Some Thoughts on the Indian Supreme Court Decision in Toyota v. Prius
December 14’s decision in Toyota v. Prius is probably the Indian Supreme Court’s most significant substantive trademark ruling since October 2015.
Questions
It asks four simple yet fundamental questions on Indian trademark law:
First, does the evidence of goodwill led by a Claimant in a pure passing off action in India have to be goodwill in India alone?
Second, whatever the answer to the first, how persuasive is evidence of goodwill held by the Claimant abroad?
Third, from a qualitative standpoint, should Indian judges be looking for evidence by passing off Claimants that speaks to the likelihood of confusion between their products or services and those of the Defendants or to proof of actual confusion between the two?
Fourth, if such goodwill is insufficiently established by the Claimant, what is the fate of the claim?
The Territoriality Position
The Supreme Court’s substantive discussion begins by listing the following, uncontroversial propositions from precedent — that passing off actions are unaffected by registrations; that passing off requires a Claimant to establish goodwill, misrepresentation and damage, and that passing off claims can be sustained against (later) registered proprietors. (It relies, in turn, on the March 2015 Indian Supreme Court opinion in SS Mohideen; an older Indian Supreme Court decision, August 1996’s Whirlpool; the 1990 House of Lords decision in Jif Lemon, and passages from Kerly.)
The Supreme Court then veers towards interesting territory by referring to two authorities.
It refers, first, to Wadlow’s discussion of the trade-off that confronts endorsing extreme positions on the territoriality of goodwill. It then goes to the 2015 UK Supreme Court decision in Starbucks v. BSkyB in support of the view that the goodwill of a trademark or brand is contingent on the presence of customers in a jurisdiction, and not necessarily on a physical place of business.
The framing here is important because the BSkyB Court distinguished this from people who are not ordinarily customers but become customers elsewhere — for instance, when they make purchases abroad. (To complete this specific arc, BSkyB also said that this goodwill requirement is also met if products/services are purchased by customers in a jurisdiction through an agent or subsidiary in that jurisdiction, though the service itself may be received abroad.)
Taken in this distinctly English sense, goodwill and reputation are separable things. The latter is the everyday sense in which the influence of a trademark is measured. The former is the legal basis on which a claim of passing off is founded.
The Reliance on BSkyB
However, the Toyota Supreme Court’s discussion of BSkyB never gets this far. Critically, Toyota makes no mention of the principled reasons offered by BSkyB for why the alternative — recognizing the goodwill of a trademark internationally — is not endorsed by English Courts.
BSkyB made three points on this.
First, it said that the attempt of this furrow of passing off law is to draw a balance between protecting the public interest in free competition and protecting rightsholders against unfair competition. Permitting a claim to be sustained on the strength of an amorphous international, internet-driven goodwill would enable some rightsholders to assert some goodwill within virtually every jurisdiction. This, felt BSkyB, would skew the balance.
Second, it noted that, specific to the UK itself, Section 56(2) of the 1994 UK Trade Marks Act already protects rightsholders of trademarks well known in the UK if they are domiciled or have business in a Convention country. In effect, this means that the need to amend the traditional, pro-territoriality common law position on goodwill is attenuated because those most likely to be prejudiced by such a position are already statutorily protected to some degree.
Third, BSkyB examined in great detail both pro- and anti-territoriality views in the common law world. It concluded, however, that there was no “clear trend in the common law courts outside the UK” which would justify abandoning the “hard line approach” of discarding evidence of goodwill outside the jurisdiction in question.
The overall effect generated by these observations is one of fine margins. They come with the recognition that there are good reasons for both pro- and anti-territoriality positions but emphasize that, all things considered, changing the course of common law from the former to the latter may not be warranted.
The Toyota Supreme Court, by contrast, concludes that “[t]he overwhelming judicial and academic opinion all over the globe, therefore, seems to be in favour of the territoriality principle. We do not see why the same should not apply to this country.”
This is a wildly inaccurate impression, and one which does a disservice to the vibrant debate around the requisites for establishing goodwill around the world. Not only is there no defence for it but it is not even in line with BSkyB — the very case from which it appears to have been gathered — which goes to great lengths to demonstrate that the pro-territoriality common law position rests on heavily contested ground.
It is followed by another statement that is questionable at best.
“To give effect to the territoriality principle,” begins the Toyota Supreme Court in paragraph 29, “the Courts must necessarily have to determine if there has been a spillover of the reputation and goodwill of the mark used by the Claimant who has brought the passing off action.” Later in the same paragraph, it admits that goodwill and reputation of a trademark may not be exhaustively captured by the presence of “a real market” but by the Claimant’s presence “in a more subtle form”. Puzzlingly, one of its illustrations for this position is a 1978 Irish decision, C&A Modes v C&A (Waterford), which endorses the broader, more international view on goodwill.
The overall effect generated here, in contrast with BSkyB, is one of utter confusion. For one, the Supreme Court does not distinguish between goodwill and reputation, even though it is clear that the two are entirely separable in this context.
More pressingly, though, which is it? Is goodwill to be understood as something Courts must look for since it may be present across borders “in a more subtle form” or is territoriality the “overwhelming judicial and academic opinion all over the globe”? It is hard to simultaneously hold both positions, since recognizing one, by hypothesis, takes influence away from the other. Endorsing one position could have been debated; endorsing neither but making overtures at both, as the Supreme Court does here, is hard to comprehend.
Misrepresentation Requires Likelihood of Confusion, Not Actual Confusion
On, then, to what I suspect will come to be recognized as the Toyota Supreme Court’s standout contribution in time.
The Court asks, does the ingredient of misrepresentation in an action for passing off require likelihood of confusion or proof of actual confusion? It answers in favour of the likelihood of confusion standard. It does so for three reasons.
First, it says that the likelihood of confusion can be demonstrated through direct and accessible evidence. “Proof of actual confusion, on the other hand,” says the Supreme Court, “would require the Claimant to bring before the Court evidence which may not be easily forthcoming and directly available to the Claimant.”
Second, it suggests that there is no way of enforcing the actual proof of confusion standard apart from pinning this burden on the Claimant, which it reckons is “an onerous burden which may not be justified”.
Third, it rules that commercial and business morality would be better served by a likelihood of confusion being the standard, and the likelihood of confusion “would be a surer and better test of proving [a passing off action]”. (See more on the recent revival of this ‘business morality’ idea by Indian Courts.)
In itself, the endorsement of the likelihood of confusion standard is not only consistent with statute but is also immensely practical. There are no two ways about it — actual confusion (in terms of consumer impressions, feedback or surveys) is undoubtedly harder to prove.
So far, so simple. How far does this proposition travel, though? Is this a simple rule of preference (i.e. when confronted with evidence of likelihood of confusion and actual confusion, lean towards the former) or one of complete substitution (i.e. when confronted with evidence of likelihood of confusion and actual confusion, consider only the former to the exclusion of the latter)?
If it is one of substitution is this an opportunity for future Claimants to liberate themselves from the exertion of demonstrating actual confusion? Is it not relevant that the Appellants’ claim is a pure passing off claim, in preference to that of a registered proprietor? (This is arguably the toughest category of trademark claim to prove because, as a Claimant, your rights are not statutory but you are trying to defeat, by evidence alone, someone whose rights are statutory.)
Further, what is the role for proof of actual confusion in such a scenario? Does a Claimant lead proof of both likely and actual confusion and defer to the ruling Court’s preference? What of converse evidence (i.e. where the Defendant brings actual proof of the absence of confusion)? And finally, and perhaps most worryingly, what is the basis for the Supreme Court’s utterly speculative conclusion that likelihood of confusion “would be a surer and better test” of proving a passing off action than proof of actual confusion?
The Toyota Supreme Court offers no answers to any of these questions.
The ‘PRIUS’ Goodwill Evaluation
The Claimant’s case eventually reduces to this: it claims that it has goodwill over the trademark ‘PRIUS’ that runs to a time prior to the Defendants’ trademark registration in India. However, the majority of this goodwill was acquired abroad. Imposing the territoriality requirement on goodwill strictly would involve dismissing all this evidence at a stroke.
The Supreme Court does not formally do so. Instead, perhaps aware of Supreme Court precedent that runs at least as far back as Whirlpool (cited elsewhere in this judgment) — which recognized the possibility of sustaining passing off actions on the basis of such “spillover” goodwill across international borders — the Toyota Supreme Court goes a different route. It says that the Claimant must demonstrate “adequate evidence” that its trademark has acquired “substantial goodwill” in the Indian market as well.
In going searching for this “substantial goodwill”, the Toyota Supreme Court runs through the following, largely sound evidentiary conclusions — that this is a point of time inquiry that goes back to the year 2001; that advertisements and internet presence are not a safe basis to demonstrate the necessary goodwill and reputation in India over the specific stretch of time in question (1997–2001); that evidence led by the Claimant is of goodwill abroad, or of a few isolated instances (two newspaper clippings from 1997); that the Claimant had extremely limited sales and virtually non-existent advertising prior to April 2001, and that none of these elements offered sufficient proof of the prominent knowledge and information of the Claimant’s trademark even within a class of target consumers, let alone among the public at large.
These elements compel the Supreme Court to conclude that the Claimant’s trademark “had not acquired the degree of goodwill, reputation and the market or popularity in the Indian market so as to vest in the [Claimant] the necessary attributes of the right of a prior user so as to successfully maintain an action of passing off even against the registered owner.”
The italicized bit is relevant because it appears to indicate that an elevated threshold may apply to passing off claims made by unregistered proprietors against subsequent registered proprietors. However, it backs away from anything further on the issue, claiming that this is a dispute on appreciation of evidence, and one in which the Supreme Court must not dislodge a lower Court’s findings unless “wholly and palpably unacceptable”.
Again, on the surface, there is little wrong with reviewing evidence in this manner. However, one would be remiss in failing to question the vagueness of the Court’s standard of “adequate evidence” of “substantial goodwill” in India. It may be tempting to endorse such a standard in this case because it helps set up an outcome that is an intuitively agreeable one but that is a dangerous peg on which to rest extremely loose framing of this nature. Inconsistent appreciation of prior use evidence by Indian trademark Courts up and down the hierarchy is a sizable problem, and one which the Toyota Supreme Court does little to fix.
If the Claim Doesn’t Survive, the Defendants’ Case is Irrelevant
With this, the Court explains that, with the Claimant’s goodwill in India insufficiently established, nothing further survives for adjudication. (“If goodwill or reputation in the particular jurisdiction (in India) is not established by the [Claimant], no other issue really would need any further examination to determine the extent of the [Claimant’s] right in the action of passing off that it had brought against the Defendants,” says Mr Justice Gogoi. It cannot be clearer than that.)
This is significant. It means that the merits of the Defendants’ claim are entirely irrelevant since the Claimant’s case has been rejected at the threshold.
The Supreme Court makes short observations in passing on two elements of the Defendants’ defence. First, it makes note of the Defendants’ tetchy, slightly outré etymology story that derives ‘PRIUS’ from the Hindi words ‘Pehla Prayas’ or ‘first attempt’, one which the Appellants labelled “on the face of it, absurd”. (Indeed, one potential way to adjust for Toyota would have been to admit that the injunction balance in international goodwill-heavy cases tips in favour of the Claimant where the Defendants’ use faces a tenable mala fide adoption objection. This, however, is cut off at the pass by Toyota Supreme Court’s refusal to consider the Defendants’ case at all if the Claimant does not first establish that there is goodwill in India worth protecting.) Second, it observes that there was significant delay in the Appellants bringing the original claim.
However, it returns no ruling on them. This is slightly disappointing in the event, since a strong comment by the Supreme Court on either point — which are both unfortunately replete in trademark suits — would have done much to discourage these practices, at least in the short term.
Comments and Reaction
Of the substantive comments I’ve seen on Toyota, a few stand out. The SpicyIP blog gave it a smartly reasoned but ambivalent nod, and the IPKat blog ran two stories on it earlier this month— this rather anodyne comment which focused more on the background of the dispute than on the Supreme Court’s findings, and a comment questioning the Toyota Supreme Court’s findings that the Claimant leading online evidence was not good enough to satisfy a point of time inquiry that went back to 2001 and its finding ignoring the potentially mala fide adoption of the ‘PRIUS’ trademark by the Defendants. (On the latter point, as I explained earlier, the Toyota Supreme Court hasn’t ignored this as much as it has found it irrelevant, having already rejected the Claimant on insufficient goodwill in India.)
LiveLaw incorrectly reported it as a trademark infringement claim, while Bar & Bench ran a slightly more sensible but drier report. I’ve also seen a by-the-numbers report in The Trademark Lawyer Magazine, as well as slightly more thorough reports by Indian Jurist and Mondaq, both of which hinted at a well-known mark determination.
(There isn’t a well-known mark determination in Toyota. The references to well-known mark status by the Toyota Supreme Court are in recantation. I suspect the confusion emerges from Paragraph 17, which contains the passage:
“[The Appellant] has further urged that the [High Court] did not deal with the issue of the trademark ‘PRIUS’ being a well-known mark. The entitlement of such a well-known mark is to a higher statutory protection against misuse under the Act. The finding that the trade mark ‘PRIUS’ did not have trans-border reputation permeating into India is, therefore, incorrect.”
The last two sentences are not prefaced by language that indicates that these are the Appellants’ submissions and not the Court’s observations. However, the first of these sentences is of no consequence, and the latter is rejected by the Supreme Court eventually. This makes it clear that these sentences have been reproduced from the Appellants’ submissions. The problem reappears later in the judgment, when Mr Justice Gogoi captures the Respondents’ submissions in similarly unqualified language.)
The case also made copy in the mainstream media, including, from my reading, in The Financial Express, Bloomberg, NDTV, and DNA.
Reconciliation Ahead
Ultimately, though, the key question that Toyota poses is one of reconciliation. How is it possible that a passing off Claimant is required to demonstrate evidence of goodwill and reputation in India and yet have its claim evaluated by judges who are required to be open to considering passing off claims brought purely on the basis of international (or “cross-border”/ “trans-border”) reputation and goodwill alone?
It is a jarring thought indeed to consider that, for the moment at least, Toyota co-exists in the same field of vision as 2004’s Supreme Court decision in Milmet Oftho which says, in as many words, that first use in India is “irrelevant” to a passing off Claimant if it is “first in the world market”. There is a sudden and sharp discordance here, and one that throws into considerable doubt the continued relevance of decisions like Whirlpool, Milmet Oftho and several others. The discordance is sharper still, when you notice that the Toyota Supreme Court was evidently aware of the international goodwill line of cases but chose not to engage with them.
Toyota’s final compromise with territoriality — requiring “adequate evidence” of “substantial goodwill” in India, and of panning this evidence carefully because it is present “in a more subtle form” — is worded in terms so broad that it does little to guide future inquiries into the presence of such goodwill. For all its initial talk of overwhelming consensus on goodwill being fiercely territorial, this is a disappointingly diluted outcome.
As such, it’s a good metaphor for the decision itself: a headline-grabbing finding but not much champagne behind the fizz.
