Name of author: Archie Ahirwar (III Year B.A. L.L.B (Hons.) student at NLSIU, Bengaluru)
Name of author: Divyansh Bhansali (III Year B.A. L.L.B (Hons.) student at NLSIU, Bengaluru)Introduction
In a recent Case from the United States, the well-known brand Momofuku, selling chili oil, sent a cease-and-desist letter because they were concerned that consumers might confuse Homiah Sambal Chili Crunch with Momofuku Chilli Crunch. The former has a colorful floral motif paper label while the later has a minimalist jar with a hand-drawn font and no paper label. This demonstrates a case of a larger enterprise picking on a small businesse hoping that they will cave because of the financial pressure. Similarly, in India, established and well-known brands and enterprises try to curtail the presence of similar products in the market to curb the competition.
Big brands are generally insecure about the similar products in the market and using their dominant position, they tend to wipe out the smaller companies alleging trademark infringement. To protect their exclusivity in consumer’s minds, they try to aggressively enforce their trademark. Additionally, such companies often bring not-so-genuine accusations of deceptive similarity or trademark infringement against similar businesses to undermine their market value and financially burden them. Thus, when such companies become overprotective of their trademarks and excessively enforce them on others, it leads to trademark bullying.
In India, no formal definition of trademark bullying exists as yet. Though the courts in a few cases have recognized that certain claims of infringement are ‘wrongful’ and ‘groundless’, the aggrieved parties do not have any effective remedy to hold the bully-company liable and recover damages. This piece first highlights the problem of trademark bullying in India, and then analyses the current Indian laws for protection against it. In particular, it looks at the remedies provided by Section 142 of the Trade Marks Act, 1999 (“Act”), and argues that it is insufficient to address the problem. It then proposes certain changes in the current regime to make it more effective.
TRADEMARK Bullying India
As noted, legislation in India does not officially define trademark bullying. However, Indian courts have noted instances of aggressive trademark enforcement by big brands to harass and financially cripple small businesses. Last year, in the case of Subway IP LLC v. Infinity Foods & ors, Subway initiated legal proceedings against a smaller business, Infinity Foods, accusing them of trademark infringement. In response, the defendants proposed to make substantial modifications to the color of their logo, the name of the sandwich and the design of their interiors. However, Subway was not satisfied as the name of the defendant company was still ‘Suberb’. The Delhi High after taking into account the changes made by the respondents held that no case for infringement is made out. Additionally, the Court considered the generic nature of terms, applied the anti-dissection rule, and the publici juris doctrine while reaching the conclusion. In this case, Subway’s sustenance of their claim after the defendant’s proposed modifications had no basis as noted by the court.This shows how even when there are no actionable claims prima facie, dominant market players aggressively engage in unjustified legal proceedings against smaller entities to cripple them and reduce competition. However, the court did not penalize Subway in any way and no costs were imposed on them for dragging a smaller company into a court without any substantial claim.
A similar instance of trademark bullying can be seen in the battle between BigBasket and DailyBasket, where BigBasket served a cease-and-desist letter to DailyBasket requiring them to refrain from using the trademark ‘DailyBasket’ and associated domain, discontinue their mobile application, and refrain from using similar domain names with “Basket” as a dominant feature. This was a business tactic employed by BigBasket to financially pressurise a competitor and gain dominance in the market. Similar instances of bullying can be seen inBata Indiaand other cases where complaints are mostly filed by dominant rival companies against smaller competitors to financially burden them.
Insufficiency of Section 142 of the Trade Marks Act, 1999
Section 142 the Trade Marks Act (“Act”) allows an aggrieved person to sue any person for holding out unjustified threats of a trademark infringement action, or passing off a claim. The aggrieved person can obtain a declaration to the effect that such threats are unjustified, ask for an injunction, and claim damages under the section.
Though it provides protection against excessive trademark protection to a certain extent, it suffers from numerous problems. While the judiciary has used the terms “groundless” or “unjustified” legal threats in numerous cases, there is ambiguity as to what constitutes ‘unjustified threats’under the section. As evident, the Indian Courts have often grappled with questions such as whether a legal notice constitutes a threat of initiating legal proceedings. This ambiguity can be exploited by larger corporations with substantial resources to intimidate smaller entities through the legal process, even if their claims are weak.
The section also lacks any strong deterrent effect on the bullies. Though it allows for claiming damages, courts have not been imposing costs on those who make unjustified threats. This allows larger companies to continue bullying without much loss. Additionally, the provision is reactive rather than proactive, only coming into play after a threat has been made, rather than preventing bullying from occurring in the first place. The burden of initiating legal action falls on the threatened party, which can be prohibitively costly and time-consuming for smaller entities. Hence, smaller businesses trying to avoid litigation costs would not benefit from this section.
Apart from these, the protection provided by Section 142 of the Act is very limited. Clause (2) provides that the section does not apply once the trademark holder institutes suit against the alleged infringer. The courts, while interpreting Section 142 have reiterated this position by holding “While restraining a person from making unjustified threats it is not open to the court to restrain him from taking the matter to a court of law and from agitating his rights there”. This limited scope of the section allows giant companies with enormous financial power and legal resources to initiate frivolous legal proceedings against smaller entities and saddle them with the burden of litigation costs resulting in bullying behavior. Also, in cases where the courts have found the infringement claim to be perverse and unjustified, they have not imposed significant costs on the institutors, allowing them to continue engaging in such behavior without much deterrence.
Curbing the Trademark Bullying: The Road Ahead
As seen, the present remedy under Section 142 of the Act is ineffective in addressing the problem of trademark bullying. To effectively address trademark bullying, India may need to consider several reforms. The current options to counter trademark bullying only involve judicial sanctions and litigation. However, smaller entities, lacking financial resources, find it challenging to engage in litigation. Litigation poses a significant financial burden, potentially bankrupting smaller companies, even if they win.[1] Financial disparities often favor trademark bullies, giving them the upper hand in prolonged legal battles. High standards for imposing judicial sanctions and the risk of appeals further deter smaller companies from pursuing litigation.
Role of Trade Marks Registry
To solve the aforementioned problem, the model proposed by Irina Manta could be helpful. In the context of the USA, she suggests that the Patent & Trademark Office (“PTO”) could help in curtailing trademark bullying. In the proposed model, trademark owners would file cease-and- desist letters with the PTO for review, allowing the PTO to assess claims of infringement. If infringement is confirmed, the trademark owner can proceed with legal action; if not, the recipient obtains evidence to defend against claims in court. This approach aims to balance the protection of trademarks with the need to safeguard smaller entities, reducing the financial burden on victims and providing a more structured and cost-effective method for handling trademark disputes.
A similar approach may be adopted by the Indian Trade Marks Registry in India. It may receive and assess the claims of infringement on a prima facie basis and prevent indiscriminate issuance of cease-and-detest notices. This will help in preventing harassment of smaller entities with unreasonable threats of legal proceedings. The approach anyway does not deter bigger enterprises from taking the route of litigation. Even if the Registry finds that there is no prima facie basis for issuance of notice, the claimant may approach courts to enforce its rights; however, the finding of the Registry will provide additional arsenal to the defendant to defend itself.
Judiciary Proactiveness
Apart from this, the judiciary also needs to undertake reforms in its approach to promptly address the problem. Firstly, to curb trademark bullying, courts should shift their focus from strictly enforcing existing laws and principles to evaluating the market strength of the dominant company and customer perceptions. The relative market strength, its competitiveness, and engagement in bullying behavior previously by the company shall be factors while determining whether a company has engaged in bullying behavior.
Secondly, courts should establish clear guidelines and standards for identifying and dealing with bullying behavior to prevent ambiguity and ensure fair treatment. At the outset, this requires establishing clearer definitions and criteria for identifying bullying behavior. Additionally, guidelines for courts to assess the legitimacy of infringement claims more stringently could help prevent abuse of the system. A set of clear guidelines would act as a distinguishing factor between trademark enforcement and trademark bullying.
Thirdly, after thorough analysis, if the courts are convinced that there is trademark bullying of smaller enterprise with a view to curtail competition, they shall impose significant penalties on the party alleging trademark infringement. Additionally, courts can implement stronger penalties and take strict measures against repeated offenders.
Need for Codification
The above suggested steps should be taken in addition to the exercise of codification of the provisions to deal with bullying. Presently, India lacks a definition of Trademark Bullying or any provision to deter such behavior. Thus, to empower the Judicial approach in identifying the bullying, there is need provide a statutory definition for the concept of Trademark Bullying. Further to prevent the incidents of bullying, the provisions for routing the notices through Trade Marks Registry shall be included. Lastly, to deter such behavior, strict provisions for penalty should be included in the statute.
Conclusion
Trademark bullying presents a big challenge in India, and the lack of a structured legal approach to tackle it has a prejudicial impact on competition in the market. The present remedy in the form of Section 142 of the Act is insufficient to address the problem and there is a need to develop a robust framework for identifying and dealing with the cases of trademark bullying. The measures suggested above can collectively help in formulating a more balanced approach to trademark enforcement, thereby reducing the incentives for trademark owners to resort to aggressive enforcement tactics; and hence, curb bullying. These include involving Trade Marks Registry in the process, strengthening judicial oversight of the claims and codification of key definitions and penal provisions to provide a more structured legal response to the problem.
[1] Leah Chan Grinvald, ‘Shaming Trademark Bullies’ [2011] Wisconsin Law Review 630