"Peter Scot" vs Scotch Whisky: How Acquiescence and Wrong Tests Led to a Landmark Trade Mark Victory
Introduction
In the world of intellectual property, trade mark disputes often raise questions that go far beyond the ownership of a name or logo. They touch upon public deception, commercial fairness, and the integrity of markets. The case of Khoday Distilleries Ltd. versus Scotch Whisky Association is one such landmark ruling by the Supreme Court of India, decided on May 27, 2008, reported as (2008) 10 Supreme Court Cases 723. It is a case that brought together several important principles of trade mark law — the doctrine of acquiescence and waiver, the correct test for determining whether a mark is deceptive or confusing, the applicability of limitation to rectification proceedings, and the locus standi for a foreign association to maintain an action in India. Ultimately, the Supreme Court allowed the appeal of Khoday Distilleries and set aside the orders of the Registrar of Trade Marks and the Madras High Court, holding that the respondents' claim for rectification was barred by acquiescence and that the wrong legal tests had been applied. The judgment is a must-read for anyone interested in how trade mark law balances the rights of a long-standing registered proprietor against the claims of those who seek to cleanse the register of allegedly misleading marks.
Factual and Procedural Background
Khoday Distilleries Limited, now known as Khoday India Limited, is an Indian company that has been manufacturing malt whisky under the brand name "Peter Scot" allegedly since May 1968. The product was sold under two brand names — Peter Scot and Red Knight. An affidavit filed on behalf of the company explained how the brand name "Peter Scot" was coined: primarily with reference to a father named Peter, and his nationality "Scot," and also inspired by the internationally known British explorer Captain Scott and his son Peter Scott, a naturalist, artist, and Chairman of the World Wildlife Fund. Although "Scott" is spelt with two letters "t," it is phonetically identical to "Scot." The product's packaging bore the emblem of a "Rampant Lion," and on one side of the box was printed "PRIDE OF INDIA" along with "Khoday Distilleries Private Limited." On the label's right-hand side appeared the words "Distilled from the Finest Malt and Blended with the Choicest Whiskies by Scotch Experts under Government Supervision."
The company filed an application for registration of its trade mark before the Registrar of Trade Marks in the year 1971. The application was accepted and the appellant was allowed to proceed with the advertisement, subject to the condition that the mark would be treated as associated with Registered Trade Mark No. 249226-B. A proceeding was initiated for registration of the trade mark. No opposition was filed by the Scotch Whisky Association or its related respondents. Only one party, M/s Mohan Meakins, filed an opposition, and eventually the said trade mark was registered.
Respondents 1 and 2, namely the Scotch Whisky Association and a related party, came to know of the appellant's mark on or about September 20, 1974, through a routine report received from Wildbore and Gibbons. Respondent 1 had even issued a notice in respect of an application filed by the appellant for registration of the trade mark "Hogmanay," which led to the withdrawal of that application by the appellant before hearing. Despite having clear knowledge of the "Peter Scot" registration from 1974, the respondents filed an application for rectification of the said trade mark only on April 21, 1986 — a delay of approximately 12 years from the date of acquiring knowledge and nearly 18 years from when the brand name had been in use.
Apart from the rectification application, a suit for passing off was also filed by Respondent 1 in the Bombay High Court in Civil Suit No. 1729 of 1987, which was stated to be still pending at the time the Supreme Court heard the present matter.
The Dispute
The rectification application filed before the Registrar — Respondent 3 in the appeal — raised several issues, including whether the applicants had the standing to file such an application under Section 56 of the Trade and Merchandise Marks Act, 1958, whether the impugned mark was distinctive, whether the registration contravened Section 11 of the Act (which prohibits registration of marks likely to deceive or cause confusion), and whether the mark was liable to be removed.
The Registrar, Respondent 3, while opining that the evidence filed by the applicants-respondents was not entirely satisfactory, nonetheless upheld the application for rectification on the ground that the evidence gave an impression that some customers were being persuaded into thinking that "Peter Scot" brand whisky was also a Scotch whisky. The Registrar identified two specific factors: first, the presence of the word "Scot" in the mark "Peter Scot," and second, the presence of certain slogans on the whisky bottles. The plea of delay and acquiescence raised by the appellant was rejected by the Registrar on the ground that the deceptive element in the impugned mark had neither been displaced nor rebutted by the appellant. Accordingly, the rectification application was allowed.
An appeal was preferred by the appellant before the High Court of Judicature at Madras under Section 109 of the Act. A Single Judge of the High Court dismissed the appeal, observing that the adoption of the mark "Peter Scot" appeared to have been done with a view to take advantage of the goodwill associated with Scotch whisky by using the word "Scot," and that the statutory standard was the likelihood of confusion and deception, not actual confusion. The term "Scot" when used with whisky of non-Scottish origin was held to be inherently capable of causing confusion and deception. On the issue of acquiescence, the Single Judge held that the facts did not warrant the conclusion that there had been acquiescence in the legal sense because the acquiescence, if it was to be made a ground for declining rectification, must be of such character as to establish gross negligence or deliberate inaction.
The intra-court appeal before a Division Bench of the High Court was also dismissed. The Division Bench noted that the use of the "Lion Rampant" device and the description "Distilled from the Finest Malt and Blended with the Choicest Whiskies by Scotch Experts under Government Supervision" was definitely intended to lead consumers into believing that the whisky manufactured by the appellant was Scotch whisky. The Division Bench declined to interfere. The appellant then approached the Supreme Court by special leave.
Reasoning and Analysis of the Judge — Including Judgments Cited in Context
The judgment of the Supreme Court was delivered by Justice S.B. Sinha, with Justice L.S. Panta also on the Bench. The Court framed two principal issues for consideration: first, whether the delay on the part of Respondents 1 and 2 in filing the rectification application amounted to acquiescence and/or waiver; and second, whether Respondent 3 (the Registrar) and the High Court had applied the correct legal tests and thus misdirected themselves in law.
On the Nature of the Registrar's Power under Section 56
The Court observed that the power conferred on the Registrar under Section 56 of the Trade and Merchandise Marks Act, 1958 is wide and discretionary in nature. Sub-section (2) of Section 56 uses the word "may" at two places — enabling a person aggrieved to file an application, and enabling the Tribunal to make such order as it may think fit. It was held that, given its discretionary character, it cannot be said that the delay or acquiescence or waiver or any analogous principle would apply under no circumstances. Purity of the register as also the public interest are undoubtedly relevant considerations, but when a discretionary jurisdiction has been conferred on a statutory authority, the same, though it is required to be considered on objective criteria, cannot be stripped of the role that conduct, delay, and acquiescence may play. The Court referred to and relied upon the decision in Kabushiki Kaisha Toshiba v. Tosiba Appliances Co., (2008) 10 SCC 766, for the proposition that the Registrar's power is discretionary in nature, and in a given case, the Registrar may choose not to exercise its jurisdiction.
On Whether Article 137 of the Limitation Act, 1963 Applies
The Court addressed the question of whether the three-year period of limitation prescribed by Article 137 of the Limitation Act, 1963 applies to rectification proceedings. The Registrar is not a court. Referring to the Constitution Bench decision of the Supreme Court in Sakura v. Tanaji, (1985) 3 SCC 590, the Court held that Article 137 of the Limitation Act, 1963 would not apply to rectification proceedings as the Registrar is not a court. The decision in State of M.P. v. Bhailal Bhai, AIR 1964 SC 1006, was distinguished on the ground that the observations therein related to refund of money by way of writ petition, which was essentially a money claim. Similarly, the case of State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd., (2007) 11 SCC 363, was distinguished. However, the Court held that while the Limitation Act does not apply stricto sensu, the period of limitation prescribed by Article 137 — three years — may be taken as the criterion for consideration as to whether the same should be treated as a reasonable period in a given case, but not otherwise. What would be the reasonable period depends not only on the nature of action initiated before the statutory authority but also upon the purport and object of the statute.
On Acquiescence, Waiver, and Delay
This forms the heart of the judgment. The Court observed that the principles of waiver and acquiescence are applicable in a case of this nature. Apart from the ordinary rule of waiver of a right expressly provided for in a case of passing off, in cases involving equity or justice also, the conduct of the parties has been considered to be a ground for attracting the doctrine of estoppel by acquiescence or waiver for infringement.
The Court took note of the development of English law on acquiescence as traced in Scotch Whisky Assn. v. Pravara Sahakar Shakar Karkhana Ltd., AIR 1992 Bom 294. It also referred at length to the Court of Appeal decision in Habib Bank Ltd. v. Habib Bank A.G. Zurich, (1981) 1 WLR 1265, where the requirements for a plea of acquiescence were discussed with reference to the five probanda laid down by Fry J. in Willmott v. Barber, (1881-85) All ER Rep Ext 1779, and the broader approach in Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd., 1982 QB 133, which held that the application of the Ramsden v. Dyson, (1866) LR 1 HL 129 (HL), principle requires a very much broader approach directed at ascertaining whether it would be unconscionable for a party to be permitted to deny what he has knowingly or unknowingly allowed or encouraged another to assume to his detriment.
This Court then referred to its own judgment in Power Control Appliances v. Sumeet Machines (P) Ltd., (1994) 2 SCC 448, where it was held that acquiescence is sitting by when another is invading the rights and spending money on it; it is a course of conduct inconsistent with the claim for exclusive rights in a trade mark. Acquiescence is one facet of delay. The Court also cited Ramdev Food Products (P) Ltd. v. Arvindbhai Rambhai Patel, (2006) 8 SCC 726, for the proposition that delay by itself may not necessarily be a ground for refusing an injunction, but that the defence of acquiescence would be satisfied when the plaintiff assents to or lays by in relation to the acts of another person and in view of that assent or laying by and consequent acts, it would be unjust in all the circumstances to grant the specific relief. In that decision, this Court also observed that specific knowledge on the part of the plaintiff and prejudice suffered by the defendant is a relevant factor.
The Court also placed reliance on Balakrishna v. Shree Dhyaneshwar Maharaj Sansthan, AIR 1959 SC 798, for the distinction between a wrongful act that causes a complete injury and a wrong which creates a continuing source of injury — a distinction relevant to the argument that the wrong committed by the appellant was a continuing one and could not attract laches or acquiescence.
The respondents' explanation for the delay was that proceedings concerning registration of words or devices evocative of Scotland for use on Indian whisky were pending before the Supreme Court, and they had been awaiting the settlement of the law. The Supreme Court found this explanation wholly unacceptable. When action had been taken by Respondent 1 in so many other matters — including against marks like "Hogmanay," "Old Angus," "Royal Scot," "Grand Scot," "Black Skipper," "White Scot" and a host of others across 19 Indian High Court judgments and 4 decisions of courts in France, Italy, Illinois, and Malaysia — the singular failure to act against "Peter Scot" was inexplicable. Moreover, if a Supreme Court appeal was a reason to wait, why was a rectification application filed at all in 1986 while that very appeal was pending? The Court thus concluded that in the peculiar facts and circumstances of this case, the action of the respondents was barred under the principles of acquiescence and/or waiver.
The Court also held that delay would be a valid defence where it has caused a change in the subject-matter and action or brought about a situation in which justice cannot be done, relying on the decision in Mc Donald's Corpn. v. Sterling's Mac Fast Food, ILR 2007 Kant 3346, and the English cases of Harcourt v. White, (1860) 28 Beav 303, and Rodgers v. Nowill, (1847) 2 De GM&G 614. The contention that the doctrine of continuing wrong would prevent the operation of acquiescence was also rejected, placing reliance on Balakrishna v. Shree Dhyaneshwar Maharaj Sansthan, AIR 1959 SC 798.
On the Correct Test for Deception and Confusion — Issue 2
The Court then turned to whether the correct legal test was applied by the Registrar and the High Court. It restated the tests for deceptive similarity applicable in India, drawing upon its earlier decisions in Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 73, where the factors relevant for determining deceptive similarity in passing-off actions were laid down, including the class of purchasers who are likely to buy the goods bearing the marks, their education and intelligence, and the degree of care they are likely to exercise.
The Court also referred to the Australian Federal Court decision in Scotch Whisky Assn. v. Marton De Witt, 2008 FCA 73, where it was held that there are two classes of consumers in the Scotch whisky and bourbon markets: the involved consumer and the uninvolved consumer. In that case, it was observed that the purchase of bourbon and Scotch whisky products is not one of impulse, and that pricing and product quality are all factors that make for more discerning consumers of Scotch whisky. Both involved and uninvolved purchasers of bourbon and Scotch whisky products could not be confused save and except those who are exceptionally stupid or careless.
Further, the Court referred to the detailed tests laid down in Application of E.I. DuPont DeNemours & Co., 476 F 2d 1357, a United States decision, which enumerates thirteen factors for determining the likelihood of consumer confusion, including the similarity of marks in appearance, sound, connotation and commercial impression, the similarity of the goods, the conditions under which sales are made, and the length of time during and conditions under which there has been concurrent use without evidence of actual confusion.
Applying these principles, the Court held that the present case was concerned with the class of buyers who are supposed to know the value of money, the quality and content of Scotch whisky, who are supposed to be aware of the difference in the process of manufacture, the place of manufacture, and its origin. In such circumstances, the Registrar, the Single Judge, and the Division Bench of the High Court had failed to notice this crucial distinction, which was borne out from the precedents operating in the field. The Court held that the Heightened Scrutiny Test, as urged by the appellant, was not applicable in India, but that the prudent man test must be applied when the product is purchased both by village and town people. Since wrong tests were applied, the matter warranted interference, which the Court would not ordinarily have done in findings of fact.
On Passing-Off and Locus Standi
The Court noted that the decision of Respondent 3 that Respondent 1 (the Scotch Whisky Association) had no locus standi to file the application under Section 56 had attained finality, as it was not challenged. Locus had been found only in favour of Respondent 2, a foreign manufacturer whose goods are sold in India. The Court, referring to Kerly's Law of Trade Marks and Trade Names, 14th Edn., Para 15.067, p. 456, affirmed that a passing-off action may be brought only by those who own or have a sufficient proprietary interest in the requisite goodwill, and such goodwill must be really likely to be damaged by the alleged misrepresentations.
On the Geographical Indications of Goods (Registration and Protection) Act, 1999
The Court disposed of the argument that Section 26 of the Geographical Indications Act, 1999 protected rights of trade marks acquired through good faith by holding that having regard to Sections 20(2) and 26(2) of that Act, the Geographical Indications Act, 1999 would have no application to the facts and circumstances of the present case.
The Final Decision
The Supreme Court, by the judgment dated May 27, 2008, allowed the appeal. The impugned judgment and order of the Division Bench of the High Court of Judicature at Madras dated October 12, 2007, was set aside. The appeal was allowed with no order as to costs. The Court held that the action of the respondents in filing the rectification application was barred under the principles of acquiescence and/or waiver in the peculiar facts and circumstances of the case, and that even on the merits, the wrong tests of deceptive similarity had been applied by the Registrar and both the courts below.
Points of Law Settled in the Case
The case settled several important principles of Indian trade mark law in a comprehensive and authoritative manner.
On the question of the Registrar's power of rectification, the Court confirmed that the power under Section 56 of the Trade and Merchandise Marks Act, 1958 is wide and discretionary. In a given case, the Registrar may refuse to exercise it. Delay leading to acquiescence or waiver is a relevant consideration even for a statutory authority exercising discretionary jurisdiction, provided it is assessed on objective criteria.
On limitation, Article 137 of the Limitation Act, 1963 does not apply to rectification proceedings before the Registrar since the Registrar is not a court. However, the period prescribed therein — three years — may be taken as a criterion for considering whether the delay should be treated as unreasonable.
On acquiescence and waiver, these principles apply in trade mark rectification proceedings. Delay, where it has caused a change in the subject-matter or brought about a situation in which justice cannot be done, is a valid defence. The doctrine of continuing wrong does not prevent application of these principles.
On Section 11 of the 1958 Act, it does not bar the Registrar from registration of marks which would be likely to deceive or cause confusion. The appropriate question is whether the public in general or the class of buyers would be deceived or confused if the existing mark is allowed to remain on the register. Thus, deceptive similarity or confusion is the principal criterion for determining applications both for registration and for rectification.
On the test for confusion, each case depends on its own facts. The class of buyers, their education, intelligence, degree of care, whether the goods are expensive or selected with deliberation — all these are relevant. The prudent man test applies when the product is purchased both by village and town people, but the Heightened Scrutiny Test does not apply in India.
On locus standi for passing-off, only a party who owns or has sufficient proprietary interest in the requisite goodwill, and whose goodwill is really likely to be damaged by the alleged misrepresentations, can bring a passing-off action.
Case Details
Title: Khoday Distilleries Ltd. Vs Scotch Whisky Association and Others
Date of Order: May 27, 2008
Case Number: Civil Appeal No. 4179 of 2008 (Arising out of SLP (C) No. 21367 of 2007)
Neutral Citation / Report: (2008) 10 Supreme Court Cases 723
Name of Court: Supreme Court of India
Name of Hon'ble Judges: Justice S.B. Sinha and Justice L.S. Panta
Disclaimer: Readers are advised not to treat this as substitute for legal advise as it may contain errors in perception, interpretation, and presentation.
Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney], High Court of Delhi
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Headnote
The Supreme Court of India, in Khoday Distilleries Ltd. v. Scotch Whisky Association, (2008) 10 SCC 723, set aside the order of the Registrar of Trade Marks and the Madras High Court that had allowed rectification of the registered trade mark "Peter Scot" belonging to the appellant. The Court held that the rectification application filed by the respondents approximately 18 years after the appellant had started using the brand name and 12 years after the respondents had acquired knowledge of the registration was barred under the principles of acquiescence and waiver. The Court also held that the Registrar and the High Court had applied wrong tests for determining deceptive similarity, failing to appreciate that the class of buyers of Scotch whisky is educated, discerning, and aware of the difference between Indian and Scotch whisky. It further held that the power under Section 56 of the Trade and Merchandise Marks Act, 1958 is discretionary, that Article 137 of the Limitation Act, 1963 does not apply to rectification proceedings before the Registrar though its three-year period may serve as a guideline for reasonableness, that Section 11 of the Act does not prohibit the Registrar from registering marks likely to cause confusion, and that the Geographical Indications of Goods (Registration and Protection) Act, 1999 had no application to the facts. The appeal was allowed with no order as to costs.
