Khoday Distilleries Limited (Khoday India Limited) v. The Scotch Whisky Association and Ors.

Khoday Distilleries Limited (Khoday India Limited) v. The Scotch Whisky Association and Ors.

2008 (37) PTC 413 (SC)

Brief Facts:

Appellant manufactured whisky under the mark ‘Peter Scot’ since the year 1968. Respondents, an industry body of distillers, blenders and exporters of Scotch whisky, learnt about the Appellant’s trade mark application in 1974.[1] Respondents had also issued a notice to Appellant in respect of another brand being ‘Hogmanay’.

Subsequently, Respondents filed a rectification petition seeking removal of the registered mark ‘Peter Scot’ in 1986 on the grounds of deceptive similarity to ‘Scotch whisky’.

(Image from here)

Round I: Before Registrar of Trade Marks

Registrar of Trade Marks was of the view that though there was an unexplainable and inexcusable delay in filing the rectification petition, the said ground is not applicable as the plea of deceptive similarity in the marks had not been displaced or rebutted by evidence by Appellant.

On merits, the Registrar ruled in favour of Respondents as they had given positive evidence that some customers are being persuaded into thinking that ‘Peter Scot’ is a Scotch whisky. As the evidence of Respondents was not challenged by Appellant, the same was considered and the rectification was allowed.

Round II: Before Learned Single Judge, Madras High Court

Learned Single Judge found no ground to interfere in Appeal. His view was that acquiescence as a ground should establish gross negligence which leads to a party incurring substantial expenditure by being mislead that the owners of the rights have refrained from taking action. In the facts of the present case, Learned Single Judge did not find so.

The Learned Single Judge also found that the term ‘Scot’ when used in association with whisky of non- Scottish origin is likely to cause confusion.

Round III: Before Hon’ble Division Bench, Madras High Court

Hon’ble Division Bench did not interfere with the Impugned order challenged in appeal. As per the Division Bench the use of the expression ‘Distilled from the Finest Malt and Blended with the Choicest Whiskeys by Scotch Experts under Government Supervision’ was intended by Appellant to cause confusion.  Being aggrieved, Appellant filed the present petition before the Hon’ble Supreme Court.

Issues:

The main issues that were raised were:

1. Whether the delay of almost 12 years made by the Respondents in filing application for Rectification against the Appellant shall be considered as waiver/ acquiescence?
2. Whether the High Court at Madras had failed to conduct all the correct tests in order to determine the truth and thus misdirected the Court itself in law by doing all the wrong tests and thus ending up at all the wrong conclusions?

Appellant’s Contentions:

• Respondents were aware of the Petitioner’s registered trade mark in 1974 but the Respondents did not take action till 1986, which should be considered as waiver or acquiescence on part of the Respondents.
• There can be no passing off as the purchasers in the present case are discerning consumers who are aware of brands they purchase.

Respondents’ Contentions:

• The findings of lower Courts should not be interfered with as they are not perverse.
• It is not correct to contend that the delay, if any, on the part of the Respondents would amount to acquiescence or waiver as the purpose of filing an application for rectification is to maintain the purity of register and public interest.
• A perusal of Section 11 and Section 56 demonstrates that that delay is not a ground in an application for rectification. Section 11 bars marks which are likely to cause confusion. Section 56 provides for filing of rectification and should be considered only from that point of view.
• Appellant has committed a continuing wrong and hence even on facts there is no reason to attract the plea of latches, acquiescence or waiver.
• There is evidence to demonstrate confusion.
• Courts in India and abroad having consistently protected Scotch Whisky, any mark carrying words such as ‘Scot’ should not be allowed to continue.

Supreme Court’s Observations:

On Issue 1:

• We assume that such delay as in the present case, ex facie causes prejudice to manufacturer of a popular brand who may have arranged its affairs in a manner that he would not have to withdraw the brand after the brand gains popularity.
• The power of the Registrar in terms of Section 56 of the Act is wide. Sub-section (2) of Section 56 of the Act used the word ‘may’ at two places. It enables a person aggrieved to file an application. It enables the Tribunal to make such order as it may think fit. It may not, therefore, be correct to contend that under no circumstances the delay or acquiescence or waiver or any other principle analogous thereto would apply.
• When discretionary jurisdiction lies with statutory authority, the same although would be required to be exercised on objective criteria but as a legal principle it cannot be said that the delay leading to acquiescence or waiver or abandonment will have no role to play.
• The Respondents have taken multiple actions across the world over the years against multiple entities to protect its rights including against those who used the word ‘Scot’. However, the Appellant was singularly left out.
• If a notice would have been issued to Appellant like in the case of ‘Hogmanay’, the Appellant would have known its position and would have withdrawn its application.
• Once the facts are admitted the legal inference shall ensue. Lower Courts failed to advert to this aspect.
• The principles of waiver and acquiescence in a case of this nature are applicable.
• The doctrine of continuing wrong has nothing to do with the refusal on the part of a statutory authority or a court of law to exercise its discretionary jurisdiction.
• Action of the Respondents is barred under the principles of acquiescence.

Thus, Issue No. 1 was answered in affirmative.

On Issue 2:

• As per Kerly’s Law of Trade Marks and Trade Names, if the goods are expensive or important to the purchases and the customer is generally an educated person, the said factors have to be considered.
• This Court in Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd.[2] observed that one of the facts to be considered in an action for passing off is the class of purchasers who are likely to buy the goods their education, intelligence and a degree of care they are likely to exercise in purchasing and/or using the goods.
• Where the class of buyers, is quite educated and rich, the test to be applied is different from the one where the product would be purchased by the villagers, illiterate and poor. Ordinarily, again they, like tobacco, would purchase alcoholic beverages by their brand name. When, however, the product is to be purchased both by villagers and town people, the test of a prudent man would necessary be applied.
• In the present case, are concerned with the class of buyer who supposed to know the value of money, the quality and content of Scotch Whisky. They are supposed to be aware of the difference of the process of manufacture, the place of manufacture and their origin.
• Lower Courts failed to apply this test and hence the matter requires interference.

Thus, Issue No. 2 was answered in affirmative.

Author’s Comments

The Hon’ble Supreme Court lays down two propositions of law in the present case:

1. That the plea of acquiescence applies to rectification proceedings filed against a registered trade mark.
2. The test of determining deceptive similarity in case of passing off between two marks varies when the product is of a nature which is to be purchased by discerning consumers in comparison other products. In the case of former, the test is of an educated discerning consumer and in the latter case the test is of a prudent man (basically the test of imperfect recollection[3]).

Acquiescence should not be a defence in case of Rectification Proceedings

Ex facie both the propositions appear to be correct. However we are of the view that holding that even in a case of rectification acquiescence is a defence is slightly farfetched. This is for the reason that if acquiescence is considered a defence in case of rectification proceedings the consequence would be that even an infringer or an entity who has got a mark registered subsequently to a mark that is in use will acquire statutory rights over the mark because the original owner has acquiesced in filing the rectification.

The consequences would be, though otherwise an infringer, the entity would be able to be on the register and exercise all rights of a registered proprietor.

If rights are recognised in registration of a subsequent registrant in a rectification proceeding because of acquiescence (based on use) it is very natural that the same would be recognised under Statute. Thus, a possible violator because of the plea of acquiescence will convert to a stand point of ‘Honest and Concurrent user’ under Section 12 (3) of the Trade Marks Act, 1999 and also a second registered proprietor under Section 28 (3) of the Trade Marks Act, 1999. This could not have been the legislative intent.

Acquiescence is without a doubt a valid defence in cases of infringement and/or passing off. The consequence of succeeding on the ground of acquiescence in those cases (infringement and/or passing off) is that the Defendant can use the mark in question but not claim rights on the mark at his end. By virtue of this decision, a malafide wrongful infringer/user can become and be retained on the register as a registered proprietor only because the first user/registered proprietor chose not to take an action in time.

Even in Cases of passing off of products catering to discerning consumers, a pure application of discerning consumer test should be avoided

The Hon’ble Supreme Court holds that in case of products which cater to buyers who are educated and rich, the marks should be compared keeping in view an educated consumer and not an unwary purchaser. Though the test may be correct in cases of super-expensive products such as aircrafts, luxury cars or real estate, the Hon’ble Courts should be cautious of applying the same in case where the products though expensive and premium can even be purchased by large number of people. For example, mobile phones, budget cars, pianos, pool tables, furniture etc. What we are trying to say is that the ratio should not be used as a ‘One size fits all’ solution to products that are bought by discerning consumers.

Further, it has been held that even amongst sophisticated consumer there can be initial interest confusion.[4]

As per subsequent Supreme Court decisions, currently, on facts, the conduct of the Respondents might not constitute ‘acquiescence’

Our understanding of the facts in the present matter is that before 1986, the Respondents did not take any measure to stop or restrict the Appellant. Thus, it cannot be said that because a legal notice was sent for one trade mark and not for another the Appellants could have fallen into a belief that they could arrange their affairs in a manner that they would not have to withdraw their brand. There was no communication between the parties but mere silence. Now the issue is can silence amount to acquiescence. We believe that, though the Supreme Court reads M/s. Power Control Appliances and Ors. v. Sumeet Machines Pvt. Ltd.[5] it does not understand its import that acquiescence is a positive act as also held recently by the Supreme Court in Wockhardt Limited v. Torrent Pharmaceuticals Ltd. and Ors.[6]

Thus, we are of view that if the case in question would have been decided today, the result could have been different.

Wrongful Omission of ‘Evidence of Confusion’ Argument of Respondents

In the present case, the Registrar (Considerable, first Court of Instance) finds that there is evidence of some customers are being persuaded into thinking that ‘Peter Scot’ is a Scotch whisky. This evidence was admittedly not rebutted by Respondents. However, the Supreme Court despite recognising that the Respondents have made an argument that there is evidence to demonstrate confusion in the present case, omits to rule on the same and goes on to rule on the test of affluent buyers. Without giving a finding on such an important fact, can we say that the present decision has done justice?

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[1] The Respondents came to know about the Appellant when they received a notice of the advertisement of the mark PETER SCOT in the Trade Marks Journal from Wildbore and Gibbons in 1974.

[2] 2001 PTC 541 (SC)

[3] Question of comparison of two marks has to be approached from the point of view of unwary purchaser of average intelligence and imperfect recollection as held in Amritdhara Pharmacy v. Satya Deo Gupta, AIR 1963 SC 449

[4] Baker Hughes Limited & Anr. v. Hiroo Khushalani & Anr.; 74 (1998) DLT 715

[5]  (1994) 2 SCC 448

[6]  2018 (76) PTC 225 (SC)

Contribution by: Ms. Pragati Pachisia, JCCLC, Kolkata