The Effect of Disclaimers of Non-exclusivity on Passing Off

INTRODUCTION

While the fundamental principle of trademarks as regulated intellectual property is to protect the identity and distinctiveness of entities and trademark holders' goods and services from dishonest adoption by others, it should be noted that the law generally does not allow any entity to monopolise the use of a specific word that is only part of the trademark. Parts of trademarks that contain a descriptive or generic word are frequently disclaimed, indicating that the trademark proprietor has the exclusive right to use the trademark as a whole but cannot monopolise the generic words that comprise the brand. A trademark disclaimer, in general, is a statement in the registered trademark's records that refers to how a portion of the trademark, which may be generic or descriptive, cannot be claimed to be owned by the trademark's proprietor. Disclaimers in trademark registrations help to identify one proprietor's goods and services from those of another, while allowing others to characterise their own. This article examines the statutory and judicial positions surrounding disclaimed marks in infringement actions, emphasising the need of judicial clarity on disclaimers in situations alleging passing off.

Under Indian law, the tort of passing off is primarily governed by common law principles, which were initially inherited from English law. The essentials of passing off were laid down in the landmark case of Cadila Healthcare Ltd. v. Cadila Pharmaceuticals Ltd. [(2001) 5 SCC 73], where the Supreme Court of India laid down five criteria to establish a passing off claim: (1) the existence of goodwill, (2) misrepresentation, (3) likelihood of confusion, (4) likelihood of damage to the plaintiff’s goodwill, and (5) absence of reasonable defense.

Goodwill forms the bedrock of a passing off action. It refers to the reputation a business has garnered among the public, which serves as a protective shield against competitors attempting to ride on its coattails.

Disclaimers of Non-exclusivity: Statutory Recognition and Purpose

Disclaimers of non-exclusivity, particularly in trademarks, have statutory recognition under the Trade Marks Act, 1999. Section 17 of the Act is pivotal in defining the effect of disclaimers within composite trademarks. This section ensures that the exclusive rights over a trademark are granted only in relation to the mark as a whole, not over individual, non-distinctive components.

Section 17(2) mandates that if any part of a trademark is generic, descriptive, or common to trade, the Registrar of Trademarks may require a disclaimer. Such disclaimers prevent the trademark owner from claiming exclusive rights over these non-distinctive parts, thereby allowing other traders to use the disclaimed elements freely. For instance, terms like “Best” or “India” in a trademark may need to be disclaimed to ensure they remain accessible for public use.

The purpose of such disclaimers is to promote fair competition and prevent monopolization of commonly used words, symbols, or designs. However, the existence of a disclaimer does not preclude the possibility of a passing off action, especially where consumer confusion may still arise despite the disclaimer.

Judicial Interpretation of Trademarks with Disclaimers

Indian courts have consistently examined the role of disclaimers in passing off cases. While disclaimers are crucial in clarifying non-exclusive rights, their effectiveness in preventing passing off claims is limited. Courts often focus on the broader context and the real-world likelihood of consumer confusion, rather than merely the presence of a disclaimer.

1. ITC Ltd. v. Nestle India Ltd. [(2010) 42 PTC 352 (Del)]
   In this case, the Delhi High Court ruled that even if a portion of a trademark is disclaimed, it does not absolve the trademark owner from the risk of a passing off claim. The court held that the disclaimed part may still cause confusion if it forms a dominant part of the product's overall impression. Therefore, even disclaimed elements may lead to liability if they are used in a way that misleads consumers.
2. Raymond Ltd. v. Raymond Pharmaceuticals Pvt. Ltd. [(2016) 65 PTC 211 (Bom)]
   The Bombay High Court found that despite the defendant’s argument that the word "Raymond" was disclaimed, its use still created a likelihood of confusion because of the reputation that the plaintiff had built around the name. The disclaimer did not protect the defendant from a passing off claim, as the overall use of the word "Raymond" misled consumers into associating the product with the well-known brand.

Effectiveness of Disclaimers in Passing Off Actions

Disclaimers of non-exclusivity are often relied upon by businesses to limit their liability, but their effectiveness in passing off cases is limited, especially under Indian law. Courts generally examine the likelihood of consumer confusion rather than strictly adhering to the technicalities of a disclaimer. In assessing a passing off claim, the courts focus on whether the average consumer is likely to be misled, taking into account the entire context of the product’s presentation, including its packaging, branding, and how it is marketed to the public.

In passing off actions, Indian courts have frequently emphasized that disclaimers do not serve as absolute shields. The judiciary takes a consumer-oriented approach, often applying the "average person with imperfect recollection" test to evaluate whether confusion is likely. This makes disclaimers less effective as a defense, particularly if the disclaimed feature is one of the key elements that consumers identify with the product.

As seen in the following cases-

Ramdev Food Products Pvt. Ltd. v. Arvindbhai Rambhai Patel [(2006) 8 SCC 726]
The Supreme Court held that even though a disclaimer was in place, the overall packaging and presentation of the defendant's product could cause consumer confusion. The court emphasized that disclaimers cannot override the issue of misrepresentation if the overall impression still leads to confusion.

Colgate Palmolive India Ltd. v. Anchor Health & Beauty Care Pvt. Ltd. [(2003) 27 PTC 478 (Del)]

In this case, the Delhi High Court held that even with a disclaimer, the likelihood of confusion had to be assessed from the perspective of an average consumer. The court stressed that the presence of a disclaimer does not negate the possibility of passing off, especially when the misrepresentation is still significant in the minds of consumers.

CONCLUSION

To summarise, the courts' interpretation of a number of decisions depicts a regime in which disclaimers aid in preventing monopolisation of generic phrases, while also ensuring that competitor trademarks are distinct despite the presence of disclaimers. The scope of disclaimers over the common law remedy of passing off, however, is not entirely consistent with the Act's objectives; thus, there is a need for a concrete interpretation of passing off claims in registered and disclaimed trademarks, and courts must exercise caution when distinguishing between cases of intentional deception.