The decision of the Indian Apex Court against Toyota in the battle over the trademark “Prius”

This is a ground breaking development for the Trademark Law of the land where in the Hon’ble Supreme Court held that reputation and goodwill of Intellectual Property are Territorial in nature and that it cannot be said to be Universal.

The Hon’ble Supreme Court of India via this judgment made it clear in regards of the reputation of a trademark that merely because the Trademark “PRIUS” is a well known brand outside the country, doesn’t mean that the same brand value persists in the territory of India as well, thus such reputation/goodwill needs to be established within the territory of the country.

FACTS OF THE CASE:

  • The Appellant is an automobile manufacturer incorporated under the laws prevailing in Japan called TOYOTA.
  • The Respondent is a partnership firm engaged in the manufacture of spare parts of which the second and third respondents are partners; the firm was constituted in the year 2001.
  • Toyota has instituted a suit for trademark infringement and seeking permanent injunction against the respondent for the use of the words, ‘Toyota’, ‘Innova’, and ‘Prius’.
  • For the marks – TOYOTA and INNOVA, the appellant had registered trademarks and have successfully established their goodwill and reputation in the Indian Market, thus, the court decided in favor of the appellant when it comes to the above mentioned trademarks, the main conflict that arose was in relation to the trademark of the respondent for the word ‘PRIUS’, to this the Appellants contended they were owners of the well known mark ‘PRIUS’ and were the prior users of the word in the year 1997, even though had no registration for the particular mark in India.
  • The Learned Single Judge of the Delhi High Court had prohibit the Indian company i.e. the Respondents, through a permanent injunction from violating the intellectual property rights of TOYOTA under the marks of ‘Toyota’, ‘Innova’, and ‘PRIUS’, and also ruled that the words PRIUS is a well known mark owned by Toyota as they were the prior users of the word in countries other than India and that their reputation had traveled cross borders.
  • The respondent was aggrieved by the decision of the Learned Single Judge of the Delhi High Court. An appeal was filed with the division bench challenging the permanent injunction over the mark ‘PRIUS’.
  • The Division Bench arrived at the decision setting aside the order passed by the single judge stating that Toyota needs to prove their trans- border reputation and need to prove the actual passing off rather than likelihood of infringement. The Division Bench further held that the test of possibility/likelihood of confusion would be valid at the stage of Quia timet actions and not at the final stage of adjudication of the suit, especially when the defendant has been using the impugned mark for a long period as in this case. Thus the test that caters to this is a test of actual confusion.
  • The main question before the court of Hon’ble Supreme Court was : “Whether the Appellant can claim that they have a stronger brand image of the mark PRIUS being associated with them than that of the defendant who has registered the trademark way before the Appellant’s car “PRIUS” entered the Indian market in 2009?”

THROWING LIGHT ON THE PRINCIPLE OF UNIVERSALITY AND PRINCIPLE OF TERRITORIALITY

The Universality Principle means that any international brand can maintain an action for passing off if they are able to successfully prove that they are owners of a world wide reputation of that particular trademark even though the goods are not physically available in the territory of the country. The Territoriality Principle means that the international brand needs to prove his actual reputation and goodwill within the domestic territory and market of the country in question.

In this case the Hon’ble Supreme Court held that if the goodwill or reputation in a particular jurisdiction i.e. India in this case, is not established by the plaintiff, no other issue really would need further examination to determine the extent of the plaintiff’s right in the action of passing off that it had brought against the defendant in the Delhi High Court.

The Hon’ble Supreme Court held that the academic as well as judicial opinions support the territorial principle and it has been observed that ‘to be able to establish the territorial principle the courts needs to keep in mind that they need to determine if there has been a spill over of reputation and goodwill of the mark used by the claimant who has brought upon such passing off action.

The Hon’ble Supreme Court came to the conclusion that the brand name of the car PRIUS of the Claimant had not acquired the level of goodwill and the degree of reputation in the Indian market to be able to vest on the plaintiff the much needed attributes of the right of the prior user to be able to successfully maintain any action of passing off that can be taken against a registered user.

The decision was in favor of the respondent PRIUS Auto Industries ltd. as the court took in account the delay and latches by the appellant which had been unexplained by the appellant in their suit for permanent action filed in 2009 as well. Such a delay cannot be allowed to prejudice the defendants who were building and working on enhancing their goodwill and reputation to market their goods when acquiescence was made by the plaintiff.

  • This decision is seen to have a huge impact on the provisions of well-known mark under the new trademark rules, which allows inclusion of a mark in the list of well-known marks which needs to be maintained by the trademark registry. In this scenario the brand owners needs to go ahead and fulfill a higher degree of documentation which would serve as evidence in order for them to prove that they are reputed amongst the local population.
  • One important point on which the Hon’ble Supreme Court has failed to lay emphasis, was that the Toyota ‘Prius’ cost INR – 40lacs which makes this car affordable by a selected few of the country clearing that the existence of the car was known to class specific population instead of genral public. Making this a class specific good and what needed to be considered was whether the niche population who could afford such a car had knowledge about it or not. Moreover “the Hon’ble Supreme Court in Cadila HealthCare Limited V. Cadila Pharmaceuticals limited, inter alia emphasized that when the class of buyers is educated and rich, the test to be applied is different from one where the product is purchased by villagers or by the illiterate and poor.”
  • This decision is likely to impact the multinational brands which are looking for opportunities to enter the Indian market leaving them without a remedy for their IP protection until they are able to prove their local reputation and goodwill within the territorial limits of India, and also that they haven’t ignored any of the locals trying to pass off their goods/services using their brand name.

CONCLUSION

The judgment by the Hon’ble Supreme Court, all in all is quite refreshing even though there are some principles which could have been considered which would end up motivating the multinational brands from preserving their rights but this judgment is beneficial to all the registered local users. Also this judgment is going to have its utmost impact on genuine foreign entrepreneurs and proprietors of trademarks. Before this judgment the Indian Market was considered as a ‘Safe Haven’ as protection was granted to those who were registered in priority even though it was in the international business world. Now, after this judgment it is expected and therefore recommended that the owners of trademarks should file their application for registration and also indulge in decimating information regarding their goods in public newspapers and through electronic media in order to enhance their trademark’s local goodwill and reputation.

H K ACHARYA & COMPANY