Impact of the Supreme Court’s Order in the Prius Case on the Issue of Determination of Transborder Reputation of Trademarks

13th August, 2024 - 6:50 am Categories: News & Updates 0 Comments

Introduction: Setting the Tone

In one of its most consequential rulings, Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd.^[1] (hereinafter “Prius Case”) the Supreme Court of India, observed that the Intellectual Property Rights are territorial rather than being global. Before delving into the depths of this seminal ruling, it becomes important to have a cursory glance at the procedural development of this case. The legal dispute was a resultant of a suit filed by Toyota, which is a renowned Japanese automobile manufacturing Company, against Prius Auto Industries Ltd (spare parts manufacturer of automobile) for its Trademark infringement.

After considering the goodwill and reputation of the Prius Cars, an injunction was issued by the trial judge in favour of the plaintiff (Toyota), restraining the defendants from using the trademark ‘Prius’. The reputation was also established through the media presence including magazines, advertisements, and internet. However, the division bench of Delhi High Court overturned this decision and held that the injunction issued by the trial court was unjustified.

At last, the matter reached to the doors of the Apex Court through an appeal where it was ruled that the plaintiff was not entitled to the said injunction as they failed to establish goodwill or reputation of the ‘Prius’ mark in India as of 2001. In doing so, the Supreme Court based its finding on the Territoriality principle as against the well-settled Universality Doctrine. In this essay, the author seeks to analyse the implication of this seminal ruling of the Supreme Court and attempts to enlist the broad shortcomings involved in the approach adopted by the Court.

Rise of Territoriality over Universality

In the past, there have been umpteen cases where the claimant’s rights have been upheld by the Indian Courts based on the principle of Trans-border reputation of Trademarks. These decisions, collectively, culled out a doctrine of Universality which postulates that a passing off action can be effectuated if the trademark in question is having an international reputation or goodwill despite the unavailability of the product in the domestic market. Thus, it obviates the need to prove separate existence of the trademarks in each country. However, a momentous departure from this principle was witnessed in the Prius Case where the court based its finding on the principle of territoriality of trademarks. Territoriality principle entails that a successful passing off action for a trademark must show goodwill or reputation in each individual country i.e. the goodwill or reputation of the product or trademark would be considered from country to country, and not solely on the international goodwill or reputation enjoyed by it.

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In fact, the ruling of Prius Case goes against the settled position of law in the country. While scrutinizing the issue of trademarks’ trans-border reputation, the Hon’ble Supreme Court of India had remarked, in the case of N.R. Dongre v. Whirlpool Corporation^[2] that “it cannot be said that a product and the trade mark under which it is sold abroad, does not have a reputation or goodwill in countries where it is not available”. These concerns are aggravated for the court has almost disregarded, without any sort of discussion or reasonable exposition, its earlier decisions including the Whirlpool (supra) and Milmet Oftho^[3] (court rejected the argument of territoriality and said that it would be irrevalent to prove country-specific presence if the entity had already penetrated in the world market first).

Nevertheless, the reasoning adopted by the Court has a multitude of ramifications. The adoption of Territoriality doctrine entails that a thorough assessment of the documentary evidence would be conducted by the court in order to ascertain the reputation or goodwill enjoyed by the trademark. This, in turn, would create a higher threshold for the Multi-National Companies (MNCs) for instituting a passing off action in India.

The Role of Promotions and Advertisements

The method adopted by the Supreme Court for ascertaining the reputation and goodwill in the Prius Case indicates that the entities which have considerable reach to the wider sections of the public through advertisements and promotions have, comparatively, greater chances of proving the claim of passing off against the defendant. As a corollary to this, these entities must also ensure enough documentary evidence at their disposal so as to meet the higher threshold of establishing reputation or goodwill in the passing off action.

Delay in initiating an action of passing off

The Apex Court, in this case, found that the inordinate delay, on behalf of the plaintiff, in initiating an action of passing off is inexcusable. Again, this is a departure from its earlier rulings in the cases of N R Dongre^[4] and Bengal Waterproof Limited^[5] where it was held that the act of passing off is a ‘continuing wrong’ which leads to a fresh cause of action. Thus, this decision would cast a greater burden on the Multi-National Companies to exercise extreme caution and vigilance in filing the suit as any sort of delay on their part could potentially hamper the prospects of getting a favourable decision.

Conclusion

In light of the foregoing analysis, the author is of the opinion that the argument of the Supreme Court that the Territoriality principle should be preferred to Universality principle does not hold water. Additionally, the Apex Court’s decision in the Prius Case is not consistent with the authorities on this point of law.^[6] In the legal community, the decision is almost perceived as having being passed without any discussion and has also aggravated the concerns of the IPR enthusiasts and Well-known trademark owners.  Lastly, universality principle also keeps global trade and commerce in check and aligns with the resolute stance of India in affording protection to the trademarks.

Author: Aneesha Tadi, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[1] (2018) 2 SCC 1.

[2] 1996 PTC (16) 583 (SC)

[3] Milmet Oftho Industries & Ors. v. Allergan Inc., 2004 (28) PTC 585.

[4] Supra note 2.

[5] Bengal Waterproof Limited v. Bombay Waterproof Manufacturing Company and Anr., AIR 1997 SC 1398.

[6] Kamal Trading Co. v. Gillette UK Limited, 1988 (8) PTC 1; Apple Computer Inc. vs. Apple Leasing, 1992 (1) ArbLR 93; N R Dongre v. Whirlpool Corporation, 1996 (16) PTC 583; Rainforest Café Inc. v. Rainforest Café, 2001 (21) PTC 353.