Against Business Morality: The Delhi High Court Dismisses Trademark Claim by Godfrey Phillips
In Godfrey Phillips India v. PTI yesterday, the Delhi High Court dismissed at the threshold a trademark lawsuit filed by a cigarette manufacturer against a competitor. It is a decision that is remarkable for its resurrection of the concept of business morality, and its interpretation of how it should apply to trademark cases.
The Plaintiff’s cause of action in this case settled over a composite trademark registered by them for cigarettes. Their trademark is for the word ‘CAVANDERS’, with ‘GOLD LEAF’ as a secondary identifier, along with attendant green and gold packaging. The Defendants’ product which they were aggrieved of sells under ‘FUN GOLD’ and ‘SUPER LEAF’, also with green and gold packaging.
However, since the labels themselves were not similar enough to map on to a case for trademark infringement, the Plaintiffs confirmed that their grievance was simply with the use of the green and gold colour scheme. (Presumably, the Plaintiffs also opposed other parts of the Defendants’ packaging deceptively similar to their own, though this claim was never fully captured in the judge’s narration.)
This claim, predictably, ran headfirst into a Section 17-shaped objection — the provision under the Indian trademark statute which bars rightsholders from preventing others from using common, separable parts of the rightsholder’s registered trademark.
This left Mr Justice Mehta to answer whether the Plaintiffs’ claim survived solely as one anchored in passing off. He sensibly flowcharted this inquiry into an if-then: (1) whether the green and gold colour combination is distinctive of the Plaintiffs’ packaging; and (2) whether the Plaintiffs can make a passing off claim stick against the Defendants on these facts.
[Slightly incidental to the central inquiry, the judge also concluded that Plaintiffs under the Delhi High Court’s revamped Commercial Courts structure — which this case falls under — need to ensure that claims brought to such designated Commercial Courts meet a higher threshold of credibility than they did previously. This is because Commercial Courts judges now hold the power to summarily dismiss such claims [under Rules 3(a) and 6(1)(a) to Order 13-A of the Civil Procedure Code] if Plaintiffs have “no real prospect of succeeding on the claim”.]
On the question of distinctiveness, the judge found that the primary prerequisite is the possession of a reputation in relation to the trademark in question. He extended this to say that it is incumbent on the Plaintiffs to show that the elements which the Defendants have reproduced have “an exclusive correlation with the goods of the Plaintiffs”.
This standard rests on the Supreme Court’s 2001 endorsement in Laxmikant Patel of the English passing off position first articulated in this manner by Oertli v. Bowman. While the chain of precedent is agreeably founded, the burden on the Plaintiffs, at first look, does appear to be framed in a somewhat lopsided manner.
This is because distinctiveness, in the sense endorsed by Bowman, is intended to mean that the use of that trademark (or packaging, in this instance) will, to the trade and the public, evoke the Plaintiff’s products, if applied to like products by someone else. There is a significant gap between this and Mr Justice Mehta’s framing of “exclusive correlation”, because surely a type of product packaging can be evocative of its proprietor without being exclusively associated with it.
It mattered little in the event since Mr Justice Mehta found that no such distinctiveness was made out. This finding hinged on two factors — first, the notable difference in the trademarks and secondary identifiers themselves which submerge into irrelevance any similarity in colour scehmes, and second, the target audience in question — smokers — who are characterised as “reasonable customers” who typically purchase cigarettes by name and not by type of packaging.
This finding, however, is followed by a remarkable passage in which Mr Justice Mehta pegs the failure of this action and others like it to a different parameter altogether. At paragraph 14, he writes:
“ I must note at this stage that, in quite a few intellectual property rights matters, [the] Plaintiff seeks to throttle competition in order to create a monopoly-like situation for [its] products, so that [its] profits [keep] on increasing…It is this tendency in certain [litigants that] leads to filing of completely misconceived cases, with the present case being one such completely misconceived case, having no legal cause of action. It is time that [Plaintiffs] understand that [a legal cause of action is not made out] on any and every averment… so as to entitle Plaintiffs to throttle competing businesses.
The law of passing off is essentially the law of business morality i.e. Defendants cannot, because of the concept of business morality, [use] the trademarks, trade dress, get-up or other aspects similar to [those of Plaintiffs]. However, the principle of business morality as stated by the Supreme Court in the case of Laxmikant Patel will also equally apply to a Plaintiff in a suit. [The] same business morality also requires freedom of trade and not filing of misconceived and baseless cases against competitors so that [Plaintiffs] enjoy monopoly-like situations for their businesses to make ever-increasing profits.” (Emphasis mine.)
(To be clear, there is a misstep in this passage — it credits Laxmikant Patel with capturing “the principle of business morality” though the Laxmikant Patel Supreme Court did no such thing.)
The principle of business morality on which the value of this passage turns was first given expression in the 1979 English classic Erven Warnink v. J Townend & Sons. In his speech, Lord Fraser observed:
“Of course, any established trade is liable to have goodwill damaged by fair competition, and it is not every falsehood told by a competitor that will give [the Claimant] a right of action. But where the falsehood is a misrepresentation that the competitor’s goods are goods of a definite class with a valuable reputation, and where the misrepresentation is likely to cause damage to established traders who own goodwill in relation to that class of goods, business morality seems to required that they should be entitled to protect their goodwill. The name of the tort committed by the partly making the misrepresentation is not important but in my opinion the tort is the same in kind as that which has hitherto been known as passing off.” (Emphasis mine.)
These observations have been faithfully recanted in numerous Indian decisions since (two of the more prominent instances are the April 1995 Delhi appeals decision in Whirlpool and October 1997’s Bombay decision in Volvo). However, there has been little focus on their implications on passing off claims.
As such, Mr Justice Mehta’s observations in Godfrey Phillips are hugely significant for two reasons. First, this marks, by my reckoning, the first time since the early 1960s that an Indian Court has gone to the principle of business morality against the slipstream of its usual context. Traditionally, business morality is used to support passing off claims by Plaintiffs by holding that Defendants engaging in misrepresentations or other mala fides ought to be prevented from doing so because their acts go against the accepted and fair way of doing business. In Godfrey Phillips, however, business morality has been used in order to reject a passing off claim for fears of abetting monopoly-like market situations. [In April 1961, a Bombay Court in Consolidated Foods had disallowed a trademark registration claim founded on honest concurrent use for the reason that it was “difficult to hold that the [Respondent] had started using that trademark quite innocently…and also in the interest of business morality”.] On the face of it, therefore, Mr Justice Mehta’s is a staggering indictment of trademark rightsholders for their cynical use of Delhi commercial courts litigation to shut out competition.
Second, these views arrive just over a week removed from December 14’s Supreme Court decision in Toyota v. Prius. To the extent that it is relevant here, the Toyota Supreme Court had observed that it was against commercial and business morality to impose a requirement on Plaintiffs to demonstrate evidence of actual confusion to support pure passing off claims because such evidence “may not be easily forthcoming and directly available”. It found that it would be in line with commercial and business morality to require Plaintiffs to merely demonstrate likelihood of confusion instead.
The Godfrey Phillips observations, presumably made with full awareness of Toyota, are fascinating because they appear to emanate from a diametrically opposite starting point, at least in terms of the leeway afforded to passing off Plaintiffs.
Toyota appears to search for goodwill and reputation in India, by whatever means established. Beyond this, it endorses a softer trigger on the similarity inquiry itself, and finds the likelihood of confusion to be in line with the objective of the law of passing off. Godfrey Phillips, on the other hand, requires passing off Plaintiffs to climb a steep hill on distinctiveness in the first place, without ever opening up the inquiry of whether they are entitled to a passing off claim on comparison with the Defendants’ trademark at all. On this view, such Plaintiffs must demonstrate that their trademark is virtually synonymous with the elements over which there is claimed confusion — only then will a Court open itself to the question of whether the Defendants’ trademark is objectionably similar.
However, Godfrey Phillips, evidently, does more than that. It casts the Plaintiffs’ decision to sue in ethical terms and ties Courts’ decisions to admit such suits to the very objective of the law of passing off itself. It warns — in language that surely cannot be accidental — future trademark Courts to watch out for litigants possibly abusing Plaintiff’s advantages to stifle free competition.
In doing so, it utterly reverses the manner in which the principle of business morality has been called upon by Indian trademark law in recent years. Most compellingly, it sets the table for future Courts to consider not just what happens when litigants file trademark suits but also think about why such litigants sue in the first place.
