Generic Disparagement: An Open Market Suicide Attempt

Advertisements has always and will always remain to be a battleground for companies to settle their market rivalries, how much ever subtle they make it sound to be. Especially in the preset day scenario of open market and the accompanying competition of the corporate majors to grab their fair share of the market the rivalries are without an exception increasing, with the spilling effect being felt in the advertisements. The underlying concept of any advertisement is to show one’s own product as the best in the market, which is nothing but an ordinary wish that any man can have. However, the real problem is with the way in which the advertisement is trying to convey its message. In many cases advertisements compare one’s own product with the rival products, either explicitly or implicitly, to achieve their aim. This is where the real problem creeps up. A person can show one’s own product to be the best in the world, but at the same time cannot denigrate others product, to capitalize upon it. This is where the law of disparagement comes into picture. In spite of the fact that the tort of disparagement has been recognized in the Indian legal system for long it not until very recently that it has been utilized effectively. The reasons for which are too obvious to be stated. The concept of disparagement has been utilized effectively by the Indian courts at various instances to prevent the instances of disparagement against specific products. However, the concept of generic disparagement is a relatively new entrant. This is given birth out of necessity to thwart the disparaging commercials that targets a class of products rather than specifically referring to a particular product.

Talking about the notion of disparagement itself, in the decision of the Calcutta High Court in Reckitt & Colman of India Ltd. VS. Kiwi T.T.K. Limited[1] five principles were laid down as a guiding factor for grant of an injunction against disparagement, which are as under:-

1. "A tradesman is entitled to declare his goods to be best in the words even though the declaration is untrue.
2. He can also say that my goods are better than his competitors', even though such statement is untrue.
3. For the purpose of saying that his goods are the best in the world or his goods are better than his competitors' he can even compare the advantages of his goods over the goods of the others.
4. He, however, cannot while saying his goods are better than his competitors', say that his competitors' goods are bad. If he says so, he really slanders the goods of his competitors. In other words he defames his competitors and their goods, which is not permissible.
5. If there is no defamation, to the goods or to the manufacturer of such goods no action lies, but if there is such defamation, an action lies and if an action lies for recovery of damages for defamation, then the court is also competent to grant an order of injunction restraining repetition of such defamation.

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The aforesaid five principles were approved by the court in the decision in Reckitt & Colman of India Ltd. VS. M.P.Ramachandran & anr[2] and subsequently in Dabur India Ltd. Vs Emami Limited[3]. Here the Dabur India Ltd. case differs a little from the fact that it specifically recognized the concept of generic disparagement. To quote

“…in my considered opinion, even if there be no direct reference to the product of the plaintiff and only a reference is made to the entire class of Chayawanprash in its generic sense, even in those circumstances disparagement is possible.”

This has been subsequently raised at various instances by the plaintiffs to seek an injunction against a disparaging advertisement. In the case of Dabur India Limited Vs Colortek Meghalaya Pvt. Ltd the division bench of the court made certain crucial observations in this regard. The ultimate crux of this identification is to balance the freedom of speech that is guaranteed under Article 19 (1) (a) of the Constitution of India with the restrictions that can be imposed to prevent the tort of disparagement. The court while accepting that an advertisement must not be blatantly misleading also tried to protect the freedom of expression. In this light it came up with a set of guiding principles and said that,

1. An advertisement is commercial speech and is protected by Article 19 (1) (a) of the Constitution of India.
2. An advertisement must not be false, misleading, unfair or deceptive.
3. Of course, there would be some grey areas but those need not necessarily be taken as serious  representations of fact but only as glorifying one’s product.

At the same time the division bench as a disclaimer observed that it is only to this extent that the protection under Article 19 (1) (a) is available. However, if an advertisement extends beyond the grey areas and becomes false, misleading, unfair or deceptive advertisement, it would certainly not have the benefit of any protection. The same has been reiterated by Justice Rajiv Shakdher in the case of M/S Eureka Forbes Ltd. Vs Kent RO Systems.[4] Albeit with a difference, he observed that, it would help the cause of a common consumer of the defendant in line with its own stand indicates the others attributes of its products. He called for a self-imposition of those guidelines.

In light of all these above-stated judgments, one thing becomes very clear. The courts are yet to recognize the very concept of generic disparagement in a full-fledged manner. Though there has been fleeting references at various instances, the plaintiff has in most probability lost in proving his case of disparagement. The reason is that the bar that is set (rather perceived) for the tort of generic disparagement is too high, which in most cases the plaintiff fails to satisfy. Though the courts becoming increasingly tilted towards allowing comparative advertisements when the markets have become more and more open they are yet to recognize the possible damages that a generic disparager can do to the market as a whole. Of course in an open market economy, the market is the place where the best of products are chosen by the forces of the market itself. In fact, it could be suicidal for a player to try his luck with such a generically disparaging commercial. The courts, if not now, will have to recognize it down the line for the long term effects will be detrimental to the public at large.

[1] 1996 (16) PTC 393

[2]1999 (19) PTC 741

[3] 2004(29)PTC1(Del)

[4] 2011 (1) R.A.J. 44 (Del)

Pre-Referral Interest in an Arbitral Award- An Analysis

The passage of latest arbitration act has brought in a sea of changes in the field of alternative dispute resolution in India, bringing it to the international arena. However, with the passage of time, undeniably, it has also metamorphosed into different being, either for good or bad, through the judicial reasoning and practice, one such example is of the apex court’s verdict in the ONGC Vs Sawpipes case. Likewise, there are still a lot of issues that are yet to be settled in this domain. One such example is the omission on the part of the arbitrator to award interest over the award.

The power of an arbitrator to award interest over to the successful claimant is contained in the Section 31 (7) of the Arbitration and Conciliation Act. Of course, this power, as always, will be subject to those that are stated in the arbitration agreement itself. This provision, apart from suggesting that interest be provided where ever possible, also prescribes that in case the arbitration agreement is silent on the rate of interest that is to be awarded it will be given at a rate of 18% per annum for the whole period or any part of the period between the date on which the cause of action arose and the date on which the award is made. Here we have to notice the two periods over which interest is being prescribed to be given. One is for the period from when the cause of action arose till the award is given (pre award period) and the other is for the period from when the award is made till its realization (post award). Furthermore, two more types of interest can be awarded one is for the period during which the suit is pending (pendente lite) and from the date on which the decree has been made till its realization. Since these two period are of no relevance for the subject matter I refrain from going any further with this. At any rate the award of interest is determined by the provisions of the arbitration agreement itself. The parties are at an option either to have a pre-determined rate of interest over a period or not to have any interest at all. However, this will not be applicable to the period post the award. The Supreme Court has categorically stated that, “any provision in the contract barring interest will operate only till the date of award and not thereafter”[1], thus curtailing the liberty of the parties to contract out the interest for the post award period. A unique issue crops up in the case of the interest that is leviable for the pre-award period. Though the power of the arbitrary tribunal to award interest over the pre-award period is undisputed, albeit within the constraints dictated by the arbitration agreement, issues arises when the arbitral tribunal refuses to grant interest over the pre-award period based on the sole fact that it has been prohibited in the contract, in spite of the fact that the defaulting party has unreasonably withheld the payment of principal amount for a genuinely long period of time. It is to be noted that the underlying principle behind the awarding of interest, in general, is that the person who keeps the money deprives the other of its profit potentiality and therefore deserves compensation.[2] Thus, a party aggrieved, because of a mistake committed by the other party, will be positively entitled to the interest money for the pre-referral period, if not for the prohibitive clause in the arbitration agreement. If such being the case the aggrieved party’s only option is to move to the court to set aside the award by way of section 34 of the arbitration act. This provision is marred by controversies right from the day on which the act came into force. The grounds upon which an aggrieved party can approach the court, by statue, is very limited. In the present case the situation worsens, since the arbitration agreement itself provides that the interest shall not be awarded for the pre-award period, leaving him in lurch. Under section 34 of the act, the grounds upon which a person can ask the court to set aside the award are very limited, putatively to limit the scope of judicial intervention over the arbitration proceedings itself. The grounds that are stated under section 34 are as follows

•  Incapacity of the party
•  Arbitration agreement not being valid
•  Proper notice not being served to the party
•  Award crosses the scope offered by the terms of reference made to the arbitrators
•  Composition of the tribunal not according to the agreement
•  Subject matter is inarbitrable
•  Award is in conflict with the public policy of India

The above stated grounds have been subject to extensive analysis. However, the only resort amongst the above stated grounds for an aggrieved party in the present case is to challenge the award by stating that it is in conflict with the public policy of India. This too is a precarious ground, for it is subjective term that will be decided by the court. The icing on the cake is that there are umpteen numbers of judgments of the Supreme Court, which categorically states that court shall refrain from interfering with the rate of interest that is awarded by the arbitral tribunal.[3]  The ground of public policy as stated earlier has been subject to much controversy, especially after the ONGC V. Sawpipes cases, where the ambit of judicial interference under section 34 over the arbitral award was widened. In spite of such widening of the ambit a petition to set aside an award in most cases are liable to be rejected, particularly when there is a provision in the arbitration agreement preventing the same. Thus the effective space for a party to maneuver is very limited. The claims can only be based upon the equity, which is not strong enough a contention to set aside an award under section 34 of the act. One option that can be effective in such situation is to seek the court to exercise its powers under Art.142 of the Constitution of India, which invariably can only be exercised as a last resort and that too in the Supreme Court. Thus an aggrieved party is left in a lurch as far as his claims are concerned. 

In the present day highly competitive business world such instances occurs frequently. The root cause for such issues is the clause in the contract that prevents the award of interest over a particular period. Many employers, being in an advantageous position, force this clause into the contract that they enter with the contractors. The only effective remedy can to add an exception in such clauses stating that interest can be awarded wherever the principal amount has been withheld by one party for an unreasonably long period of time, with the time period stated expressly in the contract, considering the unique facts and circumstances upon which they enter into the said contract.

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[1] Sayeed Ahmed & Co. v. State of Uttar Pradesh, (2009) 3 Arb LR 29

[2] Municipal Committee, Patiala v. Krishan Kumar Bansal, (2002) 3 RAJ 15

[3] See Sayeed Ahmed & Co. v. State of Uttar Pradesh, (2009) 3 Arb LR 29, 37

The Dilemma of Intellectual Property Appellate Board

The Intellectual Property Appellate Board (IPAB), a statutory board, has been established by the central government to hear appeals from the Registrar of Patents and trademarks with the aim of providing a separate appellate authority to deal with intellectual property law disputes. This quasi-judicial body effectively replaced the High Courts in this regard by becoming the appellate authority against the decisions of the registrar. Recently the board decided a question on its own power to review. Though it has decisively ruled that the IPAB is having powers to both substantively and procedurally review, it has given rise to more questions than it tried to solve in this regard. Historically quasi-judicial bodies that are established in our country have done more harm than good. It is well accepted fact that the tribunals have been established to unclog the walloping number of cases that are still pending in the High Courts and at the same time to have a specialized body to deal with them. But the real situation is far from what it is on paper. Apart from the basic legal issues that plague tribunals in India they also suffer from infrastructural inadequacies with many (read most) tribunals working in rented premises and its members with varying pay scales and without an exception IPAB too suffers from these issues.

The Final Authority

The IPAB has been established as an authority to deal with IP cases in the stead of High court and as a final authority, with all the IP cases that were pending before the High Courts being sent to the IPAB by a notification of the central government. The IPAB is a unique tribunal in the sense that there is no appeal from its decisions to any other judicial body in this country. It is the final authority in deciding the cases on intellectual property rights. Prior to the establishment of this board all the appeals against the order of the registrar of the Trade Marks and the rectification petition against the Trademarks lied with five high courts (Madras, Bombay, Calcutta, Delhi and Gujarat High Court), as they were the only high courts that were vested with the jurisdiction by law. By its establishment this body it became the last court of appeal for both law and facts replacing the High Courts. If a person is aggrieved by an order of the board the only remedy that he will be left with is to approach the High Court by virtue its writ jurisdiction under Article 226 of the Constitution of India. By its very nature, a writ petition will not be treated like an appeal and it is a discretionary upon the court to entertain the application. Hence the board in effect becomes the final authority being violative of both principles of natural justice and constitution.

Tribunals and Separation of Powers

The Supreme Court of India, in the case of Union of India Vs R. Gandhi in the context of the establishment of Company Law Tribunal under the companies act spelt out the norms on the appointments and functions of the tribunals that are set to replace the High Courts. The court said that the basic premise upon which the tribunals are established is to provide justice speedily and efficiently by reducing the burden of the High Courts, in order to achieve this these tribunals should be independent of the influences of executive and that they should deliver justice in a fair and impartial manner. The court clearly stated that “The fundamental right to equality before law and equal protection of laws guaranteed by Article 14 of the Constitution clearly includes a right to have the person's rights, adjudicated by a forum which exercises judicial power in an impartial and independent manner, consistent with the recognized principles of adjudication.”

In the light of this appointment of members of the IPAB comes under severe criticism. Basically the IPAB consists of both judicial and technical members. The technical members are appointed on the premise that their expertise is required to adjudicate on technical aspects. The court, in the above case, stated that technical members should be appointed only when there is an absolute requirement is to do so. If indiscriminate appointment of technical members is made, it will adversely affect the independence of the judiciary since these tribunals are effectively a part of the judiciary itself. With the IPAB being a body that replaces the High Court in all aspects, its jurisdiction will require it to decide upon important questions on law which in turn will require deep knowledge of law by its members. But the qualification criteria for a person to become the president or vice-president of the board does not stipulate any kind of minimum prior judicial experience which leaves a void for someone who does not possess adequate knowledge and cannot appreciate the intricacies of law or even a ‘law degree’ to occupy that position. Moreover, the situation is aggravated by the fact that the salaries of the members of the board is determined by the Ministry of Human resources unlike the judiciary, where it is paid from the consolidated fund of India. This is in gross violation of Article 14 of the Constitution which guarantees a person to be adjudicated by an impartial and independent forum.

Way out of the labyrinth

 The IPAB by the very nature of the cases that it deals with is assuming importance in a global stage that it has to keep in mind at least two international agreements (TRIPS & Doha declaration) in mind while deciding the cases, as said by the board itself in the case of M/s, Aachi Masala Foods (P) Ltd. Vs S.D.Murali and The Registrar of Trademarks, where the board decided the question on its own power to review. Moreover, it wields the power to determine the course of economic development of our country through its rulings over inventions and innovations altogether. But the present situation of the board is unwelcoming and against the interest the nation. Unless reforms are made to restructure the whole board along with reconsideration on the eligibility and appointment of members is done the permanent damage to the IP ecosystem of the country cannot be stopped.