PLEX v. ZEEPLEX: Passing Off at the Last Minute

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The multi-media conglomerate, Zee, has recently launched a pay-per-view service, ZEEPLEX. The service allows users to rent a movie from the platform by making a payment. This rent is valid only for 48 hours after the payment and the users can view the movie with their family within 6 hours of starting it. Zee seeks to make this platform “like a multiplex” and targets 50 million DTH subscribers. The platform, however, found itself in the midst of a passing off suit heard one day before its scheduled launch date. This challenge was brought forth by PLEX, a client-server media player that also provides services such as Live TV and free movies. The Bombay High Court declined to give the desired interim injunction against Zee. In this post, I analyse the impugned order on two counts: first, the passing off concern, and second, the issue of last-minute injunctions.

Passing Off

The pre-requisites in a passing off claim have been specified by the Supreme Court in cases such as Laxmikant V. Patel v. Chetanbhat Shah (‘Laxmikant’). They are the “reputation of goods, possibility of deception and likelihood of damages to the plaintiff”. On the first count of reputation, the court noted that Plex’s domestic sales “were rarely more than US$ 24,000 to 30,000” and found that prima facie it failed to establish its reputation within India, and the defendant, Zee, instead had greater reputation. It also took note of the fact that before the announcement of ZEEPLEX, Plex had applied for registration of its mark wherein it stated that it was “proposed to be used”, and only after the announcement of ZEEPLEX moved an amendment application to show use in 2008. Importantly, the court brushed aside the plaintiff’s attempt to seek comparative treatment as other content providers such as Sony, Disney, or Hotstar. It rightly held that a “one-size-fits-all approach” cannot stand in determining reputation given its case specific nature.

Since the court already ruled the first requirement to be absent it did not need to delve it into the other two elements, but it briefly touched upon them possibly to further strengthen the denial of an injunction. On the count of deception, the factors to be considered have been provided by the Supreme Court in Cadila Healthcare Limited v. Cadila Pharmaceuticals Limited. While the court did not address the different elements individually, it made an important observation that the two services are different in nature. On one hand, ZEEPLEX’s model is based on a pay-per-view model without any user content sharing, on the other Plex features free to watch movies and sharing of user content across devices. Other factors, though not noted by the Court, also weigh against Plex due to differences in class of purchasers, mode of purchasing, and the character and performance of the two services. Finally, on the issue of damages, the court noted that Plex was “unable to show any anticipated injury” and rather a greater financial harm would be caused to Zee that had invested Rs. 11 crores in the project, an amount greater than “Plex’s combined India sales for the last five years”.

The court, thus, arrived at an appropriate conclusion in denying the relief. As the Supreme Court in Laxmikant had noted, citing Salmond and Heuston, “[t]he gist of the conception of passing off is that the goods are in effect telling a falsehood about themselves” and that its “legal and economic basis” is to protect reputation or goodwill of the plaintiff. In a scenario where a relatively lesser known player in the relevant market operates in a service substantially different from that of defendant, the concern of passing off is untenable. This is because it would neither affect the reputation or goodwill of the plaintiff, especially if the defendant is itself of much greater repute, and would neither deceive consumers as to the source of the goods or services. An alternate ruling would in fact lead to trademark expansionism which would merely increase trademark monopoly without any reduction in search costs, a delicate balance that the law seeks to maintain as discussed here.

Last Minute Injunctions

The instant case was heard a day before the launch of the defendant’s platform despite the launch being announced a month prior to that. While Justice Patel, as a one-time reprieve, let the plaintiff go on count of this delay in bringing forth the suit, he made a pertinent observation:

“Where a plaintiff has had enough notice and yet chooses to move at the eleventh hour — and makes no allowance at all for any adjustment that may be required — the plaintiff must be prepared to face the consequences.”

This is in line with his consistent approach against last minute injunctions sought in IPR cases as can also be seen in the decision in Dashrath B. Rathod v. Fox Star Studios India Pvt. Ltd (‘Dashrath Rathod’) I have earlier discussed the impact of such injunctions, if granted, on free speech at large. In this light, it would be an interesting idea to mainstream the incorporation of due diligence in form of taking immediate remedial measures on the part of the plaintiff while deciding upon the balance of convenience and irreparable injury, an approach followed in Dashrath Rathod. Inordinate delays in approaching the courts for seeking interim injunctions have also traditionally been considered as grounds for denying an injunction under Order 39, CPC (see here, here, here, here, here, and here). From a law and economics perspective, this appears to be an approach furthering efficiency. Since those impacted significantly due to a passing off, acting rationally, would seek an immediate redressal to the issue in order to minimise the associated risk, an unreasonable delay indicates lesser risk and loss involved. Accordingly, the probability of success of a plea of injunction should be inversely proportional to the extent of delay on part of the plaintiff. If a last minute injunction is granted, the associated social costs with the order are severe as that would impede investment and innovation, especially if a large sum has already been spent on the concerned service. Such an injunction is thus tenable only if the social benefits are so high that they outweigh the costs as may be the case where some development takes place only at the last moment.

In the above framework, the present case not only involves a last minute plea but also another interesting development, the plaintiff’s amendment of its registration application to indicate use since 2008 as against earlier ‘proposed to be used’. This hints towards a possibility that while the plaintiff did not initially associate much benefits flowing through its popularity in the Indian market, and thereby sidelining the earlier use, it deliberately altered the application to show greater value attached to the business. Even if this error in the application would have been a genuine oversight, it did not preclude filing of the injunction application where proof could have been shown of prior use. This implies a delay without any reasonable cause as far as the interim injunction plea is concerned, and hence the success rate had to be minimal. Since no extraordinary social benefits were shown by the plaintiff, the plea was rightly dismissed.

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