Demystifying the Concept of Trademark Disparagement in Indian Laws

According to the Merriam-Webster dictionary, the term disparagement means to talk ill about someone or something, undervalue or criticize someone in a wrong way. In the trade sense, when one manufacturer uses some statement that defames or criticizes another manufacturer’s goods, it constitutes disparagement. It solely depends on the facts and circumstances of each case to check if disparagement took place or not. Indian law restricts these types of statements and considers them unfair trade practices punished under Section 36A of the MPTP Act, 1960 and Section 2(1)(r) of the Consumer Protection Act, 1986. It is otherwise called a Slander or Defamatory statement made by one trader against another trader to cause damage to his reputation of goods or services in the industry.

TRADEMARK DISPARAGEMENT 

Trademark disparagement means building the reputation of its brand by damaging the reputation of the rival mark. 

“When one trader marks a statement that his goods are better than his opponent’s goods because the opponent’s goods are below standards or adulterated, it would be termed as trademark disparagement.”

We can analyze this statement in three parts for a better understanding-

  1. “When one trader marks a statement that his goods are better than his opponent’s goods” – this is a mere comparison and marketing tactics; hence we can witness no disparagement.
  2. When the comparison is in such a way that some elements of defamatory statement are made “because the opponent’s goods are below standards or adulterated,” – this would be a direct example of disparagement. 
  3. When the whole statement is made honestly and fairly to benefit the end consumers – where the opponent is involved in all the allegations made, it would not be disparagement and will fall under the exception of fair dealing.

ELEMENTS OF TRADEMARK DISPARAGEMENT

By these three parts, it is pretty clear that there are three elements of trademark disparagement.

  • Anything said or done by one trader on another trader( rival trader)
  • Which damages or causes to damage the brand reputation
  • The rival trader suffers the loss of goodwill and trust of the consumers- which will amount to trademark disparagement.

Trademark disparagement is the most commonly occurring situation in FMCG Goods. The courts have looked into the following criteria to determine what constitutes trademark disparagement. The nature and degree of disparagement differ from case and case, and the facts of each case have to be considered while pronouncing judgments. The criteria’s are:

  1. Aim or intent of the commercial advertisement
  2. Meaning of the advertisement
  3. Product advertised
  4. Background of the advertisement
  5. “Man of Average Intelligence” test

In the case of Imperial Tobacco Company v. Albert Bonnan, the Court held that “the plaintiff has to prove that the statements of the slander made by the defendant are in such a way that the defendant’s business suffered an injury and caused to be a direct attack on the reputation of the defendant’s business.”

The U.K and U.s Laws certainly inspire Indian judicial decisions, and therefore, it is worth mentioning certain cases in that context:

Ucan Products Limited v. Hilti (Great Britain) Ltd.: 

The Court held that the “burden to establish prima facie case against the defendant is upon the plaintiff”- who has to prove that defendant, even though aware that the facts stated were misleading and false, had advertised it.

Pizza Hut, Inc. v. Papa John’s International Inc.

When it is visible on the face of it from the statement that the advertisement has false and misleading claims, no further evidence is required.

Mc Donalds Hamburgers Ltd. v. Burgerking (U.K.) Ltd.

The test to be applied is if a reasonable man would take the claim being made as one made seriously and will have to take it with a large pinch of salt.

TRADEMARK DISPARAGEMENT VS COMPARATIVE ADVERTISEMENT 

Comparative Advertisements has two-fold aspects – defamation and consumer education. The nature and storyline of the advertisements decide which category does the advertisement falls into. Comparison has become the new theory of modern advertisement these days.   The laws on comparative advertisement vis a vis trademark disparagement can be settled under two aspects- constitutional validity and statutory validity. Apart from the legislative aspects, judicial trends have made a stance on comparative advertisement pretty clear.

CONSTITUTIONAL PERSPECTIVE ARTICLE 19(1)(A) AND ARTICLE 19(2)

Freedom of speech and expression forms the baseline of media advertisement. Any commercial speech done through media and broadcasting company will fall under the purview of Article 19(1)(a) which states that “ All Citizens of India have Freedom to Speech and Expression.”

Tata Press Ltd. v. Mahanagar Telephone Nigam Ltd., the Court explained the importance of commercial speech and advertisement.

  1. Advertisement forms an important component in consumer education.
  2. It is a commercial transaction involving the spread of information regarding the product and service.
  3. It benefits the public at large; there cannot be honest and economical marketing.

However, rights given under Article 19(1) are circumscribed by exceptions laid down under Article 19(2), which states that any statement made as part of rights to speech and expression will be governed by reasonable restrictions given herein under a. Interests of sovereignty and integrity of India; b. the Security of the State; c. Friendly Relations with the Foreign States; d. Public Order, e. Decency and Morality. 

REASONABLE RESTRICTION for the comparative advertisement vis a vis commercial speech will be governed under the Decency and Morality clause. Any advertisement made with malafide intention to defames anyone or cause or likely to cause damage to reputation or goodwill of the person or its products and services will be curtailed in this reasonable restriction clause. 

Reasonable restrictions qua entitled under Article 19(2) can also be inferred from the definition of unfair trade practice Under Section 36A Of MRTP ACT, 1969.

STATUTORY PERSPECTIVE: 

The law permits comparative advertisement but restricts on product disparagement.”

The statute allows comparative statements while advertising the product to ensure healthy and static competition but restricts disparage of the products and services. If any such misleading or false statements are made against competitors, then it would only constitute infringement but also unfair trade practice and monopolistic, restrictive trade practice.

Havells India Ltd. v. Amritanshu Khaitan & Ors, the Court laid down two essentials1. If an advertisement is likely to deceive the persons to whom it is addressed or at least must have the potential to deceive. 2. if the advertisement is likely to affect the public’s consumer behavior 

Section 29(8) and Section 30(1) of the Trademarks Act, 1999 deals with comparative advertisement and lays down as follow:

Section 29(8) states that a trademark will be infringed by advertisement if such advertisement leads to unfair advantage and is against honest practices in industrial or commercial matters, affects the distinctive nature, or is against the reputation of the trademark.

However, Section 30 deems to be an exception to the above infringement section stating:

” Nothing in section 29 shall prevent the use of the registered trademark by any person with the aim of identifying goods or services as those of the proprietor provided the use:-

  1. is in consonance with the honest practices in industrial or commercial matters, and
  2. does not take undue advantage of or is against the distinctive character or repute of the trademark.”

In the case of Pepsi Co. Inc. v. Hindustan Coca Cola Ltd., Court held that comparative advertising is permitted to the extent that it does not discredit or damage the trademark or trade name or disparages the product of the rival trader.

Horlicks Ltd. and Anr. v. Heinz India Private Limited, the Court held that “the primary objective of section 29(8) and section 30 is to allow competitive advertisement by disallowing unfair trade practices”.

Gujarat Co-operative Milk Marketing Federation Ltd.(Amul)  v. Hindustan Unilever Ltd and Ors, ( Kwality) the Court held that advertising false and misleading facts without proper verification, leading to confusing consumers by disseminating false information, constitute disparagement.

Reckitt & Colman of India Ltd. v. M.P. Ramachandran & Ors:

The five principles were laid down by the : (a) A merchant can declare his goods to be the best in the world, though the declaration is untrue; (b) comparative statements, even though false are allowed; (c) to advertise his goods, he can make false comparative statements, but (d) He says that his competitors’ goods are bad. (e) In the case of no defamation, then no action lies, but courts can take action if there is such defamation.

In the case of Colgate-Palmolive (India) Ltd. v. Anchor Health & Beauty Care Pvt. Ltd.22, the Court gave two-test steps to identify if the advertisement causes disparagement- namely, that the advertisement is motivated by malice and false

The Calcutta High Court, in the case of Chloride Industries Ltd. v. Standard Batteries Ltd., held that, if goods are disparaged maliciously or with some other such intent to injure and not by way of fair trade rivalry, the same would be actionable. 

 Boehringer Ingelheim Limited & Ors v. Vetplus LimitedCourt held that a plaintiff has to show that the advertisement is wrong and misleading, causing disparagement to claim prior order restraints. 

Take away from the Article:

  • To ascertain ‘what’ constitutes trademark disparagement is a question of fact and not law.
  • The Court has to follow certain guidelines to analyze each case of trademark disparagement. (a) The Court should give to the material complained of the natural and ordinary meaning (b) The hypothetical reasonable reader (viewer) is not naive, and also, he is not unduly suspicious
  • comparative advertising is legal to the extent that such a comparison does not damage the trademark’s reputation, is not malafide, and misleading.
  • The advertisement, both express and implied, should not be false. Caution while using a design trademark in a comparative advertisement.
  • Two remedies are available in these cases- injunction and claim damages.

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