In the recent verdict of the disputed Toyota Jidosha Kabushiki v M/S Prius Auto Industries Ltd, the Supreme Court’s stance on affirming the Delhi High Court’s decision to grant the mark PRIUS to Prius Auto Industries has been heralded as the new will lit (albeit narrower) path of the Trans-Border reputation doctrine.

Trans-Border reputation is a concept that has been well founded in the Indian legal system since the landmark Whirlpool decision in 1996. This doctrine allows unregistered trademarks in India to maintain an action for passing off without the requirement of having commercial use in India.[1] Simply put, the term reputation is a very important aspect in Trademarks as the reputation of a mark relates to its widespread knowledge and recognition of a mark because of the popularization of a good or service. In the age of easy worldwide travel and global electronic communication the worldwide diffusion of knowledge can be done efficiently and easily through various methods of communication. This means that the reputation or knowledge of a product or service under a Trade Mark isn’t restricted to the place it originates from and has the ability to surpass territorial barriers. The protection of reputation is safeguarded by the action of passing off. The objective of this doctrine that has been fiercely sown in, by precedents is to stop domestic businesses gaining profit from another’s international reputation as well as to encourage globalization.

Facts of the Case

The appellant Toyota is a Japanese automobile manufacturer that first launched the model Prius in Japan in the year 1997 and claimed it to be the first of its kind to mass- produce petrol-electric hybrid vehicle. They had later expanded to various other jurisdictions all over the world in the years 2001 to 2002. The respondent Prius Auto Industries is engaged in the business of manufacturing automobile spare parts and had constituted the Company in the year 2002. The contention arose when the Plaintiff’s had claimed infringement and sought out for a decree of permanent injunction against the respondents claiming that the trademark Prius had deceitfully secured registration in India as they had sold goods that bore the Plaintiff’s registered trademarks of ‘Prius’, ‘Toyota’, ‘Toyota Innova’ and ‘Toyota Device’.

Arguments for the Plaintiffs:

  • The recognition and reputation of a trademark are not contingent upon the actual sale of the goods bearing the contended mark in India.
  • The advertisement and promotion of the marks through different media is sufficient to establish to establish both reputation and goodwill in India.
  • The car Prius was widely advertised in leading newspapers and magazines with wide circulation all over India since 1997.
  • To establish goodwill and reputation it is not it is not necessary that the mark should be recognized by every member of the public and it would be sufficient if just persons in that industry were aware of the trademark.
  • The test of passing off rests upon a likelihood of confusion irrespective of the stage at which the matter was to be considered in. So the registration of a trademark by the defendant was irrelevant in the matter of passing off.
  • The story of the adoption of the word Prius by the defendants is absurd and there was dishonest use.
  • The issue of ‘Prius’ being that of publici juris was arrived at without any evidence.

Arguments for the Defendants

  • The action of using the Plaintiff’s registered Trademarks was to ensure that customers would have an idea of which parts were suitable for which parts. This action was claimed to be protected under Section 30.
  • The territoriality principle should be used to determine the goodwill and reputation within a particular jurisdiction. – separate goodwill in each.
  • There is a delay on part of the plaintiff to initiate action against the defendants using the trademark Prius in spite of due knowledge.

The main issue before the Court was whether Toyota could maintain a suit for the infringement of its trademark through the concept of trans-border reputation as the model Prius was not available in India until 2009?

The Trial Court had granted the injunction in favour of Toyota citing that it was a clear case of spillover of reputation from a foreign entity and as such the doctrine of trans-border reputation would maintain the action of passing off. The division bench of the Delhi High Court, however, took a different standpoint and held in favour of the defendants with the condition that the defendants were not to use the Toyota logo nor could they claim it to be genuine parts from the Toyota brand. This resulted in Toyota appealing before the Supreme Court.

Territoriality Principle versus Universality Principle

The territoriality principle states that for a trademark to maintain an action of passing off, it must gain both goodwill and reputation in the local jurisdiction. This means that the concept of goodwill of a trademark must be established by evidence separately from country to country. The universality principle as seen from various judicial precedents in India states that an action of passing off can be maintained if a trademark has a widespread international reputation though the goods are not available in the domestic market. Essentially both principles deal with the disparity of public interest in free competition and protection of trader against unfair competition.

The Supreme Court, in this case, held that the principle that was used all over the world and rightly so was the principle of territoriality. To substantiate this line of reasoning the Court had used several international precedents, namely the case of Starbucks (HK) ltd and anr v British Sky Broadcasting group plc and anr. Lord Neuberger remarks, “Where the claimant’s business is carried on abroad, it is not enough for a claimant to show that there are people in this jurisdiction who happen to be its customers when they are abroad. The Court must be satisfied that the claimant’s business has goodwill within its jurisdiction.” In this case they had differentiated and demarcated the concepts of reputation and goodwill by stating that reputation in itself is not enough and that the trademark must have also have goodwill[2]. They had further reasoned goodwill to be of paramount importance as one of the necessary elements of the Trinity test of passing off.[3]

Hence for trans-border reputation to maintain an action of passing off, the plaintiff must prove that adequate goodwill had been acquired in India prior to the incorporation and registration of Prius to Prius Auto Industries. It is, however, an accepted ground that the claimant need not have a branch, agent or business operation in the country where the action of passing off is to be maintained. However, the Court held that all the evidence that was put forth by Toyota for the advertisement of the brand Prius had been done after the year 2001 and the information that was available to the Indian customers had been sparse. They had reasoned that internet in the years of Toyota advertising the model Prius was not freely available to most of the general public in India and more so that the sales of the car Prius even after the launch in India had been meager. The Court held that the action of passing off could not be maintained as goodwill could not be established which was needed for the defense of prior use.

Registration of Trademark and Prior Use

The Supreme Court held that “the fact that a claimant is using a mark registered by another party (or even the defendant) does not by itself prevent goodwill being generated by the use of the mark, or prevent such a claimant from relying on such goodwill in an action against the registered proprietor”. This means that just because Prius had been registered in India in the year 2002 was not enough of a reason to warrant and maintain an action of passing off.

Proposed to Use to basis

The Supreme Court had discerned that the Plaintiff had only applied for registration of the trademark in the year 2009 followed by the institution of a suit that was done on a ‘proposed to be used basis’. If as the Plaintiff claims, the Toyota Prius trade-mark had been used from 1997 and has since become an established brand that has proliferated into numerous jurisdictions, then why had the application not been filed under ‘use in commerce’? An application is filed under ‘use in commerce’ when the trademark has already been used to distinguish goods or service. This was juxtaposed with the defendant’s use of the mark ‘Prius’ since 2001 and registration of the said mark in 2002. This may have just been down to an error in filing the application, but the Supreme Court has mentioned that it is of paramount importance for an application for registration of a trademark to mention whether the trademark has been used already in commerce to distinguish a goods or services.

Time is of the Essence

Another factor that was stressed upon by the division bench judges of the Supreme Court, Justice Ranjan Gogoi and Navin Sinha was that time really is of the essence to maintain a suit of passing off. Even if prior use and goodwill could be ascertained, the lapse in filing a suit of passing off cannot be delayed after the infringement is brought to the attention of the Plaintiff. The Court drew to attention the Plaintiff’s delayed response in filing a suit of passing off and claimed that the interlude of nine years could not be excused. From this, it is clear that it is important that owners of registered trademarks are on a constant look-out for infringing trademarks.

Concluding Remarks

This case is very important in clarifying the concepts of reputation and goodwill. By demarcating the differences between the two, the Court has brought to a halt the dilution of trans-border reputation and has taken a stronger stance in protecting domestic trade and commerce. The case has also emphasized the importance of evidence that is necessary to establish goodwill and has also detailed the requirements of prior use in order to maintain an action of passing off. It is also interesting that the Court has combed through the minute details of the case and determined the role of the internet at the time of the marketing the Prius automobile in the early 2000’s as not being enough to draw the interference of knowledge to the public in India. Further, all the advertisements submitted by the plaintiff to support prior use had all been published post April 2001 when the defendants had already started using the mark. The thorough analysis of the case by the Court will enable future judgments to be structurally sound in adducing the requirements of trans-border reputation.

However, a few issues in the case were not addressed. The first being that the adoption of the word Prius by Prius Auto Industries did seem to have quite an abstract beginning which by itself does not seem to be too important. However when it is coupled with the fact that the defendants had used the plaintiff’s trademark in order to sell their products, the question of dishonest use surfaces. Dishonest use has in the past been a criterion. Also, the issue of how the conclusion of the word ‘Prius’ being that of Publici Juris was drawn without any evidence was not addressed. The last meandering issue is the Court’s explanation of the two terms ‘likelihood of confusion’ and ‘actual confusion’ and its reasoning for preferring the former over the latter. When actual confusion is made as a factor of passing off instead of the likelihood of confusion then it will lead to evidence that requires both the inclusion of one’s instinctive feeling about the similarity of the marks and the fairness to the creator of the mark as well as the factor of likely commercial impact. But the Court believes that likelihood of confusion must be preferred from the standpoint of a common man.

With that said, this case is important in turning the tables for trans-border reputation in India, however, when applied to present-day cases, may prove to have different results.

[1] Mac Personal Care Private Limited v Laverana Gmbh and co.
[2] Goodwill cannot exist without reputation but reputation can exist without goodwill. For more see, Abheuser- Busch v Budejovicky Budvar 1984] FSR 413 and Rven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731.
[3] Reckitt and Coleman- Trinity Test- Goodwill, Misrepresentation and Damages.
Photo credit – Toyota Motor Europe

The article has been authored by Shehnaz Latheef, a law student pursuing law at the Tamil Nadu National Law School, Trichy.