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Souza Cruz v. N.K. Jain
Factual and Procedural Background
The plaintiff is a Brazilian corporation manufacturing and dealing in cigarettes under the trademark HOLLYWOOD, which has been in existence since 1931 and registered in 120 countries. The plaintiff discovered that the defendants, based in India, were manufacturing and exporting cigarettes under the same trademark HOLLYWOOD, using packaging identical to the plaintiff's. The plaintiff alleges infringement of its trademark and copyright and sought interim relief from the Indian court. The defendants challenged the court's jurisdiction and denied substantive allegations, filing affidavits with technical objections. The suit concerns the unauthorized use of the HOLLYWOOD trademark and packaging by the defendants for export, particularly to Ukraine.
Legal Issues Presented
- Whether the Indian court has jurisdiction to entertain a suit concerning trademark infringement and unfair competition where the plaintiff is a foreign company and the alleged infringing goods are manufactured in India for export.
- Whether the defendants' use of the HOLLYWOOD trademark and packaging constitutes infringement and passing off under Indian law and applicable international principles.
- Whether an interim injunction should be granted to restrain the defendants from manufacturing, dealing, selling, or exporting cigarettes under the infringing trademark and packaging.
Arguments of the Parties
Defendants' Arguments
- The Indian court lacks jurisdiction because the plaintiff is a foreign company with no sales or goodwill in India.
- The alleged infringing goods are not sold or offered for sale in India but are intended for export.
- The plaintiff should pursue remedies in Ukraine, where the dispute primarily arises.
- The defendants raised technical objections to the plaintiff's affidavits and documents but did not address the substantive allegations.
- An injunction from the Indian court cannot have extraterritorial effect and therefore should not be granted.
Plaintiff's Arguments
- Section 55 of the Trade Mark Act applies to use of trademarks on goods exported from India, deeming such use as use within India for legal purposes.
- The defendants are manufacturing infringing goods in India, thereby giving the Indian court territorial jurisdiction.
- The court should act to prevent infringement at its inception to protect the plaintiff’s rights.
- Reliance on Indian case law establishing jurisdiction at the defendant’s place of residence even if cause of action arises outside India.
- The defendants’ use of the plaintiff’s trademark and packaging is a dishonest attempt to benefit from the plaintiff’s goodwill.
- The plaintiff is willing to furnish an undertaking and bank guarantee to compensate defendants for any loss caused by the injunction.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| PCK Muthia Chettiar v. VES Shanmugham Chettiar, AIR 1969 SC 552 | Jurisdiction lies where defendant resides even if cause of action arises outside India. | The Court relied on this authority to affirm jurisdiction over defendants manufacturing infringing goods within India. |
| In the Matter on an Application by Hagots Huttan & Co. Ltd. to Register as a Trade Mark, 33 Reports on Patent, Design and Trade Mark Cases 357 | The courts will prevent fraudulent practices intended to be completed in another country. | The Court cited this to justify injunctive relief against the defendants despite the export nature of the goods. |
| The Collins Company v. Brown, 3 K & J 423 | A foreign manufacturer can seek injunction and account of profits against a local manufacturer committing fraud by using the foreigner's trademark. | The Court applied this principle to support the plaintiff’s entitlement to relief against the defendants’ fraudulent use of the trademark. |
Court's Reasoning and Analysis
The Court analyzed the facts and legal principles, emphasizing that the defendants are manufacturing allegedly infringing cigarettes in India, which confers territorial jurisdiction. The Court noted the applicability of Section 55 of the Trade Mark Act, which treats use of a trademark on goods exported from India as use within India for legal purposes. The Court rejected the defendants’ argument that injunctions cannot have extraterritorial effect, clarifying that injunctions operate in personam and bind the defendants regardless of where their activities extend. The Court found the defendants’ packaging to be a near identical reproduction of the plaintiff’s, constituting infringement and passing off. The Court recognized the need to prevent the defendants from causing irreparable harm by allowing the infringement to continue, holding that the plaintiff had made out a prima facie case and that the balance of convenience favored granting interim relief. The Court also acknowledged the defendants' technical objections but found them insufficient at the interlocutory stage, where only prima facie considerations apply.
Holding and Implications
The Court allowed the plaintiff’s application for an ad interim injunction, restraining defendants No. 1 and 2 from directly or indirectly manufacturing, dealing, selling, offering for sale, or exporting cigarettes under the HOLLYWOOD trademark or using cartons and packaging that are identical or deceptively similar to the plaintiff’s.
The plaintiff was directed to file an undertaking to compensate the defendants for any loss or damage caused by the injunction and to furnish a bank guarantee of Rs. 1 lakh within one month.
This decision directly protects the plaintiff’s trademark rights by preventing the defendants from continuing infringing activities originating in India. No new legal precedent was established beyond the application of existing principles on jurisdiction, trademark infringement, and interim relief.
R.C Lahoti, J.:— The plaintiff is a Corporation organised and existing under the laws of Brazil also having its principal office thereat. It is manufacturing and dealing in cigarettes under the trade mark HOLLYWOOD. It is aggrieved by the action of the respondents manufacturing in India and exporting from India cigarettes under the trade mark HOLLYWOOD.
2. According to the plaintiff cigarettes and smoking articles under the trade mark/label HOLLYWOOD were launched in the Brazilian Market in 1931. Its trade extended beyond the territorial barriers. By 1986. the plaintiffs trade mark HOLLYWOOD was the fourth trade mark in sales in western countries. It was secured by registration in a number of countries. On the date of the suit it was registered in favour of the plaintiff company in 120 countries. In Russia, the HOLLYWOOD label was registered on January 27, 1995 valid till January 19, 2004, the registration No. being 123938. Figure of sales running into lakhs and crores have been set out by the plaintiff. Of these the relevant are those in Commonwealth Independent States (CIS). Sales in millions of cigarettes were as under:
Year Millions of Cigarettes 1992 985.06 1993 1366.53 1994 1606.90
3. The marketing expenses in US million dollars were as under:—
1992 306.940 1993 414.035 1994 799.423
4. Summary of marketing and advertising expenses in CIS itself has been brought on record for the year 1992, 1993 and 1994. In 1993 the figure of sales of the plaintiffs HOLLYWOOD was 42.26 million cigarettes in Ukraine and 1.090.81 million cigarettes in Russia.
5. The characteristic features of the plaintiff's cigarette carton are as under:
“The carton has a flip open; lid in red colour with the word HOLLYWOOD printed in white on the top face of the lid. The red colouring continues till midway of the carton. The word HOLLYWOOD is again printed on the top face of the carton in white lettering below, the red portion has two strips, one white in colour and the other golden in colour, below these two strips is a thick navy blue strip; at the right bottom corner of the navy blue strip are two arrow like devices in red and navy blue, one below the other. The bottom portion of the carton is white in colour with the words American blend written in gold lettering. On one side of the carton the words a blend of the finest USA type Virginia and Burley tobaccos are written in the red portion of the carton. At the bottom of the carton which is white in colour, the word HOLLYWOOD is printed in red lettering.”
6. The plaintiffs cigarettes purchased and sold under the said cigarettes trade mark are packed in packages and cartons to which the said trade mark/label/brand name/device is also applied/affixed. Such packets and cartons manufactured by the plaintiff company also bear the trade mark/brand HOLLYWOOD with all other features of semblance including the logo and the colour scheme of red, blue and white.
7. Defendant No. 2 is a manufacturer of cigarettes based at Hyderabad and Delhi. Defendant No. 1 is one of its principal officer. According to the plaintiff it came to its knowledge in December, 1994 that defendants No. 1 and 2 started manufacturing cigarettes under the trade mark HOLLYWOOD. On investigating it was found that these defendants had applied to excise authority for permission to export cigarettes under the trade mark HOLLYWOOD in a carton which is identical to the plaintiff's carton. The carton infringes the plaintiffs trade mark rights and copyright. It was also found that these defendants were particularly going to export these goods to Ukraine.
8. The two cartons that is of the plaintiff and the infringing carton of defendants No. 1 and 2 have been produced before me. The defendants' infringing carton is a replicate of the plaintiff's carton. The comparative features of the two have been well brought out in the affidavit of Ms. Pratibha Kotha filed on behalf of the plaintiff. To reproduce therefrom:—
(a) The carton/pack/label of M/s. NTC Tobacco Private Limited was identical in all respects to the plaintiff's HOLLYWOOD pack/label/carton.
(b) The carton/pack/label of M/s. NTC Tobacco Private Limited when tampered with that of M/s. Hilton Tobacco, or original of which has been filed in the present proceedings, is identical except for the name of the manufacturer which appears in small lettering on one side of the carton. Whereas in the case of Hilton's HOLLYWOOD Packing, the letters, HTP appear, in the case of NTC's HOLLYWOOD Packing the letters NTC appear in small lettering. This difference is almost invisible to the naked eye.
9. Mr. Debjit Gupta, Advocate, also attorney of the plaintiff has also with his affidavit dated 9.2.1995 brought on record a photo copy of the affidavit of Mr. Anatoli Dovgert, Attorney at Law, Kyiv, Ukraine. He is doctor and professor of private and international law in Kyiv as well as a lawyer qualified to practice Ukraine law and having been in practice since 1982. He has deposed to the following facts.
1. There is a law in Ukraine entitled “Law of Ukraine on the Restriction of Monopoly and Prevention of Unfair Competition” which came into effect on 15.3.1992 Article 7 of this law defines act of unfair competition as including amongst other things, copying the form, package, external design, imitation, copying, direct recreation of goods of another producer.”
2. A sale of trade mark identical in appearance to those of the plaintiff under the HOLLYWOOD mark if sold in Ukraine and not authorised by the plaintiff would amount to an infringement of the article 7 of the Ukrainian law of unfair competition.
10. Yet another affidavit dated 10.2.1995 by Debjit Gupta states the plaintiff having secured registration of HOLLYWOOD label under the Brazilian Copyright law as also by the Russian Federation. As against this, the defendants have filed a short affidavit of defendants No. 1. This affidavit does not set out any factual date of its own. It merely offers adverse comments on the affidavits filed on behalf of the plaintiff. A few more objections have been set out which too are negative in their approach. They raise objections more of technical nature then of substance. May be that at the stage of trial objections raised in this affidavit may find favour with the Court and entail exclusion of a few documents/affidavits filed on behalf of the plaintiff, for at that stage the Court shall have to go strictly by the provisions of the Evidence Act. The present stage is interlocutory where the Court is called upon to decide urgently on the grant or denial of interim relief to the plaintiff. It was stage where a prima facie opinion has to be formed on the questions of prima facie case, balance of convenience and irreparable injury. A preponderance of probabilities and not findings of fact. It all that is required. Let it, however, be stated that the affidavit filed on behalf of the defendants does not throw any light on the genuineness or otherwise of the several averments made on behalf of the plaintiff and the law which would govern the parties or their actions in Ukraine.
11. The principal attack of the learned counsel for the defendants has been on the jurisdictional competence of this Court to entertain a dispute of the present nature. It is submitted that the plaintiff company is situated in Brazil admittedly it does not have any sale of its HOLLYWOOD products in India; the defendants are also not selling or offering for sale their allegedly, infringing products in India; and so the plaintiff does not have any cause of action in India. It is also submitted that the plaintiff does not have any goodwill or reputation in India. The learned counsel for the defendants cautioned the court by forcefully submitting that we do not know what is the law of Ukraine and even if not necessary, it would certainly be advisable, to leave the plaintiff to pursue its remedy in Ukraine and this Court should stay its hands.
12. In reply the learned counsel for the plaintiff has placed reliance on Section 55 of the Trade Mark Act which reads as under
55. Use of trade mark for export trade and use when form of trade connection changes (1) The application in India of trade mark to goods to be exported from India and any other act done in India in relation to goods to be exported which, if done in relation to goods to be sold or otherwise traded in within India would constitute use of a trade mark therein, shall be deemed to constitute use of the trade mark in relation to those goods for any purpose for which such use is material under this Act or any other law.
(2) The use of a registered trade mark in relation to goods between which and the person using the mark any form of connection in the course of trade subsists shall not be deemed to be likely to cause deception or confusion on the ground only that the mark has been or is used in relation to goods between which and the said person or a predecessor in title of that person a different form of connection in the course of trade subsists.
13. It is also submitted that the defendants being in India, they are admittedly manufacturing the goods alleged to be infringing by the plaintiff in India. The rule as to the cause of action is that the likely wrong should be nipped in the bud. While there may be a controversy of determination of jurisdiction by reference to plaintiff suits, there ought not be any controversy as to territorial jurisdictional when the defendant is sought to be sued in his own place, more so, when the infringing activity also originates thereat.
14. The learned counsel for the plaintiff has placed reliance on PCK Muthia Chettiar v. VES Shanmugham Chettiar, AIR 1969 SC 552, wherein it has been held that the Court at a place in India where the defendant resides has the jurisdiction to try the suit though the cause of action arise outside India.
15. In “In the Matter on an Application by Hagots Huttan & Co. Ltd. to Register as a Trade Mark.” 33 Reports on Patent, Design and Trade Mark Cases 357, it has been held at page 369 - “there is no doubt that the courts here would stop in its inception a fraudulent practice which it was intended to complete in another country.”
16. In The Collins Company v. Brown, 3 K & J 423 it has been held:
“A foreign manufacturer has a remedy by suit in this country for an injunction and account of profits against a manufacturer here who has committed a fraud upon him by using his trade mark for the purpose of inducing the public to believe that the goods to marked were manufactured by the foreigner.”
17. On the basis of the abovesaid authorities I am satisfied that prima facie this Court has jurisdiction to entertain the plaintiff's suit alongwith the prayer for the grant of ad interim injunction.
18. The learned counsel for the defendants submitted that an injunction issued by this Court cannot have extra-territorial operation; this Court would not issue a writ which is intended to operate beyond its territorial jurisdiction and certainly not beyond the country's territorial bounds. This contention deserves a summary dismissal. An injunction operates in personam. It binds a person present before the court. If issued, the defendants would be bound to comply with the court's mandate though the span of his activities may extend beyond the territorial jurisdiction of the court or of country's borders.
19. The foundation of the law of infringement of the trade mark and copyright and of passing off is honesty. No one shall be permitted to enrich himself on the goodwill and reputation built up or earned by anyone else. Why should a company like NTC Tobacco India Ltd. resort to be cheap gimmick of adopting trade mark label and artistic work of someone else? If the defendant company believes in the quality of its goods why should it not have its own trade name/label and a design/artistic work of its own and then venture in the market? There is no answer to this from these defendants.
20. In the opinion of this Court the plaintiff has made out a prime facie case of infringement of its trade mark and copyright by defendants No. 1 and 2. The balance of convenience lies in its favour. If the defendants are permitted to accomplish and perpetuate their action and pass off their goods as plaintiffs, the plaintiff is likely to suffer grave injury.
21. For the foregoing reasons the plaintiff's application for the grant of ad interim injunction (I.A No. B21/95) is allowed. The defendants No. 1 and 2 are restrained until further orders from directly or indirectly manufacturing or dealing in cigarettes, tobacco or related products and selling or offering for sale or exporting the same under the trade mark HOLLYWOOD or in the cartons which bear the trade mark/label HOLLYWOOD or any trade mark/label deceptively similar with the plaintiffs trade mark HOLLYWOOD or any such cartons or packaging which are substantial reproduction or colourable imitation of the plaintiff's cartons or packagings. During the course of hearing on behalf of the plaintiff it was repeatedly assured that the plaintiff is prepared to furnish undertaking to compensate the defendants for any loss or damage suffered by them consequent to their having been restrained by an injunction so secured by the plaintiff. It is directed that within one week an authorised attorney or representative of plaintiff shall file an undertaking on affidavit to compensate the defendants for any loss, damage or injury suffered by them consequent to this injunction in the event of the plaintiff's application and/or the suit being ultimately dismissed. In addition, the plaintiff shall also furnish within one month from today a bank guarantee in an amount of Rs. 1 lakh in support of the undertaking.
22. It is made clear that whatever has been stated in this order has been so stated solely for the purpose of disposal of this application and nothing stated hereinabove shall come in the way of either party in deciding the suit on its own merits.
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