RAJIV GANDHI SCHOOL OF INTELLECTUAL PROPERTY LAW, IIT KHARAGPUR

RESEARCH PAPER on Interlocutory Injunctions in Passing Off cases

Submitted by: Nidhi Anand, 09IP6014

14/11/2011

INTRODUCTION
The modern tort of passing off is a misrepresentation made by a trader in the course of trade, to prospective customers of his or ultimate consumers of goods or services supplied by him which is calculated to injure the business or goodwill of the trader by whom the action is brought and accordingly what the judge has to decide in a passing off action is whether the public is likely to be deceived.1 The reason why all traders and manufacturers of goods and providers of service wish to protect their name and build up their name is that they want their name or market to have an impact upon anyone who has needed their goods or services. That impact may take diverse forms, but one of them would certainly be that a name or mark would recall to the mind of a potential consumer or user of such services the source from where the goods originate or the person who provides the services. This is the impact of advertising and publicity by whatever means, including word of mouth and the guild-up of reputation. It would not be right for courts to permit the reasons who have spent considerable time, effort, money and energy in building up a name, sufficient to have an impact to lose control over such an impact by improper use of the very same or colourably similar name by another unauthorisedly or even dishonestly.2 The tort of passing off is based on the principle that that no man is entitled to carry on his business in such a way or by such a name as to lead to the belief that he is carrying on the business of another man or to lead to the belief that the business which he is carrying on has any connection with the business carried on by another. However certain authors talk of other forms of passing off- the classical form as mentioned above and where there is a misrepresentation that causes in the mind of the public a confusion in the minds of the plaintiffs goods or business and the defendants goods or business, which would not come under the broad rubric of injurious falsehood (disparaging the plaintiffs goods) or falsely exaggerating the worth of the defendants product so that the plaintiffs products are affected. While the former is a different tort, the latter is not actionable in common law. It is

B.K.Engineering Co. v. Ubhi Enterprises (Regd.) & Anr., 1985 PTC 1. Apple Computer Inc. v. Apple Leasing, 1992 (1) Arb Law Report 93.

submitted that this tension as to the conception of passing off, has resulted in the abandonment of the Advocaat formula, in favour of a reinstatement of the classical trinity test. Apart from various innovative remedies that the courts have moulded to suit the circumstances of particular case, in a passing off case there are basically two types of remedies- injunctions whereby the defendant is restrained from distributing his goods without sufficiently distinguishing them from those of the plaintiff, and damages. The latter can be either on the basis of estimated losses suffered by the plaintiff or by making of an account by the profits accrued by passing off, by the defendants to the plaintiff.3 In a suit for injunction in a passing off action, relief can only be granted on the ground that defendant has done something which is calculated to deceive.4 It is essential in passing off action to show that there has been a false representation. He must show that he has used the mark claimed by him on his goods or in connection with them and that the mark has become associated in the minds of the public with his goods. There must be a user of the mark because without user, no reputation can be acquired. A reputation has to be established.5 In National Electric Stores v. General Electric Co.6, it has been held that the plaintiffs who have acquired a reputation in the market through a trade mark or name with which their goods have become associated, have a right to restrain the defendant from using a trade mark or name which is identical with or similar to that of the plaintiffs and such right extends not only to the particular goods sold by the plaintiff but also to cognate classes of goods, provided the cumulative effect of the similarity of the mark, the commercial connection between the plaintiffs goods and those of the defendant and surrounding circumstances is such as to lead the unwary customers to mistake the defendants goods for those of the plaintiff.

THE TESTS OF PASSING OFF

Spalding and Bros. v. A.W. Gamage Ltd., (1915) 84 L.J. Ch 449. Cadila Health Care Ltd. v. Cadila Pharmaceuticals (2001) 5 SCC 73, Sham Kumar Kohli v. Golden View Electrical Industries Pvt. Ltd. etc., MANU/PH/0017/1999. National Electric Stores v. General Electric Co. AIR 1944 Lah 386.

In the case of Ervin Warnik v. Townend and Sons7 , five characteristics are laid down which must be present in order to create a valid cause of action for passing off, viz: 1. a misrepresentation, 2. made by trade in the course of the trade, 3. to prospective customers of his or ultimate consumer of goods or services supplied by him, 4. which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence), and 5. which causes actual damages to the business or goodwill of the trader by whom the action is brought or will probably do so. The above formulation it is submitted is too wide and has been disparaged though in the subtlest of terms, coming as it does from no less a person than Lord Diplock. However later on doubts were expressed as to the efficacy of the above formulation and then finally in the Gif Lemon case,8 the above formulation as given up in favour of the classical trinity test. There the House of Lords speaking through Lord Oliver held the test to be: First he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying get-up (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognized by the public as distinctive specifically of the plaintiffs goods or services. Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that the goods or services offered by him are the goods or services of the plaintiff. Thirdly, he must demonstrate that he suffers, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendants misrepresentation that the source of the defendants goods or service is the same as the source of those offered by the plaintiff. From an analysis of the Indian case law as enunciated by the Supreme Court and the various High Courts, it is submitted that the Advocaat test is still in vogue, despite the fact that in the land where it is formulated it is now bad law. In certain (rare) cases 9, the courts have alluded to the Gif Lemon, test but those are few and far between, and then too have gone to apply the
7

Ervin Warnik v. Townend and Sons, [1979] AC 731. Reckitt & Colman v. Borden, (1990) RPC 341. Aktiebolaget Volvo of Sweden v. Volvo Steels Ltd. of Gujarat (India), MANU/MH/0076/1997.

Advocaat test. It is submitted that this position needs to be clarified by the Supreme Court in a full bench or higher decision.

DISTINCTION BETWEEN PASSING OFF AND TRADEMARK INFRINGEMENT

It must be mentioned that the actions for infringement of trademark and passing off, are closely similar in some respects. As will be evident from a reading of the cases below, it is not uncommon for the plaintiffs in the same cause of action plead two causes of action- infringement of trademark and passing off. Hence there has to be a need to demarcate what the distinction is between the two causes of action. There have been numerous attempts to settle the issue. In Saville Perfumery Ltd. v. June Perfect Ltd.10, it was held that: The Statute law relating to infringement of trademarks is based on the same fundamental idea as the law relating to passing off. But it differs from that law in two particulars, namely (1) it is concerned only with one method of passing-off, namely, the use of a trade mark, and (2) the statutory protection is absolute in the sense that once a mark is shown to offend, the user of it cannot escape by showing that by something outside the actual mark itself he has distinguished his goods from those of the registered proprietor. Accordingly, in considering the question of infringement the Courts have held, and it is now expressly provided by the Trade Marks Act, 1938 section 4 that infringement takes p-lace not merely by exact imitation but by the use of a mark so nearly resembling the registered mark as to be likely to deceive. In an action for infringement where the defendants trade mark is identical with the plaintiffs mark, the Court will not enquire whether the infringement is such as is likely to deceive or cause confusion. But where the alleged infringement consists of using not the exact mark on the Register, but something similar to it, the test of infringement is the same as in an action for passing off. In other words, the test as to likelihood of confusion or deception arising from similarity of marks is the same both in infringement and passing off actions. In the case of Durga Dutt Sharma v. N.P. Laboratories11, before the Supreme Court the respondent, who manufactured medicinal products, had got the word Navaratna registered as a trade mark. The appellant, who was carrying on the business in the preparation of Ayurvedic pharmaceutical
10

Saville Perfumery Ltd. v. June Perfect Ltd.(1941) 58 RPC 147 (HL). Durga Dutt Sharma v. N.P. Laboratories, AIR 1965 SC 980

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products under the name of Navaratna Kalpa applied for registration of the words Navaratna Kalpa as a trade mark for his medicinal preparations. The objection of the respondent to the proposed registration was accepted. The matter went through a series of appeals and then came to the apex court. Here it was held: While an action for passing off is a common law remedy being in substance an action for deceit, that is, a passing off by a person of his own goods as those of another, that is not the gist of an action for infringement. The action for infringement is a statutory remedy conferred on the registered proprietor of a registered trade mark for the vindication of the exclusive right to the use of the trade mark in relation to those goods (Vide S. 21 of the Act). The use by the defendant of the trade mark of the plaintiff is not essential in an action for passing off, but is the sine qua non in the case of an action for infringement. No doubt, where the evidence in respect of passing off consists merely of the colourable use of a registered trade mark, the essential features of both the actions might coincide in the sense that what would be a colourable imitation of a trade mark in a passing off action would also be such in an action for infringement of the same trade mark. But there the correspondence between the two ceases. In an action for infringement, the plaintiff must, no doubt, make out that the use of the defendants mark is likely to deceive, but where the similarity between the plaintiffs and the defendants mark is so close either visually, phonetically or otherwise and the court reaches the conclusion that there is an imitation, no further evidence is required to establish that the plaintiffs rights are violated. Expressed in another way, if the essential features of the trade mark of the plaintiff have been adopted by the defendant, the fact that the get-up, packing and other writing or marks on the goods or on the packets in which he offers his goods for sale show marked differences, or indicate clearly a trade origin different from that of the registered proprietor of the mark would be immaterial; whereas in the case of passing off, the defendant may escape liability if he can show that the added matter is sufficient to distinguish his goods from those of the plaintiff. The latest case where this point has been revisited is the case of Wander Ltd. v. Antox India (P) Ltd.12 where it was held by the Supreme Court: An infringement action is available when there is violation of specific property right acquired under and recognised by the statute. In a passing off action, however, the plaintiffs right is
12

Wander Ltd. v. Antox India (P) Ltd. , l990 (2) Arb. L.R. 399.

independent of such a statutory right to a trade mark and is against the conduct of the defendant which leads to or is intended or calculated to lead to deception. A Division Bench of the Delhi High Court in the case- Century Traders v. Roshan Lal Duggar & Co, 13 made the following points which are pertinent to reproduce below:
(i)

The registration of trade mark in the Trade Mark Registry would be irrelevant in an action for passing off. In deciding whether a particular mark is common to the trade, use of that mark would be extremely relevant. Merely registration would not be enough. Registration under the statute does not confer any new right to the mark claimed or any greater rights then what already exist at common law and at equity without registration. That registration itself does not create a trade mark. The trade mark exists independently of the registration. Common law rights are left wholly unaffected. Priority in adoption and use of trade mark is superior to priority in registration. A single actual use with intent to continue such use confers a right to such mark as a trade mark.

(ii)

(iii)

(iv)

(v)

(vi)

It is not permissible to draw an inference as to their user from the presence of marks in the register.

INTERLOCUTORY INJUNCTIONS
Why is an interlocutory injunction important in these cases? The Supreme court in the case of Wander Ltd. v. Antox India P. Ltd.14, held: Usually, the prayer for grant of an interlocutory injunction is at a stage when the existence of the legal right asserted by the plaintiff and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence. The court, at this stage, acts on certain well settled principles of administration of this form of interlocutory remedy which is
13

Century Traders v. Roshan Lal Duggar & Co, AIR 1978 Del 250 1990 (Supp) SCC 727

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both temporary and discretionary. The object of the interlocutory injunction, it is stated is to protect the plaintiff against injury by violation of his rights for which he could not adequately be compensated in damages recoverable in the act ion if the uncertainty were resolved in his favour at the trial. The need for such protect ion must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weight one need against another and determine where the balance of convenience lies. Even more recently in the case- Mahendra & Mahendra Paper Mills Ltd. v. Mahindra & Mahindra Ltd.,15the court observed: The interlocutory remedy is intended to preserve in statute quo, the rights of parties which may appear of a prima facie case. The court also, in restraining a defendant from exercising what he considers his legal right but what the plaintiff would like to be prevented, puts into the scales, as a relevant consideration where the defendant has yet to commence his enterprise or whether he has already been doing so in which latter case considerations somewhat different from those that apply to a case where the defendant is yet to commence his enterprise, are attracted. In practice, in cases of passing off, the grant of interlocutory injunction in many cases means that the issue is settled one way or the other. This is because, when a matter such as this goes to trial then it takes between five and six years typically to be resolved in a trial court (ten if the venue of the trial is the High Court) Hence owing to the rapid changes in business cycles and vacillating consumer choices, it means that at the end of the trial, it may just be that the product has ceased to be useful or has become obsolete. Thus what happens is that the matter is invariably settled at the trial stage, as if the defendants are injuncted from using the mark or name then the matter is as good as lost for them and they invariably opt for an out of court settlement with the plaintiffs. This of course after the defendants going on appeal. This is possible as the parties to such suits are invariably medium or large businesses which unlike individuals can afford to pay the high legal fees involved in taking a matter to court and thereafter in appeal. On the other hand, if the plaintiffs prayer is not considered on this point, then the plaintiff may appeal to the higher courts as well. If after that the plaintiff is unable to get the interlocutory injunction then he would do well to drop off the action, as a decree several years down the road, when the name or brand may have ceased to be of relevance, is of little use to him after going
15

Mahendra & Mahendra Paper Mills Ltd. v. Mahindra & Mahindra Ltd. [22] (MANU/SC/0724/2001).

through the rigmarole of a trial. Thus the fates of the parties are usually settled at the interlocutory injunction stage. Here too the parties indulge in forum shopping depending on the prevalent perceptions with regard to which High Courts in their original jurisdictions, are more generous in the grant of interlocutory injunctions. For instance the laid back Madras High Court is a preferred destination as a trial here drags on for well over a decade and the judges are rather willing to give a remedy for the time being. On the other hand, the Bombay High Court, where the emphasis is to finish off with the trial in a much shorter period, than the former, the judges are less inclined to grant interlocutory injunctions. Thus companies with their head offices or registered offices in Maharashtra, have suits filed where the plaintiffs affidavit, usually claims that the plaintiff first came to know about the passing off, from the display of the goods in some small shop in Madras in a bye-lane usually in the Parrys area where all the lawyers offices are, against another Maharashtra based company.

What are the tests for grant of Interlocutory Injunction? The House of Lords before the decision in American Cyanamid Co. 16, in J.T. Stratford & Sons Ltd. v. Lindley , stated that the plaintiff had to show a compelling prima facie case that his rights has been violated and after that the plaintiff had to show that the damages would not be an satisfactory remedy in the event of there being a success of the plaintiff at the trial and that the balance of convenience favoured the grant of the injunction. This prerequisite, however, in the matter of grant of an injunction so far as the English Courts are concerned, is diluted by the ratio in the American Cyanamids case which mentions that in the event of there being a serious issue to decide, the grant would be available which mentions that in the event of there being a serious issue to decide, the grant would be available to a plaintiff on however, compliance with the other conditions. A strong prima facie case, therefore, stands substituted by a serious issue to be
16

American Cyanamid Co. v. Ethicon Ltd. [1975] 1 All ER 504.

decided.17Lord Diplock18 laid down the below-mentioned guidelines to be considered in the grant of interlocutory injunction: 1. The plaintiff must first satisfy the Court that there is a serious issue to decide and that if the defendants were not restrained and the plaintiff won the action, damages at common law would be inadequate compensation for the plaintiffs loss. 2. The Court, once satisfied of these matters will then consider whether the balance of convenience lies in favour of granting injunction or not, that is, whether justice would be best served by an order of injunction. 3. The Court does not and cannot judge the merits of the parties respective cases and that any decision of justice will be taken in a state of uncertainty about the parties rights. Hence in cases where there is uncertainty, the Court should be doubly reluctant to issue an injunction, the effect of which is to settle the parties rights once for all. Further if it is apparent that if damages, would be an adequate remedy and the defendant would be able to pay the same, no interlocutory injunction would be granted, howsoever powerful the plaintiffs case appears to be at that stage. In the event of there being some doubt, as to the adequacy of the respective remedies and damages available to either party or both, then and in that event, the question of balance of convenience arises and the same will vary from case to case.19 In Gujarat Bottling Co. Ltd. v. Coca Cola Co. & Ors.20, the court re-iterated the American Cyanamid concept: The grant of an interlocutory injunction during the pendency of legal proceedings is a matter requiring the exercise of discretion of the court. While exercising the discretion the court applies the following tests (i)
(ii) (iii)

whether the plaintiff has a prima facie case; whether the balance of convenience is in favour of the plaintiff and whether the plaintiff would suffer an irreparable injury if his prayer for interlocutory injunction is disallowed.

17

Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd., MANU/SC/0494/1999 American Cyanamid Co. v. Ethicon Ltd. [1975] 1 All ER 504 Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd., MANU/SC/0494/1999. Gujarat Bottling Co. Ltd. v. Coca Cola Co. & Ors., AIR 1995 SC 2372.

18

19

20

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When are Interlocutory Injunctions refused? Injunction is a relief in equity and is based on equitable principles.21 Hence it is submitted that for the grant of interlocutory injunctions, the courts will examine equitable considerations before deciding whether to grant an injunction. Thus apart from the usual equitable considerations such as the Doctrine of clean hands, and so on, a survey of the case law will indicate that for the grant of an interlocutory injunction, the three considerations that are most often agitated in the courts are the trinity of inordinate delay, acquiescence, laches. More often than not, a combination of one more of these defences is raised before the courts. (i) Inordinate delay The leading authority in the common law world, in the area of the law of passing off Christopher Wadlow, has stated in his treatise on the subject, which has been cited with approval by the High Courts on several occasions, that delay in applying for interlocutory relief was a very serious ground for refusing the relief. Generally, delay of up to about a month or so, has no negative impact on an inter parties application and a lapse of even double that duration need not be incurable if it can be explained and the applicants case is otherwise a strong case. As far as ex parte applications are concerned, even delay of a few days can be very significant. Unexplained delay has no effect on the plaintiffs rights at trial, however if present, is a basis for refusing interim relief. Therefore applications for interlocutory injunctions where there is a considerable delay are unlikely even to get as far as a hearing, and those that do would in all probability be refused without going into the merits of the application.22 Thus it may be stated that delay and its sisters- laches and acquiescence are threshold considerations that if evident on the face, then the court will refuse the grant of an interlocutory injunction. In the case of Hindustan Pencils Pvt. Ltd. v. M/s. India Stationery Products Co.23the trade mark Natraj with the device of Natraj with respect to pens and pencils had been plaintiffs. It was alleged that in 1985 they came to know that defendants had surreptitiously got registered over the same. The conduct of the defendants was contended as fraudulent. An application was filed with
21

N.R. Dongre v. Whirlpool Corporation 1996 PTC (16) 583 (SC). Aviat Chemicals Pvt. Ltd. v. Magna Laboratories (Gujarat) Pvt. Ltd., MANU/DE/0995/2001 Supra

22

23

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the Registrar of Copyright for rectification and to cancel the defendants copyright. Here one of the questions that came was considered was that if on the ground of delay or laches the right of the plaintiff would be defeated? The court held that if there is an inordinate delay such a right may be defeated but the duty of the court is to protect the interest of unwary customers and that if there is no inordinate delay such a right should not be defeated. 24It further held that if the court comes to the conclusion that prejudice is likely to be caused to the general public who may be misled, injunction must be issued. (ii) Laches Laches can be distinguished from inordinate delay in that in the former there has to be lapse of a very long period of time before the court would rule that the prayer for the equitable remedy is refused. long period of time before the court would rule that the prayer for the equitable remedy is refused. This is a delay that is to be measured in terms of several years.25However the key point that has to be noted in regard of laches is that there has to be prejudice caused to the person by the person who is pleading the defence. In other words, the duration of the delay can be very short but if within that period owing to the plaintiffs inaction, the defendant committed himself to a particular action then he can successfully plead the defence of laches. On the other hand, as the period of delay begins to increase, the prejudice caused to the defendant in the application proportionately reduces in significance, thus where the period of delay on the part of the plaintiff is very long- the court would not grant the equitable relief, even if the defendant does not make out a case that he has been prejudiced by the delay. Otherwise the two defences are conceptually identical and it is common to invariably plead the two defences together. (iii) Acquiescence Acquiescence means something more than mere silence on the part of the plaintiffs. Acquiescence means encouragement on the part of the plaintiff to the defendant. There should be a mistaken belief by the defendant that there is no objection to the plaintiff using its mark.26 Acquiescence is sitting by, when another is invading the rights and spending money on it. It is a

24

Hindustan Pencils Pvt. Ltd. v. M/s. India Stationery Products Co. AIR 1990 Del 19. Hindustan Pencils Pvt. Ltd. v. M/s. India Stationery Products Co. AIR 1990 Del 19 Aviat Chemicals Pvt. Ltd. v. Magna Laboratories (Gujarat) Pvt. Ltd., MANU/DE/0995/2001.

25

26

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course of conduct inconsistent with the claim for exclusive rights in a trade mark, trade name etc. It implies positive acts; not merely silence or inaction such as is involved in laches.27 Thus one can conclude that delay is an important factor in coming to a conclusion as to whether ad interim injunction should be granted or not. It will not be the sole factor. But it could tilt the balance. If there is an inordinate delay and the respondent/defendant had in meantime invested huge amounts, the court in peculiar facts may refuse injunction but at the same time in a peculiar facts if there is no inordinate delay and people at large may be misled by the infringement the injunction may be granted. These are facts which go to the peculiar circumstances of the case.28

CONCLUSION
The law in respect of the grant of interlocutory injunctions in cases off passing off actions as has been seen is no different from an interlocutory injunction granted in any other matter. However in the grant of the injunction, due to the peculiarities of this branch of law, the party that gets, the interlocutory injunction effectively wins the case. There is a tendency for all such grants of interlocutory injunctions here to become in the words of Lord Diplock mini-trials, fact that he cautioned in no uncertain terms against. Though the test lay down by his Lordship has been accepted and repeated by the courts in India, the essence of what he sought to convey has been missed in this jurisdiction. There is a much more complex test that the Supreme Court has formulated which has been subsequently bypassed. Complex questions of facts are examined on affidavit evidence and well thought out, tailored reliefs are given. However in the midst of this all this, the fact remains that despite the weight of precedent on the shoulders of the courts, that are bound by it, to their credit, the courts have in the humble opinion of the researcher done an admirable job examining all relevant factors without causing undue prejudice to either party.

27

Power Control Appliances v. Sumeet Machines Pvt. Ltd., 1994 (2) JT 70. Aviat Chemicals Pvt. Ltd. v. Magna Laboratories (Gujarat) Pvt. Ltd., MANU/DE/0995/2001.

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BIBLIOGRAPHY

1. D.M. Kerly, Law of Trademarks and Trade Names (London: Sweet and Maxwell, 1986). 2. J.S. Sarkar, Trademarks Law and Practice (Calcutta: Kamal Law House, 1997). 3. J.W. Salmond and R.F.V. Heuston, The Law of torts (London: ELBS, 1987). 4. P. Narayanan, Law of Trademarks and Passing off (Calcutta: Eastern, 2000). 5. P. Narayanan, Trademarks, Trade Names and Passing off Cases, (Calcutta: Eastern, 1997).
6. P.K. Mittal and O.P. Chadha, Supreme Court on Trademarks, Copyrights, Patents and

Designs (Delhi: Om Law Book House, 2000). 7. W.R. Cornish, Intellectual Property- Patents, Copyrights, Trademarks and allied rights (Delhi: Universal, 1993).

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