Territoriality and Transborder Reputation
Chapter Twenty-Four
Syllabus topic 1.3, "Property in Trademarks – how acquired?"
Pages 108 to 112 of 742
In one line
A reputation earned abroad can found a right in India, but only if the reputation itself reached India before the defendant started.
In the wording a student can write in an exam: two competing principles govern the extraterritorial reach of a mark, the universality doctrine, that a mark signifies the same source everywhere, and the territoriality doctrine, that a mark has a separate existence in each sovereign country; the Supreme Court has held in Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd., (2018) 2 SCC 1 that the territoriality doctrine holds the field in India, so a foreign proprietor suing in passing off must prove that his reputation had spilled over into the Indian market before the defendant's adoption.
Why the question arises
Goodwill is local, and trade is not. A mark may be famous across the world and unknown in Kolkata, or famous in Kolkata although its owner has never sold a rupee's worth here. The law has to decide which of those facts matters.
And the stakes are commercial. If reputation abroad is enough, an Indian trader who adopts a foreign mark nobody here has heard of is an infringer. If it is not enough, a foreign proprietor arriving in India may find his own mark already taken.
Stage one: Whirlpool, and the arrival of transborder reputation
Facts. In N.R. Dongre v. Whirlpool Corporation, (1996) 5 SCC 714, Whirlpool had allowed its Indian registration of WHIRLPOOL to lapse. The defendants obtained an Indian registration of WHIRLPOOL for washing machines and began selling under it. Whirlpool sued in passing off, relying on worldwide use, on sales to United States embassy staff in India, and on advertisements in international magazines circulating in India.
Held. The interim injunction was upheld. Reputation may travel across borders without the goods; advertising in magazines circulating in India was capable of creating an Indian reputation, and the trial court had found that the reputation was travelling trans-border to India through commercial publicity in magazines available in or brought into India, read by the higher and upper middle income strata of Indian society, which is the class that buys washing machines. A prior user with a transborder reputation may restrain a later registered proprietor by an action in passing off, because registration does not create a right where use has already created one and section 27(2) expressly preserves the action.
Why it matters. It is the foundation of the doctrine in India, and the two facts that carried it are worth remembering: advertisements circulating in India, and a class of purchaser who would see them.
Stage two: Milmet Oftho, and the caution
Facts. In Milmet Oftho Industries v. Allergan Inc., (2004) 12 SCC 624, Allergan sued in passing off over OCUFLOX for an eye preparation, claiming first use in September 1992 and registrations in several countries though not in India. Milmet, an Indian company, sold OCUFLOX for eye and ear treatment and said it had coined the word from the components of its own drug.
Territoriality and Transborder Reputation
Held. The injunction was upheld. In healthcare products the ultimate test is who is first in the market, and the fact that the foreign proprietor had not used the mark in India is irrelevant if it was first in the world market. But the Court added a caution quoted as often as the rule: multinational corporations who have no intention of coming to India or introducing their product here should not be allowed to throttle an Indian company by not permitting it to sell a product in India, if the Indian company has genuinely adopted the mark, developed the product and is first in the market.
Why it matters. It states the widest form of the doctrine and, in the same breath, the reason it cannot be unlimited.
Stage three: Toyota, and the limit
Facts. In Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd., (2018) 2 SCC 1, Toyota sued defendants who had used PRIUS as their trading name in India since April 2001 for auto parts, claiming that its PRIUS hybrid car, launched in Japan in 1997, had a reputation that had spilled over into India. A Division Bench of the Delhi High Court held against Toyota.
Held. The appeal was dismissed. The universality doctrine, that a mark signifies the same source all over the world, has not been accepted by courts; the territoriality doctrine, a trade mark being recognised as having a separate existence in each sovereign country, holds the field. Prior use of a mark in one jurisdiction does not ipso facto entitle its owner to claim exclusive rights in another. The test is whether the claimant has goodwill in India, and, as the Court put it drawing on the authorities, the nature of goodwill as legal property with no physical existence means that when a business is carried on in more than one country there must be separate goodwill in each. Toyota had to establish that its reputation had spilled over into the Indian market before April 2001, and its evidence of publicity and advertising did not do so.
Why it matters. It is the governing decision. Transborder reputation survives; universality does not. What must be proved is an Indian reputation at a date, on evidence.
Stage four: Neon Laboratories, and the domestic version
Facts. In Neon Laboratories Ltd. v. Medical Technologies Ltd., (2016) 2 SCC 672, the plaintiff's predecessor coined PROFOL for an anaesthetic in 1998; the defendant held an earlier application for ROFOL but did not use it until 2004.
Territoriality and Transborder Reputation
Held. The injunction in favour of the user was upheld. The first in the market test has always enjoyed pre-eminence, and the Court cited both Whirlpool and Milmet Oftho for it: in Whirlpool the worldwide prior user was preferred to the registered Indian proprietor, and in Milmet the prior user worldwide was preferred although its adversary had registered in India.
Why it matters. It shows that first in the market is one principle with a domestic and an international face, and it is the bridge between chapter 210 and this one.
What a foreign proprietor must now prove
Four things, and the third is where cases are lost.
- That he used the mark abroad, and when.
- That the defendant adopted it later.
- That his reputation had reached India before that adoption. Evidence: advertisements in publications circulating in India, spillover from television and the internet, sales to travellers, coverage in the Indian press, awards, and the presence of the goods in India even in small quantities.
- That the defendant's use is a misrepresentation likely to damage that reputation.
And the Indian defendant's answer, straight out of Milmet Oftho, is that the plaintiff has no intention of coming to India, that the defendant adopted the mark genuinely, developed the product, and is first in the Indian market.
The two doctrines compared
| Universality | Territoriality | |
|---|---|---|
| Proposition | A mark signifies the same source everywhere | A mark has a separate existence in each country |
| Consequence | Reputation anywhere founds a right everywhere | Reputation must be proved in the country of suit |
| Accepted in India? | No, Toyota | Yes, Toyota |
| What must be proved | Fame abroad | Spillover of reputation into India, before the defendant's adoption |
| Which case appears to support it | Whirlpool and Milmet Oftho, read loosely | Toyota, and Whirlpool read carefully |
Worked example
A Japanese manufacturer has sold an appliance under a coined mark since 1995. It has no Indian sales and no Indian registration. In 2015 an Indian company begins selling the same kind of appliance under the same mark in India.
What must the Japanese firm prove? Goodwill and reputation among Indian consumers, as at 2015, the date of the Indian company's adoption. Toyota v Prius fixes both the place and the date.
What will help. Indian circulation figures for the magazines carrying its advertisements, on Whirlpool; Indian press coverage before 2015; enquiries or orders received from India; participation in Indian trade fairs; and any Indian sales at all, however small.
What will not. That the mark is famous in Japan and elsewhere. That its website can be opened in India. That it has registrations in forty countries.
Territoriality and Transborder Reputation
Change the goods to a medicine. Milmet Oftho supplies a different route: in healthcare the ultimate test is who is first in the world market, and non use in India is irrelevant. The caution attaches at once, that a multinational with no intention of coming to India must not throttle a genuine Indian adopter.
Change the parties: both are Indian, and the plaintiff trades only in Kerala while the defendant trades only in Punjab. The same principle operates inside the country. The plaintiff must show that its reputation had reached the market in which the defendant operates, and Neon Laboratories supplies the domestic rule that the first in the market prevails over an earlier but unused application.
What it does NOT mean
Toyota did not overrule Whirlpool. Read Whirlpool again and the reasoning is territorial: the court found that the reputation had reached India through magazines circulating here. Toyota states the principle Whirlpool applied.
Transborder reputation is not the same as a well known mark. A well known mark is a statutory status under section 2(1)(zg) and section 11, proved on the section 11(6) factors, and it operates in registration and in infringement. Transborder reputation is a doctrine of the law of passing off and operates in a civil suit. The evidence overlaps; the doctrines do not.
And section 11(9) is not the same test. It forbids the Registrar to require, for the purpose of determining that a mark is well known, that the mark has been used in India or registered here. That is a rule about what the Registrar may demand, not a holding that reputation abroad founds a passing off action.
Quick revision
Universality: one source everywhere. Territoriality: a separate existence in each country. India follows TERRITORIALITY.
N.R. Dongre v. Whirlpool Corporation, (1996) 5 SCC 714: reputation travels trans-border through advertising circulating in India; a prior user with such a reputation may restrain a later registered proprietor in passing off.
Milmet Oftho Industries v. Allergan Inc., (2004) 12 SCC 624: in healthcare, the ultimate test is who is first in the market, and non-use in India is irrelevant if the claimant was first in the world market; but a multinational with no intention of coming to India must not throttle an Indian company that genuinely adopted the mark and is first here.
Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd., (2018) 2 SCC 1: universality not accepted; territoriality holds the field; prior use abroad does not ipso facto give rights here; there must be separate goodwill in each country, and the spillover into India must be proved as at the date of the defendant's adoption.
Territoriality and Transborder Reputation
Neon Laboratories Ltd. v. Medical Technologies Ltd., (2016) 2 SCC 672: first in the market has pre-eminence, citing Whirlpool and Milmet.
Test yourself
1. Which doctrine does Indian law follow, and which case settles it? The territoriality doctrine, that a trade mark has a separate existence in each sovereign country. Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries Ltd., (2018) 2 SCC 1.
2. What facts carried the day in Whirlpool? That the plaintiff's reputation was travelling trans-border to India through commercial publicity in magazines available in or brought into India, which circulated among the income group that buys washing machines, and that the plaintiff was the prior user while the defendants held only a later Indian registration.
3. State the caution in Milmet Oftho. That multinational corporations who have no intention of coming to India or introducing their product here should not be allowed to throttle an Indian company by preventing it from selling a product in India, where the Indian company has genuinely adopted the mark, developed the product and is first in the market.
4. What exactly must a foreign plaintiff prove about India? That its reputation and goodwill had spilled over into the Indian market, among Indian consumers, before the defendant adopted the mark, so that there is a separate goodwill in India capable of being damaged.
5. Is transborder reputation the same thing as a well known trade mark? No. A well known trade mark is a statutory status under section 2(1)(zg) and sections 11(6) to 11(10), operating in registration and infringement. Transborder reputation is a doctrine of the common law of passing off, operating in a civil suit and depending on proof of goodwill in India.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.