Noteworthy Developments in Trademark Law in India (in 2013/14)

Introduction

In the past year, trade marklawin India faced up to new challenges, representing the highly competitive nature of its markets and their increased synergy with the global economy. Courts were called upon to reinterpret the Statute and existing jurisprudence in light of changed economic circumstances and liberalized movement of goods and services across Indian borders. They were also called upon to adjudicate on disputes arising from use of trade marks within the context of television and electronic media, especially on issues relating to ambush marketing, false endorsement, disparagement and unfair competition.

India’s accession to the Madrid Protocol was also another important milestone. The Indian Intellectual Property Office has worked hard to streamline itself to the International Registration system although it is still evolving its systems.

In this paper, I will summarize some of the more important cases and will also discuss some of the prominent procedural aspects of the Madrid Protocol.

  1. Exhaustion of Rights – Does India Follow the Principle of National or International Exhaustion?

Under the TRIPS Agreement, contracting parties are free to determine whether they wish to apply national or international exhaustion of rights.[I]

The Trade Marks Act, 1999, which is TRIPS compliant, does not expressly address exhaustion of rights, leaving the question open for Courts to determine.[II]However, even though the Statue has been in force in India since September 15, 2003, it wasn’t until 2011 that an Indian Court had the opportunity to adjudicate on this issue. The occasion arose when Samsung filed a suit for infringement and passing off against some parallel importers in the Delhi High Court titled Samsung Electronics Company Limited &Anr. v. KapilWadhwa&Ors.(Samsung case).[III]Perhaps to make up for lost time, the issue has been litigated vigorously and is now pending before the Indian Supreme Court, which is expected to affirmatively decide whether India follows principles of national or international exhaustion in Trade Marks. That a lot rides on the Supreme Court’s eventual determination is evident from the fact that INTA has intervened as an Amicus in the proceedings.

The relevant provisions of the Trade Marks Act, 1999 dealing with the exhaustion principle are Sections 30 (3) and 30 (4) of the Act, which read as:

  1. Limits of effect of registered trade mark–

XXX

(3) Where the goods bearing a registered trade mark are lawfully acquired by a person, the sale of the goods in the market or otherwise dealing in those goods by that person or by a person claiming under a through him is not infringement of a trade by reason only of-

(a) the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods, or

(b) the goods having been put on the market under the registered trade mark by the proprietor or with his consent.

(4) Sub-section (3) shall not apply where the there exists legitimate reasons for the proprietor to oppose further dealing in the goods in particular, where the condition of the goods, has been changed or impaired after they have been put on the market.

Ironically, the first discussion on the exhaustion of trade mark rights occurred in a copyright case before the Delhi High Court titled Warner Bros. Entertainment Inc. &Ors v. Mr. Santosh V. G.[IV]The case in question concerned the purchase and subsequent import of original English and Foreign films into India for rental purposes. In the proceeding, the Defendant contended that since he had legitimately purchased original CDs and DVDs, the copyright owner had exhausted its rights and could to object to further sale or rental of those legitimate copies.  In this respect, the Defendant stressed that India favored the international exhaustion of rights and relied on his interpretation ofSections 30 (3) and (4) of the Trade Marks Act, 1999 in support. In its detailed order dated April 13, 2009, the Single Bench of the Delhi High Court ruled against the Defendant. However, it did not have any reason to render an affirmative opinion of the exhaustion defense because i) unauthorized rental of cinematographic works was expressly prohibited by the Copyright Act, 1957; and ii) the Court ruled that copyright owners had the ‘right and authority’ to parcel out their copyright in many ways, including geographically and the Defendant’s rental activities would necessarily impinge on and even negate the copyright owner’s aforesaid right.

The question of exhaustion of rights again made a fleeting appearance in a trade mark infringement actions filed before the Delhi High Court by Xerox Corporation titled Xerox Corporation and Anr. v. PuneetSuri&Ors[V]andXerox Corporation and Anr. v. Sailash Patel and Ors.[VI] In these cases, Xerox alleged that the Defendants were infringing its trade mark rights in the mark XEROX because they were i) importing second hand ‘pre-used’ XEROX branded photocopying machines into India; and ii) were refurbishing and subsequently selling them without the permission or license from Xerox.  The Defendants in turn resisted arguing that they legally imported original second hand XEROX machines into India and that their import and subsequent sale of those original second hand ‘used’ machines was not in violation of Xerox’s trade mark rights.  They further contended that their entitlement extended to refurbishing and reselling the imported originals so long as their customers were not misled about the condition or nature of the product. Accepting that the Defendants had rendered valid arguments, the Court agreed to add the following issues for final adjudication:

  • Whether the import, sale and use of the used / refurbished
 photocopies / printers originally manufactured under the trade
mark ‘XEROX’ by the plaintiff amounts to infringement of trade mark and
 passing off by the defendants?
  • Whether the defendants are entitled to use local spare parts for sale or use of XEROX machines? If so, the effect thereof?

However, because the parties settled before trial could commence, the Court again did not have an opportunity to decide the issue on merits. It is pertinent to point out that the eventual settlement between the parties allowed the Defendants to sell the imported second hand machines provided they carried open disclosures that the machines were second-hand purchases being sold without any warranty or serviceability from Xerox Corporation.  Some may argue that the settlement was a tacit acknowledgement of international exhaustion of rights from Xerox, and restrictions agreed upon mirrored the state of law in the United States.

This brings us finally to the Samsung case. Samsung and its Indian subsidiary (“Samsung India”), who were both Plaintiffs, complained that the Defendants were parallel importers who were importing Samsung printers meant for other markets into Indian and subsequently selling them without authorization in India, often and much lower prices. Samsung alleged that not only was the unauthorized import and subsequent sale a violation of its statutory trade mark rights, but that the Defendants sales were also damaging Samsung’s own sales activities.

In a nutshell, Samsung’s primary grievances were i) the very act of import was in violation of Samsung’s statutory trade mark rights; ii)the imported products were materially different from the ones sold in India and their sale amounted to a misrepresentation that Samsung had agreed to their sale in India.  Consequently, there was a possibility that customers could form a negative opinion of the imported printers (which did not have equivalent features) and that would have a negative impact on Samsung’s goodwill; and iii) the products were not covered by Samsung warranties and thus, customer dissatisfaction and lack of warranty coverage would tarnish Samsung’s reputation amongst consumers. In sum, Samsung argued that its case fell within the purview of Section 30 (4) of the Act as it had shown sufficient legitimate reasons to restrain the Defendants.

The Defendants countered by arguing that i) they imported and sold genuine original and unaltered Samsung printers put into the world market by Samsung and acquired by them through legitimate import channels. Their operations were identical to the manner in which Samsung India, which didn’t manufacture products in India but imported them from other markets and sold them in India;ii) their printers were sold ‘as is’ without any alteration or misrepresentation; iii) the Defendants offered their own warranties to consumers who were well aware that the products were not serviced by Samsung India; and iv) India followed the principle of international exhaustion of rights so once Samsung had legitimately put its products out in the global market, Section 30 (3) of the Trade Marks Act, 1999 prevented it from imposing any further restriction on their resale. Thus, Samsung could not prevent parallel importation.

In support of their position of international exhaustion, the Defendants relied on statement of objects and reasons of Clause 30 of the Trade Marks Bill, 1999, which reads as under:

Sub clause (3) and (4) recognize the principle of “exhaustion of rights” by preventing the trade mark owner from prohibiting on ground of trade mark rights, the marketing of goods in any geographical area, once the goods under the registered trade mark are lawfully acquired by a person. However, when the conditions of goods are changed or impaired after they have been put on the market, the provision will not apply.

The Defendants also relied upon 227th Report on Copyright Amendment Bill, 2010 which reads as under:

Indian law is quite liberal in permitting Parallel Imports of genuine goods bearing the registered trade marks provided such goods have not been materially altered after they have been put in the market…. The general rule is that once trademarked goods are released anywhere in the market by or with the consent of trade mark proprietor, the proprietor cannot assert its trademarks rights to prevent imports of such goods into India, provided that such goods are not materially altered.

In its nuanced and detailed order, the Court traversed through very philosophical arguments. To arrive at its decision, the Court lookedat other provisions of the Trade Marks Act, 1999 and noted that under Section 29 of the Act, import and export of goods under a trade mark without authorization would amount to its infringement if they were further put to use in the course of trade. The Act did not distinguish between genuine and counterfeit products in this respect.

The Court then looked at Section 30 (3) and opined that this section provided an exception to infringement as defined in Section 29 and had to be looked at in the same context as the conditions enumerated in Section 29.  It held that the opening wording of the section – where the goods bearing a registered trade mark–plainly referred to a mark registered in India and this defined the context of the entire section. Accordingly, the later use of the words “the market” as opposed to “any market” in the section clearly meant the domestic market where the mark was registered i.e. the Indian market. Therefore, Section 30 (3) operated as an exception to infringement only if the goods were legitimately acquired through a registered proprietor or his distributer within the Indian market and then offered for further sale there.  The Court held:

Thus, once the situation becomes clear about the import of the opening words of the section, then the said lawful acquisition due to the controlling words registered trademark must originate from the domestic market/ national market, and the subsequent wordings has to be also given contextual reading and the wider import of the same words “in the market” cannot be given to include “worldwide market”. Thus, it has to be confined to within the same market as otherwise it would lead to giving permission to sell anywhere in the world by purchasing from India which cannot be the purpose and intent of legislature while enacting such exception to infringement of Trade Mark in India in the Indian law.

Interestingly, the Court declined to give any weight to the statement of objects and reasons of Clause 30 of the Trade Marks Bill, 1999 and the 227th Report on Copyright Amendment Bill, 2010 relied on by the Defendants arguing that since the language of the Statute was clear and unambiguous, there was no need to look into parliamentary material for interpretation and construction of the Statute. The Court decided all issues against the Defendants

Aggrieved by the decision, the Defendants appealed before the Division Bench of the Delhi High Court.[VII]Noting that the interesting issue [of exhaustion] in trade mark law had immense bearing on trade and commerce in India, the Appeal Court undertook a comprehensive review of the lower Court’s decision. While, agreeing with the lower Court that per Section 29 (6) (c) of the Act, even import of genuine products could constitute infringement, the Appeals Court disagreed that the wording in that section gave context to the exception in Section 30 (3).  On the contrary, the Appeals Court held that the words “the market” meant the international market as it held:

There is no law which stipulates that goods sold under a trade mark can be lawfully acquired only in the country where the trade mark is registered. In fact, the legal position is to the contrary. Lawful acquisition of goods would mean the lawful acquisition thereof as per the laws of that country pertaining to sale and purchase of goods. Trade Mark Law is not to regulate the sale and purchase of goods. It is to control the use of registered trade marks. Say for example, there is food scarcity in a country and the sale of wheat is banned except through a canalizing agency. Lawful acquisition of wheat in that country can only be through the canalizing agency. The learned Single Judge has himself recognized that the law of trade marks recognizes the principle of international exhaustion of rights to control further trade of the goods put on the market under the trade mark.

The Appeals Court also analyzed various foreign Statutes noting that wherever any foreign Statute intended to confine the meaning of the word “market” to mean the domestic market, it expressly stated so. Applying principles of comity of law, the Appeals Court found that the Indian Statute mirrored Statutes that favored international exhaustion of rights. In addition, the Appeals Court also derived support from the statement of objects and reasons of Clause 30 of the Trade Marks Bill, 1999 and the 227th Report on Copyright Amendment Bill, 2010 as well as India’s position during the Uruguay Rounds of the TRIPS Agreement to find that Indian policy favored international exhaustion of trade mark rights. The Appeals Court reversed.

Samsung then preferred an appeal through special leave to the Indian Supreme Court, which has admitted the appeal and has agreed to hear arguments on the question of exhaustion of rights.  Acknowledging that the issue at hand is a philosophical one with immense ramifications, the Supreme Court has allowed INTA to intervene as an amicus in the proceeding.  The Supreme Court took INTA’s amicus brief in support of national exhaustion of rights on record on September 20, 2013. Substantive arguments in the proceeding are yet to commence although it is very possible that there will be a final decision in time for the INTA annual meet in Hong Kong.

III. rade Mark with a Reputation – are they protected?

The Trade Marks Act, 1999 introduced the concept of a well-known trade marks.  The Act defines a well-known trade mark to be:

“well-known trade mark” in relation to any goods or service, means a mark which has becomes so to the substantial segment of the public which uses such goods or receives such services that the use of such mark in relation to other goods or services would be likely to be taken as indicating a connection in the course of trade or rendering of services between those goods or services and a person using the mark in relation to the first mentioned goods or services”[VIII]

Well-known trade marks are afforded extra protection under the Statute that recognizes their special status in the market. For example, the Statute prohibits registration of trade marks that are confusingly similar to a well-known trade mark for any class of goods/services.[IX]Consequently, well-known trade marks can act as a complete bar to registration, provided however, their well-known status is acknowledged as such in that particular proceeding or by a Court or tribunal previously.

However, the Act also recognizes registered trade marks that are not yet well-known but have acquired a certain degree of reputation within India. Such marks are afforded limited protection from infringement by virtue of Section 29 (4) of the Act, which states:

A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which-

(a)  is identical with or similar to the registered trade mark, and

(b) is used in relation to goods or services which are not similar to those for which the trade mark is registered, and

(c)  the registered trade mark has a reputation in India and the use of the mark without due cause takes unfair advantage of or is detrimental to, the distinctive character or repute of the registered trade mark.

Thus, a registered mark that has a reputation may form the basis of an infringement action against an identical or confusingly similar trademark that is used in relation to dissimilar goods/services if it can establish that use of the complained of trade mark is likely to cause dilution through blurring or tarnishment.It is important to note that Section 29 (4) encompasses a broader category of marks that include well-known trade marks.

In a recent case titled Bloomberg Finance LP v. PrafullSaklecha&Ors[X], the Delhi High Court provided much needed direction on Section 29 (4). In this case, the Plaintiff – Bloomberg Finance LP – sued for infringement and passing off, complaining about the Defendants’ use of BLOOMBERG as part of the group corporate name comprising 36 companies all associated with real estate and construction services. At the time the suit was filed, the Plaintiff’s actual use of BLOOMBERG in India consisted of television and related data services. However, they placed material on record to establish the worldwide fame and reputation of the mark BLOOMBERG.

On facts, the Plaintiff’s case was well established and, the Court’s ultimate order granting the interim injunction prayed for was not in doubt. However, the noteworthy aspect of this case is the Court’s detailed analysis of infringement under Section 29 (4) of the Trade Marks Act, 1999 and its clear reiteration that the primary ingredient to invoke infringement under this provision was that the mark had a reputation. The other necessary ingredients to establish infringement were – a) the infringer’s use was without justification; and b) such use would likely cause damage to the Plaintiff’s mark through blurring or tarnishment.

The Court distinguished ‘mark with a reputation’ from well-known mark as defined in the Act holding that:

“It may not be necessary for the proprietor of a registered mark to show that it is a well-known trademark’ as defined in Section 2(zg) although if in fact it is, it makes it easier to satisfy the ‘reputation’ requirement of Section 29(4) of the TM Act”

The Court also noted that there was no requirement to demonstrate “likelihood of confusion” stating:

“legislative intent is to afford a stronger protection to a mark that has a reputation without the registered proprietor of such mark having to demonstrate the likelihood of confusion arising from the use of an identical or similar mark in relation to dissimilar goods and services.”

Although the foregoing decision of the Court was at the interim state, it has given new purpose to Section 29 (4), which has hitherto been used in a more restrictive manner to protect famous trademarks. However, in a new economy that is witnessing tremendous entrepreneurial growth and almost instantaneous brand penetration (largely due to television and the social media), it can be expected that Section 29 (4) will now have a larger role to play in trade mark litigation in India.

  1. Trade Marksand the Big Screen.

Use of known trade marks in movies has provided new and interesting challenges reflecting the competing needs of businesses to control their brand identity and the freedom of speech, especially artistic need to display realistic settings in movies. In various cases filed across India, businesses complained that their trade marks were displayed in negative light, causing loss of reputation and goodwill.  In many instances, Courts have agreed with the Plaintiffs’ and enjoined disparaging use of reputed trade marks in movies.  However, Courts have been careful not to tread on freedom of speech.

In Bata India Ltd. v. A.M. Turaz&Ors[XI], the Plaintiff – Bata is one of India’s best known business houses. It complained of the use of its registered trade mark and trade name BATA in a song that was part of an upcomingBolywood movie –Chakravyuh.  Bata complained that the lyrics of the song, which also referenced other well-known Indian business houses,disparaged its reputation and goodwill because it personified the Plaintiff as the epitome of corporate greed. The Defendants, on the other hand argued that the song in question was really about rising prices and a critique on capitalism, which when viewed in the context of the movie, really reflected a general grouse of the leftist movement against industrial houses. The Defendants’ contended that use of the names of industrial houses was only symbolic and was not defamatory.  They further argued the song was protected under free speech.

Agreeing with the Plaintiff, the Court found that the Defendants’ use of the Plaintiff’s name along with those of other business houses was unnecessary to demonstrate leftist ire against capitalism. Reiterating that the right to free speech was sacrosanct but not absolute, the Court issued an interim injunction restraining the Defendants from releasing the movie, holding:

“…it is not merely use of names in the said song but the damaging and offending expressions which are put forth, leveling serious attributions against the plaintiff which are per se defamatory in nature and therefore, the defendants cannot be permitted to use the name of the plaintiff in order to disparage its reputation by holding them guilty of looting the nation and running their engine by the blood of the general public.”

The Defendants’ promptly appealed before the Division Bench of the Court.[XII] The appellate bench reversed the lower Court order largely because it agreed that the song merely represented the struggle between the ‘haves’ and the ‘have nots’ and when viewed and heard in its contextual setting the song would not be considered derogatory or defamatory by the audience.

The Plaintiff petitioned the Supreme Court[XIII] against the appellate court reversal. Terming the impugned lyrics of the song to be in poor taste, the Court agreed with the Division Bench that the song did not intend to besmirch the reputation of any particular business house or commercial enterprise. The Court declined to interfere with the Appellate Court, holding that the entire song had been written in a manner, which attempted to depict the producer’s view of the state of society today. However, in a fine balancing Act, the Supreme Court directed that the song, when played, was to be run with the following disclaimer:

“Use of the names in the song are merely as example. No injury or disrespect is intended to any particular person or brand.”

In another example, the spoken use of a reputed trade mark in a movie dialogue was restrained because the Court perceived the context to be detrimental to reputation and goodwill of the mark in question.[XIV]In Hamdard National Foundation &Anr. v. HussainDalal&Ors.[XV], the Plaintiff’s mark – ROOHAFZA (a rose flavored concentrate) was used in a movie dialogue where the character (played by a popular movie star) where the dialogue has the character scoffs at ROOHAFZA to his mother. The Plaintiff alleged that the dialogue would have a detrimental effect on the viewing audience and the Court agreed.  Since the movie had already released, it directed the objectionable dialogue to be omitted from future screenings of the movie.[XVI]

In a direct indication that Courts are willing to protect reputed trade marks from unnecessary negative publicity, the Delhi High Court recently even restrained the use of an approximation of the name of a popular banking institution in a movie scene because the scene in question related to a bank heist.[XVII]  The movie scene in question centered around a heist in a bank by the name of IBIBI bank, which the Plaintiff – ICICI Bank Ltd – arguedwas such a close approximate of their name that the audience would readily understand and associate it with the Plaintiff. The Plaintiff’s main grievance was that the bank heistin the scene would adversely affect consumer perception of the Plaintiff’s own security, thereby damaging their reputation as one of India’s trusted banks. Since the movie was yet to be released, the Judge granted interim relief directing the producers to blur offending name and related references from the scene.

However, whether such broad remedies impinge on creative freedom protected under free speech is still an open question. What is certain is that Courts have indicated that unnecessary use of reputed brands is not fair play.

  1. Madrid Protocol – India Accedes.

Finally, India formally acceded to the Madrid Protocol on July 8, 2013 and joined 90 other countries under the International Registration system. To accommodate the requirements of the International Registration System, the Indian Trade Mark Office has worked hard to automate its online systems and integrate its database with the WIPO system. However, the system is still evolving and the Indian Office is streamlining procedures to ensure that International Applications are processed and examined in conformity with Indian law and in parity with Indian applications.

International Applicants designating India would be well advised to keep the following specifics in mind:

  • Pre-filing searches should be conducted to check availability before designating India.
  • In the event a specification of goods/services exceeds 500 characters in any class, excess character fee would be applicable.
  • Specification of goods/services must conform to Indian standards as published by the Trade Marks Office.
  • While International Registrations do not require any claim of use, since India is a common law country, including an appropriate claim of use in the Indian application, is highly recommended if possible.
  • Upon examination, if the Registrar raises substantive objections, then the response to the examination report is due within 30 days from issuance and will have to be filed by an Indian Agent/Attorney.
  1. Conclusion

If the events of the past year are any indication, trade mark jurisprudence in India is rapidly progressing to a more mature state. Traditional standards of trade mark infringement are being redeveloped to accommodate a more fluid market where movement of products/services across national borders is the norm. Courts have demonstrated their appreciation of the new challenges faced by trade mark owners. Theyare mindful of the instantaneous impact of the electronic media on brand identity in the new economy and are willing to fashion appropriate remedies. However, trade mark owners must also actively contribute by updating strategies to protect their brands.

[I]Article 6 -
Exhaustion – For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.

[II] The word ‘market’ though used throughout the statute has not been defined in the Act. Consequently, it is open to interpretation whether the term means internal or global market.

[III] Delhi High Court, CS(OS) 1155/2011

[IV] Delhi High Court, CS (OS) No. 1682/2006

[V]Delhi High Court, CS(OS) 2285/2006

[VI]Delhi High Court, CS (OS) 2349/2006

[VII]Delhi High Court, FAO (OS) 93/2012

[VIII] Section 2 (zg) of the Trade Marks Act, 1999

[IX] Section 11 (2) of the Trade Marks Act, 1999

[X]Delhi High Court, CS(OS) 2963/2012

[XI] Delhi High Court, CS (OS) 3010/2012

[XII] Delhi High Court, FAO (OS) 505/2012

[XIII]Supreme Court, SLP (C) No. 32998 of 2012

[XIV] Section 29 (9) of the Trade Marks Act, 1999 states: where the distinctive elements of a registered trade mark consists of or include words, the trade mark may be infringed by the spoken use of those words as well as by their visual representation and reference in this section to the use of a mark shall be construed accordingly

[XV] Delhi High Court, CS (OS) 1225/2013

[XVI] This case draws an interesting parallel with the popular Hollywood movie Sideways. The characters in the movie denigrate Merlo and a 2009 study by Sonoma State University found that Sideways slowed the growth in Merlot sales volume and caused its price to fall.

[XVII] ICICI BANK LTD. v. ASHOK THAKERIA AND ORS.,CS (OS) 1744/2013