Trademark Bullying: A Legal Means to Illegal Ends

The law of Trademark Protection was developed to grant exclusive proprietary right to Trademark owners, the monopoly of the Trademark owners over their trademarks and safeguard the collective goodwill. In a nutshell, Trademark Protection originated to restrain the sale of counterfeit products under an existing reputed brand name, but what happens when the same owners who are protected go above and beyond their legal capacity to protect their mark? The exact term for such an act is “Trademark bullying”.
Off late it has become a persistent problem with big companies, whereby they try to strong-arm small enterprises for business gains. Proprietors having high stakes go out of their way to protect their marks, even though the target entities do not use marks that are remotely similar to theirs. When a proprietor becomes an aggressive protector of his Trademark, lines between actual infringement and absurd contestations blur. To understand whether the same is bullying or an actual trademark infringement we will have to understand what constitutes bullying and the subtle difference between infringement and trademark bullying.

Definition & Ingredients

Definition of Trademark Bullying
The United States Patent and Trademark Office (USPTO) has defined trademark bullying as “the act where the trademark owner that uses its trademark rights to harass and intimidate another business beyond what the law might be reasonably interpreted to allow.”1 The practice of a proprietor being overprotective of their mark and enforcing trademark rights beyond the required limit and scope of trademark law is called Trademark Bullying. 2 For instance when a powerful company or a big MNC like Amazon or Apple, that has immense funds, files a suit against local or smaller companies for infringement. Legal proceedings have a humongous cost attached to them and cannot be afforded by everyone. A small company that does not have adequate finances to fight a legal battle tends to budge under the influence of these powerful companies and give up on using their mark along with the products and services used under the mark, which they are legally entitled to. However, these threats are more than often groundless and baseless.

The course of action for entities that suspect infringement should be to verify whether the rival mark is actually similar to the proprietors’ mark. The next step would be to understand the trade circle, the market area and the similarity in the goods and services and further understand whether there is actual infringement or dilution. Similarly, one needs to determine whether there is a likelihood of confusion that might arise when a man with average intelligence looks at the rival marks. After the conclusion of the said due diligence, the proprietors would be in a position to understand whether they need to proceed with a legal action.

Who is a Trademark Bully and What Constitutes Trademark Bullying?
Various elements are to be considered before concluding whether it is a good faith trademark enforcement or bullying. A bully is someone who crosses the outer limit of “likelihood of confusion” en route to its trademark enforcement by prosecuting proprietors that are using an allegedly similar mark for non-competitive goods and services. In the case of deceptively similar marks and competitive goods and services, any act of aggressive enforcement will fall within the ambit of good faith litigation, and it holds true even if the mark is relatively weak but the market segment is competitive. Likewise, when owners of dissimilar marks enforce their rights against marks in the use of non-competitive goods, it is trademark bullying. But what happens when the owner of deceptively similar marks tries to enforce their rights against non-competitive goods and services? The owners in such scenarios seek to rely on the related goods or complementary goods doctrine, which tries to establish a link between two non-competitive goods. Since such links are difficult to establish, the enforcers usually rely on unfounded claims of “famous and well-known trademark”.

Modus Operandi of Bullying and the Effect on Small Entities Big companies have been observed to follow a similar pattern when they try to eradicate their competition out of the markets. They send out a common cease and desist notice which contains threats in legal language alleging trademark infringement and dilution. They also mention that they have been successful in prosecuting other enterprises using similar trademarks and then initiate either opposition proceedings or rectification proceedings against the small enterprise.3

The effect on the small enterprises that do not have any economical or legal support is they sit for a settlement wherein they are asked to withdraw their marks and the same is accepted by the small enterprises. The small enterprises tend to incur a huge financial cost of rebranding, removal of products from the markets, and loss of reputation because of the suit.

Comparative Analysis of Judicial Approach to Trademark Bullying in India and the US

The Approach by US Courts
While in India the cases which surround the issue of trademark bullying are still fewer, the instances are much higher in the United States. Here are a few cases that helped the courts of the United States to look at the situation of trademark bullying from a different perspective.

In Monster v. Vermonster, the manufacturer of a renowned energy drink “MONSTER”, Hansen Beverage Co., sent a cease-and-desist notice to Rock Art Brewery for using “Vermonster” to market its brewed beer. Rock Act Brewery was a small company that sold its beer in a few states in the United States of America. Hansen asserted a likelihood of confusion over the term Vermonster for beer and Monster for an energy drink.

Even though the marks were completely dissimilar and unique in their own way, Rock Art was asked to comply with the notice, however, the proprietors of Rock Art stood against the bullying and issued a public statement and started advertising as well as marketing their product. They also took to social media which persuaded Hansen to back down and come to a settlement.4

After this particular case the U.S. Commerce department in coordination with the USPTO came up with a report which addressed the wrongful harassment of small entities by big companies.5

In Apple v. Prepear, Apple being a leading producer and seller of electronic products tried to manipulate a small entity – Prepear, a recipe sharing application, into letting go of their mark. At the outset, the logo of Prepear and Apple are pretty distinctive with Prepear having a drawing of a pear outlined in green against a white background and leaf facing downward and the logo of Apple being a half-eaten apple with the leaf facing upward. Further, the goods and services provided were also dissimilar.

Prepear took to social media to fight against the bullying and shared how Apple had managed to do the same with other entities who has created a fruit logo. Prepear also stated that they had to let go of various employees because they could not afford their pay alongside defending the costly suit. Although this case has not been decided yet, it is clear that both the logos are dissimilar, and the goods and service offered are also distinctive therefore there should be no cause of confusion for any man with average intelligence. Nonetheless, the factors that are to be taken into consideration while deciding whether there is a plausible infringement or bullying are fairly obvious.

Indian Jurisdiction
Indian legislators had forethought the possibility of such misuse and provided a viable resolution under section 142 of the Trademark’s Act, 1999 which outlines the law against groundless legal threat.

The provision states that when a person through circulars, advertisement, or otherwise threatens another person with an action or proceeding for infringement of a registered or alleged to be registered trademark, the aggrieved person may bring a suit against such person and obtain a declaration to the extent that such threats are unjustified.

The available legal remedy for such threats is that an injunction may be issued in favour of the aggrieved party to restrain the other person from the continuance of such threats and also to recover damages. This remedy is available for only those whose trademarks are registered.

One of the first case that may be identified as bullying in India is Milmet Oftho Industries and Ors v. Allergan Inc [(2004)12 SCC 624], wherein the Indian Pharmaceutical company Allergan sold a drug named ‘Ocuflux’. The Appellant, an international pharmaceutical company sold a drug with a similar name in different countries and therefore sought a passing off suit against Allergan. The Supreme Court held that “if multinational companies do not have any intention of coming to India or introducing their products in India, they should not be allowed to throttle Indian Companies if the Indian Company has been genuinely using their mark in India and developed the product and was the first in the market”.

Another notable case is Jones Investment Co v. Vishnupriya Hosiery Mills [2015-4-L.W.30], where the Appellant was an American company which had been using the trademark ‘Jones New York’ internationally for manufacturing and producing clothing, hosiery and footwear. The respondent on the other hand was a small textile firm based in Erode, a city in Tamil Nadu. The Respondent had filed an application for their mark ‘Jones’ in relation to the textile products, which was opposed by the Appellant and the Registrar of Trademark had dismissed the same which gave rise to an Appeal.

The Appellants contended that they had transborder reputation and that the respondents did not have enough sales of their products and therefore, would not be able to compete with the Appellant. However, the IPAB took a similar stand which was taken by the Supreme Court in the previous cited case and stated that “a multinational company cannot claim infringement of trademark by a local Indian company purely based on international presence, unless they can expressly establish that their presence extends to India or precedes that of the Indian company.”

In a similar case of Bata India Limited Vs Vitaflex Mauch GmbH (CS(OS) No. 1112/2006), wherein the plaintiff instituted a case against the defendant for restraining them from making baseless groundless threats of legal proceeding. The main question that the court had to deal with was whether the legal notice sent by the defendant amounted to a legal threat and if the plaintiff was entitled to injunction and damages. The Delhi High Court held that the legal notice amounted to threat and the same was unjustifiable, therefore, the defendants were ordered to restrain themselves from issuing any further baseless threats.

The recent spat between BigBasket and DailyBasket is the latest example of prevalence of Trademark Bullying in India. BigBasket slapped DailyBasket with a cease-and-desist notice directing DailyBasket to (1) Stop business operation under the trademark “Daily Basket” and the domain name dailybasket.com ,and transfer the same to Big Basket; (2) discontinue the mobile application; (3) discontinue use of similar domain or trademark with the term “Basket” as a dominant feature of the domain name or the trademark; and lastly, (4) Pay INR 2,00,000.00/- as legal fees. This would be a fit case of bad faith enforcement, since the term “Basket” can be easily regarded as a term common to trade, and hence any proprietor in the trade of consumer goods is free to use it.

Although India had already made a provision for such threats, the act does not clarify what amounts to groundless and baseless threat. However, the above judgments decided by the Court and IPAB are clear on a few elements including whether the marks are actually similar and cause confusion, whether the international companies have an intention to bring their product into the country, first to use over first to file, etc. which have been taken into consideration when assuming if the same is to be considered as bullying or infringement. The Indian judiciary has not second guessed in slamming MNC’s and other powerful companies when it was clear that the local businesses were being wrongly and illegally affected by the infructuous cease and desist notice being sent to them.

The Road Ahead
Every legal notice of cease-and-desist would not amount to trademark bullying. The dynamics of each case are different, making the court re-think every scenario and look-out for the issue of trademark bullying or to check whether the plaintiff is seeking an injunction to avoid the actual consequence of an infringement. The primary purpose of the provision under the trademark act was to make sure that small entities and local businesses do not lose out on what they are legally entitled to own. However, there are ways in which the issue could be further curbed i.e. by providing resources to small entities including legal aid camps, creating awareness, law firms taking initiative and handling more pro bono cases etc. Small entities off late have sought some respite by resorting to social media wherein their plight is understood by a community of like-minded people who support through backlash at bigger companies which harms their reputation and goodwill gained over the years. While the laws in US on standard of proof for claims of trademark dilution shows a way to restrain trademark bullying on superficial claims of famous and well-known trademarks, the laws in India are still not clear on how far a litigant may go on such unfounded claims before being termed as a bully.
This article tries to explain what constitutes bullying and the subtle difference between infringement and trademark bullying.

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Why filing of Provisional Patent Application keeps you ahead in the Patenting race?

With an additional focus to build an Innovation based entrepreneurial eco system, innovation is happening at the drop of a hat. However, the floodgate of invention around the race does not seem to be limited to an ingenious mind but also requires a go-getter attitude. As we know, Patent protection works on a “first to file” basis and not on “first to invent” which means it is granted to the one who files the Patent application first, subject to fulfilling other patentability criteria.

A Patent application has to be filed along with certain Specifications (details/working of the invention). These specifications are of two types i.e. Provisional and Complete. Therefore, the application can be filed along with the Provisional or Complete Specification. If filed with Provisional, the Complete specification needs to be filed within 12 months.

 

Provisional Specification is very basic in nature and does not require details about the invention, unlike Complete Specification. Perhaps the difference between the two specifications is clear from the preambles of the specifications itself i.e.:

Preamble of the Provisional Application: “The following specification describes the invention”.

Preamble of the Complete Specification: “The following specification describes the invention and the manner in which it is to be performed.”

 

Even though, the Provisional Specification does not require claims, detailed descriptions, drawings etc., however, due care needs to be taken to ensure that the specification is broad enough so the objectives of the invention is covered as Complete Specification cannot be broader than what was disclosed in the Provisional.

 

Many times, during the office action as well as during the infringement or revocation attack, it is the provisional specification, which is first scrutinized to check if the invention was covered clearly. Therefore, even though it is provisional, taking professional guidance while drafting would be advisable to avoid possible mishaps in the future.

 

In order to stay ahead in the competition of technological advancement, R&D companies and other IP sophisticated companies around the globe, work on new inventions and file applications with the bare minimum information to get a priority date for their inventions. This is done before deep diving into specifics such as looking at the prior art or doing the feasibility test for the product/process etc.

 

Ideally, if an inventor comes up with an invention, she should not wait for the invention to be fully developed or for the feasibility test to be done. Needless to mention, millions of researchers around the globe are working on similar subjects and one never knows who might be coming up with similar invention in some part of the world and perhaps may be moving faster to file the patent application to claim priority.

 

Post filing of a Patent Application along with the Provisional Specification, an inventor has 12 months’ time to complete the research and file the Complete Specification. Since this option has been provided under the Patent law, availing it to claim the priority date would be a wise thing to do rather than wait for the research to complete where one would be running the risk of losing everything if someone else files before them. 

 

Ideally these 12 months period are given so one can carry out the patentability/ prior art search, which help the inventors tremendously in working around similar inventions.  Further, the Companies/inventors could also use the (provisional) Patent Application number to discuss the invention with potential investors, partners, licensee, etc. with due caution. 

 

In a situation where the inventor is unable to file the Complete Specification within the due date due to unavoidable circumstances, there is an option to file a request to post-date the application for a maximum period of six months subject to non-disclosure of the invention in the public domain.  

 

Considering these obvious advantages, filing a Patent Application along with a Provisional Specification could and would prevent a genuine effort from being a day late and a dollar short.

 

 

 

Image Credits: Photo by Med Badr Chemmaoui on Unsplash

Post filing of a Patent Application along with the Provisional Specification, an inventor has 12 months’ time to complete the research and file the Complete Specification. Since this option has been provided under the Patent law, availing it to claim the priority date would be a wise thing to do rather than wait for the research to complete where one would be running the risk of losing everything if someone else files before them. 

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Arbitration in Intellectual Property Disputes in India – A fable or reality?

Reconciliation of the rights pertaining to the creation of mind through a creature of contract remains an unsolved conundrum in India.  

In the wake of commercialization, when the Indian legal system is tenaciously shifting its focus from adjudication to alternate dispute resolution, arbitration has become a trend-setter in effectively resolving various kinds of commercial disputes. Arbitration is preferred in commercial disputes because it ensures neutrality, confidentiality, timeliness, and expertise while granting an award. The rise in arbitration proceedings, therefore, necessitates the conclusive determination of a range of issues that continue to be incessant in this field. One of the pressing issues while executing an arbitration clause in a contract is – whether an IPR dispute arising from a commercial agreement arbitrable? Delving deeper into the Indian scenario, it is evident that this issue remains an unsolved conundrum. Different benches in different High Courts have adopted a diversity of observations, contradictory to each other, forming a motion of debate as follows: 

 

Arbitrability of IPR Disputes arising from a commercial contract:

 

Pro-Arbitration 

“I do not think the world of domestic and international commerce is prepared for the apocalyptic legal thermonuclear devastation that will follow an acceptance of the plaintiff’s submission that no action under the Trade Marks Act or the Copyright Act can ever be referred to arbitration.” 

The above was stated recently in ‘Eros International Media vs. Telemax Links’ (2016), where the Bombay High Court while dealing with the issue of arbitrability of a dispute under Section 8 of the Arbitration and Conciliation Act 1996 (henceforth referred to as “the Act”) in a suit for copyright infringement, held that the disputes in contractual nature would always be an exercise of a right in personam owing to the fact that the defied parties would seek particular reliefs against each other and hence, be referred to settlement by arbitration.  

The facts of the Eros Case surrounded the grant of a license by the Petitioner for copyright distribution of its films. The Respondent had violated an express prohibition clause of the license which barred the exercise of distribution rights upon termination of the agreement. Similarly, in ‘Deepak Thorat vs. Vidli Restaurant Limited’ (2017), the Bombay High Court reiterated the holdings of the Eros Case.  

Earlier, the Delhi High Court in ‘Ministry of Sound International vs. M/s Indus Renaissance Partners’ (2009) had observed that IP-related disputes born out of a contract could be referred to arbitration, provided that there was no blanket ban on conducting arbitration of such issues.  

 

Pro-Litigation 

On the other hand, the Bombay High Court in the case of ‘Steel Authority of India Limited (SAIL) vs. SKS Ispat and Power Limited’ (2016) has held a different view while dealing with an application of notice of motion filed by Defendants under Section 8 of the Act against the damages and permanent injunction claimed by the Plaintiff for infringement of their registered trademarks. The application under Section 8 was made relying upon the clauses of the arbitration agreement governing the matter. However, the Bombay High Court dismissed the notice of motion on the ground that the infringement as well as passing off of a trademark as meted out in the suit, were a violation of rights in rem and therefore, not maintainable to be referred for arbitration.  

Further, in ‘Munidipharma AG vs. Wockhardt Ltd.’ (1990), the matter before the Delhi High Court was related to civil remedies for copyright infringement under Chapter XII of the Copyright Act, 1957. The Court had held that every such suit or other proceedings under Chapter XII related to a ground of copyright infringement or other rights in connection with it would only be maintainable and amenable before the district court of competent jurisdiction. 

 

No Definitive Verdict by the Apex Court 

A quick glimpse at Supreme Court verdicts on this subject well establishes the fact that we are still waiting for an authoritative determination by the Apex Court on the arbitrability of IP disputes arising from a contract. The only relevant judgment is the case of ‘Booz Allen Hamilton vs. SBI Home Finance Ltd.’ (2011) where on the one hand the Apex Court ruled out the arbitrable nature of rights in rem; on the other hand, the disputes involving rights in personam borne out of rights in rem were observed as arbitrable. The case addressed the right in rem versus the right in personam debate but did not determine the contractual aspect of the rights. Similarly, in ‘A Ayyasamy v. A Paramasivam’ (2016) while determining the arbitrability of fraud, the Court blatantly listed the IP disputes as arbitrable as a whole, without analyzing its contractual and non-contractual aspects. It should be noted that these cases basically dealt with statutory claims that had statutory remedies granted exclusively by civil courts. Therefore, they cannot be cited as authorities for IPR related contractual disputes.  

 

Way Forward  

A keen observation upon the nature of IPR disputes and their adjudication portrays the divergence of allied rights as rights in rem which are to be adjudicated by the prescribed statutory body and rights in personam which are exercised and executed between private parties in a commercial contract. Hence, once an IP infringement is identified to be sourced from a commercial contract, for an arbitrator to exercise its jurisdiction over such claim of infringement, the existence of a breach of contractual covenants by the parties involved should be proved. This is because commercial contracts are consciously entered into by the private parties to decide their rights and obligations and amicably settle the disputes before a private forum.  

It is pertinent to emphasize that sometimes in a contract involving IP ownership; we may anticipate a wide range of disputes directly or indirectly akin to IP ownership or license. Under such circumstances, it would always be open to the arbitral tribunal to determine the issue of arbitrability based on whether a particular IP dispute is directly arising from the breach of contract. For example, when a contract pertains to the enforcement of IPR, the disputes aiming to the validity of registration of IPR shall not be arbitrable. Therefore, the formula of ‘one field one law’ to ascertain the arbitrability of IPR allied disputes cannot be applicable to each case with varied facts and issues. Unlike India, in the periphery of International Commercial Arbitration, jurisdictions like the USA, Switzerland, Hong Kong, France, and institutions like WIPO have taken a progressive step towards the growth of IPR arbitrations by framing customized rules to administer the arbitration of IPR disputes. Therefore, in order to bury this conundrum in perpetuity and fall in line with the International framework, India needs to formulate a special rule or issue a conclusive verdict on the matter.  

Image Credits: Photo by Edge2Edge Media on Unsplash

A keen observation upon the nature of IPR disputes and their adjudication portrays the divergence of allied rights as rights in rem which are to be adjudicated by the prescribed statutory body and rights in personam which are exercised and executed between private parties in a commercial contract. Hence, once an IP infringement is identified to be sourced from a commercial contract, for an arbitrator to exercise its jurisdiction over such claim of infringement, the existence of a breach of contractual covenants by the parties involved should be proved.

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