One of the significant judgements from the recent time is the order of the Delhi High Court in the popular Crocs case. In an order dated March 6, 2019, the Court rejected the maintainability of a suit for passing off, in the case of a registered design. It is important to note here that the Plaintiff had brought this suit after the Court had previously rejected its previous suit for infringement of its registered design, holding that the same was invalid on the ground of prior publication mentioned in Section 2(d) (albeit such publication had been done by the Plaintiff itself) of the Designs Act, 2000.

Brief facts

The Plaintiff, Crocs Inc. USA, brought a suit against Aqualite India Ltd. and others. We’ve covered the facts of the case and the arguments advanced by the parties in our post here. The Plaintiff had instituted the suit based on the Defendants’ alleged copying of its shape trademark, trade dress, and registered design. The Plaintiff had initially, separately filed suits against some of the defendants on the grounds of infringement of design and passing off respectively, and now sought permanent injunction against the defendants.

Decision

Justice Endlaw, who heard the matter, came to the following conclusions:

  1. A registered design cannot constitute a trademark. Reference was made to the legislative intent behind the Designs Act, as well as Section 2(d) of the Designs Act which made it clear that any feature of shape, configuration, pattern, ornament or composition of lines or colours applied to any article used as a trade mark cannot be registered as a design. The Court also held that the Designs Act mandated protection only for a fixed period of time and allowing designs to be registered as trademarks would effectively mean that the holder of a design right could protect it in perpetuity by seeking protection under the trademarks regime.
  2. Causes of action for design infringement and passing off can be combined in a single suit, provided certain criteria are met. A cause of action for design infringement, however, does not imply that there is necessarily a cause of action for passing off.

Analysis

In Justice Endlaw’s view, a reading of the Statement of Objects and Reasons of the Designs Act makes it clear that the legislature has sought to draw a clear distinction between what can be protected as a trademark and what can be protected as a design. Section 2(d) clearly excludes “trademarks” from the ambit of the Designs Act, and Section 19(1)(e) allows for the cancellation of designs in the event that the shape is not a design as defined in Section 2(d).

Justice Endlaw also holds that the Designs Act is a complete code as it is an Act made to “consolidate and amend” law relating to designs. Upon referring to Section 2(d) of the Designs Act, it is pertinent to note that “if the feature of shape, configuration, pattern, ornament or composition of lines or colours applied to any article is being used as a trade mark, it cannot be registered as a design”.

Prima facie, it appears as though the argument that if the holder of a design right was able to protect a design as a trademark, it would allow them to protect the design in perpetuity holds true. However, considering that each type of IP regime (trademarks, copyrights, patents, designs, etc.) envisages a different duration of protection, it also becomes important to consider the nature of protection granted under each regime.

Difference between trademark and design protection

Broadly speaking, with respect to trademarks, a rights holder would have to show that there is a likelihood of confusion between conflicting marks. In the case of design rights (being rooted in copyright), the rights holder only has to establish that there is a substantial similarity (which is easier to establish) between an infringer’s design and that of the rights holder. While a trademark holder can theoretically assert a right in perpetuity, they are also held to a higher burden of proof to assert and enforce such a right. Therefore, although the duration of a design protection is shorter, it is an easier right to enforce and usually has a wider scope than a trademark right.

Further, the purpose of the various IP regimes must also be considered. At a very superficial level, the purpose of a trademark is to identify the source of products/services and protect consumer goodwill. Therefore, it would certainly defeat the purpose of the designs regime if a design which was meant to go into the public domain was kept proprietary by way of asserting trademark rights in perpetuity.

Section 19 of the Designs Act allows for the cancellation of designs on the grounds that they are not designs within the ambit of Section 2(d) of the Act. Section 2(d) clearly states that a trademark (albeit under the definition of the 1958 Act) is excluded from being considered a design.

Therefore, the logical extension of this principle would be that if a design had reached a level of popularity where it has become capable of identifying a source, i.e. it was capable of functioning as a trademark, then the design was liable to be cancelled under the ambit of Section 19(1)(e) read with Section 2(d). This appears to run contrary to the three-judge decision in Mohan Lal v. Sona Paints and Hardwares (2013) 55 PTC 61 (Del), where the Delhi High Court had held that a design once registered could not be cancelled on the grounds that it had become an indicator of source, i.e. a trademark, after registration.

An argument could be made that the natural extension of the decision in Mohan Lal means that if a registered design gained the ability to identify source during its registration, it would enjoy simultaneous protection as both a trademark and a design. Justice Endlaw categorically rejects this, holding that “the only inference from a harmonious reading of the law relating to trade mark and the law relating to designs is, that what is registered as a design cannot be a trade mark, not only during the period of registration as a design but even thereafter.” This apparent divergence may require the decision in Mohan Lal to be reconsidered at some point.

Was Carlsberg correct?

The second issue framed by Justice Endlaw is whether the decision in Carlsberg Breweries Vs. Som Distilleries (2018 SCC OnLine Del 12912), which states that a composite action for infringement of design and passing off was maintainable only if the Plaintiff could show any features which were additional to the registered design being used as a trademark, and not in respect of the registered design itself, runs contrary to Mohan Lal.

It is also pertinent to state that the decision herein refers to numerous other cases where a distinction between trademarks and designs has been drawn. A design has been held to be a shape which is “part of the goods”. A trademark, on the other hand, “is something which is extra, which is added on to the goods to denote origin.” Therefore, there would have to be additional features in the trade dress/getup of the product over and above what had been claimed in the design. In Mohan Lal, the majority opinion held that “a design can be used as a trade mark and if by virtue of its use, goodwill is generated in the course of trade or business, it can be protected by an action in the nature of passing off.” However, this requires further examination.

A reading of the minutiae of Mohan Lal (according to Justice Endlaw), makes it evident that it is now a well-settled point of law that a rights holder must establish that there are additional features to what has been registered as a design in order to claim trademark rights. Any goodwill that may accrue would only accrue to the additional features and not what has been protected as a design. However, in such a scenario, the holder of the rights would be able bring a suit for both infringement of the registered design as well as passing off of the additional features. This is an interesting proposition in terms of practical enforcement.

Consider the famous shape of a bar of Kit Kat, which is one of the go-to examples for a shape trademark. As per the decision in the present case (and indeed Mohan Lal), if the KitKat shape was registered as a design, Nestle would only be able to enforce trademark rights over any feature that was additional to the iconic four-bar shape (for example, if there was a raised circular portion in the middle of the bar which did not feature as a part of the registered design).  In such a scenario, Nestle would indeed be able to bring an action for passing off, but only in respect of the raised circular portion. Any other actions against a third-party for copying the four-bar shape would only lie out of Nestle’s design rights, which would lapse after fifteen years.

Impact of the judgement

Upon reading of the judgement, Justice Endlaw, at one juncture, holds “In my view, the only inference from a harmonious reading of the law relating to trade mark and the law relating to designs is, that what is registered as a design cannot be a trade mark, not only during the period of registration as a design but even thereafter.”  Later on, he states “A, in majority opinion in Mohan Lal supra, in paragraph 22.8, of a design being usable as a trade mark post registration is concerned, I may add that, in my opinion, the goodwill acquired during the period of registration, when  there is a statutory  bar to its use as a trade mark, cannot be considered and in my opinion anyone claiming protection as a trade mark will have to show the rights as accruing with effect from post registration.“

The above statements appear mutually exclusive. If a registered design cannot be a trademark, even after its registration lapses, it becomes difficult to see how a rights holder can assert rights accruing post registration. The overall effect of this is rather puzzling, as it appears to dis-incentivize rights holders from seeking protection under the designs regime. If a product is wildly successful, so much so that its very shape becomes iconic and functions as a source identifier (such as the KitKat bar, the Coca-Cola bottle, or the Zippo lighter), but it has been protected under the provisions of the Designs Act, the rights holder would only be entitled to seek remedies against infringement for a period of 15 years, after which the same would enter the public domain and there would be no recourse. Further, the rights holder would have to show that there are additional features to the famous design and seek to enforce rights based on that. This appears to negate the practical value to a business of having a shape so recognizable that it instantly triggers recollection of a specific brand.

In the previous KitKat example, if the shape of the chocolate bar was registered as a design, then Nestle would have to establish that there is something extra to the shape which identifies the source. In this case, would it be the KitKat lettering that is found on each individual bar? In such a scenario, the KitKat lettering would merely be a regular word mark anyway. Would Nestle (or Coca-Cola, or Zippo) be unable to seek remedies against someone who has copied their iconic shapes and tries to profit from it after the expiry of the design? It appears that this particular judgement has raised a number of further questions on which clarity would be appreciated.

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