FAO(OS) NO. 62/2008 Page 1 of 46 * IN THE HIGH COURT OF DELHI AT NEW DELHI + FAO (OS) No. 62/2008 CADILA HEALTHCARE LTD. ….. Appellant Through: Mr. Mihir Thakore, Sr. Adv. With Ms. Pratibha M. Singh, Ms. Bitika Sharma, Bijal Chhatrapati, Ms. Shrada Seth Advs. Versus GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD. & ORS. ….. Respondent Through: Mr. Mihir Joshi, Sr. Adv. with Mr. Arvind Nigam, Mr. Pranit Nanavat, Mr. Rishi Agarwal, Advs. CORAM: HON’BLE MR. JUSTICE MUKUL MUDGAL HON’BLE MR. JUSTICE VIPIN SANGHI 1. Whether the Reporters of local papers may be allowed to see the judgment? YES 2. To be referred to the Reporter or not? YES 3. Whether the judgment should be reported in the Digest? YES J U D G M E N T MUKUL MUDGAL, J. 1. The present appeal arises from the judgment/ order dated 23rd October, 2007 in CS (OS) No. 605/2007 titled as Cadila Healthcare Ltd. vs. Gujarat Co-operative Milk Marketing Federation Ltd. & Ors. wherein according to the case set up by the appellant the learned Single Judge had FAO(OS) NO. 62/2008 Page 2 of 46 refused injunction to the appellant/plaintiff even after coming to the conclusion that the appellant‘s Trade Mark ‗Sugar Free‘ has acquired a considerable degree of distinctiveness amongst traders and consumers and accepting that the appellant‘s Trade Mark had achieved a secondary meaning. The respondent had also filed cross objections to a limited extent. 2. The brief facts of the case as per the appellant are as follows:- a) In 1988, Cadila Chemicals Ltd. an erstwhile company of Cadila Group developed and launched in the market, a product containing ―Aspartame‖ an artificial sweetener as a low calorie table-top sweetener, which is as sweet as sugar containing only 2% of its calories. b) The appellant's product containing 'aspartame', a protein derivative, was launched under the brand name/trademark 'Sugar Free' in the year 1988. The product under the trademark 'Sugar Free' was originally coined and adopted as aforesaid by Cadila Chemicals Ltd., predecessors of the appellant. c) In the year 1995, consequent upon the restructuring of the ―Cadila Group‖ of businesses, the business of Cadila Chemicals Ltd. was transferred and bifurcated between two transferee companies viz. Cadila Healthcare Ltd., i.e., the appellant and Cadila Pharmaceuticals Ltd. with all its property, FAO(OS) NO. 62/2008 Page 3 of 46 rights and trademarks, both registered and unregistered, vide a judgment and order dated 2nd May 1997 of the Gujarat High Court passed in Company Petition No.82/1996. d) By virtue of the said order, certain assets of Cadila Chemicals Ltd. including its trademark 'Sugar Free' and other marks along with their goodwill came to be transferred to and became vested in the appellant, and as a result the appellant became the proprietor of the brand name/trade mark 'Sugar Free' with effect from 2nd May 1997. e) Upon becoming the proprietor of the trademark 'Sugar Free' as aforesaid, the appellant continued to promote and market the said product under the trade mark 'Sugar Free' and since then has been continuously using it. f) The appellant has 74% market share in the sugar substitute market in India and the total sales of the appellant's products under the trademark 'Sugar Free' alone, upto 31st December 2006 has been around 216.40 crores. g) The respondents adopted a trade mark consisting of the words 'Sugar Free' for their frozen dessert, identical with and deceptively similar to the appellant's various trademarks, the essential feature of each of which is the words 'Sugar Free' as a trademark in respect of their products. FAO(OS) NO. 62/2008 Page 4 of 46 3. The appellant filed a suit before the learned Single Judge seeking a decree of permanent injunction for restraining the respondents from using in any manner, particularly in relation to their products, viz. frozen desserts and choc minis, the expression ‗Sugar Free‘, which, the appellant claimed had acquired exclusivity as a trade mark in relation to the various products manufactured by it. 4. The learned Single Judge by his impugned judgment dated 23rd October, 2007 inter alia recorded the above findings:- (a) Since the plaintiff-appellant‘s product herein is specialized in nature, being sweeteners/sugar substitutes, the popularity of sugar free range of products will have to be ascertained within a specific and limited classes of consumers. Such persons can include medical professionals, patients of diabetics/heart patients or simply those who are fashionably health conscious. (b) Consequently, the distinctiveness associated with the appellant‘s trademark is essentially relative and is in respect of a particular class of consumers. Thus, the distinctiveness of a trademark can only be ascertained in relation to consumer-base. (c) The data produced by the appellant does not indicate that the trademark ‗Sugar Free‘ acquired a considerable degree of distinctiveness FAO(OS) NO. 62/2008 Page 5 of 46 among the traders and consumers but that is not ipso facto conclusive of an action of passing off which requires that not only there is an acquisition of secondary meaning by trademark or distinctiveness associated with it, but in fact also requiring that the respondent has misrepresented his products as those of the appellant‘s and caused damage to the distinctiveness associated with the trademark used in relation to the appellant‘s product. At this interim stage the respondents goodwill and the typical style and packaging coupled with the well aware customer base which can easily distinguish between the appellant‘s and the respondent‘s product and deception is thus, prima facie, ruled out. (d) While there is no perceptible similarity between the two different packaging in terms of colour scheme and get up, sugar free has been written in more prominent form than that of Amul, thus focusing on the word ‗Sugar Free‘ by overshadowing the respondent‘s trademark Amul. (e) The chances of the consumer, who is the regular purchaser of the appellant‘s products, being deceived are minimal and such a consumer can easily distinguish between the appellant‘s and the respondent‘s product. (f) There, however, may be a possibility that such a consumer may be led into believing that the appellant‘s product figures as an ingredient of the respondent‘s frozen dessert. FAO(OS) NO. 62/2008 Page 6 of 46 (g) Merely because other alternatives are available to the respondent to describe its product, does not imply that the appellant can be allowed to arrogate itself to monopoly to use the expression ‗Sugar Free‘ which is inherently descriptive in nature and has become publicis juris in relation to food and beverages. (h) Mere descriptive distinction of a trademark by a trader, irrespective of acquisition of secondary meaning and distinctiveness in relation to trader/appellant‘s product cannot entitle the appellant to preclude others from using the said expression for the purposes of describing the characteristic features of their products. Thus, no blanket injunction can be granted against the respondent from using the expression ‗Sugar Free‘ only in the descriptive and not trademark sense particularly when the use of such an expression is widespread in relation to food and beverages. Thus, no embargo can be placed on the use of expression ‗Sugar Free‘ by the respondent particularly when the respondent had prima facie satisfied the court of its bonafide intention to use the said expression, not as a trademark but only in descriptive and laudatory sense. (i) There may exist a fair risk of misleading the consumers of appellant into believing that the appellant‘s product figures as an ingredient in the respondent‘s pro-biotic frozen dessert. FAO(OS) NO. 62/2008 Page 7 of 46 5. Consequent to the above findings, the learned Single Judge directed as under: - ―(i) The defendant is restrained from using the expression ‗Sugar-free‘ in the present font size which is conspicuously bigger than its trade mark ‗Amul‘. (ii) The defendant is free to use the expression ‗Sugar- free‘ as part of a sentence or as a catchy legend, so as to describe the characteristic feature of its product.‖ 6. The learned Senior Counsel for the appellant Shri Mihir Thakore articulated his arguments while assailing the learned Single Judge‘s judgment in brief as follows: A) The appellant‘s mark ‗Sugar Free‘ is not descriptive but merely suggestive. In support of this contention he submitted that: i) The appellant‘s trade mark ‗Sugar Free‘ is a coined word and an ungrammatical combination of two English words. Even assuming that it is not a coined word, even then it is not descriptive of the appellant‘s product but merely suggestive. The appellant‘s product which is an artificial sweetener cannot be directly consumed or eaten. ‗Sugar Free‘ would not be apt to describe an item which is not directly consumed but is merely an additive. The appellant has adopted it as a mark for a sugar substitute since 1988, when no products containing artificial sweeteners were manufactured or marketed in India or imported into India, there was absolutely no use of FAO(OS) NO. 62/2008 Page 8 of 46 ‗Sugar Free‘, or any other similar word to describe the products which did not contain sugar. A sugar substitute or artificial Sweetener cannot be described as Sugar Free, even if the meaning ‗free of sugar‘ is given to the ungrammatical phrase ‗Sugar Free‘, since that which is used as a substitute for sugar in foods or beverages cannot be termed free of sugar and only the foods or beverages so made could be described as free of sugar. Aspartame or Sucralose are artificial sweeteners or sweetening agents which can be used in lieu of sugar. Such chemical compounds cannot be described free of sugar. ―Sugar Free‖ is therefore not descriptive of a sugar substitute or Artificial Sweetener such as Aspartame/Sucralose. At the highest ‗Sugar Free‘ is suggestive of the use to which the chemical compound can be put to. A correct description for such chemical compound is ―Artificial Sweetener‖ or ―Sugar Substitute‖. ii) Reliance was placed on Oxford Dictionary, wherein it was submitted that no such word is found. Reliance was further placed on Sections 5 (iv) and 7(v) of the Prevention of Food Adulteration Act (hereinafter referred to as the ―PFA Act‖) read with rule 47 of the Prevention of Food Adulteration Rule (hereinafter referred to as the ―PFA Rule‖) as it existed prior to its amendment by GSR 388 (E) dated 25th June 2004 with effect from 25th June 2004 prohibited manufacture, sale and import of articles of food containing artificial sweetener, other than carbonated water, soft drink concentrate, FAO(OS) NO. 62/2008 Page 9 of 46 supari, panmasala and pan flavoring material and it is only with effect from 25th June 2004 that it is permissible to use artificial sweetener in certain food articles. This would also show that in terms of the requirement of law, chemical compounds which sweeten food articles are described as ‗artificial sweetener/tabletop sweeteners‘ and food articles containing such artificial sweeteners have to be described with captions such as, ‗no sugar added‘ and ‗contains artificial sweetener‘ and not as, ‗Sugar Free‖. iii) It was contended that the Court in the case of Proctor & Gamble vs. Office of Harmonisation in the Internal Market (OHIM) , famously known as “the Baby Dry case” (2002) RPC 17, held that there was an unusual juxtaposition of two independent English words which is unlikely to acquire a secondary meaning. The argument of the respondent that ‗Sugar Free‘ is a familiar English word and therefore the Baby Dry judgment does not apply, fails to properly appreciate the ratio of the Baby Dry judgment where the emphasis is not on ‗familiar expression‘ in English language but on ‗familiar expression‘ in English language for designating baby nappies or for describing their essential characteristic. The appellant‘s plea that the word ―Sugar Free‖ is not descriptive of its product and merely suggestive cannot be prima facie rejected in the light of discussion in McCarthy on Trademarks. A suggestive mark is entitled to the same protection accorded to a coined and fanciful mark. Even a ―fair use‖ defense is a defense only FAO(OS) NO. 62/2008 Page 10 of 46 against descriptive, not a suggestive, trademark. Suggestive mark is thus protected without any necessity for providing secondary meaning. B) The submission of the respondent that ‗Sugar Free‘ is generic and has no trademark significance is untenable, as this argument apart from being raised for the first time cannot be sustained for the reasons herein below: i) The Sweeteners cannot be divided by creating two classes – sugar based and sugar free. The correct criteria for describing the sweeteners would be – natural sweeteners and artificial sweeteners. Natural sweeteners are substances like sugar, jaggery, brown sugar etc. Artificial sweeteners are the genus of which Saccharine, Aspartame, Sucralose are species. These artificial sweeteners can never be termed as sugar free sweeteners either colloquially or otherwise. ii) Generic terms are generally nouns and only in very rare cases they can be adjectives. Reliance is placed for the above reasoning on Gilson on Trademarks Edition (2007) and McCarthy on Trade Marks (2007). iii) A generic term would answer the question ―What are you? (What is this?)‖ If a powder of artificial sweetener is placed before a lay person, he will answer the above question by saying it is an artificial sweetener or a sweetener. If on the other hand, the same question is put to a person well- versed in chemical compounds, the question will be answered by saying it is FAO(OS) NO. 62/2008 Page 11 of 46 Saccharine or Aspartame or Sucralose, as the case may be. None of them will answer that the product is Sugar Free Sweetener or much less, ―Sugar Free‖. The answer to the above question therefore, would never be ‗Sugar Free‘ and consequently, ‗Sugar Free‘ is not generic. iv) It would be pertinent to point out that Sugar Free is neither an attribute, nor an adjective, vis-à-vis an artificial sweetener. ―Sugar Free‖ is an additive suggesting that the product will sweeten, without the disadvantages of sugar, that it is safe for diabetics/health conscious person, entitling it to protection as a trademark. In any event, Sugar free is not generic of artificial sweeteners. ‗Sugar Free‘ is also not generic of the products that are free of sugar. v) Again a generic term would answer the question ―what are you? In the context of the products that are free of sugar such as ice creams or cookies or biscuits or chyawanprash, the answer to the above question cannot be sugar free and would necessarily be ice cream or cookies or biscuits or chyawanprash as the case may be. vi) All products that are free of sugar are generally meant for the diet conscious or for the diabetics. If such products do not contain sugar, ‗Sugar Free‘ is at the most descriptive of such products and cannot be termed generic of such product. FAO(OS) NO. 62/2008 Page 12 of 46 C) It is evident that ‗Sugar Free‘ is neither generic of artificial sweeteners nor generic of products which do not contain sugar. The argument advanced by the learned counsel for the respondent is to anyhow categorize „Sugar Free‟ as generic. Assuming without admitting that the ―Sugar Free‖ is descriptive of the products that do not contain sugar, it is certainly not generic of such products and as far as artificial sweeteners are concerned, it is neither generic nor descriptive and is consequently entitled to the same status as a coined word and can be registered as trademark. Moreover, even in respect of such food articles which do not contain sugar, the use of ‗Sugar Free‘ purportedly to describe them is only after the amendment of the Prevention of Food Adulteration Act, 2004 and much after the appellant had acquired huge reputation and goodwill in respect of its product. Such user clearly is tantamount to passing off. D) The word ―Sugar Free‖ has become distinctive of the sugar substitute and has acquired a secondary meaning in the sugar substitute (Artificial Sweetener) market namely as the appellant‘s sugar substitute. The appellant adopted the mark for its sugar substitute in 1988 and has since then been continuously using it exclusively. There was almost no use of ‗Sugar Free‘ in India till 2004. The appellant has also marketed a drink containing Aspartame namely ―Sugar Free Dlite‖. The appellant has 74% market share in the sugar substitute market in India. Even a common English word FAO(OS) NO. 62/2008 Page 13 of 46 descriptive of the product can become distinctive by a long and continued use and is entitled to similar protection, and that a man has no right to put off his goods for sale as the goods of a rival trader and induce purchasers to believe that the goods which he is selling are manufactured by another entity or are connected in some manner with such other entity. The appellant can take action against anyone who seeks to use their goods in such a manner that it would indicate some connection with the appellant. The appellant‘s mark ―Sugar Free‖ has become distinctive in India by long exclusive use as a trade mark by the appellant. The distinctiveness need not be inherent but can be acquired and can be distinctive to a class of consumers or an area/country such as India. The appellant is entitled to seek injunction against the respondent from using their mark and committing the tort of passing off. E) In support of the above argument, Shri Thakore emphasized that the descriptive marks which have achieved a secondary meaning and a very strong consumer recognition would be entitled to the same wide scope of protection afforded to the most fanciful and invented mark. That is, a descriptive mark, upon attaining a secondary meaning may be protected just as if it had been ―strong‖ and arbitrary or fanciful at its inception. Even the most descriptive term is capable of becoming very well-known and a ―strong‖ mark through extensive consumer recognition and association. The FAO(OS) NO. 62/2008 Page 14 of 46 evaluation of the strength of a mark depends solely upon the placement of a term on the spectrum of marks as to whether it is inherently distinctive or not distinctive, and, in addition to that one has to look at the market place strength of the mark at the time of litigation. Thus, the true relative strength of a mark can only fully be determined by weighing two aspects of strength that is Conceptual strength like the placement of mark on the spectrum of marks and Commercial strength like the market place recognition value of the mark. F) The appellant mark ‗Sugar Free‘ in respect of sugar substitute is a well known and a strong mark. It has been in the market for the last 17 years. There has been substantial advertisement in respect of the appellant‘s product both on TV channels and in newspapers. The appellant has almost 3/4th of the market share in sugar substitutes. The appellant‘s mark even if termed as descriptive has attained a secondary meaning in the context of sugar substitutes and has to be protected just as if it had been a strong and arbitrary and fanciful mark at its inception. G) He further contended that the adoption and use by the respondent of the words ‗Sugar Free‘ on their packing is dishonest for the following reasons: (1) The respondent knew that it is the appellant‘s trade mark for sugar substitutes such as Aspartame and Sucralose. FAO(OS) NO. 62/2008 Page 15 of 46 (2) The respondent knew that appellant is marketing a drink under the trademark ―Sugar Free Dlite‖ containing sugar substitute and is already in the Food and Beverage market. (3) The manner and size of writing on the packaging clearly indicates use in the trademark sense and not merely to describe the characteristics of the product. If it was only to describe the product characteristics, it could have been used in any other manner. In fact, the packet of Frozen Dessert already contains the following words ―INDIA‘S FIRST SPECIALLY CREATED LOW FAT DIABETIC DELIGHT‖ which is sufficient to describe the product and there was absolutely no need to use the word ‗Sugar Free‘. (4) The Gujarati advertisement translates all other words including the word ―INDIA‘S FIRST SPECIALLY CREATED LOW FAT DIABETIC DELIGHT‖, but ‗SUGAR FREE‘ continues to be stated as such in Gujarati clearly indicating the use of these words in the trade mark sense. (5) The hoardings show the use of Sugar Free also in slogan ‗Sugar Free Guilt Free Worry Free‘ in addition to ‗Sugar Free‘ in large lettering clearly indicating use in trademark sense and not in descriptive sense. (7) If the only manner in which the respondent‘s product could be described is Sugar Free, it could be understood that the respondent has used Sugar Free to describe the product, but when product can be described in FAO(OS) NO. 62/2008 Page 16 of 46 innumerable other ways such as ‗Free of Sugar‘, ‗Sugar Less‘, ‗No Sugar‘, contains artificial sweetener‖ etc., the use of the distinctive trade mark of the appellant is dishonest. (8) The respondent had negotiated to purchase appellant‘s ‗Sugar Free‘ for the purpose of manufacturing and marketing diabetic ice-cream. In view of this, it became the duty of the respondent not to use the appellant‘s trademark while marketing its product, particularly when it did not purchase the product of the appellant for use in making such food product. Using the appellant‘s Trade Mark clearly amounts to taking advantage of the appellant‘s reputation and giving at least an impression to some members of the public that there is connection between the respondent‘s product and the appellant. H) The manner in which ‗Sugar Free‘ is depicted on the packing as well as in the advertisements and the repeated use of the term ‗Sugar Free‘ in the advertisements clearly indicates that the term ‗Sugar Free‘ is not used in purely descriptive sense. The use by the respondent is not fair. Fair use of a descriptive word by the respondent would be in a non trademark sense. In the instant case, there is an overuse of ‗Sugar Free‘ clearly demonstrated by the public advertisement hoardings. The use by the respondent of Sugar Free is not to describe his goods is evident, inter alia, from the fact that the phrase ―INDIA‘S FIRST SPECIALLY CREATED LOW FAT DIABETIC FAO(OS) NO. 62/2008 Page 17 of 46 DELIGHT‖ is being used. Even though to convey absence of sugar there are innumerable alternatives available yet the respondent has chosen to use the words „Sugar Free‟ in bold lettering. Significantly, the advertisements in vernacular language Gujarati does not contain a Gujarati translation of Sugar Free which it should have, if the bonafide intent was to describe the product. The respondent‟s argument that their product is different and their style of writing font is different is only to answer the conventional concept of Passing Off. The fact that AMUL is written and for that reason no person is likely to believe that the product is the product of the appellant does not answer the other tests of Passing Off. I) Thus, permitting the respondent to use the mark ‗Sugar Free will lead to passing off, confusion and deception in the following manner: (1) Consumers or at any rate some of them will believe that there is a connection with the appellant or that appellant‘s product are used in the manufacture of the respondents frozen dessert. It would appear to the consumer or at least to some of them that the product is endorsed, approved or recommended by the appellant thus creating a misrepresentation by connection. (2) The Appellants are already in the Food and Beverage market with a product called ‗Sugar Free Dlite‘ which is a ready to drink beverage. The Appellant‘s legitimate extensions would be to enter into other Foods and FAO(OS) NO. 62/2008 Page 18 of 46 Beverages for Diabetics market like Sugar Free Dlite Jello/Ice-cream/Frozen desserts/Cake mix etc. There could be serious confusion in the market which can cause damage to the reputation of the appellant. If everyone is allowed to use ‗Sugar Free‘, there will be not only confusion