Trademarks are not merely the owner’s commercial signature but are “a silent salesman” through which direct contact between the owner of the mark and the consumer is obtained and maintained. Under the traditional trademark system, the value of a trademark was based on its ability to identify the source of the product bearing the mark, the quality it assures, and the goodwill it embodies. Despite what some commentators say there is a general consensus that the primary purpose of trademark protection is to supply consumers with accurate information regarding the source of the goods.
Recently, the Bombay High Court passed an ad interim injunction in favour of Burger King, a global fast-food joint, and has restrained a local burger joint located in Pune from using the trademark “Burger King” until further proceedings. This effectively put a stay on the Pune court order, which allowed the local business to continue using the “Burger King” trademark. Notably, the Pune-based joint has been operating since 1992, while the U.S.-based multinational has only applied for the trademark in India in 2009. This decision has again reignited the debate on the concept of transborder reputation which big multinational corporations have used for actively pursuing trademark infringement suits against long-standing local businesses.
In this article, the authors explore the issue of transborder reputation and the evolution of Indian jurisprudence on the topic with special reference to the evidentiary standards required to prove the same. The piece advocates for stricter evidentiary standards to curb the so-called ‘trademark bullying’ by international giants ensuring that long-established local businesses are not unfairly disadvantaged.
Concept of Transborder Reputation
The growth of globalisation and the development of technology has led to the genesis of the concept of trans-border reputation. Such a reputation exists when the trademark and the product associated with it become well-known beyond the territorial region where it operates, which is likely to happen as a result of numerous promotions, constant media coverage, and presence in the market. Trans-Border reputation can be developed irrespective of the presence of the trademark and its associated product as long as the trademark circulates through media and advertisements.
The distinction between reputation and goodwill is nuanced ie. for goodwill to exist actual business needs to be generated through the mark by making products available or by offering services while on the other hand reputation constitutes the name and identity of a brand or mark, although the products or services linked with it are not sold within a particular territory or market area. Due to a lack of recognition of this particular distinction between ‘reputation’ and ‘goodwill,’ the courts in India did not detail the reputational aspect of trademarks separately for a long time.
. One of the first judgments where the Supreme Court dealt with the reputational aspect in a stand-alone manner and went on to articulate a transborder reputation doctrine is the Whirlpool case. [1]The court held that in passing off cases, a positive reputation and goodwill associated with a trademark, whether registered or unregistered, is protected in one jurisdiction provided that the same extends to other jurisdictions.
Evidentiary Standards to Establish Transborder Reputation
The idea of a trans-border reputation in India has changed over time. Indian courts have amplified considerable understanding in providing evidence for proving that a trademark has gained such a reputation. To prove the slightest existence of the said reputation for claiming an interim injunction was explained by the Delhi High Court in the case of Mac Personal Care Pvt. Ltd,
The Court laid down certain considerations essential for making a preliminary assessment of trans-border reputation.
- Trademark registration in a foreign jurisdiction increases the scope of the presumption of reputation and even more so when the trademark has received multiple registrations in different territories.
- In the same regard, if any international magazine, journal, or publication that may include books has ever referred to the trademark, such little evidence is considered proof of reputation.
- Also, the frequency of sales is considered when developing a prima facie opinion.
Although these factors are not mutually exclusive, they help indicate whether there is a likelihood of an existing international reputation, hence aiding the Court in forming an ex-ante view.
Shift Towards Territoriality Principle in Establishing Trans-Border Reputation
It is, however, noteworthy that the Supreme Court in the Prius Case used the “territoriality principle” to prove the existence of a “trans-border reputation” in passing off actions.
According to the territoriality principle, even as it relates to trademarks it is mandatory for the trademark to be either formally registered or that it has established independent distinct reputation and goodwill within the jurisdiction. Hence, prior use of a trademark in one country does not grant an owner blanket right to use the same trademark in another country of their choice.
Furthermore, the Court observed that the evidence, largely based on prints and electronic media like web articles, would be insufficient as internet connectivity was significantly less in India during that time.
Globalisation v. Upliftment of Small Business
While the presence of multinational corporations (MNCs) like Burger King, Whirlpool, and Toyota is often seen as a catalyst for economic growth and globalization, that does not mean one should turn a blind eye to the very real costs of trade and globalization. The goals of trademark law which are to prevent consumer confusion, are being used by certain multinational companies to overstep their bounds and become “bullies” wherein they harass smaller, lesser-known companies such as MSME’s, on whose backbone Indian economy has thrived.
Disputes over intellectual property are often fierce and have painted some corporations as trademark bullies – deep-pocketed corporations stamping out mom-and-pop style shops. The images accompanying this label are not surprising, as the term “trademark bully” strongly implies some impropriety on behalf of the corporation. Still, it is not always that large corporations behave improperly when they seek to defend their intellectual property.
Such actions that include the aggressive prosecution of trademark infringement by MNCs only puts small businesses in India in an even more difficult situation. Most of these businesses began using their brand names before the entry of the global corporations in the market; despite their legitimate prior use, these small enterprises face the daunting prospect of fighting against corporations with vast legal teams and significant financial muscle. The Pune Burger King case, where the local joint had been operating since 1992, illustrates the precarious position of small businesses in such disputes.
As former Chief Justice of the US Supreme Court Warren E. Burger once said, “For many claims, trials by the adversarial contest must in time go the way of the ancient trial by battle and blood. Our system is too costly, too painful, too destructive, [and] too inefficient for a truly civilized people.” The same is the case in India, the small business owner may feel like, when starting a case, he would lose the moment he enters the courthouse because of the numerous uncertainties like the duration of the trial and if the merits of the case are on his side? Irrespective of how strong the small business owner’s case is, he will undoubtedly be intimidated.
To protect their intellectual property rights, companies may feel they must use aggressive tactics because of the uncertainties inherent in pursuing traditional litigation. More evasive (and harder to measure) than strike suits are cease and desist letters, as was attempted in the Pune Burger King Case. Such threatening letters, which usually are printed on formal law firm stationery and contain intimidating legal jargon, “have been colourfully characterized as ‘gorilla chest thumping’ and ‘trademark extortion.‘ “
Way Forward
The Indian legislators were aware of such predatory activities and introduced section 142 of the Trademarks Act, 1999, as a solution. This provision enables the offended party to be granted an injunction to halt further threats and recover for harm. However, such an action can only be made by the registered owner of a trademark.
India has provisions to counter such threats but these provisions do not specify what constitutes a “groundless or baseless threat”. However, there are a few other factors that Indian courts have pointed out, which include the differences between the marks which are to be assessed as to whether they are likely to confuse, the intent of international companies having plans to establish themselves in the Indian market and above all the concept of first-to-use and first-to-file. These aspects define where the action draws a fine line between bullying and genuine infringement.
Conclusion
When global players venture into local markets, they bring with them global practices and processes which could be indifferent to the region’s context. Trademark protection which is pursued to safeguard worldwide brands often fails to consider historical and cultural grounds of local enterprises. This lack of harmony between globalization and the protection of small businesses undermines the principles of fair competition and local entrepreneurship. While the approach of the Pune Court may seem at odds with the full embrace of globalization, it aligns with the broader goal of Atma Nirbhar Bharat and sustainable economic development.
The case underscores the need for a balanced approach that respects both global trademark laws and the rights of local businesses. There should be greater recognition of the concept of “prior use,” where local businesses that have been operating under a particular name or brand for an extended period are given protection against claims by later entrants, regardless of their global stature. Courts and policymakers need to ensure that the laws are not just skewed in favour of large corporations but also consider the impact on small businesses, which are the backbone of the local economy.
[1] N.R. Dongre v. Whirlpool Corpn., (1996) 5 SCC 714
This blog is written by Aman Anand and Abia Usmani, 3rd Year BA LLB students at Dr. Ram Manohar Lohiya National Law University