We’re pleased to bring you a guest post by Kartik Sharma and Aditya Singh analysing a recent order by the Delhi High Court involving passing off. Kartik and Aditya are 2nd year students at NLSIU, Bengaluru, and had earlier written for us on the Calcutta High Court’s decision in a matter involving Amul’s trademark, here.
The Various Intricacies of Passing Off: Examining the DHC Order in Akash Aggarwal v Flipkart
Kartik Sharma and Aditya Singh
A very salient legal development in the domain of “passing off” took place in the month of August. In Akash Aggarwal v Flipkart & Ors, a single judge bench of Delhi HC held Flipkart along with a group of retailers liable for perpetuating the tortious offense of passing off for using the same product images as that of the plaintiff. The basis for the same was that the respondents were taking unfair advantage of the plaintiff’s mark and encashing upon his reputation. Flipkart by itself agreed to take down the listings, however, a division bench(“DB”) of the Delhi HC on appeal placed an interim stay on the observations made in the order (not restoring the listings as that was voluntarily agreed to by Flipkart) in light of its wider ramifications stating-
“…whether a link provided on a web page, which permits a customer to access the site or a web page of another seller per se amounts to passing off requires examination.”
While the matter is sub judice before the DB, the authors argue that the single judge bench’s order was rightly stayed. The single judge bench’s ruling has essentially construed the act of using the same product photo as synonymous to usage of the mark without evaluating the features of the photograph and whether they are likely to mislead the public. Apart from that the basis for passing off as stated above was that of freeriding of plaintiff’s goodwill which we argue is different from the third prong of passing off i.e., detriment to the senior.
After giving a brief description of the platform interface, this blogpost shall, firstly, demonstrate how the impugned act does not amount to PO. Secondly, it shall argue that there is a legal fallacy in invoking unfair advantage in PO. Finally, the blog shall conclude by briefly stating the ramifications of construing latching-on as PO and including unfair advantage within PO.
DESCRIPTION OF THE PLATFORM
In brief, an option is provided by Flipkart to new third-party sellers to list some of the popular products on the platform and become its sellers. In effect, they are displayed as ‘more sellers’ of that particular product hence ‘latching on’ to the primary product’s listing. In the instant case the photo of the product would still be that of the plaintiff on selecting ‘more sellers’ while the other details such as the manufacturer, seller etc would change. This feature was to enable newer sellers to access wider audience and benefit from the ongoing consumer trends. The further intricacies of this process shall be discussed as requisite in the forthcoming sections.
DOES LATCHING ON PASS AS PO?
The tort of PO has a simple basis that “no man is entitled to represent his goods as being the goods of another man”. There are 3 key prongs of PO as held in Reckitt Colman v Borden that are: (1) Plaintiff’s mark has acquired goodwill/reputation; (2) there is a misrepresentation by the defendant which is likely to mislead the public; (3) the plaintiff has incurred or is likely to incur damage (to business or goodwill) as a result of the misrepresentation. In the instant case, when users access ‘more sellers’, the product photo remains that as found on the primary seller’s listing, however, the other details such as seller, manufacturer, etc change. Hence, it becomes pertinent to analyse whether the photos posted by V Tradition are akin to their mark and hence possess the potential to create confusion. The authors argue that photographs used by V Tradition are generic photographs and therefore not capable of misleading the public.
The photographs should have distinguishable features such that they now possess a ‘secondary meaning’ in order to have a nexus with the plaintiff’s goodwill. While this benchmark is ordinarily used to determine the strength of a mark, the same becomes relevant to the instant case to gauge whether the photographs can mislead the public (prong 2 of PO) to believe those products to be of V Tradition. They have been employed extensively by courts in their inquiry into PO and we believe they aid in better determination of reputation as well. (Two other relevant cases to explore this rationale would be Mahendra Paper Mills v. Mahindra & Mahindra ltd, (2002) 2 SCC 147 and Kirloskar Diesel v. Kirloskar Proprietary, 1995 SCC OnLine Bom 312). For instance, the three stripes of Adidas inscribed on a clothing immediately connects it to the world-famous brand. Such a feature materializes its uniqueness in helping to distinguish the product from its competitors. However, the product listing photographs of V tradition do not possess a secondary meaning that enables the customers to make a connection to the brand i.e., they fail to denote their origin company. The photos, seen from the POV of a customer of average intelligence are generic.
Likelihood of Confusion
The likelihood of confusion arising out of the option of “more sellers” also seem to be absent. The jurisprudence of passing off makes two facts abundantly clear: the product has to be examined as a whole in its entirety ; and certain added elements to the product can free the defendant even if he has used the particular trademark. Once a customer redirects to the particular product page of the alternate seller, the name of the seller at the top changes. With regards to the photographs, we have already made out the case for it in the preceding paragraph, In the product details, the details of the manufacturers are clearly laid down. The pricing varies across sellers. The Delhi HC faced a similar situation in Kellogg v Pravin Kumar Bhandabhai. Here, the names of respective products were displayed prominently on their cartons besides other differences in the visual presentation and no confusion was held by the court. The target customer base was another point factored in the judgment. Similarly, here also the customers can be reasonably expected to refer to the relevant details and features present on the e-commerce website especially when the details are present on the main listing page and at the pre-payment preview. Thus, an overall examination of the situation tips the balance in favour of there being little to no probability of confusion.
Unfair advantage & Assumption of Goodwill
As already stated briefly, Justice Singh in the single bench order held that the feature of latching on is synonymous with PO as the same enables the defendant to “encash upon the reputation of the Plaintiff which he has painstakingly built” and hence amounts to ‘unfair advantage.’
Irrespective of whether PO would have been applied in totality or mixed with unfair advantage which is legally questionable, one needs to examine whether there actually exists goodwill in the impugned brand name at all. The single-bench assumes the same on the basis that the plaintiff has had 82,000 product ratings and 2.5 lakh fulfilled orders on Flipkart since 2020. While there are no concrete statistics present, Flipkart reportedly sold 200 million fashion products just in the summer and spring of 2022 wherein women’s ethnic wear and kurtas were among the highest-sold items. Hence, when viewed relative to the market size, there arises a genuine doubt about whether 82,000 ratings, 10,000 reviews (which comes to 0.3 ratings and 0.04 reviews per order) and 2.5 lakh orders in about 2.5 years is actually sufficient to form a strong brand value. This is especially erroneous when the product photos, as established above are not even akin to V Tradition’s mark and goodwill. The authors are of the opinion that the DB should go into a deeper analysis of whether there actually exists goodwill in ‘V Tradition’ or if it is just a handful of high-selling products grossing as an effect of a general trend.
Another pertinent legal question arises: whether the aspect of ‘unfair advantage’ should have been applied to the instant case at all. As stated above, the third prong of PO is that the senior will or is likely to incur some damage (blurring, tarnishment, loss of business, etc) whereas unfair advantage is a totally different component which can still result without there being damage to the senior. The latter essentially means that the junior has used the senior’s mark and has benefitted from his goodwill and reputation without due cause, the major emphasis here is on moral unfairness as opposed to economic harm. To benefit and to cause damage are two different things.
In the instant case, since V Tradition and the other retailers are likely to have a similar customer base, there actually may be a loss of business but that as argued is not due to ‘misrepresentation’ as it means in PO. Even though unfair advantage is not a component of PO, the court also failed on another front when it did not assess the extent of monetary gain received by the junior because the same as per Raymond v. Raymond Pharmaceuticals, has to be substantial.
The reason why the authors raise this point and criticise this approach is because of the bad precedent this judgement sets. It over broadens PO to include cases where there is none to minuscule damage to the senior. This is extremely detrimental to newer entrants and small traders and punishes them despite the senior not being harmed.
Let us take the fact scenario in L’Oréal v. Bellure wherein L’Oréal manufactured high-end perfumes catering to a wealthier customer base and Bellure though imitating L’Oréal in some aspects had much lower prices to cater to a less affluent customer base. The two bases do not intersect yet under this version, the court could construe PO. What is interesting here is that the claim of PO by L’Oréal had actually failed in EWCA.
Implications of the Order
While in the instant case we have the primary criticism of over broadening PO, one cannot under look the fundamental criticisms that surround legal intervention in cases of free-riding, the same was also briefly covered in our previous post. As Professor Gangjee and Burrell put it- one cannot be punished for participating in a positive externality. Intervention should only be to the extent of incentivizing investment to prevent under-investment; however, we also add the caveat that the same can only be incentivized by intervention if the junior can afford it. The feature of latching on essentially enables newer sellers to avail the benefit of positive externalities. And as we have questioned above, it may very well be that V Tradition is itself reaping the benefits of a trend and not the origin of it. Add choice fatigue and the para highlighted above.
The feature of latching on is a facilitative mechanism intended to aid both the consumers and the new sellers. Amidst the deluge of products, the listings of new sellers by default will appear at the bottom of the search results due to lesser activity on their listings and the consumers are likely to miss out on them due to scrolling fatigue. Latching on can enable the customers to access similar products of new sellers in a convenient way. Without this, neither the sellers will be able to benefit from the trends nor will the consumers be able to access all the competitive prices in an efficient manner. Hence, latching on should not be construed as PO in a facts-blind manner especially when it enhances the overall competitiveness of the marketplace and is also an essential function of intermediaries such as Flipkart to enable the abovementioned factors.
CONCLUSION
In this post, we have argued that firstly, the impugned act should not be construed as PO because the defendants are not using the mark of the plaintiff per se. The photographs have no nexus to the plaintiff’s brand as they lack distinctiveness and their genericness has not acquired any secondary meaning and the likelihood of confusion is also absent on the platform. Secondly, since the facts were being examined through the lens of PO, the single-judge bench should not have held the same based on the defendants gaining an unfair advantage. This is because the same is not a part of PO as can be seen in its third prong. Thirdly, we have also dwelled into the ramifications of including unfair advantage within PO and construing latching on as PO in a fact-blind manner.