Court: Supreme Court of India Case No.: Civil Appeal Nos. 5375-5377 of 2017 Decided on: 14 December 2017 Bench: Justice Ranjan Gogoi & Justice Navin Sinha Citation: Toyota Jidosha Kabushiki Kaisha v. M/S Prius Auto Industries Ltd. & Ors., (2018) 2 SCC 1
Background
The Appellant, Toyota Jidosha Kabushiki Kaisha, is a Japanese automobile manufacturer with a global presence. It holds registrations in India for the trademarks ‘TOYOTA’, ‘TOYOTA INNOVA’ and ‘TOYOTA DEVICE’, obtained during the period 1989 to 2003. The Appellant also claimed rights over the mark ‘Prius’, which was the brand name under which it had launched the world’s first commercial hybrid car in Japan in 1997 and subsequently in other countries including the United Kingdom, Australia and the United States of America during 2000-2001. The car was displayed at automobile shows in Delhi and Bangalore in 2009 and was formally launched in India in 2010. Toyota applied for registration of the mark ‘Prius’ in India only on 3 December 2009, on a “proposed to be used” basis and filed the suit shortly thereafter on 21 December 2009.
The Respondent No. 1, M/s Prius Auto Industries Limited, is a partnership firm engaged in manufacturing automobile spare parts and chrome accessories, constituted in 2001. The Respondents adopted the mark ‘PRIUS’ in April 2001 and obtained two Indian trademark registrations: ‘PRIUS’ bearing Registration No. 1086682 dated 13 March 2002 and ‘PRIUS – The name you can trust’ bearing Registration No. 1163594 dated 2 January 2003. The Respondents explained in their written statement that the word ‘Prius’ was arrived at by first conceptualising ‘pehela prayas’ – a Hindi expression meaning ‘first attempt’ – as a reflection of their being the first manufacturers of chrome-plated accessories and then tracing the equivalent Latin word ‘Prius’. The Respondents claimed continuous use of the mark since 2001 and had supplied products to automobile companies including Hyundai Motors and General Motors.
The Appellant’s case on the registered marks ‘TOYOTA’, ‘TOYOTA INNOVA’ and ‘TOYOTA DEVICE’ was that the Respondents used these marks on their packaging – ostensibly for item identification. The Respondents contended that as spare parts manufacturers, they were entitled to indicate the vehicles for which their parts were suited and that such use was honest use in an industrial or commercial matter, protected under Section 30 of the Trade Marks Act, 1999.
Procedural History
Civil Suit No. CS (OS) 2490 of 2009 was filed in the Delhi High Court. An ex parte ad interim injunction restraining the Defendants from using all four marks was granted on 22 December 2009, but was vacated on 19 March 2010 on an application filed by the Defendants. On appeal, the Division Bench of the Delhi High Court by order dated 10 August 2010 permitted the Defendants to use the marks ‘TOYOTA’ and ‘INNOVA’ conditionally – only for item identification, with prescribed conditions as to font, disclaimer wording and an obligation not to replicate the Plaintiff’s logos. At the conclusion of the full trial, the learned Single Judge by judgment dated 8 July 2016 held that the Defendants had infringed the registered marks ‘TOYOTA’, ‘TOYOTA INNOVA’ and ‘TOYOTA DEVICE’ and further held that the Defendant was guilty of passing off under the mark ‘Prius’, since Toyota was the first user of that mark in the world market even if not in India and that the goodwill of the mark had permeated the Indian jurisdiction. Punitive damages of Rs. 10 lakhs were awarded. Both parties appealed. The Division Bench of the Delhi High Court by judgment dated 23 December 2016 reversed the finding on ‘Prius’, holding that the evidence did not establish that the Plaintiff’s transborder reputation had permeated India prior to April 2001. The Division Bench also dismissed the Plaintiff’s appeal on quantum of damages. Toyota then appealed to the Supreme Court by way of Special Leave Petition, which was heard as Civil Appeal Nos. 5375-5377 of 2017. Before the Supreme Court, the Defendants did not press their grievance against the conditional injunction on the ‘TOYOTA’, ‘TOYOTA INNOVA’ and ‘TOYOTA DEVICE’ marks. The sole question before the Supreme Court was therefore the correctness of the Division Bench’s decision reversing the injunction against use of the mark ‘Prius’.
Issues for Determination
The Supreme Court identified the following questions as arising for determination. First, whether the Territoriality Doctrine or the Universality Doctrine governs the determination of goodwill and reputation in a passing off action and which of the two principles applies in India. Second, whether the Appellant had established sufficient goodwill and reputation for the mark ‘Prius’ in India prior to April 2001 – the date of first adoption of the mark by the Respondents – so as to entitle the Appellant to maintain an action for passing off. Third, whether the test for confusion in a passing off action at the stage of final adjudication is one of likelihood of confusion or actual confusion. Fourth, whether the delay on the part of the Appellant in approaching the Court operated against it. The Court also noted, without deciding it independently, the Appellant’s contention that the mark ‘Prius’ qualified as a ‘well-known trade mark’ under Section 2(1)(zg) read with Section 11(6) and 11(9) of the Trade Marks Act, 1999.
Key Holding of the Court
The Supreme Court dismissed the appeals and affirmed the Division Bench’s orders dated 23 December 2016 and 12 January 2017. On the principal question of passing off, the Court held that Toyota had failed to establish that the mark ‘Prius’ had acquired the necessary goodwill, reputation and market presence in India prior to April 2001 – which was the relevant date for determining the rights of the parties. Since goodwill in the domestic jurisdiction was not established, the action for passing off could not be maintained against the Respondents, who were the registered proprietors of the mark in India. The Court did not find it necessary to examine any other issue arising in the case, as the failure to establish domestic goodwill was determinative.
Statutory Provisions Involved
The Court engaged with Section 2(1)(zg) of the Trade Marks Act, 1999, which defines a ‘well-known trade mark’ and Sections 11(6) and 11(9) of the Act, which govern the protection of well-known marks against registration of identical or similar marks. Section 30 of the Act – relating to acts not constituting infringement, including honest use – was relevant to the ‘TOYOTA’, ‘TOYOTA INNOVA’ and ‘TOYOTA DEVICE’ aspect of the dispute. The action of passing off is a common law right and the Court reaffirmed its basis in the context of the Trade Marks Act, 1999, by reference to S. Syed Mohideen v. P. Sulochana Bai, (2016) 2 SCC 683 and N.R. Dongre v. Whirlpool Corporation, (1996) 5 SCC 714.
Reasoning of the Court
The Court began by reaffirming the foundational principles governing passing off actions in India. Citing its earlier decision in S. Syed Mohideen v. P. Sulochana Bai, (2016) 2 SCC 683, the Court reiterated that an action for passing off, premised on the rights of a prior user generating goodwill, is unaffected by registration under the Act and that a passing off action can lie even against a registered proprietor of the mark. The Court also restated the ‘trinity test’ from Reckitt and Colman Ltd. v. Borden Incorporated, (1990) 1 All ER 873, which requires the plaintiff in a passing off action to establish three ingredients: goodwill, misrepresentation and damage.
On the question of the governing doctrinal framework, the Court examined the tension between the Territoriality Doctrine and the Universality Doctrine. The Universality Doctrine posits that a trademark signifies the same source across all countries, so that prior use in one jurisdiction creates rights globally. The Territoriality Doctrine, by contrast, treats a trademark as having a separate legal existence in each sovereign country, so that rights are specific to each jurisdiction. Having surveyed judicial and academic opinion – including the decision of the UK Supreme Court in Starbucks v. British Sky Broadcasting, 2015 UKSC 31, the views of Prof. Christopher Wadlow in “The Law of Passing-Off” (5th Ed.) and the approach of the Federal Court of Australia in ConAgra v. McCain Foods, (1992) 23 IPR 193 – the Court held that the overwhelming weight of judicial and academic opinion across jurisdictions supports the Territoriality Doctrine and that the same must apply in India. Accordingly, the question of whether the Appellant could succeed in a passing off action depended on whether it had established goodwill for the mark ‘Prius’ specifically in the Indian market.
The Court accepted that the car ‘Prius’ had undoubtedly acquired considerable goodwill in several other jurisdictions well before the Respondents’ adoption of the mark in India. However, the critical question was whether that goodwill had permeated the Indian market by April 2001. The Court found that it had not. The evidence placed on record – consisting primarily of international automobile magazine coverage, website data, availability on informational portals like Wikipedia and two isolated news items in issues of the Economic Times dated 27 March 1997 and 15 December 1997 – was insufficient to establish the necessary goodwill and reputation in the Indian market at that point in time. The Court specifically noted the limited internet penetration in India as of 2001, which meant that online availability of information could not be safely taken as a proxy for consumer awareness within the country. Furthermore, testimony from Toyota’s own witnesses indicated that no advertisements were published by Toyota in India prior to April 2001 and that, since the car’s launch in India in 2010, only around 130 units had been sold – itself indicative of a limited Indian market for the product. These circumstances led the Court to agree with the conclusion of the Division Bench that the mark ‘Prius’ had not acquired the degree of goodwill, reputation or market presence in India required to vest in Toyota the attributes of a prior user entitled to maintain a passing off action.
On the question of the applicable test for confusion, the Court expressed disagreement with the Division Bench’s view that the test of likelihood of confusion applies only at the quia timet stage and that actual confusion must be proved at the stage of final adjudication. The Court held that likelihood of confusion is the appropriate and sufficient standard even at the final hearing. Imposing a requirement of actual confusion, the Court reasoned, would cast on the claimant an unduly onerous burden – actual instances of confusion are often not easily available to the plaintiff and commercial and business morality, which is the foundation of the law of passing off, should not be defeated by such a requirement. The appropriate standard remains one of preponderance of probabilities. However, since Toyota had failed to establish goodwill in India, this doctrinal clarification did not affect the outcome in its favour.
The Court also noted the Appellant’s delay in approaching the courts. The Appellant had applied for registration of ‘Prius’ in India only on 3 December 2009, filed suit on 21 December 2009 and the evidence established that both parties had been advertising in the same automobile magazines since at least 2003 – meaning Toyota was aware of the Respondents’ mark at least from that date. This prolonged unexplained silence, during which the Respondents had used and built their business around the registered mark, was held to operate against Toyota. The Court observed that such delay cannot be allowed to work to the prejudice of defendants who have, over a long period, conducted their trade on the basis of their registered mark.
Doctrinal Significance
This judgment is one of the most significant decisions in Indian trademark law for several interconnected reasons.
Most fundamentally, the Supreme Court has authoritatively settled that the Territoriality Doctrine and not the Universality Doctrine, governs the law of passing off in India. This is a landmark pronouncement that will govern all future cases involving foreign brands claiming passing off rights in India on the basis of international reputation, without a demonstrated market presence in the country. The Court’s alignment with the UK Supreme Court in Starbucks and the Federal Court of Australia in ConAgra signals India’s integration with the mainstream of international trademark jurisprudence on this question.
The judgment also makes an important doctrinal clarification on the standard of confusion in passing off actions. By holding that likelihood of confusion – not actual confusion – is the applicable test even at the stage of final adjudication, the Court has ensured that the evidentiary burden on a plaintiff who has established goodwill remains reasonable and proportionate. The Division Bench’s requirement of actual confusion was rightly characterised as inconsistent with the purpose underlying the law of passing off. This clarification, though expressed as an obiter finding in this case, carries the authority of the Supreme Court and is likely to be applied as a binding principle in future passing off litigation.
The judgment also reinforces the principle, drawn from S. Syed Mohideen, that registration under the Trade Marks Act does not extinguish common law passing off rights and that a passing off action can be maintained even against a registered proprietor. The converse, however – that a party claiming goodwill must demonstrate it within the domestic jurisdiction – operates as an equally firm principle. The two propositions together form the architecture of the law: registration is no shield against a prior user’s equity, but equity itself requires proof of domestic goodwill.
Finally, the judgment’s treatment of delay and acquiescence as a factor capable of disentitling a plaintiff to equitable relief serves as an important practical reminder to trademark owners. Monitoring of domestic markets and prompt enforcement of rights are not merely commercially prudent – they are conditions that the law imposes on those who seek equitable intervention. Prolonged inaction in the face of open and continuous use by a domestic trader registered under Indian law may, as this judgment confirms, prove fatal to the ultimate claim.