Toyota Loses Trademark Battle: Supreme Court Upholds Prius Auto’s Rights (2017)

Introduction

Date of the Judgment: 14 December 2017

Citation: (2017) INSC 997

Judges: Ranjan Gogoi, J. and Navin Sinha, J.

Can a company claim exclusive rights to a trademark in India based solely on its global reputation, even if it hasn’t established a significant presence in the Indian market? The Supreme Court of India addressed this question in a trademark dispute between Toyota, a global automobile manufacturer, and Prius Auto Industries, a local auto parts manufacturer. The core issue revolved around whether Toyota could prevent Prius Auto from using the ‘Prius’ trademark in India, despite Prius Auto having registered the mark earlier in India. The bench comprised Justices Ranjan Gogoi and Navin Sinha.

Case Background

Toyota, a Japanese car manufacturer, sued Prius Auto Industries, an Indian auto parts firm, for using their registered trademarks ‘TOYOTA’, ‘TOYOTA INNOVA’, and ‘TOYOTA DEVICE’ and the unregistered mark ‘Prius’. Toyota claimed prior global use of the ‘Prius’ mark since 1997, while Prius Auto had registered ‘Prius’ in India in 2002-2003 for auto parts. Toyota argued that Prius Auto was infringing on their trademarks and passing off their goods as Toyota’s.

Prius Auto countered that they used ‘TOYOTA’ marks only for item identification and had registered ‘Prius’ in India in 2002, using it since 2001. They claimed the mark was inspired by the Hindi phrase ‘pehla prayas’ (first attempt) and argued that Toyota’s ‘Prius’ car was not sold in India until 2009, so no confusion could arise. Toyota launched the ‘Prius’ car in India in 2010.

Timeline

Course of Proceedings

The trial court initially granted an ex-parte injunction against Prius Auto, which was later vacated. The Division Bench of the High Court allowed Prius Auto to use Toyota’s registered trademarks conditionally, restricting their use to identifying the compatibility of their products. The trial court then ruled in favor of Toyota, stating that Prius Auto’s use of ‘Prius’ constituted passing off. However, the Division Bench reversed this decision, stating that Toyota had not established sufficient goodwill in India before Prius Auto’s registration of the mark. The Supreme Court upheld the Division Bench’s decision.

Legal Framework

The case primarily involves the Trade Marks Act, 1999. Section 2(1)(zg) of the Act defines a “well-known trade mark.” Section 30 of the Act protects the honest use of a trademark for identifying goods. The court also considered the concept of “passing off,” which protects unregistered trademarks based on prior use and goodwill. The Court also considered Section 11(6) and 11(9) of the Trade Marks Act, 1999.

Section 2(1)(zg) of the Trade Marks Act, 1999 defines a well-known trade mark as:
“a mark which has become so to the substantial segment of the public which uses such goods or receives such services that the use of such a mark in relation to other goods or services would be likely to be taken as indicating a connection in the course of trade or rendering of services between those goods or services and a person using the mark in relation to the first-mentioned goods or services.”

Section 30 of the Trade Marks Act, 1999 states:
“Nothing in section 29 shall be construed as preventing the use of a trade mark by— (a) a person for the purposes of identifying goods or services as those of the proprietor provided the use— (i) is in accordance with honest practices in industrial or commercial matters, and (ii) is not such as to take unfair advantage of or be detrimental to the distinctive character or repute of the trade mark.”

Arguments

Toyota’s Arguments:

• Toyota argued that the ‘Prius’ mark had a global reputation and that its goodwill had spilled over into India, even before the car was launched in India.
• They contended that the wide publicity and advertisements of the ‘Prius’ car in leading newspapers and magazines worldwide since 1997 were sufficient to establish its reputation in India.
• They asserted that the Division Bench of the High Court did not address whether ‘Prius’ was a well-known mark, which would entitle it to greater protection.
• Toyota claimed that the test for passing off is based on the likelihood of confusion, not actual confusion.
• They argued that Prius Auto’s use of multiple Toyota trademarks and the conditional injunction order of 2000 indicated a dishonest intention to benefit from Toyota’s goodwill.
• Toyota found the explanation of the adoption of the mark ‘Prius’ by Prius Auto as absurd.

Prius Auto’s Arguments:

• Prius Auto contended that they used Toyota’s trademarks only to identify the compatibility of their spare parts, which is protected under Section 30 of the Trade Marks Act, 1999.
• They argued that Toyota’s application for trademark registration in India was late and on a “proposed to be used basis,” while Prius Auto had adopted and registered the mark much earlier.
• They claimed that the ‘Prius’ car was not sold in India until 2009, so there could be no confusion.
• Prius Auto submitted that the Territoriality Principle, not the Universality Doctrine, applies, requiring a trademark to have a separate existence in each country.
• They asserted that Toyota failed to show evidence of the ‘Prius’ mark’s reputation spilling over to the Indian market before April 2001.
• Prius Auto argued that the word ‘Prius’ is publici juris and that their explanation for adopting the name was logical.

Submissions

Issues Framed by the Supreme Court

1. Whether the Division Bench of the High Court was correct in holding that the grant of injunction in favour of the plaintiff, insofar as the trade name ‘Prius’ is concerned, was not justified?
2. Whether the defendants, by using the name/mark ‘Prius’ to market automobile spare parts, are guilty of passing off their products as those of the plaintiff, thereby injuring the reputation of the plaintiff in the market?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered various cases and legal principles while deciding the matter.

The court also referred to “The Law of Passing-Off” by Prof. Christopher Wadlow.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court relied on S. Syed Mohideen vs. P. Sulochana Bai [2016 (2) SCC 683] to reiterate that passing off actions are based on prior user rights and goodwill.
• The Court cited N.R. Dongre vs. Whirlpool Corporation [1996 (5) SCC 714] to acknowledge that wide advertisement can establish trademark use, but found that this was not the case here.
• The Court referred to Milmet Oftho Industries & Ors. vs. Allergan Incorporated [2004 (12) SCC 624], but emphasized the importance of goodwill in the specific jurisdiction.
• The Court applied the triple identity test from Reckitt and Colman Ltd. vs. Borden Incorporated [1990 (1) All E.R. 873] but found that Toyota failed to establish the necessary goodwill in India.
• The Court cited Trans Tyres India Pvt. Ltd. vs. Double Coin Holdings Ltd. & Anr. [2012 SCC Online Delhi 596] to support the territoriality principle.
• The Court used Starbucks vs. British Sky Broadcasting [2015 UK SC 31] and Athletes’ Foot Marketing Associates Inc. vs. Cobra Sports Ltd. [(1980) R.P.C. 343] to emphasize the need for customers within the jurisdiction for establishing goodwill.
• The Court referred to Taco Bell vs. Taco Co. of Australia [1981 60 FLR 60] and ConAgra vs. McCain Foods [(1992) 23 IPR 193] to support the territoriality principle.
• The Court referred to SA Anciens Etablissements Panhard et Levassor v. Panhard Levassor Motor Co [1901 2 Ch. 513], Grant v. Levitt [1901 18 RPC 361], and C&A Modes v. C&A (Waterford) [1976 I.R. 198 (Irish)] to show examples of how a market can be established in a territory.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the principle of territoriality in trademark law. The Court emphasized that a trademark’s reputation must be established within a specific jurisdiction, not just globally. The lack of evidence of Toyota’s goodwill and reputation for the ‘Prius’ mark in the Indian market before April 2001, weighed significantly against Toyota. The Court also considered the delay on the part of Toyota in approaching the courts, which prejudiced Prius Auto.

Fact:Law Ratio

The Court’s reasoning was more influenced by the factual aspects of the case, such as the lack of evidence of Toyota’s goodwill in India and the delay in approaching the courts, than the legal principles alone.

Logical Reasoning

Key Takeaways

• Territoriality Principle: Trademarks must establish goodwill in each specific market. Global reputation alone is not enough.
• Prior User Rights: Prior use and goodwill in a specific market are essential for a passing off claim, even against a registered owner of the mark.
• Burden of Proof: The burden of proving goodwill and reputation in a specific market lies with the claimant.
• Likelihood vs. Actual Confusion: Likelihood of confusion is more relevant in quia timet actions, while actual confusion is required in final adjudication.
• Delay: Delay in approaching the courts can prejudice a claimant’s case.

Directions

The Supreme Court did not issue any specific directions, but affirmed the order of the Division Bench of the High Court, dismissing Toyota’s appeal.

Development of Law

Ratio Decidendi: The ratio decidendi of the case is that the territoriality principle governs trademark disputes, and a claimant must establish goodwill and reputation in the specific jurisdiction where they seek to enforce their trademark rights. A global reputation is not sufficient. The court also clarified that in passing off claims, the test of likelihood of confusion is more relevant in quia timet actions, whereas actual confusion is needed when the matter is finally adjudicated.

Change in Law: This judgment reinforces the territoriality principle in Indian trademark law, clarifying that a global reputation does not automatically translate to trademark rights in India. This is a reiteration of the previous position of law.

Conclusion

The Supreme Court upheld the Division Bench’s decision, ruling against Toyota. The court emphasized the importance of establishing goodwill within a specific market, rather than relying solely on global reputation. This case clarifies the application of the territoriality principle in Indian trademark law and highlights the need for businesses to establish a local presence to protect their trademarks.