comparative advertising, disparagement and

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advertisement techniques, advertising has definitely come of age2. ... the declaration may be untrue for the reason being that every individual has ... is a marketing strategy used by the companies in promotion of their products to attract ..... It might be the distinctive crocodile mark for Lacoste or the half bitten apple mark for.

COMPARATIVE ADVERTISING, DISPARAGEMENT AND TRADEMARK INFRINGEMENT: AN INTERFACE Saadiya Suleman* Introduction Advertising is one of the most important and critical aspects of trade and business. Once described as the life blood of free media1; it has now become the life blood of competition in market. From the unknown street vendor to the multi-billionaire multinational corporation, everybody is advertising. Whatever is being sold in the market is being advertised in one way or the other. From the traditional methods of hawking to the suave media and internet advertisement techniques, advertising has definitely come of age2. It has evolved into a glamorous multibillion dollar business. Advertising pervades society and has become a persuasive force working on collective mentality of the public affecting their behaviour. By means of advertisements the consuming public is induced to buy the advertised product or service3. Every individual’s motivation to buy a product or a service is different. Advertisements play an important role in fashioning consumer choices. They build up a psychology in the minds of consumers of what is good and appealing to the eye, as a consequence of which consumers generally get attracted to the more advertised product and ignore the less advertised one. Advertisements create brand image and reinforce it time and again. Brand advertising on a large scale by manufacturers supplement goodwill and thereby increases the commercial significance of the trademark around which it revolves4. Traditionally, advertisers sought to present their goods and services in the most favourable light as possible, attempting to influence the public by highlighting the merits of their product or services5. However, the early seventies of the last century, ushered a new era of advertising wherein comparative advertisements and commercials identified the competitors

* 1. 2.

3. 4. 5.

Indian Law Institute New Delhi. Tata Press Ltd v. Mahanagar Telephone Nigam Ltd & Ors AIR 1995 SC 2438. For details on evolution of advertising from ancient to modern times see P.B Sawant & P.K. Bandhopadhyay, Advertising Law and Ethics, 7 (Universal Law Publishing Co. Ltd., New Delhi 2002). Stewert E. Sterk, “The Law of Comparative Advertising: How Much Worse is ‘Better’ Than ‘Great’”, 67 Trademark Rep. 368 (1977). W Cornish & D Llewelyn, Intellectual Property: Patents, Copyright, Trademarks and Allied Rights, 610 (6th Asian ed Thomson Sweet & Maxwell London 2008). Supra note 3. Ibid. [18]

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products by name 6. This has created new issues relating to unfair competition, disparagement and trademark infringement. What when, in the course of comparison, the advertisement goes beyond mere promotion of one’s goods as being better and denigrates the competitors’ goods as worse. Advertising is recognised as commercial speech and guaranteed protection under law7. A tradesman, therefore, is entitled to declare his goods to be best in the world, even though the declaration may be untrue for the reason being that every individual has the right to believe he is the best and his product is also the best. For the purpose of proclaiming his goods as being the best in the world one might be tempted to compare the advantages of his goods over the goods of others. However, while saying his goods are better than his competitors’, can one be allowed to say that the competitors’ goods are bad? Does that not amount to slandering/disparaging the goods of his competitors? What if the goods advertised are actually better in quality than those of the competitors? Can a seller use a competitor’s trademark in advertisement while comparing the relative qualities of the competitive goods? Or would such use for the purpose of distinguishing and claiming superiority over the competitors’ product, in the course of advertisement without the permission of the trademark owner constitute trademark infringement? The paper seeks to analyse the intricacies of law involved in the concept of comparative advertising in relation with product disparagement and trademark infringement. Comparative Advertising, Disparagement and Unfair Competition Self gratification is a human tendency and so is self aggrandization. Humans have this tendency of constantly comparing themselves with their peers. In the process of comparing one might be tempted to believe that he/she is as good as the other or he/she is the best or at least better than the rest. In fact there is nothing wrong as such in believing that one is the best for it is very human to do so. But it is one thing to say –“I am the best’ and another to say “I am the best. He is not good.” Commercial transactions reflect human tendencies and advertising media reflect the above at the best. So when in course of promoting one’s goods/services one tends to compare with the competitor, a very thin line demarcating what is permissible and what not, is to be delicately maintained.

6.

7.

The National Broadcasting Company (NBC) with the approval of the Federal Trade Commission (FTC) adopted the policy of accepting advertisements identifying the competitor or the competing product by name. See Suzanne B. Colnon, “Comparative Advertising: Whatever Happened to Brand X”, 67 Trademark Rep. 407 (1977). The Avis “We Try Harder” campaign is generally considered to be the pioneer of comparative advertisements wherein Avis by referring to the No. 1 brand directly hit Hertz, the No. 1 in rental cars. In supra note 1, the Supreme Court of India recognised commercial speech as a fundamental right well covered within the ambit of article 19(1) (a). In the United States, in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council Inc., 425 U.S. 748 (1976), the Supreme Court held that the First Amendment protects commercial speech because such speech has informational value for people trying to make decisions about how to live and even informs opinions on political issues. [19]

1.1 Comparative Advertising: “Anything his can do, mine can do better!”8 “Anything his can do, mine can do better!” This adage sums up the essence of comparative advertising. There was a time when it was customary in the advertising trade not to even hint at the identity of competitors. But times change and so does the practices of trade and business. This custom too changed and many advertisements now show the competitor’s goods, identify them by the trademark, and even invite the buyer to make comparisons9. It is a marketing strategy used by the companies in promotion of their products to attract instant attention. ‘Comparative advertising’ is the term used to describe advertisements where the goods or services of one trader are compared with the goods and services of another trader.10 Article 2(c) of the Directive 2006/114/EC of the European Parliament and of the Council Concerning Misleading and Comparative Advertising defines ‘comparative advertising’ as ‘any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor.’ Typically, comparative advertisements contain more or apparently more information than “normal” advertisement that rely upon traditional salesman “puffery”, and that raises the possibilities of benefit to the public as well as the chances of abuse of the same11. Comparative advertising enables advertisers to objectively demonstrate the merits of their products. It improves the quality of information available to the consumers enabling them to make more informed decisions relating to the choices available to them as between competing products/ services by means of demonstrating its merits over various comparable products. Based on this information, consumers may make informed and therefore efficient choices12. For instance, if a seller has legally copied public domain features of his competitor’s goods, then he has the right to inform the public of this fact so that the public can make a well informed choice between the two13. In case, one has copied an unpatented product sold under a trademark, he may use the trademark in his advertising to identify the product he

8.

9. 10. 11.

12. 13.

See Jeerome G. Lee, “Comparative Advertising, Commercial Disparagement and False Advertising”, 71 Trademark Rep. 620 (1981) wherein the author describes comparative advertising by the adage and traces down the history of comparative advertising in the U.S. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 25:52 (4th ed. Sweet & Maxwell, London 2005). Uphar Shukla, “Comparative Advertising and Product Disparagement vis-à-vis Trademark Law”, 11 JIPR 409 (2006). See supra note 3 at 369. However, according to some authors, advertisements that indulge in disparaging the goods of competitor’s product are more often than not tasteless, misleading, and essentially uninformative. See Paul T. Hayden, “A Goodly Apple Rotten at the Heart: Commercial Disparagement in Comparative Advertising as Common-Law Tortious Unfair Competition”, 76 Iowa L. Rev. 67(1990) for an elaborate discussion. Also see supra note 8. Péter Iskolczi-Bodnár, “Definition of Comparative Advertising”, European Integration Studies, 25, Miskolc, Vol. 3 (2004). Supra note 9, ibid. The author here quotes Justice Holmes in Saxlehner v. Wagner, 216 U.S. 375, 54 L. ed. 525, 30 S. Ct. 298 (1910) opining, “They have the right to tell the public what they are doing, and to get whatever share they can in the popularity of the water by advertising that they are trying to make the same article, and think that they succeed. If they do not convey, but, on the contrary, exclude, the notion that they are selling the plaintiff's goods, it is a strong proposition that when the article has a well-known name, they have not the right to explain by that name what they imitate. By doing so they are not trying to get the good will of the name, but the good will of the goods.” [20]

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has copied, so long as it does not create a reasonable likelihood that purchasers will be confused as to the source, identity, or sponsorship of the advertiser’s product 14. Comparative advertising aiming to inform the consumer, objectively and truthfully, promotes the transparency of the market. Market transparency is deemed to benefit the public interest as the functioning of competition is improved resulting in keeping down prices and improving products. Comparative advertising stimulates competition between suppliers of goods and services to the consumer’s advantage. 15 The concept of comparative advertising is construed broadly to include personal comparative advertising 16, objective comparative advertising 17, positive or parasitic comparative advertising18, negative or critical comparative advertising19. It is not necessary for the express or tacit, direct or indirect, reference to the competitor to be identifiable. It can occur without any use of the competitor’s trademark at all. 20 Comparative advertising may refer to an indeterminate number of competitors. 1.2 Commercial Disparagement: “Mine is best, his is no good!” “Mine is best, his is no good!” This necessarily implicates disparaging of rivals goods or services. As per the Merriam Websters Dictionary “disparage” means “to lower in rank or reputation”, “degrade” or “to depreciate by indirect means, as an invidious comparison” 21. The Black’s Law Dictionary describes the word ‘disparage’ as meaning “to connect unequally” or “to dishonour something or someone by comparison” or “to unjustly discredit or detract from the reputation of another’s property, product or business” or a “false and injurious statement that discredits or detracts from the reputation of another’s property, product or business”.22 Commercial disparagement simply means knocking off competitor’s product as being no good23. It is quite settled that mere touting or exaggeration of the

14. 15. 16. 17. 18. 19. 20.

21. 22. 23.

Louis Altman and Malla Pollack, Callmann on Unfair Competition, Trademarks and Monopolies (4th ed., St.Paul. Minn, Thomson West 1981). See supra note 12 at 26. This was one of the primary reasons that the FTC promoted comparative advertising in the 1970’s in the U.S. See supra note 9 at 621. Such comparison relates to the person or the business of the competitor. Here the goods and services and prices of the competitor are the main objects of comparison. In such a comparison the advertiser asserts that his product or he himself, as the case may be, is as good as his competitor’s. Critical comparative is the most contentious of all kinds wherein the advertiser tends to make the public think that his product or he himself, as the case may be, is better than his competitor’s. It is a general trend to compare product by showing a rival product packaging with similar shape and color combination by blurring the trademark or not depicting it at all. For example a white and pink pack of ponds talc without the ponds trademark shown on it or an orange and blue pack of sanitary napkins without the whisper trademark. Merriam- Webster‘s Collegiate Dictionary, Eleventh ed. Garner Bryan A, Black’s Law Dictionary (7th ed. West Group, Minnesota 1999). Supra note 9. Ibid. [21]

general advantages of one’s own products is not objectionable where the representations are true or at worst constitute mere puffing24. Generally, obvious untruths or exaggerations intended to amuse or catch the eye of the consumer are permissible provided that they are clearly to be seen as humorous or hyperbolic and not likely to be understood as making literal or misleading claims for the advertised product. However, specific statements about absolute qualities or superiority are actionable when false or deceptive as the falsity of claims transgresses the traditional boundaries of puffing. When “puffing” metamorphoses into disparagement is a difficult question to judge. One must apply the test of a reasonable man, i.e., whether a reasonable man would take the claim made as being a serious claim or not. A possible alternative test could be to ask whether the defendant has pointed to a specific allegation of some defect or demerit in the plaintiff's goods.25 In disparagement, puffing involves a comparison between the two products. As long as the comparison attempts primarily to enhance the quality of the advertiser’s product without being unduly critical of the competitor’s product, there is no disparagement 26. When an advertiser while making comparisons makes false statements about the competitor or his products’ thereby tending to damage his reputation or diminishes his respect, goodwill, confidence or esteem in which he is held, then disparagement is said to be done. It tends to discredit or detract the reputation of another’s property, product or business. Commercial disparagement is a common law tort closely related to defamation. It has been defined as a false statement intended to call into question the quality of a competitor’s goods or services in order to inflict pecuniary harm27. Commercial disparagement differs from defamation in that actions under the latter chiefly serve to protect the personal reputation of an injured party, while a business disparagement claim protects economic interests 28. Disparagement exists when the quality of competitors’ goods or products is impugned, while an attack on the honesty or integrity phrased as an insult to the goods brings an action for defamation. To be treated as defamatory, a comparative advertisement would have to be so strongly worded that it threatened injury not only to the product but also the reputation of the competitor.29 For a disparagement action, the aggrieved competitor must show either a “scienter” that the statement published is false, or intent to do harm to the plaintiff or to affect his interests adversely in an unprivileged manner. 30 Comparative advertisements, however, generally concentrate more on the features of the product rather than on the business practices of the competitor.

24. 25. 26. 27. 28. 29. 30.

Smith Victor Co. v. Sylvania Electrical Products, Inc. 242 F. Supp. 302, 309, 149 USPQ 701, 705 (ND III 1965). Colgate-Palmolive (India) Limited v. Anchor Health and Beauty Care Private Ltd. 2009 (40) PTC 653 (Mad). Supra note 8 at 625. Picker Int’l, Inc. v. Leavitt, 865 F. Supp. 951, 964 (D. Mass. 1994). Forbes Inc. v. Granada Biosciences, Inc., 124 S.W.3d 167, 170 (Tex. 2003). Supra note 3 at 370. Id at 372. [22]

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Product disparagement is closely related to false advertising. At common law, misrepresentation about one’s own product falls in the realm of false advertising tort, and misrepresentation about another’s product in the realm of product disparagement 31. Disparagement is distinguishable from other types of false advertising in that it generally involves casting aspersions on the quality of goods or service of another. Despite this basic distinction, commercial disparagement and false advertising have the same effect, i.e., one’s goods or services are falsely presented to the potential customers in a more favourable light than those of another32. For establishing false advertising a misleading statement of fact about a product or service which actually deceived or has the tendency to deceive a substantial segment of audience to whom the advertisement is directed is made by the advertiser. The deception has to be material in that it is likely to influence consumers’ purchasing decisions and there is a strong likelihood of the competitor being injured as a result of such advertising. 33 1.3 Comparative Advertisement and Unfair Competition: “Mine is as good as his!” “Mine is as good as his!” In cases where by means of comparison with a well established brand name or trademark in course of advertising a new entrant tries to takes advantage of the good reputation of a competing product, such comparative advertisement referred to as parasitism is deemed to be unfair competition. The advertiser refers to a famous product just to take advantage of its goodwill and favour his own product which he describes as being as good. Such use of competitor’s trademark for the purpose of free riding on its reputation/goodwill would amount to trademark infringement even though the original function of trademark is not infringed.34 An interesting point to be kept in mind here is that when an advertiser promotes his goods by saying that his are as good as that of the rivals, he is not in any ways denigrating the competitor, in fact he is in a way saying that his rivals goods are good and his are also up to the mark. However, if in proclaiming so he causes confusion in the mind of public as regards the source of the goods, then, it would amount to infringement of the trademark. The central theme of unfair competition laws is a policy of preventing those types of competitive practices that are unfair by reason of their tendency to subvert competition upon the merits.35 By preventing these detrimental or destructive forms of competition, and insuring fairness and honesty, the operation of competitive markets is improved.36

31. 32. 33. 34.

35. 36.

Graeme B. Dinwoodie & Mark D. Janis, Trademarks & Unfair Competition Law Policy, 759 (Aspen Publishers, New York 2004). Oppenheim & Western, Unfair Trade Practices & Consumer Protection, 150 (West Publishing Co. New Delhi 1974). Michael A. Epstein, Epstein on Intellectual Property, § 8-02 (Wolter Kluwer, Austin 2008). Recently the European Court of Justice (ECJ) in the L’Oreal v. Bellure [2009] EUECJ C-487/07_O., has widened the scope of protection for trademark owners by holding that when one utilizes trademark of another to promote its own goods, this can constitute “taking unfair advantage” of the trademark owner’s mark, even if the essential function of the trademark owner's mark i.e., to guarantee origin, is not jeopardized. Supra note 32. Ibid. Ibid. [23]

The rights in a trademark are recognized as part of the broader law of unfair competition. The rights in a trademark grow out of the trademark’s use in trade, not through adoption as are the rights in copyright and patent.37 Comparative advertising that contains inaccurate, false and misleading information about competitor’s product may be actionable under unfair competition if it causes a likelihood of confusion between the advertiser and the competitor, or between the respective goods or services or trademarks or trade names. Comparative claims may trigger actions involving injurious falsehood. For example, in case of product comparisons containing false specifications while indicating a product’s superiority in a specific field, the advertisement comes out with a percentage or figure meant to illustrate the enormous differences between the compared products (“half the quantity of X cleans twice the number of clothes and that too 100% whiter than Y”). Such statement can be actionable under tort if the claim is not based on properly conducted clinical tests and, therefore, turns out to be false. Such statements also make for unfair competition practices. A comparison that refers to attributes of a competitor bearing no relation to his commercial activities would always be prohibited as unfair business practices. For example any imputation in the advertisement on the personal life or any activity of the competitor unrelated to the product or services is outside the purview of fair competition and would be deemed as unfair competition. Comparative advertising resulting in unjustified dilution of the goodwill or reputation would amount to unfair competition. Generally, a practice that might not be previously considered as unlawful would be considered unfair if it offends public policy as has been established by statutes, the common law or via some statutes is established to be so. An immoral, unethical, oppressive or unscrupulous practice is also read within the ambit of unfair competition. A practice that causes substantial amount of injury to consumers or to competitors is considered as unfair. 2. Comparative Advertising and Trademark Infringement An important aspect of advertising is the use of trademark of the product/service advertised. What is most conspicuous in an advertisement is the trademark of the product. What sells is the brand name or the trademark. It is the trademark with which the consumers associate the product shown in the advertisement. For example the alphabet “M” written in a distinctive style flashes the image of the famous American fast food chain McDonalds in the peoples mind. It might be the distinctive crocodile mark for Lacoste or the half bitten apple mark for Apple, the consumers associate with the symbol that is marketed for ease of promotion. It wouldn’t be an exaggeration to say that we live by symbols and buy goods by them as well38. A trademark is a form of a merchandising shortcut which induces a purchaser to select what he wants or made to believe that he wants39. 37. 38.

39.

David D. Mouery, “Trademark Law And The Bottom Line Coke Is It!”, 2 Barry L. Rev. 107(2001). Justice Frankfurter in Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co. held that “The protection of trademarks is the law’s recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them.” 316 U.S.203, 205, 53, USPQ 323, 324-25 (1942). Ibid. [24]

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The advertisement uses the power of the symbol/mark to draw the prospective consumer towards his product. It is through the advertisement of the mark that the desirability of the commodity is conveyed to the minds of the potential customers40. The trade mark has become the outward expression of goodwill, the inanimate, intangible thing that has come to connect the goods with a person. Trademarks create goodwill for the trademark owner as the owner puts his efforts into the promotion of the mark. When a purchaser wants or believes that he wants the goods or services symbolized by the trademark, that desire is created by goodwill.41 The traditional trademark protection doctrine is based on the identification of the source of particular goods and services. The orthodox justification for protecting trademarks is that trademarks enhance the efficient functioning of a competitive marketplace by ensuring that consumers can either find goods from the same source as goods they have enjoyed previously, or can find goods whose reputation has been advanced through advertising42. This source and identification being the primary function, the secondary function of trademarks is indicating quality, advertising the product and providing information to the potential consumers. Trademarks identify products and services to the consumer, and the advertiser promotes its products and services through the use of trademarks. The advertising function assists in preventing of the diversion of sales to other undertakings43. Trademarks also play an important role in providing consumers with the necessary amount of information that needs to be communicated44. In fact, some of the functions of advertising can be said to synonymous with the function of trademarks45 and when a customer buys an advertised product it is because of the recognition of the trademark of the product. For example when a consumer thinks of buying an ipod the first thing that strikes his mind is the apple logo; such is the impact of the mark. The logo symbolises the goodwill attached with the ipods manufactured by apple and that goodwill attached with the logo is what draws the consumer to the product.

40

41. 42 43. 44. 45.

Justice Frankfurter further says that the owner of the mark exploits this human propensity of being led into belief of want by making every possible effort to impregnate the atmosphere of the market with the drawing power of the congenial symbol. Whatever may be the means applied, the aim is the same, to convey through the mark, in the minds of the potential customers, the desirability of the commodity on which the mark appears. Ibid. Supra note 37 at 115. Graeme W. Austin, “Trademarks and the Burdened Imagination”, 69 Brooklyn L. Rev. 827 (2004). Mohammad Amin Naser, “Re-Examining the Functions of Trademark Law”, 8 Chi.-Kent J. Intell. Prop. 99 (2008). Id. at 101 See supra note 37 at 116 wherein the author points out that the functions of adverting are synonymous with trademark law that is to prevent likelihood of confusion. The author quotes Courtland L. Bovee & William F. Arens, Contemporary Advertising 6-7, (2nd ed., Irwin 1986) where the following functions- a) identification of products and differentiation from others, b) communication of information about the product, its features etc., c) inducing customers to try new products and to suggest reuse, d) increasing product usage, e) building brand preference and loyalty are describes as being the primary functions of advertising and further compares them with modern trademark function and argues that if an advertisement utilizing a trademark identifies the product and differentiates it from other like products, the likelihood of confusion is reduced and the advertisement achieves a sale for the trademark owner. Thus, the functions of modern advertising promote trademarks. [25]

As per the traditional theory of trademark protection the law guarantees the owner, the exclusive right to use the mark for the purpose of identification of his goods and services. This right is protected by the trade mark law against the commercial use of the mark by others, if the use is in any ways likely to deceive the consumers or susceptible to cause confusion. Trade mark laws in general do not prohibit the non-confusing use of another’s trade mark. Now this poses an interesting situation when a competitor uses somebody else’s trademark not with the intention of causing confusion as to the origin or source but still may cause harm to the trademark owner. Use of rival company’s trademark in comparative advertising is one such instance. A comparative advertiser uses the trademark of the compared product to identify product quality and not product source and in seen in light of the traditional theory of protection of trademark such use cannot violate the right of the trademark owner46. However, considering the secondary function of trademark as a tool of advertisement and promotion, it is interesting to see whether the use of competitor’s trademark while comparing it with one’s own amounts to trademark infringement or not. The Chanel perfume case47 is an example of the non confusing use of trademark. In this case, the Ninth Circuit Court held that a perfume seller, who put out a product simulating the unpatented formula of Chanel No. 5 perfume, had the right to use the CHANEL trademark to inform the public of this fact but at the same time, there should not be any misrepresentations of fact or chances of creation of the likelihood that purchasers will be confused as to the source, identity or sponsorship of the advertiser’s product. 48 Another noteworthy aspect here is related to the property theory of trademark. If trademark is considered as a property then in that case use of a trademark by another would amount to trespass. A trademark in due course of time attaches goodwill with use. When used in advertising purposes for a long time, the trademark along with the brand name becomes an asset for the owner. How far is it justifiable for a competitor to use that asset for the purpose of comparison in an advertisement for the promotion of his own product? Considering the informative value of comparative value, can it be argued that in an advertisement, a competitors’ trademark can be used without his permission for the purpose of assisting the public in making informed choice? How feasible it would be for an advertiser to seek permission for using a rival’s trademark for the sake of promoting his own. A competitor seeking an easy way out may use a technique of comparative advertising without explicitly making use of rival’s trademark. If by showing a pictorial representation of rivals product clearly identifying the shape of the container/pack and using the same colour 46. 47. 48.

Albert Robin & Howard B. Barnaby, “Comparative Advertising: A Skeptical View”, 67 Trademark Rep. 358 (1977). Smith v. Chanel, Inc., 402 F.2d 562, 159 U.S.P.Q. 388 (9th Cir. 1968). The court held that- “To prohibit use of a competitor's trademark for the sole purpose of identifying the competitor's product would bar effective communication of claims of equivalence. Assuming the equivalence of defendant's “Second Chance” and plaintiff’s Chanel No. 5, the public would not be served by a rule of law which would preclude sellers of Second Chance from advising consumers of the equivalence and thus effectively deprive consumers of knowledge that an identical product was being offered at one third the price. We are satisfied, therefore, that both authority and reason require a holding that in the absence of misrepresentation or confusion as to source or sponsorship, a seller in promoting his own goods may use the trademark of an-other to identify the latter's goods.” Ibid. [26]

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combination (which might not be registered as trade dress) without labelling it with the brand name or trademark, then in such a case, where a viewer might easily identify both the compared products, would it amount to trademark infringement. Disparagement issues under the common law or unfair competition law are easier to invoke in such situations. The general approach of the courts while deciding such cases has been to permit comparative advertisement so long as such advertisement was not detrimental to and did not take unfair advantage of a registered trademark49. 3. Permissible Limits of Comparative Advertising Comparative advertising is considered to be a legitimate means of informing consumers of the advantage of the product or service compared with that of a competitor. However because of the inherent nature of such advertising causing a negative impact on the competitors, issues relating to liability and regulations are raised50. For the purpose of policing comparative advertisements and commercials naming competitor, the advertising and broadcasting agencies took up the initiative as they are the ones who are involved in day to day decision making process of advertising policies51 . Guidelines are issued by such agencies for the purpose of self regulation with the aim of promoting and insuring standards of accuracy and fairness. These guidelines provide workable standards for the advertising industry. However these are non governmental bodies and do not have a statutory enforcing authority and work as complementary to the legal framework. In general, the law is that it is neither trademark infringement nor unfair competition to truthfully compare competing products in advertising, and in doing so, to identify by trademark, the competitor’s goods. However, such comparative advertising will not be permitted if it is likely to confuse buyers as to exactly what they are getting52. In the controversial O2 Holdings Ltd v. Hutchinson 3G Ltd53 case, the ECJ held that proprietor of a registered trade mark is not entitled to rely on his trade mark rights to prevent the use, by a third party, in a comparative advertisement, of a sign similar to that mark in relation to goods or services identical with, or similar to, those for which that mark is registered where such use does not give rise to a likelihood of confusion on the part of the public. The court

49. 50. 51.

52.

53.

Vodafone Group PLC v. Orange Personal Communications Service Ltd. [1997] F.S.R. 34. Supra note 6. Ibid. In the United States it is the American Association of Advertising Agencies that came with the guidelines to be adopted as a standard for comparative advertising. In India, it is the Advertising Standards Council of India(ASCI), a voluntary Self-Regulation council, formed for the purpose of controlling the contents of advertisements that works in accordance with the Code for Self-Regulation in Advertising . In Britain it is the Advertising Standards Authority (ASA) that deals with complaints of breaches of the British Code of Advertising Practice. See S.L. Dogan & M.A. Lemley, “Trademarks and Consumer Search Costs on the Internet”, 41 Houston L. Rev. 777 (2004) wherein the author says that "Competitors have an affirmative right to use others' trademarks to capture public attention and attempt to divert it to their own products. As long as they do not mislead people into presuming some kind of affiliation between themselves and the trademark holder, competitors may use the marks to explain that their product imitates or aspires to the qualities of the trademark holder’s goods.” O2 Holdings Ltd v. Hutchinson 3G Ltd [2008] C-533/06 [27]

ruled that trademark law is applicable to comparative advertisements but in order to succeed infringement it is necessary to prove likelihood of confusion or the noncompliance of any of the seven comparative advertisement directives54. While every seller has the right to truthfully use a competitor’s mark in comparative advertising that right can be abused55. Whether there is trademark infringement and a likelihood of confusion of buyers is a question to be determined by the specific language of the advertising copy. Clearly, even if a seller so uses a competitor’s mark in comparative advertising as not to cause a likelihood of confusion, but the claims of comparison with other goods is not cent percent true and correct, there may be liability for false advertising or trade disparagement56. Comparative advertising is an act of competition and therefore in regulating the same compliance with the general principles of article 10bis of the Paris Convention57 has to be kept in view. In the United States, the Federal Trade Commission (FTC) has promoted comparative advertising especially in the television media as an effective means of presenting product information to the public so that more rational purchase decisions can be made. The FTC believes that the technique of comparing products invariably promotes competition, product improvement and leads to the lowering of prices in the market58. Early FTC case law shared the concern of early trademark law of diverting trade from legitimate competitors. However, it is now well recognized that the purpose of the FTC Act, like the other antitrust laws, is to protect competition, not competitors, because competition benefits consumers59. As far as the European Union is concerned, prior to the Comparative Advertising Directives issued by the European Parliament different countries had different norms for advertising. Comparative advertising was allowed60 in some countries and banned61 in others. Though it was generally accepted that misleading and unlawful comparative advertising can lead to distortion of competition within the internal market, however, the member states have now 54. 55.

56. 57.

1. 2. 3. 58. 59. 60.

Ibid. An example of truthful use of competitors mark can be seen in the motor vehicle industry where pamphlets are comparative charts about various features of the concerned vehicles are made available to the consumers. It is on the consumer to then decide to opt out of any of the vehicles as per his needs and requirement. Supra note 9. Article 10bis reads- (1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition. (2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition. (3) The following in particular shall be prohibited: all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods. Jenna D. Bellar, “The Law of Comparative Advertising in the United States and Around the World: A Practical Guide for U.S Lawyers and their Clients”, 29 Int’l L. 917 (1995). Ross D. Petty, “Initial Interest Confusion versus Consumer Sovereignty: A Consumer Protection Perspective on Trademark Infringement”, 98 Trademark Rep. 757 (2008). For example Portugal, Switzerland and United Kingdom. [28]

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been required to permit comparative advertising by virtue of the codified directive 2006/ 114/EC62 which succeeded the earlier directive 84/450/EC as amended by the directive 97/ 55/EC63. The directive contemplates of certain minimum and objective criteria for determining whether advertising is misleading or not. The directive contemplates for establishing conditions of permitted comparative advertising in order to determine which practices relating to comparative advertising may distort competition, be detrimental to competitors and have an adverse effect on consumer choice. Such conditions of permitted advertising should include criteria of objective comparison of the features of goods and services64. The directive also contemplates the application of international conventions on copyright as well as the national provisions on contractual and non-contractual liability in case the results of comparative tests carried out by third parties are referred to or reproduced in comparative advertising.65 The directive thus provides for the control of misleading or comparative advertisements through self-regulatory bodies as well as through the courts. It serves the community’s goal to complete the internal market by the means of harmonization and abolishment of internal frontiers. The different approaches taken by national laws prior to the directive towards the legitimacy of comparative advertising forming an obstacle to the free movement of goods and services are now seeked to be at least minimally standardized by providing for minimum permissible limits for comparative advertising. Comparative Advertising in India For a developing country like India, the importance of advertisements in the promotion of economy is immense66. With the liberalisation and globalisation of the economy and with increasing presence of MNC’s, firms in India have been indulging in aggressive and vigorous 61. 62. 63.

64. a)

65. 66.

For example Belgium, Luxembourg and Germany. Codified on 12 December 2006, by Directive 2006/114/EC of the European Parliament and of the Council Concerning Misleading and Comparative Advertising. On 6 October 1997, the European Parliament and the Council adopted Directive 97/55/EC amending Directive 84/450/EEC concerning misleading advertising so as to include comparative advertising. See Report from the Commission to the Council and the European Parliament on Consumer Complaints in respect of Distance Selling and Comparative Advertising. Article 4 lays down eight factors taken into account for permissibility of comparative advertisingIt is not misleading; b) It compares goods or services meeting the same needs or intended for the same purpose; c) It objectively compares one or more material, relevant, verifiable and representative features, which may include price; d) It does not discredit or denigrate the trademarks, trade names, other distinguishing marks, or the goods, services, activities or circumstances of a competitor; e) for products with designation of origin, it relates in each case to products with the same designation; f) it does not take unfair advantage of the reputation of a trademark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products; g) it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name; h) it does not create confusion among traders, between the advertiser and a competitor or between the advertisers trademarks, trade names, other distinguishing marks, goods or services and those of a competitor. Preamble para 10. The Hon’ble Supreme Court held in supra note 1- “Advertising is considered to be the cornerstone of our economic system. Low prices for consumers are dependent upon mass production, mass production is dependent upon volume sales, and volume sales are dependent upon advertising.” [29]

promotion of their products and services67. Thus, comparative advertising in India can be said to be a recent phenomenon as compared to the U.S. Comparative advertising has become a trend in Indian advertising scenario as more and more companies are reverting to it. Pepsi-coke, regaul-ujala, cherry blossom-kiwi, volini-moov, horlicks-boost, complanhorlicks, colgate-anchor advertisements are certain examples of cut throat competitive comparative advertisements and the recent Rin-Tide advertisement controversy is a further case in point68. Advertising is protected as commercial speech under article 19(1)(a)69. However, as in case of speech, commercial speech too is subject to reasonable restrictions. If an advertisement extends beyond the grey areas and becomes a false, misleading, unfair or deceptive advertisement, it would not have the benefit of any protection of article 19(1)(a)70. Let us now proceed to analyze the laws or norms existing in India as regards comparative advertisements. Advertisement Regulatory Regime in India There is no codified law regulating advertisements in India. But there are statutory provisions scattered here and there in several enactments71. These provisions do not deal with the

67. 68.

69.

70. 71. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xii)

Akhileshwar Pathak, “Liberalisation and Law on Comparative Advertising in India”, available at http://www.iimahd.ernet.in/publications/ data/2004-01-02akhilpathak.pdf. (Accessed on 21/02/10 at 23:00hrs.) Procter and Gamble Home Products Limited & Anr. v. Hindustan Unilever Limited C.S. No.43 of 2010 in the High Court of Calcutta. This case is an example of blatant comparison with rivals product and denigrating the same. The advertisement clearly uses the rivals’ product for the purpose of comparison and by using the punch line of rivals’ ad campaign further mocks on it. At the stage of granting injunction, the High court completely overlooked the aspect of trademark infringement and said that only issue on the basis of which the order has been passed this day is disparagement. The Hon’ble Supreme Court in supra note 4 held that- “Advertising as a “commercial speech” has two facets. Advertising which is no more than a commercial transaction, is nonetheless dissemination of information regarding the product-advertised. Public at large is benefitted by the information made available through the advertisement. In a democratic economy free flow of commercial information is indispensable. There cannot be honest and economical marketing by the public at large without being educated by the information disseminated through advertisements. The economic system in a democracy would be handicapped without there being freedom of “commercial speech”. Dabur India Ltd. v. Colortek Meghalaya Pvt. Ltd. and Godrej Sara – Lee MANU/DE/0225/2010 Some of the statutory provisions regulating advertising as such aresection 292(2)(b) of Indian Penal Code declares advertisements relating to obscene material as punishable The Young Persons (Harmful Publications) Act, 1956 making it a punishable offence to advertise publications portraying commission of offences, acts of cruelty etc., as would corrupt a young person; The Emblems and Names (Prevention of Improper Use)Act, 1950 making an advertiser liable for punishment for using select emblems and names for commercial purposes; The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 (which came up for consideration in Hamdard Dawakhana case), prohibiting misleading advertisements relating to drugs and magical remedies; The Indecent Representation of Women (Prohibition) Act, 1986 prohibiting advertisements containing indecent representation of women; The Prenatal Diagnostic Techniques (Regulation and Prevention of Misuse) Act, 1994 prohibiting advertisements relating to prenatal determination of sex The Transplantation of Human Organs Act, 1994 prohibiting advertisements inviting offers for the sale of human organs The Drugs and Cosmetics Act, 1940 preventing the use of the reports of a test or analysis of the Central Drugs Laboratory for advertising a drug or cosmetic The Prize Competition Act, 1955 and The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 The Cigarettes and other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution)Act, 2003, prohibiting the advertisement of Cigarettes and other Tobacco Products The Cable Television Networks (Regulation) Act, 1995 prohibiting (under Section 6) the transmission of advertisements on the cable network, which are not in conformity with the Advertisement Code, set out under Rule 7 of the Cable Television Network Rules, 1994. The Advertisement Code set out under Rule 7 of the Cable Television Network Rules, 1994 does not deal with false, misleading or disparaging advertisements. The code seeks to prohibit advertisements offending morality, decency and religious susceptibilities of the subscribers.

[30]

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comparative aspect of advertisements as such. The Code for Self-Regulation in Advertising lays down norms for comparative advertising. Apart from the ASCI which is a self regulatory body, among different legal tools that govern comparative advertising in the country, the Monopolies of Restrictive Trade Practices, 1969 (MRTP Act) and Trade Marks Act, 1999 provide the basic structure for such advertising in tandem with the common law remedies for disparagement. Comparative Advertising and the ASCI Code for Self-Regulation in Advertising of the ASCI works as a self regulatory mechanism of regulating advertisements in India. ASCI is a non statutory Tribunal set up in 1985 and incorporated under section 25 of the Companies Act, 1956. It entertains and disposes complaints based on its Code of Advertising Practice (CAP). It has adopted the code to lay down guidelines with a view to achieve the acceptance of fair advertising practices in the best interest of the ultimate consumer. The basic approach of ASCI reflected in the code is to ensure that advertisements observe standards of fairness in competition such that both –a consumer’s need to be informed of choices available to him in the market place and; the canons of generally accepted competitive behaviour in business are served. The code provides for the seeking of permission in case an advertiser refers to some other product or service in promotion of its own72. This covers both comparative advertising with the object of free riding73 as well as for the purpose of proclaiming superiority over the product compared with. The code also prohibits use of statements or visual presentation in advertisements which directly or by implication or by omission or by ambiguity or by exaggeration are likely to mislead the consumer about the product advertised or the advertiser or about any other product or advertiser74. Puffery is permissible as per the code if it is not misleading75. As regards the comparative advertising the code permits it “in the interests of vigorous competition and public enlightenment” 76 provided that (a) It is clear what aspects of the advertiser’s product are being compared with what aspects of the competitor’s product. (b) The subject matter of comparison is not chosen in such a way as to confer an artificial advantage upon the advertiser or so as to suggest that a better bargain is offered than is truly the case.

72.

73.

74. 75. 76.

Para 3 of chapter one reads- Advertisements shall not, without permission from the person, firm or institution under reference, contain any reference to such person, firm or institution which confers an unjustified advantage on the product advertised or tends to bring the person, firm or institution into ridicule or disrepute. If and when required to do so by the Advertising Standards Council of India, the advertiser and the advertising agency shall produce explicit permission from the person, firm or institution to which reference is made in the advertisement. Para 2 chapter four- Advertisements shall not make unjustifiable use of the name or initials of any other firm, company or institution, nor take unfair advantage of the goodwill attached to the trade mark or symbol of another firm or its product or the goodwill acquired by its advertising campaign. Para 4 chapter one. Para 6 chapter one. Para 1 chapter four. [31]

(c) The comparisons are factual, accurate and capable of substantiation. (d) There is no likelihood of the consumer being misled as a result of the comparison, whether about the product advertised or that with which it is compared. (e) The advertisement does not unfairly denigrate attack or discredit other products, advertisers or advertisements directly or by implication.77 Comparative Advertising and the Trademark Law The Trade Marks Act, 1999, has incorporated provisions relating to comparative advertising under Sections 29(8) and 30(1). Section 29(8) of The Trademarks Act, 1999 enunciates situations, when the use of a trademark in advertising can constitute infringement. It says that any advertising which is not in accordance with honest practices; or is detrimental to the distinctive character, or to the repute of the mark, shall be an act constituting infringement78. At the same time section 30(1) makes comparative advertising an exception, to acts constituting infringement under section 29. It provides that any advertising which is in accordance with honest practices, and does not cause detriment to the distinctive character or to the repute of the trademark will be permissible and will not constitute infringement79. Thus, non honest practices or the use of trademark that is detrimental to the reputation or distinctiveness of the mark are the only grounds of infringement. The term “honest practice” is nowhere defined. According to Kerly, the term ‘honest practices’ is a hybrid derived originally from the Paris Convention (article 10 bis), “honest practices in industrial and commercial matters” (and now in article 6 of the Trademarks Directive of European Union) and words found in articles 4 and 5 of the Directive: “where use of sign without due cause takes advantage of, or is detrimental to, the distinctive character or repute of the trademark.” 80 The meanings of the expressions ‘in accordance with honest practices’ and ‘is not such as to be detrimental to repute of the trademark’ appear to be intertwined- any comparison, which causes detriment to the reputation of a trademark81 owner, should be dishonest. At the same time, while making a comparison a trader cannot say that the goods of a competitor are undesirable or bad because that would amount to slandering or defaming the competitor and his goods, which would not be in accordance with honest practices, as it would be detrimental to the reputation of a trademark. Further, the question whether a particular advertisement is ‘honest or not’ is greatly open ended, and is to be decided from the perspective of a reasonable consumer i.e. whether a reasonable consumer can be presumed

77. 78.

79.

80. 81.

Ibid. Section 29(8)- A registered trade mark is infringed by any advertising of the trade mark if such advertising-- (a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters or (b) is detrimental to its distinctive character or (c) is against the reputation of the trade mark. Section 30(1)- Nothing in section 29 shall be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor provided the use--- (a) is in accordance with honest practices in industrial or commercial matters. And (b) is not such as to take unfair advantage of or be detrimental to the distinctive character or repute of the trade mark. David Kitchen, David Llewyn, et. al.(eds.), Kerly’s Law of Trademarks and Trade Name 366 (14th ed., Sweet & Maxwell, London 2005). Supra note 10 at 412. [32]

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to have ignored claims that are considered to be exaggerated, hyperbole, would be likely to say that the advertisement is honest82. There is, however a large and clearly shared core concept of what constitutes honest conduct in trade, which may be applied by the courts without great difficulty and without any excessive danger of greatly diverging interpretations83. Honesty has to be gauged against as what is reasonable for the relevant public of advertisements for the goods or services in use 84. The burden of proof remains upon the trademark owner that the unauthorized use of his mark is not honest, and not upon the user of the mark85. It is generally accepted that if anybody takes an unfair advantage by advertising a registered trade mark and thereby affects the reputation of the said trade mark then it amounts to infringement of trade mark within the meaning of Section 29(8) (a) and (c)86. Recently in the Rin-tide controversial ad, the trademarked product of tide naturals was used in the rin ad, relief was claimed in the court on basis of trademark infringement however the court at the stage of granting injunction just took into consideration the disparagement aspect and overlooked the trademark aspect completely87. Comparative Advertising and MRTP. Comparative advertising is permissible subject to certain limitations as to unfair trade practices. In 1984, the MRTP Act was amended to add a chapter on Unfair Trade Practices. A MRTP commission was established to deal with the cases falling under the ambit of unfair trade practices. Section 36A defines ‘unfair trade practice’ to mean a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provisions of any services, adopts any unfair method or unfair or deceptive practice including the practice of making any statement, whether orally or in writing or by visible representation which gives false or misleading facts disparaging the goods, services or trade of another person88. The object behind having this provision was to bring honesty and truth in relationship between the seller and the consumer89. Giving false or misleading facts disparaging the goods, services or products of another person came under the purview of this section. Disparaging statement may be patent, or a subtle play of semantics, i.e., an innuendo. Even statements which

82. 83.

84. 85. 86. 87. 88. 89.

Ibid. “It appears to be now well settled that the test of honesty for the purpose of the proviso is one that has to be judged by an objective standard, and in my judgment the appropriate question to be asked in relation to that test in the present case is whether a reasonable motor service provider would think the use complained of in the present case to be honest, or rather, in accordance with honest practices in that business.” Aktiebolget Volvo v. Heritage (Leicester) Ltd., F.S. R (2000) 253. Ibid. Ibid. Paras Pharmaceuticals Ltd. v. Ranbaxy Laboratories Ltd. and Ors. 2008(38) PTC 658(Guj). See supra note 67. Section 36A(x). There is an obligation on the part of the seller that if he advertises, he must speak the truth and this obligation should not be restricted to just telling the truth but also to avoid half truths. See S M Dugur, Law of Monopolistic and Restrictive Trade Practices, 385 Wadhwa &Nagpur(2000). [33]

disparage indirectly are covered by the section. Whether there is disparagement or not would depend on the facts and circumstances of each case90. Prior to the amendment of 1991, it was necessary to prove loss or injury to the consumer, this controversial requirement was done away with after the amendment91. The commission decided many cases related to unfair trade practices in the realm of advertising before the repeal of the MRTP Act by the Competition Act of 2002. The commission was the authority to decide and provide for relief in case of disparagement and unfair practice indulged in advertising by a competitor. The commission in course of deciding cases evolved certain standards as to what would constitute unfair trade practice and amount to disparagement. In Investwell Publishers (P) Ltd., Bombay92 the commission interpreted the following five necessary ingredients of unfair trade practice- a) there must be a “trade practice”; b) the trade practice must be employed for the purpose of promoting the sale, use, supply of any goods or the provision of any service; c) trade practice should fall within the ambit of one or more of the categories enumerated in clause (1) to (5) of section 36A; d) the trade practice should cause loss or injury to the consumers of goods or services; e) the trade practice under clause (1) should involve making a ‘statement’ whether orally or in writing or by visible representation. In Ace Marketing Private Ltd.93 , the commission held that in order to attract customers, providing comparative information does not offend the provision of the Act. In case there is no deliberate or mischievous suppression of vital information in the advertisement causing loss or injury to the consumers, the enquiry against the advertisement is liable to get discharged. In Ashok & Company94 , the commission held that the statement or representation which is false or misleading must be of fact and not of mere opinion. “False” connotes representations which are untrue whether the person making the representation is aware of the untruthfulness or not. Praising or “puffing up” is absolutely not an unfair trade practice under the MRTP Act. In Satinder Singh v. Zandu Pharmaceutical Works Limited95, the commission held that a statement that “my product is real”, does not amount to stating that the products of other companies are not real, so long as there is no specific effort to run down other products. In re Guinea Mansion96 , the commission held that in order to sustain a charge under clause (x)of section 36A, it is essential to prove that false or misleading facts were intended to disparage, denigrate or condemn the goods of any other person. Even if there is self praise in an advertisement, it would not necessarily lead to disparagement of the goods of others. Thus we see that in establishing unfair trade practices the approach of the commission has

90. 91. 92. 93. 94. 95. 96.

See id. at 432. See Society for Civic Rights v. Colgate Palmolive (India) Ltd. (1991)2 Comp L J 372(MRTPC)(FB). UTP Enquiry no. 146/1987, order dated 05/10/1988 cited from M. L Sachadeva & N. Ranganathasamy, Unfair Trade Practices: Cases & Material,( Bahri Brothers, New Delhi 1992). (1987) Tax LR 1792 (30)(MRTPC). UTP Enquiry no. 284/1988 decided on 19/05/1988 cited from supra note 92 at 2.333. UTP Enquiry no. 491/1987 cited from supra note 89 at 435. UTP Enquiry no.451/1987 decided on 08/03/1988 cited from supra note 89 at 436. [34]

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been to permit puffing up in course of comparative advertisement and the making of truthful averments in advertising does not amount to disparagement. Falsity of claim can also be dispensed if the intention was not to denigrate. Though the Act now stands repealed, some of its provisions continue to stand. It has been suggested that the same protection against unfair trade practices have been available under the Consumer Protection Act and thus the repeal of the MRTP Act would not be of any significance. However, within the structure of the Consumer Protection Act, competing firms cannot be ‘consumers’ to approach a consumer forum. The question that gains importance here is not whether a consumer has adequate remedies and protection against such unfair trade practices of a corporation but whether the warring corporations have adequate law against unfair trade practices, and a justice delivery system to protect themselves from infringement of trademark and product disparagement by competitors in the field of advertising. The consumer no doubt has a remedy under the Consumer Protection Act in case of him being duped by misleading statements made by the advertisement as the Consumer Protection Act provides for a three tier structure to promote interest of the consumers but what about the competitors indulging in denigrating advertisement about the rival’s product/goods /services? We know that now by virtue of section 66 of the Competition Act, the MRTP Commission stands dissolved and all cases pertaining to unfair trade practices referred to in clause (x) of subsection (1) of section 36A and pending before the Monopolies and Restrictive Trade Practices Commission shall, after the expiry of two years referred to in the proviso to subsection(1) stand transferred to the Appellate Tribunal and the Appellate Tribunal shall dispose of such cases as if they were cases filed under that Act. Also, all investigations or proceedings relating to unfair trade practices referred to in clause (x) of subsection (1) of section 36A and pending before the Director General of Investigation and Registration on or before the commencement of this Act shall, on such commencement, stand transferred to the Competition Commission of India and the Competition Commission of India may conduct or order for conduct of such investigation in the manner as it deems fit. This section makes it clear that no jurisdiction or power upon the MRTP Commission is conferred to decide or adjudicate any case or proceeding arising under the MRTP Act, 1969 on or after the commencement of this Act. Thus the competition commission cannot take up new cases that could arise under section 36A(i)(x) of the repealed MRTP Act. But the power to enquire into complaints of unfair trade practices is also vested with the Consumer Forum, in view of the fact that the provisions of section 36A of MRTP Act, 1969 stands imported verbatim into the Consumer Protection Act, 1986 by the Amendment Act 50 of 1993. The definition of “unfair trade practice” found in section 36A (1) of the MRTP Act, 1969, is adopted in pari materia in section 2(1) (r) of the Consumer Protection Act, 1986. However, a manufacturer or a dealer cannot invoke provisions of the Consumer Protection Act, since that Act is intended only for the benefit of consumers and not for the benefit of manufacturers, marketers or service providers. A manufacturer, however, still has a common law remedy to approach the civil court subject to other constraints. [35]

Disparagement and Trademark Infringement The right of reputation is an inherent personal right of every person and a person’s reputation is considered his property97. Based on this principle, disparagement of a competitor by making a statement calculated to expose him to hatred, contempt or ridicule, or to injure him in his trade, business, profession or to cause him to be shunned or avoided in society is defamatory and actionable if it is false, made in writing and published. The motive of the defendant is not material for determining liability98. However, truth of the defamatory words is a complete defence to the action. In case of civil action the reliefs available are injunction and damages. It is an actionable wrong to make defamatory statements about a man’s goods or business, if they are untrue and made maliciously or if they are intended to produce damages and if in the course of things, they do produce damages. Such an action is known as a slander of title, or malicious or injurious falsehood and comes under the general category of an action for trade libel. The subject matter for action may relate to trademark, patent, designs or any kind of property. An action can be maintained only if the plaintiff proves that the statements made in course of advertisements were false or untrue, made without a just cause or excuse and has made the plaintiff suffer damage thereby. In order to succeed in an action, only if the plaintiff is able to prove malice, the burden is on him. Here falsity of statement is important because if the statement is true, it will not constitute slander of title. In case, a statement is made which is false in fact but is made belief that it is true and made without any indirect motive of hostility to the plaintiff hence, in such a case, an action of injurious falsehood will not stand.99 What is important in context of disparagement and unfair trade practices, in course of comparative advertisement is that, is it feasible for the aggrieved company to seek relief under the common law or under the penal law of the country? Trademark law puts limits to comparative advertising and so did the MRTP Act before its repeal. How does the aggrieved company approach the court and in what manner the judiciary views the matter becomes the deciding factor here. Generally, the court attempts to safeguard the financial interest of the plaintiff and also the interests of the defendant/trader are borne in mind so that he is in a position to inform the public at large that his goods are available in the market which have certain advantages over the goods of the plaintiff/trader. Essentially the courts are guided by the fact that competition is good, and healthy competition surely is in the favor of the public, i.e., consumer. It is this underlying philosophy, which motivates the courts to zealously protect commercial speech as a fundamental right under article 19(1) (a) of the constitution. Judicial Approach Indian judiciary has been very vigilant in guarding in the interest of the consumers as well as that of the corporations whose products are being denigrated. The courts have over the time evolved certain guidelines to check disparagement of goods or the infringement of the rights of the owner.

97. 98. 99.

Pinner World Unfair Competition Law, An Encyclopedia, (Sijthoff & Noordhoff). Ibid. Ibid. [36]

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In Reckitt & Colman of India Ltd. v Kiwi T.T.K. Ltd.100 the court held that – “I.) A tradesman is entitled to declare his goods to be best in the words, even though the declaration is untrue. II) He can also say that my goods are better than his competitors', even though such statement is untrue. III) For the purpose of saying that his goods are the best in the world or his goods are better than his competitors' he can even compare the advantages of his goods over the goods of others. IV) He, however, cannot while saying his goods are better than his competitors', say that his competitors' goods are bad. If he says so, he really slanders the goods of his competitors. In other words he defames his competitors and their goods, which is not permissible. V) If there is no defamation to the goods or to the manufacturer of such goods no action lies, but if there is such defamation an action lies and if an action lies for recovery of damages for defamation, then the Court is also competent to grant an order of injunction restraining repetition of such defamation.” The above principle that while praising its product, an advertiser cannot describe the competitor's product as inferior, thereby damaging its reputation has been reiterated in many cases. 101 Even generic disparagement of a rival product without specifically identifying or pin pointing the rival product is equally objectionable and no one can disparage a class or genere of a product within which a complaining plaintiff falls and raise a defence that the plaintiff has not been specifically identified102. Generic disparagement can be restrained even at instance of a party who manufactures or trades in that class of goods 103. In Pepsi Co. Inc. and Ors. v. Hindustan Coca Cola Ltd. and Anr.104 , the court held that “In the electronic media the disparaging message is conveyed to the viewer by repeatedly showing the commercial everyday thereby ensuring that the viewers get clear message as the said commercial leaves an indelible impression in their mind and so in order to decide the question of disparagement, the following factors have to be kept in mind: (i) intent of the commercial; (ii) manner of the commercial; (iii) story line of the commercial and the message sought to be conveyed by the commercial. Out of the above, “manner of the commercial”, is very important. If the manner is ridiculing or the condemning product of the competitor then it amounts to disparaging but if the manner is only to show one’s product better or best without derogating other’s product then that is not actionable.” In Reckit Benckiser (India) Limited v. Naga Limited and Ors105 the court while expressing its opinion that there is a need for a Regulatory Authority for the purpose of putting a check on false advertising as it is difficult to distinguish between claims that are exaggerated and those which are false held that-

100. 101. 102. 103. 104. 105.

(1996) 114 PLR 45. Also see Reckitt & Colman of India Ltd v. M.P.Ramachandran and Ors. 1999 PTC (19) 741. See Dabur India Ltd. v. Colgate Palmolive India Ltd. AIR 2005 Delhi 102, Dabur India Ltd. v. Emami Limited 112 (2004) DLT 73. Dabur India Limited v. Colgate Palmolive India Ltd. AIR 2005 Del 102. Eureka Forbes Ltd., v. Pentair Water India Pvt. Ltd. 2007(35) PTC 556 (Karn). 2003 (27) PTC 305 Del. 2003(26)PTC 535(Del). [37]

“If a competitor makes the consumer aware of his mistaken impression, the Plaintiff cannot be heard to complain of such action. I find it difficult, nay impossible, to hold a party liable for libel when all that has been stated by the competitor is the truth. Truth is always a complete defense against any assault or challenge regardless of whether any damage is sustained as a result of it”. In Karamchand Appliances Pvt. Ltd. v. Sh. Adhikari Brothers and Ors.106, the court held that in order to puff up the product, the defendant may be entitled to boast no matter unjustifiably about the efficacy of their product but there should be a check on such exaggerated claims in the interest of public. “Parliament may in the larger interests of the consumer public by law provide a mechanism to regulate and/or prevent the making of such exaggerated claims. But in an action against a wrong caused by a disparaging advertisement, the question as to how and to what extent the claim made in the advertisement is justified may have to been examined only to the extent same is necessary for determining the limited issue before the Court. In Dabur India Ltd v. Wipro Limited107 , the court opined that if a product is good, adverse advertising may temporarily damage its market acceptability but not in the long run. The matter regarding truthfulness of the content of advertising has to be considered (if it at all arises) at the stage of trial but until then the defendant cannot be allowed to go on defaming the plaintiff on its submission that what it is saying is the truth. In, Colgate- Palmolive (India) Limited v. Anchor Health & Beauty Care Private Limited,108 the court has brought consumer interest in the forefront. The court held that“An advertisement which tends to enlighten the consumer either by exposing the falsity or misleading nature of the claim made by the trade rival or by presenting a comparison of the merits (or demerits) of their respective products, is for the public good and hence cannot be taken to be an actionable wrong, unless two tests are satisfied namely (i) that it is motivated by malice and (ii) that it is also false. This is on account of the fact that a competitor is better equipped to make such an exposure than anyone else and hence the benefit that would flow to the society at large on account of such exposure would always outweigh the loss of business for the person affected. If two trade rivals indulge in puffery without hitting each other, the consumer is misled by both, unless there is increased awareness or Governmental intervention. On the other hand, if both are restrained from either making false representations/incorrect representations/misleading representations or issuing unintended warranties (as defined as unfair trade practice under the Consumer Protection Act), then the consumer stands to gain. Similarly, permitting two trade rivals to expose each other in a truthful manner, will also result in consumer education.”

106. 107. 108.

2005(31)PTC 1(Del). 2006(32)PTC 677(Del). 2009(40)PTC 653(Mad). [38]

VIDHIGYA - The Journal of Legal Awareness

In Unibic Biscuits India Pvt. Ltd. v. Britannia Industries Limited109, the court held that right to advertise does not permit to go to that extent so as to cause damage or irreparable injury to the product of the others and while granting injunction, the balance of convenience lies more in favour of a party who will be put to great hardship, irreparable loss and injury, if the temporary injunction is not granted. The approach of the courts in general has been to take up the issue of disparagement more seriously than that of trademark infringement in case of comparative advertising. Conclusion “All that glitters is not gold”. This old adage is apt for advertising industry. The fascinating world of advertisements lures people. Advertisements full of subtle truth and hidden lies are inundating the mass media. In times of cut throat competition warring corporations are coming up with more and more sophisticated means of advertising. Comparative advertising is one of the most fascinating techniques adopted by them. Comparative advertising is no doubt one of the most effective methods for advertising. It arouses consumer interest in the product and at the same time promotes competition in the market. It encourages the producers of goods and providers of services to raise their standards to meet the competition. It also helps the consumers in making informed choices. But it is not always that what the consumers are being told is the truth. It can be false, misleading and deceptive. Advertising, no doubt is commercial speech protected under 19(1)(a) but it cannot be unregulated. In the interest of consumers it is highly desirable to have a government backed regulatory advertising regime. ASCI has been working as as a self regulatory body for a considerable time now but it does not create an enforcement mechanism which has necessary teeth for practical ramifications. Before the repeal of the MRTP Act, the MRTP Commission was equipped with power to check unfair trade practices. After its repeal by the Competition Act, 2002, an action may lie for “unfair trade practices” under the Consumer Protection Act but only at the instance of a consumer or a group of consumers or a voluntary consumer association. Thus, within the existing law, a manufacturer whose product is disparaged has no locus standi to seek a remedy. The only option is to bring it to the notice of a consumer association or represent the case to the central or the state government. In case of disparagement, the corporations also have a limited recourse to the Trademark Act for protection of infringement of trademark and common law remedies for disparagement. As far as the trademark law is concerned, though section 28(9) is sufficient in itself as regards the comparative advertisement but what are honest practices under the trade law is subject to judicial interpretation and would depend on individual case. In the absence of any directives like the European CAD’s, all depends on the interpretation of sections 29(8) and 30(1) by the courts. There are a number of high court judgements relating to comparative advertisement. What is evident from the judgments is that the courts approach has been to

109.

MIPR 2008 (3) 347. [39]

protect the goodwill of the owner as well as to promote the consumer interest especially after the Colgate-Palmolive- Anchor judgment wherein the court has stressed highly on the consumer interest . Courts take issue of disparagement more seriously than that of trademark infringement. Exaggerated claims are permitted but not false claims however, unfortunately there is no central body to check the falsity or truthfulness of the claims made in the advertisements. Such a body is highly desirable to check the veracity of claims and also for grading of quality of products. In the interest of consumers and for the purpose of encouraging competition in the market thereby benefitting the economy, it is highly desirable that an amendment is made in the Competition Act restoring the functions of the MRTP Commission to Competition Commission regarding comparative advertising and disparagement of competitor’s product so that the aggrieved companies have a locus standi to complain against disparaging advertisements and unfair trade practices. It is therefore submitted that in the interest of consumerism comparative advertising is desirable but it should be objective and not denigrating the rivals’ product. Fair and healthy competition is a sign of a prospering economy and activities promoting competition are to be promoted. A balance between consumer interest and the interest of the trademark proprietors has to be maintained and that can only be done in the light of some clear cut guidelines laid down by a central authority with strong enforcement mechanism.

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