Territoriality and the Independence of Rights

The worked case

The case is Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd.

Facts. Toyota launched its Prius hybrid car in Japan in 1997 and the mark became known in many countries. It did not sell the car in India until 2010. In 2001 Prius Auto Industries, an Indian maker of car spare parts, adopted the mark PRIUS, and registered it in India in 2002 to 2003. Toyota sued for passing off, relying on the worldwide reputation of the mark, and applied for Indian registration only later and on a proposed to be used basis. The reported citation is (2018) 2 SCC 1; AIR 2018 SC 167.

Held. Toyota's appeals were dismissed. At paragraph 28 the Court held that the overwhelming judicial and academic opinion across the world favours the territoriality principle over the universality doctrine, and that there is no reason why the same should not apply in India. To succeed the claimant must show a spill over of reputation and goodwill into the Indian market, and the Court found that all Toyota's evidence of Indian reputation post dated April 2001, when the defendants adopted the mark.

Why it matters. It is the modern Indian statement of the principle on which the entire Module II treaty system rests. It also draws the line against the other Indian authority on the same principle.

That case is N.R. Dongre v. Whirlpool Corporation, in which an American proprietor whose Indian registration had lapsed obtained an injunction because it could prove that its advertising circulated in India and had produced Indian reputation.

Facts. Whirlpool Corporation had advertised in magazines circulating in India but its Indian registration had lapsed. The defendants registered WHIRLPOOL in India and sold washing machines under it. Whirlpool sued in passing off and obtained an interlocutory injunction, affirmed on appeal. The citation is (1996) 5 SCC 714.

Held. The appeal was dismissed with costs. A passing off action rests on a common law right distinct from the statutory right of a registered proprietor, so an injunction may be granted in an appropriate case even against the owner of a registered mark, and on the material the grant of the interlocutory injunction was a proper exercise of discretion.

The two cases together are the whole doctrine. Reputation abroad is not enough; reputation that has spilled over into India is. Territoriality is not a rule about advertising budgets, it is a rule about where the goodwill actually is.

A worked example

Hemant Rao holds an Indian patent and a corresponding European patent on a solar inverter.

A German court revokes the European patent for obviousness. His Indian patent is unaffected. Paris Article 4bis(2) says so in terms, and an Indian court would not treat the German judgment as determining Indian validity.

The Indian Controller may nevertheless look at the German decision as evidence. Section 8 of the Patents Act requires an applicant to keep the Controller informed about corresponding foreign applications, and the prior art relied on in Germany can be put before an Indian court. Independence is about legal effect, not about evidence.

Hemant's Indian patent expires twenty years from his Indian filing date, and the German one from its own filing, and they may differ. Article 4bis(2) mentions duration expressly for that reason.

What it does NOT mean

Territoriality does not mean foreign judgments are irrelevant. They have no binding effect and considerable persuasive value.

Independence does not apply to copyright in the same way. Berne makes protection automatic in every Union country, so the rights arise together; but Article 5(2) still makes their content national.

Territoriality is not a defence to infringement of an Indian right by imports. Importing infringes under section 48 of the Patents Act, and the exhaustion question in section 107A(b) is a separate one.

Quick revision

• Territoriality: existence, scope, validity and remedies are governed by the law of the country where protection is claimed (lex loci protectionis). Berne Article 5(2) states it.
• Independence: Paris Article 4bis(1) and (2) for patents, covering nullity, forfeiture and duration; Paris Article 6(1) and 6(3) for marks.
• The qualification is Paris Article 6quinquies, the telle quelle rule for a mark duly registered in its country of origin.
• Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd: territoriality, not universality; a claimant must prove spill over of reputation into India before the defendant's adoption.
• N.R. Dongre v. Whirlpool Corporation: spill over proved, so an injunction issued in passing off even against a registered proprietor.
• Independence is about legal effect, not evidence: section 8 of the Patents Act still requires disclosure of corresponding foreign applications.

Test yourself

1. State and explain the principles of territoriality and independence. Territoriality is the principle that an intellectual property right exists only under the law that created it and only within that law's territory, so that its existence, its scope, its validity and the remedies for its infringement are all governed by the law of the country for which protection is claimed. Article 5(2) of the Berne Convention states it for copyright: apart from the provisions of the Convention itself, the extent of protection and the means of redress afforded to the author are governed exclusively by the laws of the country where protection is claimed. Independence is a different principle, addressed to what happens when the same subject matter is protected in several countries at once. Article 4bis(1) of the Paris Convention provides that patents applied for in the various countries of the Union shall be independent of patents obtained for the same invention in other countries, whether or not those countries are members of the Union, and Article 4bis(2) adds that the independence is without limitation, particularly as regards the grounds of nullity and forfeiture and as regards normal duration. Article 6(1) and 6(3) do the same for marks. The two principles are distinct: territoriality says where a right operates, independence says that one right's fate does not determine another's, and a system could be territorial without being independent, as some were before 1883, with the result that inventors lost domestic rights through foreign accidents.

2. Work the Prius case and explain what it decided. Toyota launched the Prius hybrid in Japan in 1997 and the mark became known in many markets, but Toyota did not sell the car in India until 2010 and applied for Indian registration only later, on a proposed to be used basis. In 2001 an Indian manufacturer of automobile spare parts adopted PRIUS as its mark and obtained Indian registration in 2002 to 2003. Toyota sued in passing off relying on the worldwide reputation of the mark. The Supreme Court dismissed Toyota's appeals, holding at paragraph 28 that the overwhelming judicial and academic opinion across the world favours the territoriality principle rather than the universality doctrine, and that the same must apply in India. The consequence is that a claimant relying on foreign reputation must prove a spill over of that reputation and goodwill into the Indian market, and must prove it as at the date the defendant adopted the mark. Toyota's evidence of reputation in India all post dated April 2001, so the claim failed. The reported citation is (2018) 2 SCC 1. The decision matters because it is the modern Indian statement of the very principle on which the international treaty system rests, and because it draws the line against the earlier authority in the Whirlpool case, where an American proprietor whose Indian registration had lapsed did obtain an injunction, its advertising having circulated in India and produced Indian reputation.

3. A German court revokes the European counterpart of an Indian patent. What follows in India? Nothing follows as a matter of law. Article 4bis(2) of the Paris Convention provides that patents applied for in different countries are independent as regards the grounds of nullity and forfeiture, so the German revocation does not invalidate the Indian patent, does not bind an Indian court and does not oblige the Indian Controller to do anything. The Indian patent continues in force until it is separately revoked under section 64 of the Patents Act 1970 or lapses for non payment of renewal fees, and its term runs twenty years from the Indian filing date under section 53, which may differ from the German term because Article 4bis(2) mentions normal duration expressly. What does follow is evidential rather than legal. Section 8 of the Patents Act requires an applicant to keep the Controller informed of corresponding applications filed outside India and of their prosecution, and the prior art on which the German court proceeded is available to be put before the Indian Controller or an Indian court in a revocation proceeding or a counter claim. So the German decision has no binding effect and may have considerable persuasive weight, and the distinction between legal effect and evidence is where candidates most often go wrong.