SpicyIP Fellowship 2019-20: “See You Later, Alligator!” The Delhi High Court Rejects Crocs’ Suit For Passing Off of Registered Design

We’re pleased to pleased to bring to you a guest post by our Fellowship applicant, Arushi Gupta. Arushi is a 2nd year student at Maharashtra National Law University, Mumbai. This is her first submission for the Fellowship.

“See You Later, Alligator!” The Delhi High Court Rejects Crocs’ Suit For Passing Off Of Registered Design

 Arushi Gupta  

On 7^th March 2019, in Crocs Inc. USA v. Aqualite India Limited, the Delhi High Court rejected the maintainability of a suit of passing off for a registered design. The plaintiff had filed this suit after its suit of design infringement was rejected on the ground of prior publication. Thus, the first issue was whether the suit of passing off for a registered design was maintainable. The second issue was whether the passages in Carlsberg Breweries v. Som Distilleries adjudicated the controversy and, if not, whether the said paragraphs were contrary to Mohan Lal v. Sona Paint and Hardwares.

The Plaintiff contended that the common law remedy of passing off was maintainable for a registered design and submitted that the three-bench in Mohan Lal supported its claim. The Defendant challenged the maintainability of the suit in light of the dicta in the five-bench in Carlsberg and contended that the cause of action only lies when elements other than the registered design are used as trademark/trade dress. In response, the Plaintiff submitted that the definition of mark in the Trademarks Act includes shape and bar to registration of a mark as shape is only in the Design Act. Further, it averred that Carlsberg was confined to the joinder of infringement of design and passing off and otherwise affirmed Mohan Lal.

The Court ruled that a registered design couldn’t enjoy protection as a trademark. Its rationale was in two parts:

(1) The legislative intent behind Section 2(d) of the Designs Act.

(2) The interpretation of the judgment Mohan Lal v. Sona Paint and Hardware where the Delhi High Court had held that an action of passing off is maintainable in a registered design.

I. The legislative intent behind Section 2(d) of the Designs Act

Section 2(d) defines a design as “…the features of shape, configuration, pattern, ornament or composition of lines or colors applied to any article… but does not include any trade mark as defined in clause (v) of sub-section (1) of section 2 of the Trade and Merchandise Marks Act, 1958…”

According to Section 2(d), any shape that is capable of being a mark (on account of inherent or acquired distinctiveness) cannot enjoy protection as a design. Thus, if a mark is registered as a design, it ceases to be a mark.

The Court’s rationale was that allowing a design to register as a mark would defeat the purpose of Section 2(d). The legislature has limited the protection for designs. Thus, the Court reasoned that the intent would be defeated, if after the expiry of 20 years, the same features would become a trademark. This would ever green designs and over protect them. Further, an anomalous situation would arise if one category of marks would not enjoy protection as a design whereas the other category of design would be able to enjoy protection as a mark. This would be discriminatory.

In my view, these two scenarios cannot be equated. First, the argument of ever greening is flawed. In a previous post, Professor Basheer had discussed the architecture of the Design and the Trademark Act. Although, the Design Act grants protection up to 20 years, it offers protection against substantially similar designs. In contrast, while Trademark Act offers protection for life, the ‘likelihood of confusion’ standard is much stricter. Therefore, the remedies offered differ. Second, the intent behind limiting design protection is not lost. When the design falls in the public domain, it may be used by others provided they ensure no confusion as to source.

Professor Basheer also pointed to the intent behind Section 2(d). When a mark is registered as a design, it means that the shape already has the ability to identify source. Thus, the purpose of the trademark owner to register the shape mark under the Design Act would be to avail the substantially similar standard under the Design Act. Section 2(d) bars this.

On the other hand, when a shape is registered as a design, over years of exclusive use, in some situations, it gains the ability to identify source. Thus, it requires the protection of Trademark Law to protect the interests of the owner and consumers from confusion as to source. For instance, consider the shape of Coco-Cola bottles. It was not always source-indicator for the company. However, due to widespread and long use, it acquired secondary meaning to constitute as a trademark.

II. The judgment in Mohan Lal v. Sona Paint and Hardware

In Mohan Lal, the Court held that post-registration there is no limitation on the use of a registered design as a mark since the use of a registered design as a trademark is not a ground for cancellation under Section 19 of the Design Act. However, the Court in Crocs read the judgment as holding that “post-registration a design may be a trademark if ‘something extra’ than the design functions as a mark.”

To substantiate, the Court referred to a judgment, Smith Kline & French Laboratories Ltd. vs. Sterling-Winthrop Group Ltd., which was cited in Mohan Lal. The decision was regarding a color mark where the half-and-half color combination of the capsule was distinctive. It is pertinent to note that this judgment was delivered at a time when non-traditional marks were not considered as trademarks. It was succeeded by in Re Coco-Cola where the Judge had refused to grant trademark protection to the shape of the Coco-Cola bottle since he believed no trader should be allowed to gain monopoly in shapes of containers that carry goods. In Smith, the Court considered whether product features such as colors or shapes are not marks since they form an essential part of the good. However, the Court conclusively held that the contention that a mark is not register able because it covers the whole surface of the goods was bad in law. Thus, as stated in paragraph 21.7 of Mohan Lal itself, the idea of trademark as “something extra” is untenable in cases of overlap. In cases of overlap, a design, which is part of the goods, begins to identify source. Even in Smith, the something “extra” was the color of the capsules, which was very much part of the design of the goods.

In the present case, the Court contrived this ratio to mean that if any extra features other than the registered design were used as a mark then only those additional features can claim protection as a mark. This means that no shape registered as a design can possibly gain the status of a mark. To my mind, this argument is untenable for the reasons provided above.

To summarize, the legislative intent behind Section 2(d) is to prohibit a trademark from enjoying protection as a design. It is not to prohibit a design from enjoying protection as a trademark. Rather, as discussed in by Professor Basheer in a previous post, it is the legislative intent of Section 19 to prohibit a design from (simultaneously) enjoying protection as a mark. Thus, the ratio of Mohan Lal relied on Section 19 to substantiate its holding.

Section 19 (1) Any person interested may present a petition for the cancellation of the registration of a design at any time after the registration of the design, to the Controller on any of the following grounds, namely: –

(e) It is not a design as defined under clause (d) of section 2.

The section states that a design can be cancelled if it is not a “design” within the meaning of Section 2(d). Thus, if a design were used as a mark, it would lose its identity as a design. Since the Trademark Act does not prohibit a design to be registered as a mark, the design could be registered as a mark. However, upon use of the design as a mark, it would cease its identity as a design. Interestingly, the section does not prohibit an expired or cancelled design from registration as a mark. Rather, it only prohibits simultaneous protection. Thus, the concerns of overprotection and ever greening identified as the reason for prohibition of overlap remain unaddressed.

Allow me to take you back to my Coco-Cola example. If Coco-Cola made the wise decision of registering as a trademark, this is what its market situation would look like. It would enjoy protection for eternity and remedies such as infringement and passing off. However, Coco-Cola would be exposed to insults such as local traders pouring in their own drink into its novel design for a bottle. It would be unable to prove that consumers would believe that local drinks are coming from the same source as the famous drink. On the other hand, if Coco-Cola made the decision of registering as a design patent, it would enjoy the broader standard of “substantial similarity” but lose out on crucial remedies of possible injunctions against confusingly similar bottles.

Thus, the protection of a registered design cannot overlap with a trademark. In

Carlsberg, the Court held that because of Section 19(e) the design would have to be used as a trade dress or packaging to claim protection under the remedy of passing off. To my mind, this limitation is only a decision of policy. The Design Act prohibits the overlapping of rights to avoid designs from getting a backdoor trademark (not trade dress or packaging!) and prolong their life. However, as I have argued earlier, overlapping does not prejudice design or trademark. Rather, it ensures that shapes, which are designs and have the ability to indicate source and protect consumer from confusion are protected.