Name of author: Ujjaini Biswas (IV Year, NALSAR University of Law, Hyderabad)

Keywords – Consumer behaviour, deception, trademark infringement, initial interest, goodwill misappropriation

Introduction

The Trade Marks Act of 1999 protects consumers from deception and confusion, while protecting proprietors of goods and services from misappropriation of goodwill. The Doctrine of Initial Interest Confusion (“IIC”) has recognised that damage to the goodwill of the original trademark proprietor can occur even through a momentary confusion. This gives rise to the need to develop a threshold for the “initial confusion”, to ensure that consumers do not get deceived, while brands are also not unjustly prevented from entering the market. In this piece, the author examines the evolving standards of IIC in the US and Europe. Thereafter, the author analyses whether Indian courts follow the established principles of IIC to combat misappropriation of goodwill. Lastly, the piece identifies the judicial conflicts regarding the standard of IIC, and the sufficiency of “initial confusion”, and concludes by proposing a framework for effective judicial intervention. Essentially, this blog tries to address the question of how Indian courts should apply the doctrine of IIC in the digital economy to balance the protection of consumer attention and the goodwill of the goods/services.

Evolving standards of IIC in the US and Europe

The doctrine of IIC started narrowly in the USA, as a way of dealing with bait-and-switch tactics, but then expanded massively once the internet era came in. In Grotian v. Steinway(“Steinway”), the Court held that initial confusion of the consumers can damage Steinway even if the consumers figure it out before buying. The damage was caused by Grotian’s free-riding on Steinway’s reputation to attract prospective customers. Then, in the Mobil Oil Corp v. Pegasus(“Pegasus”), the Court emphasised the likelihood of Pegasus Petroleum gaining crucial credibility during the initial phases of a deal using Mobil’s Pegasus. This showed that US courts were extending the protection under IIC beyond the confusion during sale, to focus on crucial credibility as the harm. IIC was explicitly articulated in Brookfield Communications Inc. v. West Coast Entertainment Corp (“Brookfield”), where the Court held that there was no real confusion, since users knew they were on another site. However, the Court still found liability, because WestCoast improperly benefited from the goodwill that Brookfield developed, by using Brookfield’s mark in meta-tags, which diverted consumers. Courts thus started imposing liability for mere diversion of web traffic without confusion at the point of purchase. Again, in Playboy Enterprise Inc. v. Netscape Communications Corp. (“Playboy”), the Court drew an analogy from Brookfield and held that even if consumers realise the ads are not from Playboy, the defendants were still freeriding on Playboy’s reputation to attract consumers. With this clear expansion of the doctrine, courts began to treat “initial interest” as actionable even in the absence of confusion amongst potential consumers.

In Europe, the traditional model of trademark law focused on confusion at the point of sale. However, some countries have followed the American interpretation of IIC. In Och-Ziff Management Europe Ltd v. Och Capital LLP (“Och-Ziff ”), the UK judiciary held that IIC is actionable because the confusion arises before the purchase, particularly via advertising or promotion, even if the confusion gets corrected later, prior to the actual sale. The Court of Northern Ireland in BP Amoco v. John Kellyalso held that even though the plaintiff could not prove damage, there was a case of trademark infringement since the consumers took their decision based on initial confusion. The key rulings of the EU that are relevant for this piece, are that of Die BergSpechteand Portakabin v. Primakabin, In these cases, the Court of Justice of the European Union (“CJEU”) held that buying a rival’s mark as a Google AdWord can also amount to trademark infringement, if it makes it difficult for reasonably observant consumers to identify the origin. From these rulings, an ambiguity arises regarding IIC specifically, whether a mere fleeting diversion of consumer attention is sufficient to constitute trademark infringement, or whether it must be shown that such confusion actually influences the consumer’s purchasing behaviour.

Indian jurisprudence on the Doctrine of IIC

Under India’s Trade Marks Act, infringement of registered trademarks is governed by Section 29, which allows a registered proprietor to sue another if they use an identical or similar mark in a manner likely to cause confusion. The central point on which Indian judges have differed is whether confusion ought to persist until the actual transaction (that is, when the consumer buys the goods or services), or whether the initial diversion of the consumer’s attention suffices for the establishment of trademark infringement. A survey of High Court (“HC”) rulings across various sectors reveals the diverging interpretations. Single-Judge benches in the Forest Essentials case and the Under Armour case narrowed the scope of IIC by making it a requirement for the confusion to remain until the consumer makes the purchase. The same was then overturned by the Division Benches, who ruled that confusion need not stay till the end. In the Rajnigandha case, the Delhi HC held that in fast-moving consumer goods sectors like pan masala, an average customer would have imperfect recollection and would rely on the general impression of the product rather than conduct a close scrutiny. Even small variations in spelling do not make the consumer disillusioned because the dominant part of the trademark and the phonetic similarity remain intact. Courts have also recognised online diversion as sufficient for infringement analysis. In a case involving pharmaceutical drugs, the Court held that one must avoid confusion not only when the APIs (active pharmaceutical ingredients) are different, to prevent wrong treatment, but also when they are identical. This was a consumer-centric rationale, as confusion can harm public confidence in the safety of the drugs and their adherence to treatment. Whether extending this strict requirement to identical APIs raises an argument of dilution of the justification of IIC, and risks over-protection of trademarks, will be dealt with in the next section.

Balancing consumer welfare and brand goodwill protection

Does promoting consumer welfare by offering more options of goods harm the competitive advantage of businesses? This stems from the reasoning that if a consumer has more options to choose from, a company’s market share reduces, and it may even weaken the goodwill of the business. However, liability under trademark law is based on the fact that consumers should not be deceived, and not on the injury faced by the businesses. Thus, allowing courts to rule trademark infringement on mere distraction or fleeting diversion is not enough. For example, as Rothman explains in her paper, getting diverted by a substitute for iTunes would not affect the positive view enjoyed by consumers about the Apple company, and thus, its goodwill is not affected. Rather, the consumer can make an informed decision regarding the products available in the market.

The Supreme Court ought to establish the threshold of initial confusion, at which brands can be held liable for trademark infringement. Two of the core factors that Courts must consider are identifying the harm caused and the type of consumers for that product/service. The case survey above throws light on three kinds of situations, one, where there is a case of momentary confusion, or, as some courts have mentioned, “fleeting diversion”. Secondly, it could be a case where the consumer gets rid of their initial confusion, but their interest gets piqued by the new product, which makes them purchase the same. Thirdly, the consumer goes ahead to purchase the product solely due to the initial confusion.

A structural framework for applying IIC

I.S. Fhima had advocated for Courts to focus on “operative confusion” and hold brands liable for trademark infringement only if the confusion actually affects consumer behaviour. This approach cannot be applied universally across all sectors of products and services. Firstly, in cases involving fast-moving consumer goods, consumers do not spend a lot of time getting to know the product; they just tend to rely on a general impression or previous recollection. There, the cost of allowing brands to confuse consumers using their trademarks far exceeds the benefit of providing options to consumers, because the consumer does not make a deliberate, informed decision. Again, in the pharmaceutical sector, drugs are matters of life and death. Hence, the Court (in Aziwake ruling) rightly held that even a mere likelihood of confusion would suffice for infringement, as buying the wrong product (albeit containing an identical API) may have drastic consequences. In these scenarios, “fleeting diversion” should be held to be sufficient for trademark infringement. In cases of other goods, such as in the case of Forest Essentials, where the consumers are literate and make informed purchases, having the option of another brand with a similar name would be less likely to confuse them, and instead would provide them with more options. In such cases, the Court ought to adopt the approach laid down by the CJEU in Die BergeSphecte that the infringement liability arises when the advertisement is such that it “does not enable normally informed and reasonably attentive internet users, or enable them only with difficulty” to know about the origin. This would harmonise the divergent interpretations. 

To frame a robust approach, Indian courts ought to first start with a contextual application of the Cadila factors, by assessing the trademark holistically, and incorporating specialised thresholds for various markets as explained in the preceding section. Secondly, in cases of e-commerce, keyword advertising, and domain names, the Courts ought to prioritise that the speed of online navigation does not absolve the infringer of deceptive intent, and reject the argument that online consumers are inherently informed. Thirdly, it should embrace those US and European court rulings that infringement rests on initial confusion capable of altering their behaviour, and not mere diversion unconnected to the deception. This prevents over-protection of trademarks, while also protecting consumers from deception.

Conclusion

As can be seen, the doctrine of IIC straddles the line between consumer protection from deception and free-market competition. This piece argues that the solution lies in rejecting both the extremes of fleeting diversion and consumer confusion till the point of purchase. Instead, it advocates for a middle path, where the Courts ought to check whether the confusion is likely to result in a change in the consumer’s behaviour. Drawing from US and European jurisprudence, Rothman’s critique of overreach and Fhima’s argument of operative confusion, the paper has attempted to resolve the research question. It proposes the adoption of a context-sensitive framework, which then preserves the function of trademark law, while avoiding an overreach, thereby enabling Indian courts to address the doctrine of IIC in the digital economy.