Wockhardt Limited v. Torrent Pharmaceuticals Limited

Supreme Court of India | Decided: 12 September 2018 Civil Appeal No. (arising from Division Bench judgment of the Bombay High Court) Bench: Hon’ble Mr. Justice R.F. Nariman & Hon’ble Ms. Justice Indu Malhotra Citation: 2018 SCC OnLine SC 1846

Background

Torrent Pharmaceuticals Limited, the plaintiff and respondent before the Supreme Court, is the registered proprietor of the trade marks CHYMORAL and CHYMORAL FORTE in respect of a pharmaceutical drug containing the enzyme combination chymotrypsin-trypsin, administered post-surgically for the treatment of swellings and wounds. The expression CHYMO in the trade mark is derived directly from the generic name of the active pharmaceutical ingredient chymotrypsin, giving the mark a descriptive origin while remaining commercially distinctive through long use and registration. The plaintiff’s title to the marks is traced through a chain of assignments the marks were originally held by Armour Pharmaceutical Company and subsequently assigned to Elder and Company, which in turn assigned them to Torrent Pharmaceuticals Limited in the year 2014. The user claimed on behalf of the plaintiff dates back at least to the year 1988, when Elder Pharmaceuticals Limited was actively selling pharmaceutical products under the two trade names. The commercial scale of the plaintiff’s business under these marks was substantial the plaint disclosed sales figures of approximately Rs. 59 Crores and Rs. 95 Crores for the years 2014-15 and 2015-16 respectively.

Wockhardt Limited, the defendant and appellant before the Supreme Court, is a prominent Indian pharmaceutical company that had been manufacturing and selling a drug under the trade mark CHYMTRAL a name that differs from CHYMORAL only in the substitution of the letter T for the letter O. The drug sold by Wockhardt under the CHYMTRAL mark was a product of the same therapeutic class as Torrent’s CHYMORAL, being an enzyme-based post-surgical formulation. The defendant’s use of the CHYMTRAL mark had been in existence for a considerable period before the filing of the suit and the mark had been registered in the name of the defendant. The two products had therefore coexisted in the pharmaceutical market for a significant number of years estimated by the Single Judge at a minimum of five years and possibly more before Torrent initiated legal proceedings seeking to restrain Wockhardt from using the CHYMTRAL mark.

Torrent filed a suit based on both trade mark infringement and passing off against Wockhardt before the Bombay High Court. However, at the stage of the hearing on the application for an interim injunction before the learned Single Judge, the arguments were confined exclusively to the action in passing off. The Single Judge, after a detailed examination of the facts and the applicable legal principles, declined to grant the interim injunction sought by Torrent. The Single Judge found that none of the three classical requirements for passing off reputation, misrepresentation and damage had been made out to the required prima facie standard. On the question of reputation, the Single Judge found that reputation as to source had not been sufficiently demonstrated. On misrepresentation, the Single Judge held that while confusion between the two marks might be assumed, he would not presume misrepresentation by Wockhardt as to source. Most significantly, the Single Judge found that there was a clear case of acquiescence on the part of the plaintiff or its predecessors in title who had lain by for a long period with full knowledge of Wockhardt’s use and registration of the CHYMTRAL mark, without raising any objection, while Wockhardt built up a substantial business under that mark.

Torrent appealed the Single Judge’s order to the Division Bench of the Bombay High Court. The Division Bench reversed the Single Judge’s order in its entirety, holding that all three tests for passing off had been established on the facts and that the Single Judge’s order was vitiated by errors of law apparent on the face of the record. The Division Bench found that reputation had been established through the sales figures and the user dating back to 1988, that misrepresentation in law was made out because the substitution of the letter T for O was the only difference between the two marks creating a likelihood of confusion and that damage to the plaintiff was undoubted. The Division Bench also rejected the Single Judge’s finding of acquiescence. Having granted the injunction, the Division Bench itself stayed the operation of its order for twelve weeks and that stay was subsequently continued by the Supreme Court. Wockhardt then appealed to the Supreme Court by special leave under Article 136 of the Constitution.

A further significant development occurred during the pendency of the proceedings before the Supreme Court. After the Division Bench judgment, Wockhardt began selling its enzyme product under a new trade mark Chymowok which had been registered in its name since 14 November 2009 with effect from a date in 2008 but had never been commercially used until the Division Bench judgment was passed against it. The sales under the Chymowok mark from December 2017 to August 2018 amounted to approximately Rs. 2.71 Crores, demonstrating that Wockhardt had successfully transitioned its commercial activity to the new mark during the period of the stay.

Issues for Determination

Whether the Division Bench of the Bombay High Court was justified in interfering with the discretionary order of the learned Single Judge refusing to grant an interim injunction and whether the Division Bench had correctly identified and applied the principles governing appellate interference with the exercise of judicial discretion in interlocutory injunction matters as laid down by the Supreme Court in Wander Limited v. Antox India Pvt. Ltd.
Whether the learned Single Judge had correctly applied the three-pronged test for passing off reputation, misrepresentation and damage in declining to grant the interim injunction and whether the Division Bench was justified in finding that each of the three elements had been established on the prima facie material before the court.
Whether the learned Single Judge had correctly understood and applied the legal requirement of misrepresentation in the law of passing off, specifically whether he had erred in requiring proof of fraud, deceit or intention to deceive on the part of the defendant as an element of misrepresentation, which is not required under settled law.
Whether the defence of acquiescence was made out on the facts so as to disentitle the plaintiff from obtaining interim injunctive relief and what positive conduct or positive act is required to establish acquiescence as distinct from mere delay or inaction.
Whether the Supreme Court should exercise its discretionary jurisdiction under Article 136 of the Constitution to interfere with the Division Bench’s judgment granting the interim injunction, having regard to the commercial developments that had occurred during the pendency of the appeal including Wockhardt’s adoption and substantial use of its new trade mark Chymowok.

Key Holdings of the Court

the Supreme Court held that the Division Bench had not violated the principles laid down in Wander Limited v. Antox India Pvt. Ltd. governing appellate interference with the exercise of judicial discretion in interlocutory injunction matters. The Court found that the Division Bench had interfered on a matter of principle specifically on the ground that the learned Single Judge had applied incorrect legal tests and not merely because it would have reached a different conclusion on the facts. Interference on the ground of an error of law in the application of the test for passing off is a legitimate basis for appellate intervention under the Wander-Antox framework.
Second, the Court affirmed the settled legal position that fraud or intention to deceive is not a necessary element of an action for passing off and that the defendant’s state of mind is wholly irrelevant to the existence of the cause of action. The learned Single Judge had erred in law by treating the absence of fraudulent intent or deceit as a basis for declining to find misrepresentation. The Division Bench was therefore justified in interfering with this specific legal error, which had infected the Single Judge’s analysis of the misrepresentation element of passing off.
the Court affirmed the Division Bench’s finding that reputation had been established through the long user of the marks since 1988 and the substantial sales figures disclosed in the plaint. The plaintiff’s title through assignment did not diminish the reputation attaching to the marks, as the goodwill in the marks had been transmitted together with the assignment.
the Court affirmed the Division Bench’s finding that misrepresentation in law was made out, given that the only difference between CHYMORAL and CHYMTRAL was the substitution of a single letter, creating a likelihood of confusion even among relatively educated purchasers such as doctors and literate patients.
on the question of acquiescence, the Court upheld the Division Bench’s finding that the defence had not been established. The Court affirmed the principle that acquiescence requires a positive act on the part of the plaintiff that leads the defendant to believe that the plaintiff has consented to the defendant’s use of the mark mere silence, delay or inaction, even for a prolonged period and with knowledge, does not by itself amount to acquiescence. The attempt to equate delay with acquiescence was held to be legally incorrect.
the Supreme Court declined to interfere with the Division Bench’s judgment under Article 136 of the Constitution. The Court placed decisive weight on the commercial reality that had emerged during the pendency of the appeal Wockhardt had successfully pivoted its business to the new trade mark Chymowok, generating substantial sales under that mark and was no longer in fact selling its product under the CHYMTRAL mark. In these circumstances, the balance of convenience was well served by the Division Bench’s judgment and there was no compelling reason to exercise the Court’s discretionary jurisdiction in Wockhardt’s favour. The appeal was accordingly dismissed.

Statutory Provisions Involved

The Trade Marks Act, 1999 provided the statutory framework within which the suit and the appeal proceedings were situated. Although the passing off action is a common law action independent of the statutory registration regime, the registration of both marks under the Trade Marks Act was relevant to the issues of priority and the establishment of the plaintiff’s title to the marks in question.

The law of passing off, being a common law cause of action, is not codified in a single provision of the Trade Marks Act, 1999 but is preserved and recognised by Section 27(2) of the Act, which expressly saves the rights of action against passing off. The three-pronged test of reputation, misrepresentation and damage applied by the courts in this case represents the classical common law formulation of the cause of action for passing off as it has been consistently recognised and applied by Indian courts and as affirmed by the Supreme Court in numerous decisions.

Article 136 of the Constitution of India confers on the Supreme Court the discretionary power to grant special leave to appeal from any judgment, decree, determination, sentence or order passed or made by any court or tribunal in India. The appeal before the Supreme Court was filed under this provision and the Court’s exercise of discretion in declining to interfere with the Division Bench’s judgment was grounded in the well-established principle that the Court will not ordinarily exercise its discretionary jurisdiction under Article 136 where the balance of convenience does not warrant interference and where significant commercial developments have occurred that render the grant of relief inappropriate.

The principles governing appellate interference with interlocutory injunction orders, as articulated in Wander Limited v. Antox India Pvt. Ltd., (1990) Supp SCC 727, constituted the central legal framework for the Court’s assessment of whether the Division Bench had properly exercised its appellate jurisdiction. The Wander-Antox principles establish that an appellate court should not interfere with the exercise of discretion by a court of first instance in granting or refusing an interlocutory injunction unless the discretion has been exercised arbitrarily, capriciously or perversely or unless the court has ignored settled principles of law.

Reasoning of the Court

The Supreme Court’s reasoning in dismissing the appeal operated along two distinct but related tracks. The first concerned the correctness of the Division Bench’s decision to interfere with the Single Judge’s order, examined against the principles governing appellate interference with discretionary orders. The second concerned the Court’s own exercise of discretion under Article 136 in deciding whether to interfere with the Division Bench’s judgment, informed by the commercial developments that had occurred during the appeal.

On the first track, the Court examined the basis on which the Division Bench had interfered with the Single Judge’s order and found it to be legally justified. The Division Bench had identified a clear error of law in the Single Judge’s analysis of misrepresentation specifically, the Single Judge’s treatment of fraud or deceit as a necessary ingredient of misrepresentation in passing off. The Court reaffirmed the settled legal position, drawing upon its earlier decisions in Laxmikant V. Patel v. Chetanbhai Shah, Satyam Infoway Ltd. v. Siffynet Solutions Pvt. Ltd. and S. Syed Mohideen v. P. Sulochana Bai, that fraud is not a necessary element of the right of action in passing off and that the defendant’s state of mind is wholly irrelevant to the existence of the cause of action. Once the marks are shown to be deceptively similar and the plaintiff has established reputation, misrepresentation in the legal sense is made out without any requirement to prove fraudulent intent. The Single Judge’s contrary assumption that confusion may be assumed but not deceit or deception and that something more than confusion was required to establish misrepresentation was therefore an error of law that justified the Division Bench’s intervention. Since interference was on the ground of an error of law in the application of the substantive test for passing off, it fell squarely within the category of interference on principle that is permissible under the Wander-Antox framework.

On the defence of acquiescence, the Court carefully distinguished between the concepts of delay, laches and acquiescence. Mere delay in bringing proceedings, even over a prolonged period and with knowledge of the defendant’s use of the mark, does not by itself amount to acquiescence in the legal sense. Acquiescence requires a positive act conduct on the part of the plaintiff that affirmatively represents to the defendant that the plaintiff has consented to or approved of the defendant’s use of the mark, such that it would be unjust and inequitable to allow the plaintiff to resile from that representation and seek relief. The Court found that the facts before it did not disclose any such positive act by the plaintiff or its predecessors in title. The plaintiff’s failure to object to the defendant’s trademark registration application, its failure to protest the defendant’s use of the mark and its acquisition of the mark in 2014 with notice of the defendant’s registration and use did not individually or collectively amount to the kind of affirmative conduct that the law requires to establish acquiescence. The attempt to equate the plaintiff’s inaction and delay with acquiescence so as to deny it interim relief was legally incorrect and had been rightly rejected by the Division Bench.

On the Court’s own exercise of discretion under Article 136, the reasoning was pragmatic and rooted in the commercial realities that had developed during the pendency of the appeal. The Court noted that Wockhardt had registered the Chymowok trade mark as long ago as 2009 but had never commercially used it. The moment the Division Bench judgment went against it, Wockhardt pivoted its entire commercial operation to the Chymowok mark, generating sales of Rs. 2.71 Crores under that mark in the period from December 2017 to August 2018. The remaining stock under the CHYMTRAL mark had been disposed of and no new product was being manufactured or sold under that mark. In these circumstances, Wockhardt was not suffering any ongoing commercial prejudice from the continuation of the Division Bench’s injunction its business was operating under a new trade mark and generating substantial revenue. The balance of convenience therefore clearly favoured refusing to interfere with the Division Bench’s judgment and the Court saw no compelling reason to exercise its extraordinary discretionary jurisdiction under Article 136 in Wockhardt’s favour.

Doctrinal Significance

The Supreme Court’s judgment in Wockhardt v. Torrent Pharmaceuticals makes several important contributions to the law of passing off and the principles governing appellate interference with interlocutory injunction orders, all of which are of enduring relevance to intellectual property litigation in India.

The judgment provides a clear and authoritative restatement of the settled legal position that fraud, deceit and intention to deceive are not necessary ingredients of the cause of action for passing off and that the defendant’s state of mind is wholly irrelevant to whether the cause of action is made out. By affirming this principle in the context of a pharmaceutical trade mark dispute and by holding that the Single Judge’s contrary assumption was an error of law sufficient to justify appellate interference, the Court reinforced the strong protection that passing off law affords to trade mark proprietors against deceptive similarity even in the absence of any dishonest intent on the part of the defendant. This is particularly important in the pharmaceutical context, where the consequences of consumer confusion about the source of a drug including risks of wrong medication and patient harm can be severe.

The judgment’s treatment of acquiescence is also doctrinally significant. By clearly distinguishing acquiescence from mere delay and holding that acquiescence requires a positive act that affirmatively represents the plaintiff’s consent to the defendant’s use rather than passive inaction with knowledge the Court provided important clarity on the conditions under which this equitable defence is available. This distinction prevents defendants from sheltering behind the mere passage of time to defeat an otherwise meritorious passing off claim and ensures that the defence of acquiescence retains its proper character as a form of estoppel grounded in affirmative conduct rather than silence.

The judgment’s application of the Wander-Antox principles to the specific situation where a Single Judge has committed an error of law in the application of the substantive test for passing off also provides useful guidance on the boundaries of permissible appellate interference with interlocutory orders. By confirming that an appellate court may interfere when a first instance court has applied an incorrect legal test as opposed to merely reaching a different factual conclusion the Court clarified that the Wander-Antox framework does not insulate legally erroneous interlocutory orders from appellate correction. This ensures that the principle of minimal appellate interference with interlocutory discretion does not become a shield for the perpetuation of legal error.

Finally, the Court’s pragmatic approach to the exercise of its discretion under Article 136 placing decisive weight on Wockhardt’s successful commercial transition to the Chymowok mark during the pendency of the appeal reflects a commercially realistic approach to the grant of discretionary relief at the highest appellate level. The Court’s recognition that the grant or refusal of relief must be informed by the current commercial reality and not merely by the legal positions of the parties at the time the proceedings were initiated is an important reminder that equitable relief is always subject to the equities as they exist at the time of the decision.

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