Thursday, July 27, 2006

Dilution of Goodwill and Trademark Protection

A trademark is a distinct sign that uniquely identifies a product or service to a consumer. It also distinguishes the business and its products and services from those of competitors. At times business owners invent trademarks, which could be rooted in a language not commonly used around the world. In cases where a trademark acquires an international reputation, irrespective of the meaning the mark holds, consumers might identify any product or service using the same or a similar trademark with those of the original trademark owner. This can affect the goodwill and reputation of the original trademark owner.

These issues can fall within the ambit of passing off of goods and sometimes under the doctrine of dilution. Passing off is a common law tort which is used to enforce unregistered trademark rights. It essentially occurs when the reputation of a player in the market is misappropriated by another, which in turn affects the reputation and goodwill of the first. Dilution refers to the unauthorized use of the same mark on unrelated brands and wares, resulting in the whittling away of the distinctiveness of the trademark. While the hypothesis behind the doctrine of dilution is essentially the same all over the world, different nations have adopted different approaches to it.

In Aktiebolaget Volvo v AK Bhuva (2006 (32) PTC 682(Del)) the Delhi High Court considered these issues. The plaintiff is the registered owner of the mark VOLVO and manufactures heavy commercial vehicles, construction equipment, drive systems for marine and industrial applications and cars. AK Bhuva manufactures motors and pumps, domestic flourmills and submersible pumps. The defendant, prior to the adoption of the plaintiff's mark, used KRISHNA BRAND as its mark to establish itself. It had also filed an application for the registration of the mark VOLVO which, on opposition by the plaintiff, was withdrawn. However, an investigation conducted by the plaintiff revealed the usage of the mark VOLVO by the defendant on its products. Hence the plaintiff filed for trademark infringement.

The mark VOLVO was proved by the plaintiff to be an innovative word - although Latin in origin, it has all the trappings of an invented trademark. Moreover, the plaintiff could also substantiate long and continuous usage of the trademark with the help of documents revealing extensive geographical spread involving several countries with large volumes of sales across the globe. The court observed that the adoption of the mark by the defendant was unauthorized and showed an ulterior motive to ride on the reputation of the plaintiff's mark by attempting to pass off its goods as those of the plaintiff. Therefore, the court concluded that the adoption of the mark not only violated Section 29 of the Trademarks Act (infringement of trademarks), but also amounted to passing off and dilution.

The court also referred to the observations on the doctrine of dilution made by the court in Caterpillar Inc v Mehtab Ahmed (2002 (25) PTC 438). In this case the plaintiff was a manufacturer of heavy machinery, footwear and clothing under the marks CAT and CATERPILLAR. The defendant, a footwear manufacturer, marketed its goods under a mark very much similar to that of the plaintiff. The court held that the defendant's sole objective was to deceive the industry and the public either by clearly misrepresenting that its goods were licensed by the plaintiff or by passing off these goods as those of the plaintiff. Since the goods were identical, this had the effect of diluting the identification value of the plaintiff's mark. The court also reiterated that when dilution is accompanied by confusion as to the source, affiliation or connection of the goods, it will affect the goodwill, reputation and trade name established by the plaintiff.

Based on a similar argument, the court in the instant case granted a permanent injunction in favour of the plaintiff and issued a damages order against the defendant. In the light of these decisions, it is clear that, in addition to the threat of passing off or the occurrence of infringement, dilution is another threat that established brands and trademarks must combat.

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