passing off which finds its roots in the tort of deceit has developed into a separate branch of tort in itself through a number of case laws and landmark judgments and has become an important concept today. Protection, without excessive controlling and promoting competition without imprudent constraint, is the very basis of an economy and the common law tort in a discussion.
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