The Hon’ble Supreme Court, in its recent Judgment, Brihan Karan Sugar Syndicate Private Limited Vs. Yashwantrao Mohite Krushna Sahakari Sakhar Karkhana [1], held that the volume of sale and extent of advertisement, of the product in question, will be a relevant consideration for deciding whether the Appellant (Plaintiff) had acquired reputation or goodwill.
Facts of the Case:
The Appellant, engaged in selling country liquor with the label “Tango Punch”, for which it has a copyright registration, filed a suit for permanent injunction restraining the Respondent, selling country liquor with the label “Two Punch Premium”, from infringing its copyright in its label and from passing off the Respondent’s products as those of the Appellant’s. The learned trial Court, observing that the labels used by the Respondent were deceptively similar to the Appellant’s labels, granted permanent injunction to the Appellant on counts of both infringement of copyright and passing off. The Hon’ble Bombay High Court observed that no interim injunction had been granted in the Suit by the learned trial Court, an Appeal against which had been dismissed by the Hon’ble High Court and no interference against which had been made by the Hon’ble Supreme Court. It had been further observed that when the Respondent had made an application for the approval of the impugned label to the Commissioner of State Excise, the Appellant had raised an objection for the same, however, had later withdrawn the objection unconditionally. The Court, in light of the above observations, stayed the execution and operation of the decree till the final disposal of the Appeal.
Contentions of the Parties:
The Counsel for the Appellant submitted that since the decree had been passed after a complete trial, it ought not to have been stayed. He further submitted that acquiescence in the context of copyright does not mean mere silence or inaction but implies a positive act, which was missing.
On the contrary, the counsel for the Respondent submitted that no evidence was adduced to establish that the brand and label of the Appellant were well established in the market and that the Appellant had not adduced evidence to prove its figures of sale, turnover, advertisement expenses, etc. He further pointed out that there was a delay in approaching the Court on the part of the Appellant, after withdrawing its objection to the Respondent’s application for approval of its label, which itself amounts to acquiescence.
Supreme Court’s observations and holding:
The Hon’ble Supreme Court, firstly, referred to the observations in its decision in Toyota Jidosha Kabushiki Kaisha Vs. Pirus Auto Industries Ltd. and Ors. [2], and to the triple tests, in a passing off action, laid down by the House of Lords in Reckitt & Coleman Products Ltd. Vs. Borden Inc. and others [3], that the Plaintiff in a passing off action has to prove that he had acquired a reputation or goodwill connected with the goods, and if the same is not established in a particular jurisdiction, no other issue would need any further examination to determine the extent of the Plaintiff’s right in the action of passing off.
The Court observed that while the Appellant had produced the statement of sales and the advertisement and sales promotion expenses, certified by a Chartered Accountant, the Chartered Accountant was not examined to prove the statements and it was incumbent upon the Appellant to actually prove the figures of sales and expenses incurred on advertising and promotion at the time of final hearing of the suit. It was held that by merely producing the statements without proving the contents thereof, the Appellant could not have established its goodwill in connection with the goods and the same made out a case for grant of stay of the execution of the decree, as regards passing off.
It was further held that for establishing goodwill of the product, it was necessary to prove not only the figures of sale, but also the expenditure incurred on promotion and advertisement of the product, for which there was no evidence. Moreover, it was observed that the Statement of Accounts, signed by a Chartered Accountant, indicating the expenses incurred on advertisement and promotion and figures of sales, may constitute a material for consideration while deciding an application for temporary injunction, however, the figures must be proved in a manner known to law at the time of final hearing of the suit.
It was thus held that the Hon’ble High Court was justified in staying the part of the decree by which injunction was granted for passing off, even assuming that the aspect of deceptive similarity of the labels was established by the Appellant, as the Appellant failed to prove one of the three elements of passing off.
Further, on the point of infringement of copyright, it was observed that there was a positive act on the part of the Appellant, in withdrawing the objections it had raised to the grant of permission to the Respondent to use the impugned labels, whereby it was not mentioned that the withdrawal was conditional. Moreover, given that the objections were withdrawn on 25th April, 2016, and the suit was filed on 4th October, 2017, a prima facie case of acquiescence was observed to have been made out.
Conclusion:
The important observation by the Hon’ble Supreme Court is that mere filing of certified sales and advertisement expenditure certificates of Chartered Accountants only proves existence of a document and not the contents. Contents of such certificates can only be proved by examining the Chartered Accountant, which was not done in the trial court, thus failing to prove the necessary ingredient of goodwill in a passing off case.
The Hon’ble Apex Court has thus clarified its position as to the importance of proving the volume of sales and the extent of expenditure on advertisement of a product, for establishing goodwill earned in that product. However, what the exact volume of such sales should be in order to establish goodwill is a question that has been left open by the Hon’ble Court and such volume can vary on a case to case basis. Moreover, there may be cases wherein goodwill may have been established with minimal or no expenditure on advertisement. For example, there may be brands which have been able to establish goodwill based on their quality, which may have led to popularity based on word-of-mouth publicity. On the other hand, there may also be cases wherein entities have spent large sums of money on advertising of their products, however, the products may have failed to become popular and generate goodwill, despite such large scale advertising.
[1] 2023 SCC OnLine SC 1163
[2] (2018) 2 SCC 1
[3] [1990] 1 WLR 491
