Intellectual Property Rights | Passing Off | Trade Mark | Uncategorized

ITC LIMITED V. NESTLE INDIA LTD. – CURIOUS CASE OF ‘THE MAGIC NOODLES’ – PART II: POST TRIAL DECISION

ITC Limited v. Nestle India Ltd.

Decided on: 10.06.2020

In the High Court of Madras

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On 10th June, 2020, the Hon’ble High Court of Madras provided a final decision on the suit for passing off filed by ITC Limited (hereinafter ‘ITC’) against Nestle India Limited (hereinafter ‘Nestle’) over latter’s use of the mark ‘MAGICAL MASALA’. The product involved is Noodles.

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In 2015, the Hon’ble High Court of Madras gave an interim decision/order in the present matter injuncting Nestle from using the mark ‘MAGICAL MASALA’. Our Post on the said order containing facts of the matter and the arguments raised by the parties at that stage along with our comments is accessible here. It is advisable to read our previous post to get a full understanding of the matter.

To maintain brevity we will not repeat the facts and contentions already covered in the previous post.

Plaintiff’s Main Additional/Elaborated Contentions in Final Arguments:

  • Plaintiff launched its Sunfeast Yippee! Noodles in two variants, i.e. ‘Magic Masala’ and ‘Classic Masala’ in 2010.
  • Adoption of the expression ‘Magical Masala’ by Defendant was intended to dilute the Plaintiff’s proprietary rights over its mark and goodwill associated with it.
  • There was nothing ‘Magical’ about the flavour and therefore it was not open for the Defendant to claim bonafide right over the use of the expression ‘Magical Masala’.
  • ‘Magic Masala’ was a sub-brand of the Plaintiff.
  • In the Instant Noodle market, products are recognised by sub-brands.
  • Merely because others in the industry have used ‘Magic’ is of no significance as the dispute the present case is confined to instant noodles. In any event, third party use is not a defence in law.

Defendant’s Main Additional/Elaborated Contentions in Final Arguments:

  • Two words ‘Magic’ and ‘Masala’ are common to the trade and are not distinctive and therefore cannot be appropriated.
  • The Plaintiff’s annual reports demonstrates= that the Plaintiff had introduced its noodles in three different flavours namely, ‘Classic Masala’, ‘Magic Masala’ and ‘Chinese Masala’.
  • Defendant had adopted the words ‘Magic’ and ‘Masala’ from Defendant’s allied food products, namely, ‘Maggi Dal Magic’, ‘Maggi Masala Magic Cubes’ and ‘Masala- Ae-Magic’ etc.
  • To succeed in a passing-off claim, it is essential for the Plaintiff to establish that on account of prior adoption and extensive commercial use as trade mark, ‘Magic Masala’ has acquired distinctiveness.

Court’s Observations:

On Characteristics of Trade Mark

  • A trade mark metaphorically answers the buyer’s questions ‘Who are you?’, ‘Where do you come from?’ and ‘Who vouches for you?’
  • Purpose of the trade mark is to establish a trade connection between the goods or the services offered by the proprietor of such a trademark.
  • Trade mark is a powerful asset of the business and should be chosen wisely.
  • However, often proprietors adopt weak marks which are incapable of protection.

On Perils of choosing weak marks

  • Proprietors are not expected to choose weak marks. If they do, same is at their own peril.

On nature of protection to descriptive and generic marks

  • Marks which are not distinctive are inherently weak and are therefore incapable of being registered or protected unless achieved distinctiveness on account of long and uninterrupted use.
  • Generic names can never be monopolized or registered as trade marks even if they are promoted as trademarks.

On the Nature and Ingredients of Tort of Passing off

  • An action for passing off is a broader remedy than an action for infringement. It is to restrain or stop an unfair trade practice by a competitor who misleads the consumer by making them believe that they are indeed purchasing the goods of his competitor.
  • In passing off, Plaintiff must establish that his business/goods have acquired reputation.
  • In Toyota Jidosha Kabushiki Kaisha v. Prius Auto Industries, (2018) 2 SCC 1, it was held that passing off is premised on the right of the prior user generating a goodwill.
  • For passing off, three ingredients are required Goodwill, misrepresentation and damages.
  • Additionally, Court has to view whether there is likelihood of confusion.
  • Thus, claim passing off, Plaintiff has to establish that the mark is distinctive.
  • In order to show what amounts to sufficient business to amount to goodwill, the claimant should show that it has sufficient goodwill in the form of customer base.

On facts of the present case

  • From evidence on record, it is clear that Defendant had used the expressions ‘Magic’ for some of its food items (Not for Instant Noodles) prior to the Plaintiff.
  • The Defendant had adopted the mark ‘Maggi Masala-Ae-Magic’ prior to the Plaintiff.
  • Term ‘Magic’ is commonly used in food and cosmetic industry.
  • ‘Magic Masala’ was first adopted by Lays for their potato chips. It was rather used to name the flavour along some of its other flavours such as classic, onion flavour etc.
  • Lays & Plaintiff’s product has same consumers, similar target groups and point of sale.
  • Term ‘Magic’ and its derivative ‘Magical’ are common to the trade. Neither parties can claim monopoly over ‘Magic’ or ‘Masala’ as they are common words in Indian culinary and food industry.
  • The adoption of the word ‘Magic’ by the Plaintiff was inspired from the use of the said word across the industry and also from some of the food products of the Defendant.
  • Expression ‘Magic Masala’ was inspired from common words ‘Magic’ and ‘Masala’ as they were not only used by the Defendant but also from other products in the food and cosmetic industry.
  • Plaintiff was the first to use the combination of the two words i.e. ‘Magic’ and ‘Masala’ as ‘Magic Masala’ for noodles in 2010.
  • The adoption of ‘Magical Masala’ by Defendant was inspired by the words ‘Magic’ and ‘Masala’ being common to trade and Defendant’s own products.
  • The adoption by Defendant of ‘Magical Masala’ was also inspired from Plaintiff’s adoption of ‘Magic Masala’. However, such an adoption is not malafide.
  • Expression ‘Magic’ was not used as a ‘flavour descriptor’ by the Plaintiff because there is no flavour known to the world which is called ‘Magic’. The Plaintiff has used the word ‘Magic’ to name the flavour in sachet and thus called it ‘Magic Masala’.
  • However, the Plaintiff has used the expression ‘Magic Masala’ in a laudatory manner to praise the ‘Masala’ in the sachet. Laudatory epithet cannot be given monopoly.
  • Plaintiff called its flavour as ‘Magic Masala’ to facilitate consumers to discern between different flavours. Plaintiff did not intend ‘Magic Masala’ as trademark or sub-brand.
  • The fact that no trademark application was filed by the Plaintiff for ‘Magic Masala’ as word mark also shows that the same was not intended to be used as trademark/sub-brand.
  • Neither the Plaintiff nor the Defendant can claim the monopoly over the respective laudatory words ‘Magic’ or ‘Magical’ along with common word ‘Masala’ to the exclusion of one another.
  • It would unfair to take a view that two common English and Indian words ‘Magic’ and ‘Masala’ respectively or when together which are common to the trade former being laudatory had become distinctive of Plaintiff’s ‘Sunfeast Yippee! Noodles’ so much so that the expression ‘Magic Masala’ had transcended itself to the status of a sub-brand.
  • The expression ‘Magic Masala’ and ‘Magical Masala’ are not adapted to distinguish the noodles. They are adapted only to distinguish different flavours.
  • A reading of the Annual Reports make it clear that Plaintiff itself did not conceive ‘Magic Masala’ as a brand/sub-brand.
  • On comparison of two wrappers there is no scope for passing-off.
  • The competing brands ‘Sunfeast Yippee!’ and ‘Maggi’ are completely different.
  • It will be therefore wrong to hold that the Defendant has made any misrepresentation.
  • Had the Defendant not used the words ‘Magical Masala’, Plaintiff could have perhaps at a later point of time made a claim that the expression ‘Magic Masala’ had become distinctive and therefore was entitled for a monopoly.

Closure by the Hon’ble Court

The Plaintiff is not entitled to succeed in a passing-off as there is no passing-off by the Defendant.

Author’s Comments

While we agree with the conclusion reached by the Learned Single Judge that the marks in question are ‘common to trade’ and ‘magic’ is laudatory and thus there is no passing off by the Defendant as there is no goodwill/distinctiveness associates with the Plaintiff for the expression ‘Magic Masala’, we at the same time do not agree with certain observations on law in the present case. We further do not find any relevancy of recognition of certain facts noted by the Hon’ble Court to arrive at its findings.  Additionally, we feel that the Hon’ble Court had contradicted itself at protection that can be attributed to ‘Magic Masala’

On Law

On Ingredients of Passing Off

The Hon’ble Court recognises that there are three ingredients of passing off and states them to be Goodwill, misrepresentation and damages and then further observes that over and above these three ingredients, the Courts have to see likelihood of confusion.

These observations have been made despite the fact that the Supreme Court decision Laxmikant V. Patel v. Chetanbhai Shah and Anr., 2002 (24) PTC 1 (SC)  is referred in the present decision.

Supreme Court clearly lays down that Misrepresentation by the Defendant is not required in an action for passing off. Even an innocent violation is covered under the tort of passing off.

Further, a perusal of the Supreme Court decision in Laxmikant (supra) also makes it clear that the ingredients for passing off are goodwill, likelihood of confusion and likelihood of damages. An interpretational extension to the erstwhile recognised ingredients of passing off being misrepresentation and damages.

Therefore, the Hon’ble Court misreads precedents on the ingredients of passing off and lays down wrong tests for adjudication of the same and goes contrary to the established principles set up by the Supreme Court.

On protection of laudatory words

The Hon’ble Court holds that laudatory epithet cannot be given monopoly. A complete ban on registration and protection of laudatory words in our view is wrong. We believe that the Hon’ble Courts should test the distinctiveness a party has achieved in laudatory word/s and thereafter should decide whether the marks are protectable. The Hon’ble Court does that inquiry to some extent but wrongfully holds that laudatory epithet cannot be given monopoly.

Section 9 (1) (b) of the Trade Marks Act, 1999 bars registration of those marks which exclusively indicate the quality or intended purpose of a good/services. However, if such marks are able to prove distinctive character as a result of the use made of them they are entitled to registration.[1]

We do agree ‘Magic’ or ‘Magic Masala’ or even ‘Magical Masala’ are laudatory. However, a  blanket observation that laudatory words cannot be given monopoly per se in our view is incorrect.

On taking into account unnecessary facts

It is completely irrelevant whether or not a trade mark application was filed by the Plaintiff for the word mark ‘MAGIC MASALA’ as this was a suit for passing off and the essential criteria was goodwill in the term ‘MAGIC MASALA’. The factum of application would not have changed the course of decision as even if there would have been an application, the Plaintiff would have had to prove goodwill.

On certain Contrary Findings

On one hand, the Hon’ble Court holds that laudatory words cannot be monopolized and ‘Magic Masala’ is laudatory. On the other hand, the Hon’ble Courts states that had the Defendant not used the words ‘Magical Masala’, Plaintiff could have perhaps at a later point of time made a claim that the expression ‘Magic Masala’ had become distinctive and therefore was entitled for a monopoly.

These on the face of it are contrary findings. We do agree with the latter finding to the extent that use of an expression for a longer time before Defendant starts using it is an added factor to assess goodwill. However, considering that the expressions in questions are flavor descriptors, as held by the Learned Single Judge, the same would have never ever had monopoly.

Not only is the subsequent finding contrary but is also hypothetical. It was also completely irrelevant on facts. However, it does make the point that a mark if used as a trade mark,  the same can acquire distinctiveness even if it is descriptive or laudatory.

[1] Proviso to Section 9 (1), Trade Marks Act, 1999

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