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Contemplating effectiveness of proposed amendments to Drugs and Cosmetics Rules in tackling the menace of deceptively similar trademarks

Trademark infrignement

The problems faced by brand owners and consumers who deal with trademarks that are identical or deceptively similar are well known. In most such cases, consumers may be end up buying one product thinking its another, leading to inconvenience. However, when such confusions occur in pharmaceutical products, it may not just be a matter of inconvenience, but could have far reaching consequences. This very problem of pharmaceutical products marketed under trademarks that are confusingly similar is sought to be addressed in India by an amendment proposed to the Drugs and Cosmetics Rules, 1945.

The proposed amendment may be attributed to the directions given by the High Court of Delhi in a suit 

between Curewell Drugs & Pharmaceuticals and Ridley Life Science, although Indian courts have dealt with many cases involving drugs bearing confusingly similar names. The draft proposes to introduce the below recited rules to address the issue of drugs bearing confusingly similar names.

“In case the applicant intends to market the drug under a brand name or trade name, the applicant shall furnish an undertaking to the licensing authority that such or similar brand name or trade name is not already in existence so that the brand name or the trade name to be used by the applicant shall not lead to any confusion or deception in the market.”

It is pertinent to note that, Section 17B of the Drugs and Cosmetics Act, 1940 empowers the drug licence granting authority, Drug Controller General of India (DCGI), to raise objections in case of drugs bearing confusingly similar brand names, which is also pointed out by the Court. In view of said section, it is not clear how the proposed amendment to the Rules further empower DGCI to proactively tackle the problem.

One may argue that it is not the lack of provisions in appropriate statutes to deal with the problem, rather it is the lack of procedures and infrastructure to effectively implement the provisions, that has led to the problem not be effectively addressed. The Court in fact recognises this and has issued directions for consideration by the authorities to tackle the problem effectively. The directions are listed below.

  • Creation of a secured platform, to be under the supervision of the DCGI, which is accessible to all State FDAs, both for access of data and for uploading of data.
  • Creation of a “master electronic database” of all the approved brand names for manufacture and sale of drugs issued both by the DCGI and the State FDAs and making the same available to all state FDAs and Drug controllers through a secured platform. The list to be maintained and made available both brand wise and manufacturer wise, on the secured platform.
  • List of registered trade marks under Class 5 for pharmaceutical and medicinal preparations be obtained from the Controller General of Patents, Trade marks and designs and be made available to the approving authorities at the Central level and State level.
  • Access to the data be given to Drug Inspectors/Drug Controllers across the country;
  • Drug Inspectors/Drug Controllers to conduct regular and periodic inspections as per the Act and the Rules to ensure that the drugs that are being manufactured in a particular unit are duly licensed for. The reports of the said inspections to be submitted through the secured platform;
  • Periodic and regular reports of drug inspectors should be compulsorily submitted to the respective licensing authorities on the secured platform and a mechanism be set up for review of the said reports at the State level;
  • Periodic meetings ought to be held at the central level, to review the status of manufacture and sale of drugs across the country, under the aegis of the DCGI;
  • Strict action in accordance with law ought to be taken against those manufacturers who manufacture drugs without licences, who indulge in adulteration or contamination of drugs etc. A periodic report as to the number of actions taken, ought to be uploaded on the secured platform of the DCGI.    

Implementing procedures and developing technology platforms in line with the directions above is certainly the way forward if the authorities wish to tackle the problem proactively and effectively. We certainly hope that such long-term solutions, though time consuming and resource intensive, are implemented, given the serious consequence that may result from the problem of drugs being marked under deceptively similar trademarks.

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Deceptively Similar Marks: Registration Allowed If Services/Goods are Different Although Within the Same Class

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Brief Facts of the Case

Karnataka Co-Operative Milk Producers Federation Ltd. (KMF), has been producing and selling milk and milk products, since 1985, under their mark ‘NANDINI’ which had been registered under Class 29 and Class 30.

M/S. Nandhini Deluxe is in the business of running restaurants since 1989 under the name ‘NANDHINI’ and had applied for the registration of the same.

The Deputy Registrar of Trade Marks had the application submitted by the restaurant chain and allowed for the registration for their mark ‘NANDHINI’ as well. The Intellectual Property Appellate Board (IPAB), however, set aside Deputy Registrar’s order, and the High Court confirmed the IPAB’s decision on the following grounds:

  • The mark ‘NANDINI’ (KMF) had acquired a distinctive character and was a well-known mark;
  • Products sold under the infringing mark ‘NANDHINI’ (Restaurant) were of the same classes as those under ‘NANDINI’ (KMF).
  • The use of the infringing mark is different only in one alphabet but with no difference in spelling or pronunciation in the local language and would very likely to cause confusion in the minds of public if allowed to be registered for the commodities falling in the same class;

In 2015, the proprietors of ‘NANDHINI’ (Restaurant) appealed to the Supreme Court against the decision of the High Court.

Arguments by the Parties:

Proprietors of ‘NANDINI’ i.e. KMF objected to the use of the mark ‘NANDHINI’ by the Appellants (Restaurant) on the grounds that:

  • It was deceptively similar to the mark of the respondent and was likely to deceive the public or cause confusion.
  • KMF had long and sustained use by the ‘NANDINI’ and had acquired a distinctive character and was well-known to the public.
  • The public associates ‘NANDINI’ with ‘NANDHINI’ because of phonetic similarity.
  • ‘NANDHINI’ was adopted by the restaurant chain to ride on the goodwill of trade mark ‘NANDINI’ (KMF).

Proprietors of ‘NANDHINI’ Deluxe objected that:

  • It was running the business of restaurant since 1989 and KMF had started using mark ‘NANDINI’ since the year 1985 only for milk and milk products and not for other products.
  • Goods and services of ‘NANDHINI DELUXE’ were totally different from that of the KMF and, therefore, there was no likelihood of confusion or deception among the public.
  • The monopoly under a Trademark only extends to the goods which are falling in a particular class and not the entire class of goods and the trade mark which is similar in nature can be registered for the goods which are falling within the same class but are not identical to those of the previously registered mark.

Court’s Ruling:

The Hon’ble Supreme Court granted the registration of the mark ‘NANDHINI’ by the restaurant on the condition that registration will not be given to them for milk and milk products.

The court relied on the following reasoning to determine whether a similar trade mark in respect of similar goods would cause deception and confusion in the minds of the users:

  • While the goods of both parties fall under the same classes (i.e. 29 & 30), the goods of the parties differ from each other.

One (NANDINI) was concerned with the production of only milk and milk products while the other (NANDHINI) dealt in fish, meat, poultry and game, meat extracts, preserved, dried and cooked fruits and vegetables, edible oils and fats, salad dressings, preserves etc. Furthermore, ‘NANDHINI’ had also relinquished its claim for milk and milk products.

  • The nature and style of the business of the appellant restaurant and the respondent federation were altogether different. One (NANDINI) was a manufacturer of dairy products while the other (NANDHINI) ran a full-scale restaurant business.
  • There’s mere phonetic similarity as far as the word marks are concerned (i.e. NANDHINI/NANDINI). However, the trade mark with logo adopted by both parties are different.

The restaurant chain uses the word ‘NANDHINI DELUXE’ which is followed by the tagline ‘the real spice of life’ and a device of a lamp accompanying these words.

On the other hand, the milk federation only uses the word ‘NANDINI’ beneath a ‘Cow’ logo and is encircled by egg shape circle.

  • There is a difference in not just the visual appearance but even in their products. The manner of business is different. All of these factors make it difficult to imagine that an ordinary man would associate the goods of the Restaurant as that of the Milk Federation.
  • The restaurant had applied the trademark ‘NANDHINI’ in respect of goods which are used in the products/services of restaurant business. Said items do not strictly belong to Class 29 or 30. Other items necessary to run their business or render their services include stationery, furniture, utensils and crockery all of which do not fall under class 29 or class 30.

To quote the SC:

“One other significant factor which is lost sight of by the IPAB as well as the High Court is that the appellant is operating a restaurant under the trademark ‘NANDHINI’ and it had applied the trademark in respect of goods like coffee, tea, cocoa, sugar, rice, rapioca, sago, artificial coffee, flour and preparations made from cereals, bread, pastry, spices, bill books, visiting cards, meat, fish, poultry and game; meat extracts; preserved, dried and cooked fruits and vegetables; jellies, jams, fruit sauces, etc. which are used in the products/services of restaurant business. The aforesaid items do not belong to Class 29 or 30. Likewise, stationery items used by the appellant in the aid of its restaurant services are relatable to Class 16. In these circumstances, there was hardly any question of confusion or deception.”

Thus, the goods that are dealt with under the name ‘NANDHINI’ aren’t strictly under class 29 & 30. The milk and milk products, which are sold by the respondent under the trade mark of ‘NANDINI’, fall under Class 29 and Class 30 as per classification under Schedule IV to the Trade Marks Rules, 2002.

  • "Nandini/Nandhini” is a generic name, representing a goddess and a cow in Hindu mythology, and it is not an invented or coined word attributed to one party.
  • Referring to the judgement in Vishnudas Trading As Vishnudas vs The Vazir Sultan Tobaccoco. Ltd. JT 1996 (6), 366 1996 SCALE (5)267, it is stated that the proprietor of a trade mark cannot enjoy monopoly over the entire class of goods especially if he is not using the said trade mark in respect of certain goods falling under the same class. Refusal under Section 11(2)(b) cannot be made because both the parties started using the marks within a span of 4 years of each other and both have built a considerable reputation with the state boundaries for themselves over the years.

 

Thus, on all these grounds, the Supreme Court laid down that the two marks are not deceptively similar.

Conclusion:

The Supreme Court thus allowed the mark ‘NANDHINI’ to be registered and used by the restaurant based on the ground that it (device/logo) is not deceptively similar to the mark ‘NANDINI’ (device/logo) used by the respondents.

On the face of it, this decision may seem logically sound because denying registration on grounds of mere phonetic similarity, when the marks are visually poles apart and the products under them are also different, would be a hindrance to a healthy competition.

However, it would also be pertinent to note that the court seems to have overlooked the fact that in this case, ordinary person would mean any person hailing from Karnataka or one who has lived here for a considerable amount of time. To anyone, from any other part of the country, these marks would most probably be similar and confusing.

The restaurant chain operated within Bangalore and no one outside Bangalore would have plausible reason to be aware of this chain. The Milk Federation sells its products within the region of Karnataka. Hence, any one residing here for a long time would not confuse them. But, to any ordinary person from outside the city or state limits, these marks would seem to be confusing or having the same origin.

To understand this conundrum better, we can look back at the case of London Dairy v Londonderry wherein the Bombay High Court ruled that mere phonetic similarity would not amount to infringement of any sort. One mark was famous for its ice cream products. The other for its boiled confectionary. Both were sweets, but one was not confused for the other because the former had built a reputation for itself nationally while the new one was distinctly viewed by the consumers as something different. The consumers were not confused because they could differentiate between the origin of the two marks and their underlying products.

We hope this article was a useful read. 

Please feel free check our services page to find out if we can cater to your requirements. You can also contact us to explore the option of working together. 

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TRADE MARK DILUTION vis-à-vis THE JEEP-ROXOR DISPUTE

Roxor vs Jeep

Jeep-Roxor Trade Dress Issue

Fiat Chrysler Automobiles (FCA) has moved the US International Trade Commission (USITC) against Mahindra & Mahindra to stop the sale of Mahindra’s Roxor ATV, alleging that Mahindra is violating the Trade Dress of the Jeep Brand. FCA has complained that the off-road Roxor’s design is similar to that of Jeep's traditional design. FCA has stated that due to the manufacture of Roxor in India and its assembly in the US, the cost of Roxor is low and thus resulting in the underselling of Jeep. The FCA also claims that the Roxor infringes some of the design elements from the Jeep brand, such as the “boxy body shape with flat-appearing vertical sides and rear body ending at about the same height as the hood,” and has produced the photographic evidence to suggest similarities between the Jeep and the Roxor.

FCA’s Allegations

The allegations made by FCA against Mahindra and Mahindra could be summed up as two major issues:

  1. Mahindra has infringed Jeep’s trade Dress
  2. Mahindra has diluted Jeep’s trade mark

To establish whether there’s any such infringement or dilution, it becomes imperative that we first understand the concept of Trade Dress and the concept of dilution.

  1. What Is Trade Dress Infringement?

    1. What is a Trade Dress?

A Trade Dress is different from a Trade Mark[1]. Trade dress refers to the overall appearance of a product. It is an umbrella term and includes shape (Coca-Cola Bottles[2]), colour (Red Soles of Louis Vuitton Shoes[3]), design (Herme’s bag designs[4]), texture (use of braille markings on products), the packaging (Colgate’s Toothpaste Pack), labels (Levi’s Red Tabs on Jeans), presentation. It also encompasses the manner of promotion or advertisement including the use of distinctive graphics, configurations, and marketing strategies.

Courts have found a variety of trade dress to be distinctive – the bean shaped window used by Jelly Belly Candy Company, GOLDFISH’s fish-shaped crackers, Hershey's KISS chocolates, Taco Cabana’s restaurant décor, the number 007 as a reference to James Bond, etc. have all been held to be trade dresses, the infringement of which would result in legal action.

In the US, protection against trade dress infringement is provided for in the Lanham Trademark Act. Similar statutes and various common-law doctrines also provide protection to trade dress to ensure fair competition.

The law of trade dress generally serves four purposes[5]:

  • to protect the economic, intellectual, and creative investments made by businesses in distinguishing their products.
  • to preserve the good will and reputation that are often associated with the trade dress of a business and its merchandise.
  • to promote clarity and stability in the marketplace by encouraging consumers to rely on a business's trade dress when evaluating the quality of a product.
  •  to increase competition by requiring businesses to associate their own trade dress with the value and quality of the goods they sell.

While it is advantageous for businesses to register their trademarks, service marks, and trade names with the government, trade dress has no formal registration requirements and receives legal protection simply by being distinct and non-functional.

  1. How to Prove Infringement of Trade Dress?

To establish a claim for trade dress infringement, a company must demonstrate the distinctiveness of its product's appearance. However, such a protection cannot be granted for any feature that is functional in nature. Goods that are packaged or promoted in an ordinary, unremarkable, or generic fashion normally receive no legal protection under the law of trade dress. Simultaneously, something as simple as a grille on the front end of the Jeep automobile may be considered sufficiently original if the manufacturer takes deliberate and tangible steps to promote that aspect of the vehicle over a long period of time or if the public associates that grille with FCA.

  1. Distinctiveness

While the Lanham Act does not mention the requirement of a showing of distinctiveness, courts have universally imposed that requirement. Thus, the plaintiff must show that consumers perceive the particular trade dress as identifying the source of a product. Even if a mark is found to be not inherently distinctive, it still can be said to be distinctive if it has acquired a secondary meaning. Thus, the mark should be such that the consumer has created an association between the trade dress and the source of the trade dress (the company).

In the present case, Jeep has acquired recognition for its overall appearance and the general reaction to Mahindra’s Roxor was to associate it with FCA’s Jeep[6]. The FCA owns all rights for Jeep Trade Dress and has standing to bring an action for trade dress infringement under the United States Lanham Act and additionally, has strong rights in its Jeep Design Marks based on use and recognition of them, under Section 43(a) of the United States Lanham Act. These factors will make it difficult for Mahindra to prove that they are not infringing upon Jeep’s trade dress.

  1. Functionality

The Lanham Act doesn’t provide for protection of a trade dress of a functional nature. If trademarks were allowed for the functional features of a product, then the owner of such a trademark would end up achieving a monopoly over these features regardless of whether they qualify as patents, thereby affecting competition.

In the case of Qualitex[7], the court says that a manufacturer could not use the shape (special illumination-enhancing shape) as a trademark because, after the patent expired, this would be a hindrance to competition.

A quick review of the jeep’s history[8] would highlight that the jeep was built in the manner in which it was to serve a functional purpose[9] – to serve the US Army. Mahindra might hold on to this straw to prove that the features are functional and hence not protectable as trade dress. The Roxor is an off-road vehicle and is therefore suitable rugged terrains which other vehicles might not be able to tread. But other features, such as the use of the grille and the boxy shape would be difficult to justify and thus this argument would be weak at best.

FCA has stated that Roxor dilutes its brand and has thereby sought an injunction against Mahindra. To determine whether there is a dilution of brand, we need to understand the concept of dilution.

  1. What Is Trade Mark Dilution[10]?

    1. Dilution as a Concept

The Federal Trademark Dilution Act 1995 prohibits marks that dilute the distinctiveness of famous marks in the United States. Under this statute, the owner of a famous mark can stop others from commencing use of a mark in commerce which is likely to dilute his own famous mark, even in the absence of actual or likely confusion, competition or actual economic injury. The goods and services for which the mark will be used are irrelevant in determining likelihood of dilution.

To qualify as famous, a mark must be “widely recognized by the general consuming public of the United States, and must satisfy, inter alia, the duration, extent and geographic reach of advertising and publicity for the mark; the amount, volume and geographic extent of sales of goods or services offered under the mark; the extent of actual recognition of the mark; whether the mark is registered in the United States

There are 2 limitations to a mark being declared famous in the United States – Firstly, it must be distinctive (whether acquired or inherent). Secondly, fame in a limited geographic market in the United States or in a specialised market is insufficient.

There are two ways by which a famous mark can be said to be diluted: blurring and tarnishing.

  1. Blurring applies when a person uses a trademark in a manner which diminishes the uniqueness of a famous trademark. It is an association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark. To illustrate, if someone adopts the famous mark Sony to provide goods and services unrelated to electronics, such as shoes, then such a use may dilute or blur the distinctiveness of the Sony mark such that it becomes associated with additional sources instead of a single source.
  2. Tarnishing happens when the use of the mark is such that it would negatively impact the reputation of the famous mark. It is an association arising from the similarity between a mark or trade name and a famous mark that ends up harming the reputation of the famous mark. Thus, if someone adopts the tradename Patanjali to produce and sell liquor, the use may dilute the Patanjali mark by tarnishing the goodwill and reputation associated with the Patanjali mark. If the mark becomes associated in the eyes of consumers with liquor, the goodwill attached to the family-friendly, environmentally-positive brand will presumably be damaged.

In the present factual matrix, Mahindra has not made any use of Jeep’s brand name or trademark in any form whatsoever. So, the claim that Mahindra’s sale of Roxor dilutes the Jeep brand name is baseless and holds no ground. While the impression is that Roxor looks similar to Jeep, there seems to be no evidence to show that Roxor rides on the Jeep brand name or attempts to tarnish it negatively.

  1. Proving Dilution[11]

In March 2003, in a case[12] the US Supreme Court laid down that the federal dilution law, unlike traditional trademark law, was intended to protect the famous marks and not the consumers. It stated that to claim dilution, the owner of a famous mark must demonstrate that actual dilution, and not the likelihood of dilution, has occurred. Thus, dilution can only be proven by evidence of actual harm to the famous mark.

FCA claims that consumers will attribute any defects or negative impressions of the Roxor to FCA thereby harming FCA’s reputation and the intangible goodwill associated with its brand. It also claims that there is a substantial threat that consumers will perceive the Roxor as having quality issues, as not being as durable and off-road capable as expected for Jeep brand vehicles, or as simply not worth the price being charged for them. It must be noted that FCA does not provide any substantial evidence to show any such negative impact. Instead, they have stated what could bee termed as mere speculations as to dilution thus, not providing enough grounds for remedy.

  1. Remedies Against Dilution[13]

Generally, the only remedy available is an injunction against further dilution. However, if the plaintiff can prove that the defendant wilfully intended to ride on the reputation of the famous mark or to cause dilution of the famous mark, then other remedies such as attorney’s fees, damages, defendant’s profits would also be available.

Should the FCA, despite the odds, be able to prove that there’s any trademark dilution, the only remedy they could get is an order of injunction asking Mahindra to stop the sale of Roxor in the US. FCA’s sale of Jeep products has been on the decline before Roxor was even introduced to the market. Thus, any claim for damages should not be entertained.

  1. Exceptions to Dilution

The Act makes clear that certain actions will not deemed as dilution. Fair use (whether in advertisement or parody), non-commercial use, and all forms of news reporting and news commentary would not constitute dilution under the Act.

Mahindra need not claim any defence because prima facie, FCA does not have enough evidence to back their claim for Trademark dilution.

Conclusion

A careful perusal of the complaint made by FCA and a quick glance over Mahindra’s Roxor would show that, there is no trademark violation per se because the logos and the names of the vehicles are not similar at all. The word “Mahindra” is clearly and boldly visible on Roxor’s body. Thus, FCA’s claim of Trademark Infringement does not seem to hold good. And essentially, the Roxor and the Jeep have different specifications that end up causing a difference in how these two operate off road[14].

In the end, it boils down to infringement of Trade Dress. To determine whether the Roxor is an infringement of Jeep’s Trade Dress, the question that needs to be addressed is whether the Roxor looks so much like a Jeep that the public, instead of finding it similar, confuses it entirely with a Jeep model. And it would seem like Mahindra would have a tough time proving their case[15]. Thus, the test for likelihood of confusion[16] becomes important.

Section 43(a) does not state in expressive terms as to in whom the likelihood of confusion must exist. As a rule, an appreciable number of ordinarily prudent purchasers of the products in question should have been misled or confused. However, section 43(a) does not always require that the likelihood of confusion be among the actual consumers or the potential consumers of a manufacturer or business. The Fourth Circuit Court has laid down that a trade dress infringement could be based on a likelihood of confusion among the general public if such public confusion will adversely affect the plaintiff’s reputation with all the parties it interacts with.[17]

The likelihood of confusion is determined on the basis of the overall visual impression of the parties’ products or services in terms of a number of factors[18] (such as strength of dress; proximity of goods; similarity of dresses; evidence of actual confusion; marketing channels used; type of goods and degree of care likely to be exercised by purchaser; defendant’s intent in selecting dress; and likelihood of expansion of product line). Confusion, however, must be likely among a substantial number of consumers. Only a few misled consumers are insufficient to maintain a cause of action.

The Second Circuit Court has also extended the likelihood of confusion to the general public based on an adverse impact on the trademark user’s reputation[19]. Actual confusion is not the standard for trade dress infringement; rather, it is enough to show that confusion is likely among consumers. This is different from trademark dilution where the plaintiff would require actual evidence to show harm caused by dilution. Thus, FCA could claim that Mahindra’s Roxor is likely to cause confusion amongst the general public with respect to its apparent counterpart Jeep. However, this could be a tall claim because while most magazine and journal reports point out to the similarity between the Roxor and the Jeep, none of them mention that the Roxor is being mistakenly confused for Jeep or vice versa. Additionally, FCA would have to prove that its goodwill/reputation suffers an adverse impact because of Roxor.

We hope this article was a useful read. 

Please feel free check our services page to find out if we can cater to your requirements. You can also contact us to explore the option of working together. 

Best regards – Team InvnTree   

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License

 

[12] Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003).

[17] Communications Satellite Corp. v. Comcet, Inc., 429 F.2d 1245, 1251 (4th Cir. 1970).

[18] Adidas-Salomon AG v. Target Corp., 228 F. Supp. 2d 1192 (D. Or. 2002).

[19] Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200, 205 (2d Cir.1979).

Risks of adopting Gods’ names as Trademark

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Goodwill in a trademark is built over the years by making sustained investments into the brand. After having made these investments over the years, a trademark that cannot be enforced to the fullest desirable extent is certainly a setback. One such class of trademarks that has inherent limitations as to its enforceability are names of gods. Names of gods are commonly used as trademarks in a variety of businesses in India. While some of these trademarks may have been registered, others continue to be used as unregistered trademarks. Whether registered or unregistered, enforceability of such trademarks remains a challenge. We have analyzed a case concerning one such trademark, in which judgement was passed recently, to explore the angle of registrability and enforceability.

The Bombay High Court recently passed a judgement in a case between Freudenberg Gala Household Product Pvt. Ltd (hereinafter “Gala”) and GEBI Products (hereinafter “Gebi”). Gala started using a trademark “LAXMI” in respect of its product, brooms, in the years 1995. Gala subsequently applied for and obtained registration of the trademark “LAXMI” as a “label”. Notably, “LAXMI” is the name of a popular Hindu goddess. Gebi, on the other hand adopted the trademark “MAHA LAXMI” also in respect of brooms. “MAHA LAXMI” is another name of the same Hindu goddess “LAXMI”. The primary question before the Court was whether the registered label mark “LAXMI” was infringed by Gebi by the usage of the trademark “MAHA LAXMI” in respect of identical goods, brooms. The Court ruled in favor Gebi.

In this case, succinctly put, in-principle Gale contested that the scope of protection of its registered label trademark extends to the words within the label, and not just the label as a whole. Over and above that, since the word within the label is the name of a god, Gale sought monopoly over usage of name of a god as a trademark, expressed in whichever form, with respect to a certain class of goods.

It is well established that, where a label is registered as a whole, such registration cannot possibly give the proprietor of the trade mark exclusive statutory right over any particular word or name contained therein apart from the mark as a whole. Registrar of Trade Marks vs. Ashok Chandra Rakhit Ltd. The Court applied well established principles while dealing with label/device marks, to compare the registered label mark of Gale as a whole and the mark adopted by Gebi as a whole, to find that Gebi’s mark was not infringing on the label mark of Gale.

With respect to usage of name of gods, the Court prima facie found substance in assertion that names of gods are not exclusive and such words cannot be monopolized by one party. The Court further opined in the same context that claiming and protecting the label mark is different than to claim monopoly over a common word.

In conclusion, adopting names of gods as a trademark may be a risky proposition. Even if one has adopted such a mark, one may be able to register the mark as a label or device, and registration of the mark as a word mark as such may not be feasible. Further since exclusive statutory rights may not be claimed over such words, enforcement remains a challenge.

I hope the article was interesting.

Please feel free check our services page to find out if we can cater to your requirements. You can also contact us to explore the option of working together. 

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Far reaching repercussions of connecting zero GST provision with Trademark Registration

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The Goods and Service Tax (GST), which is hailed as one of India’s biggest tax reforms came into effect on July 01, 2017. The implementation of GST has impacted almost every sector that is part of the Indian economy, including intellectual properties. The tax rates on some items are linked to their trademark status.

Items for which GST rate is linked to trademark status

The GST rate schedule provides a list of items on which tax under GST will not be applicable. However, the schedule comes with a caveat, wherein some of the items (mostly food items) in this list will attract 5% GST if such items are put in unit container and bears a registered brand name. The items that will attract 5% GST in view of said caveat are listed below.

Under chapter 4 (Dairy produce; bird’s eggs; natural honey; edible products of animal origin, not elsewhere specified):

  • Natural honey, chena or paneer 

Under chapter 10 (Cereals):

  • All goods, wheat and meslin, rye, barley, oats, Maize (corn), rice, grain sorghum, buckwheat, millet and canary seed; other cereals such as Jawar, Bajra and Ragi 

Under chapter 11 (Products of milling industry; malt; starches; inulin; wheat gluten):

  • Cereal groats, meal and pellets; aata, maida, besan, flour of wheat or meslin flour, cereal flours other than of wheat or meslin i.e. maize (corn) flour, rye flour etc.

Under chapter 22 (Beverages, spirit and vinegar):

  • Tender coconut water

Under chapter 31 (Fertilisers):

  • Tender coconut water

There were confusions generally as to what would be considered as “registered brand name”.  On 5th of July, the Ministry of Finance issued a statement (presented below) addressing the confusion.

“In this context, the notification… clearly defines ‘registered brand name’ as brand name or trade name, which is registered under the Trade Marks Act, 1999. In this regard, Section 2 (w) read with section 2 (t) of the Trade Marks Act, 1999 provide that a registered trade mark means a trade mark which is actually on the Register of Trade Marks and remaining in force.” “Thus, unless the brand name or trade name is actually on the Register of Trade Marks and is in force under the Trade Marks Act, 1999, CGST rate of 5% will not be applicable on the supply of such goods”

As can be interpreted from the above statement, any listed product that is sold under a trademark, which is registered and remains in force under the Trade Marks Act, will be levied CGST at 5%. For example, there will be no CGST on natural honey sold under a trademark that is not registered. However, natural honey sold under a registered trademark will attract 5% CGST.

Consequence

The items to which this provision applies are basic food items, towards which consumers are highly price sensitive. Hence, the choice for companies, large, medium and small, is to either maintain a registered trademark and have the consumers incur 5% addition cost, or sell under unregistered trademarks. In our view, considering the price sensitive nature of the goods, and consumers in general, the choice for the companies would be obvious. Companies are likely to refrain from applying for trademark registration covering such items, and if they have already registered, then they may apply for cancellation of registration. It has come to our notice that some of the largest players in this sector have applied for cancellation of registration.   

Going forward, we anticipate that trademark applications covering such item will be few and far in between. Also, there will be requests for amendments or cancellation of registered trademarks covering such items.

In the medium to long term, we anticipate increased instances of smaller players introducing such items into the market, bearing trademarks (of course unregistered) that are identical or deceptively similar to large reputed companies. Such activities will dilute the goodwill, and may also negatively impact the reputation of established companies. Such established companies will find it difficult and expensive to stop such players from riding on their goodwill, since enforcing an unregistered trademark is far more complicated compared to enforcing a registered trademark. Although companies may appreciate the risk involved, they would be willing to take this risk considering the pricing pressure discussed earlier. Therefore, in the medium term, we see an increase in trademark litigation in this space.

While we have elaborated on the tentative risks faced by companies, in our view, ordinary consumers are the most exposed. As discussed earlier, there will be relatively more players (as compared to the conditions currently) in the market, trying to ride on the goodwill of reputed companies, and one cannot really expect products of superior quality from such players. Now considering that items of this nature are bought by anyone and everyone, literate and illiterate, there is a high possibility of consumers being deceived into buying such items thinking that it originates from a reputed source. Such confusion is highly undesirable especially in connection with food items, which are brought on a regular basis, and consumed largely on a daily basis.

Conclusion

The Government appears to have introduced the provision of nil GST on some items that are sold under unregistered trademarks to incentivise small traders. However, established companies are positioned to nullify the incentive, and most likely will, by either refraining from applying for trademark registration or cancelling registration. Additionally, the Government’s move may negatively impact the culture of intellectual property protection, which the Government is rigorously trying to foster.

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VAT on McDonald’s trademark licenses

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The last few decades have witnessed an influx of many international consumer brands in India. These multinational corporations license their intellectual property to regional organizations, which can subsequently become franchisees of the International brand. International brands license their trademarks and patents to regional organizations that pay fees in the form of royalties. The Delhi High Court passed judgement in an interesting case concerning the taxation of such royalties of the following companies: McDonald’s (the Appellant), Bikanerwala, GlaxoSmithKline Asia and Sagar Ratna (the Petitioners).

            The abovementioned companies owned trademarks and licensed their brands in franchise agreements. GSK Asia had issued trademark licenses of their powdered beverage, ‘Horlicks’, to SmithKline Beecham Consumer Healthcare Ltd. for sale in India, Nepal and Bhutan. All licenses were non-exclusive, and the Petitioners received royalties made up from a percentage of the revenue earned from the sale of the trademark-bearing products, namely burgers, health drinks, biscuits, etc.

            The Constitution states laws related to Sales tax and Service tax in the Articles 246, 268A and the Seventh Schedule. The Union List (a list of items given in the Seventh Schedule on which the Parliament has exclusive power to legislate) provides for ‘92C. Taxes on services’, while the ‘54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of Entry 92A of List I.’ is included in the State List. Generally, according to the stated excerpts, an IP transaction would be taxed ‘Service Tax’ by the Union if it is taken as a rendering of a service and would be taxed ‘Sales tax or VAT’ by the State if it is taken as a sale of goods.

            There have been several situations wherein organizations tried to bypass either of the taxes by reasoning that the nature of their IP transaction was not taxable by the concerned authority. After several litigations and constitutional amendment, the law related to IP transactions can be summarized as follows:

  1. Composite contracts that include elements of both sale and service cannot be taxed twice. (State of Madras v. Gannon Dunkerley). Sales tax (or VAT) and Service tax are mutually exclusive taxes.
  2. Transfers of the right to use goods (TRUGs) are considered sales. IP is considered as goods.
  3. A mere permission to use IP is not considered to be a sale.

Now, it is to be noted that when an IP transaction is considered to be a sale, the respective State(s) may levy sales tax on the resulting royalties. Hence, it is not a surprise that time and again, several States claimed that IP licenses are considered as TRUGs, due to which the States can levy sales tax on the transaction.

The main question here was to identify the circumstances where the licensing of IP rights amount to a sale of goods, and the circumstances in which they would amount to the rendering of a service. In BSNL v. Union of India (2006), Justice Lakshmanan delivered five criteria that had to be fulfilled for a transaction to qualify as a TRUG:

  1. There must be goods available for delivery;
  2. There must be a consensus ad idem as to the identity of the goods;
  3. The transferee should have a legal right to use the goods – consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee;
  4. For the period during which the transferee has such legal right, it has to be the exclusion to the transferor -this is the necessary concomitant of the plain language of the statute – viz. a “transfer of the right to use” and not merely a licence to use the goods;
  5. Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others.

      In this case before the Delhi High Court, the crux of the matter was whether sales tax had to be levied on the royalty payments received by the licensors in the trademark licensing.

            In the assessment year 2005-2006, the Delhi Value Added Tax authorities gave a notice to McDonald’s that royalty payments were to be taxed as they were related to the transfer of rights to use the trade mark "McDonald's". On 17th March 2006, the Value Added Tax Officer issued a letter alleging that McDonald’s had a sale turnover from trade mark and patents in the form of royalty received from its franchisees; and thus, attracted a levy of sales tax under the provisions of the Delhi Sales Tax on Right to Use Goods Act, 2002 (DSTRTUG Act).

Subsequently, McDonald’s filed a reply wherein it resisted the levy of sales tax under the DSTRTUG Act and submitted a copy of the Master License Agreement (MLA) executed between the Appellant and McDonald’s India. However, the Value Added Tax Officer treated the McDonald’s system as goods and sent McDonald’s an order with a demand of Rs. 13,44,684 charged as Sales tax.

Aggrieved, McDonald’s appealed to the Joint Commissioner of Trade and Taxes, who upheld the order given by the Value Added Tax Officer. In response, McDonald’s appealed to the Appellate Tribunal in September 2008. The Tribunal, however, dismissed the appeal. As a final resort, McDonald’s filed an appeal at the Delhi High Court.

In a similar manner, the petitioner Sagar Ratna Restaurants Private Ltd paid Service tax to the Central Government at a rate of 12.36% for the related fiscal year, but received an order passed by the Value Added Tax Officer stating that its received franchisor fee is subject to DVAT levy. Additionally, Bikanerwala Foods Pvt. Ltd and GlaxoSmithKline Asia Pvt. Ltd. have entered into franchise agreements similar to that of McDonald’s and Sagar Ratna Hotels, earn royalty for rendering such services and accordingly pay service tax on the same. They were also served notices regarding the payment of VAT.

McDonald’s argued that the franchise agreement only confers the right to use the McDonald’s systems in a restaurant, and royalty is paid as a percentage of gross sales. Further, according to one of the clauses in the licensing agreement, the licensee is not allowed to use any name, mark or other related intellectual property except in connection with the operation of the restaurant.

McDonald’s applied the five-point criteria of BSNL stated above, and stated that there were no goods which were deliverable at any stage and there was no transfer of right to use any trade mark. Thus, they argued that the levy of sales tax/VAT was without jurisdiction and contrary to the relevant statutory provisions

The franchise agreements signed between the Petitioners and their respective franchisee parties were drafted in a similar manner, wherein the licensees were not given the exclusive right to use the respective trademarks and were only permitted to use the trademarks for the limited purposes provided in the franchise agreements. Thus, the Petitioners gave an argument similar to that of McDonald’s.

When the Delhi High Court examined the McDonald’s Master License Agreement, it found that the agreement was a composite franchise agreement which included trade secrets, know-how, recipes, training, etc. along with the trademark to the franchisee. The High Court determined that a limited right to use the composite system of a business is not a transfer of the right to use goods. Subsequently, the Court held that any such composite contract that non-exclusively provided a bunch of services could not be levied Sales tax.

The Delhi High Court’s judgement in this case cleared the confusion caused by several contradictory judgements passed in prior cases. However, it seems to be too little, too late, considering the introduction of the Goods and Services Tax (GST) from 1st July 2017, which is bound to change the game altogether.

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Place of business: How important is it for instituting a suit of infringement?

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In an order dated 22nd July, 2016, a single Judge of the Delhi High Court delivered his Judgement over a suit of infringement of trademark. The single Judge believed that the Court had territorial jurisdiction to entertain the suit. However, the alleged act of infringement took place in Kolkata (where the Defendant’s Office is located), while the Plaintiffs do not even have an Indian presence. A permitted user of the Plaintiff’s trademark has a presence in Delhi. In light on this, can the permitted user institute the suit? Does the Delhi Court have the authority to provide judgement on this matter? Let’s see.

History and Facts

This dispute arose when US based Exxon Mobil Corporation (“EMC”) alleged infringement of its registered trademark “Exxon” by Kolkata based “Exon Engineering Corporation” (“EEC”), and filed an action before the Delhi High Court. Exxon Mobil Corporation (Plaintiff 1), does not have an office in India. However, a wholly owned subsidiary (Plaintiff 2) of Exxon Mobil Corporation has an office in Delhi and is a permitted user of the trademark “Exxon”. Kolkata-based Exon Engineering Corporation (Defendant) is the registered proprietor of the trademark “Exon Engineering Corporation” and has an office in Kolkata. Section 134(2) of the Act empowers a plaintiff to institute a suit for trademark infringement at any place where its office is located. The plaintiffs here contended that the Delhi High Court was vested with the jurisdiction to adjudicate upon the matter as Plaintiff 2, being the permitted user of the trademark, has its presence in Delhi. On the other hand, the Defendant argued that it was carrying on business in Kolkata, so a court in Delhi would not have jurisdiction to adjudicate upon the matter. Further, the Defendant argued that in light of Section 53 of the Act, Plaintiff 2, by being a permitted user, could not institute the suit. Further, the Defendant was of the opinion that Section 134(2) could not come to the aid of Plaintiff 2, since Plaintiff 1 does not have an office in India.

The judge held that the explanation to Section 134(2) of the Act allowed this, and ruled that a “permitted user” would be empowered to institute a suit. The judge based this judgement on a case which involved an interpretation of Section 62(2) of the Copyright Act. The judge also accepted Plaintiff 2’s contention that Plaintiff 1 would be deemed to use the mark in Delhi owing to its use by its wholly owned subsidiary. The Defendant appealed before the Division Bench against this judgment, resulting in the judgment under consideration.

Division Bench Ruling

The Division Bench first looked into whether or not Plaintiff 2 could institute a suit in this case. The Division Bench held that Section 53 of the Trademarks Act clearly prohibits a permitted user from instituting a suit for infringement. The Bench pointed out the difference between a permitted user and a registered user and how, under the provisions of the Trademarks Act, a registered user and not a permitted user of a trademark can institute a suit.  Hence, the Bench ruled that Plaintiff 2 was not legally empowered to institute the suit.

Next, the Court went on to decide whether the Delhi High Court had jurisdiction to adjudicate upon the suit. For this, the Bench relied on the case of Ultra Home Construction vs. Purushottam Kumar Chaubey. The Bench assumed Plaintiff 2’s office in Delhi to be a subordinate (branch) office. Further, referring to Sections 134(2) and 62(2) of the Trademarks Act, 1999, the Bench contemplated that when the cause of action neither arises at the place of the principal office nor at the place of the subordinate office but at some other place, the Plaintiffs could institute a suit at the place of its principal office but not at the place of its subordinate office. The Bench then ruled that the Plaintiff 1's principal office is in USA and its assumed subordinate office is in New Delhi, but the cause of action has arisen in Kolkata. Unfortunately, the place where the plaintiff No.1 could sue under Section 134(2) would then be in USA which is not available to it because Section 134(2) is in respect of the suits filed in India alone. Consequently, the Delhi Court would not have territorial jurisdiction to entertain the present suit. Therefore, the Bench reversed the single judge’s decision and rejected the plaint for lack of jurisdiction.

The court order can be found here

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Huge relief for Prius Auto Industries – Judgement on trademark infringement given against Toyota motor corp.

We had earlier written on how Toyota Motor Corp. won case against Prius Auto Industries for the infringement of trademark “Prius”. Prius Auto Industries, a Delhi based automotive accessories company, were found guilty of using Toyota Motor Corp.’s “well-known” trademarks. The single-judge Bench of Justice Manmohan, on July 8, 2016, had given an order preventing Prius Auto Industries from manufacturing, selling or using the Toyota Motor Corp.’s trademarks such as “Prius”, “Toyota” and “Innova”. In addition to this, the court had also directed Prius Auto Industries to pay INR 10 lakhs, to Toyota Motor Corp. as compensation for trademark infringement.

Aggrieved, Prius Auto Industries appealed against the judgement. The appeal was heard by justice Pradeep Nandrajog of the division bench of the Delhi High Court, on 23rd December 2016. Upon hearing both the parties, judgement was given favouring Prius Auto Industries saying that the use of “Prius” by Prius Auto Industries does not infringe on Japanese car maker Toyota Motor Corp.’s trademarks.

Prius Auto Industries had appealed saying that trademarks should be determined in context to a similar class of goods and in a relevant geographical market. Accepting Prius Auto Industries arguments, Delhi high court gave judgement in favour of Prius Auto Industries that,

“Toyota is a big company. It has had a presence in India for over two decades when the suit was filed. It was well entrenched in the Indian market in the year 2001. Obviously no consumer of Toyota car or buyer of an auto part sold by Toyota was ever confused by the appellants selling their products under the trade mark Prius, for if this was so, in ten years somebody would have complained to Toyota or at least would have made known said fact to Toyota.”

The judgement also quashed Toyota Motor Corp.’s argument that Prius Auto Industries had been benefited from the trans-border reputation. Toyota Motor Corp. relied on reports in the Indian newspapers, that published news about Toyota’s new hybrid car “Pirus” in Japan in 1997. The Court, however, held that,

“Though published in a newspaper, the publication is in the nature of an article written and thus the weight of its evidentiary worth in the context of an explosive news on a fact of history being made known to the public would be minimal.”

Regarding trans-border reputation, the judgment states,

“The weight of the evidence led by Toyota would be that it has simply established that when it launched the hybrid car Prius in the market in Japan in 1997, the event was reported as a news item in different countries including India but not with such prominence that the public at large became aware of the same. The law on trans-border reputation requires two facts to be established. The first is reputation in foreign jurisdictions of the trade mark. The second is knowledge of the trade mark due to its reputation abroad in a domestic jurisdiction.”

“There being no advertisements published by Toyota for its car Prius in India and coupled with the fact that not all cars marketed under different trade marks by Toyota acquire a global reputation and much less in India, internet penetration as of the year 2001, being low in India, the weight of the evidence leans in favour of the view that by April 2001 Toyota had not established a global reputation in its trade mark Prius which had entered India.”

Read the full division bench judgement here.

Read the single judge judgment here.

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Amazon India served notice By Flintobox for diverting website traffic

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A Chennai-based start-up company Flintobox, a provider of kids’ activity boxes, sent a legal notice to Amazon for alleged unlawful diversion of traffic to Amazon’s website by using their brand name.

Flintobox has already sent a “cease-and-desist” notice to Amazon claiming damages of 10 lakhs INR. According to Flintobox, anyone typing the word ‘Flintobox’ in Google search engine found “Flintobox at Amazon” as the first result in the form of a sponsored advertisement, which on further clicking would give no information of Flintobox products. Rather, it would display products by other companies similar to Flintobox.

The word, “Flintobox” has been a trademark of the company for over 2 years. The company first raised a complaint with Amazon in July 2016 and then again in October 2016. However, it received only automated responses from Amazon, according to official statements. Amazon did not take any action despite complaints, according to Flintobox, and that it had to provide documents to Google to stop the advertisement. Google, however, later changed to the word “Flinto box” in the advertisement thus not agreeing to completely remove the advertisement since the word with a space was not trademarked. Flintobox claimed that they have decided to take legal action against Amazon after failing to get any response from Amazon over the issue.

The CEO of Flintobox stated in a recent blog, titled Google And Amazon – The Sharks That Are Stealing Nemo’s Food #WakeUpAmazon, stated that “Amazon, the biggest online retailer on planet Earth, used Google to steal a prospective buyer of Flintobox, and instead introduced them to some of their (rather irrelevant) products.”

Some search engine optimization technicians and IP experts have also pointed out the possibility of unintentional infringement owing to the automated system used by Amazon that might have picked up phrases for Google Ad words without realizing it being a brand name. Hence the complexity of the case is quite visible, especially because of a generation of a keyword being a brand name, by a software.

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Importance of registering a Trademark: “Sualkuchi’s” Will Tell The Tale

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Having a long tradition of silk weaving, Sualkuchi, in Assam, houses the state’s largest and the oldest silk industry. This silk industry is the provider of employment to local weavers. In the recent years, exploitation of this industry had greatly affected the people as the originality of the silk was compromised with. The local weavers of the silk village have recently breathed a sigh a relief, after a saga of protests demanding a ban of textile products produced outside has ended with the decision of the Controller General of Patents and Trade Marks to issue a trademark to the handloom products.

History

Around March-April, 2013, violence agitated the silk village of Assam. The root cause leading to the violence at Sualkuchi was the procurement and sale of Banarasi silk clothes under the brand of Sualkuchi silk or Assam silk and misleading the people at large. Hundreds of silk weavers of Sualkuchi came out to the streets and burnt down silk products procured from Varanasi, which some local traders were marketing as genuine Assam silk. Heaps of such silk products that were stored in showrooms and godowns of these traders were burnt down to ashes. Local weavers alleged that the traders have indulged in the practice of taking away samples of the indigenous Assamese designs and motifs to traditional silk weaving pockets in places of Varanasi, engage silk weavers of these places to produce adulterated Assamese silk products, and finally taking back the finished products to Assam to sell as genuine Assamese products. The adulterated products were relatively lowly priced.  These aggrieved the local weavers and compelled them to protest such practices.

These events urged people to take steps to rather popularize their craft. It was then, that the initiation of the process of registering a trademark for the original Assamese products started. The “Sualkuchi Tat Silpa Unnayan Samity” applied for the trademark on September 6, 2013. The application was registered against the number 2592761 under class 24. The word “SUALKUCHI’S” will now be found on these silk products woven by the local weavers and artisans of Sualkuchi, as per the provision of the trademark.

Conclusion

Although the hostility that took place is condemned, the CGPDTM’s decision has played an important role in providing the local weavers a ray of hope that their efforts will be recognized nationwide by their registered trademark.

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