TORT 077 Passing Off and Injurious Falsehood Cadila and Slander of Goods and Title — Law of Torts Notes for Judiciary

Passing Off and Injurious Falsehood: Goodwill, Misrepresentation and Damage, Cadila, and Slander of Goods and of Title

Two torts protect a trader, and they answer opposite attacks. Passing off protects the goodwill he has built against a misrepresentation that another's goods are his: the complaint is imitation. Injurious falsehood protects him against false statements made maliciously about his goods, his business or his title: the complaint is disparagement. Passing off is the common law protection of an unregistered mark and is expressly preserved by the Trade Marks Act, 1999; the leading Indian authority on deceptive similarity is Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd.

The classical trinity, the Cadila factors, injurious falsehood, and how it differs from defamation

1. Passing Off: The Classical Trinity

The element	What must be shown
Goodwill or reputation	The plaintiff must have established goodwill or reputation attached to the goods or services he supplies, in the mind of the purchasing public, by association with an identifying get up. Goodwill is the attractive force that brings in custom, and it is property
Misrepresentation	A misrepresentation by the defendant to the public, leading or likely to lead the public to believe that his goods or services are those of the plaintiff
Damage	Damage, or the likelihood of damage, to the plaintiff's goodwill by reason of the erroneous belief

The misrepresentation need not be intentional. Innocent passing off is actionable, though fraud, where it is shown, makes the plaintiff's task much easier and may affect the relief.
The test is the likelihood of confusion in the mind of an average consumer of imperfect recollection. The court does not place the two marks side by side and compare them feature by feature; it asks what impression each leaves on a person who saw one some time ago.
The goodwill may attach to a name, a mark, a label, a shape, a colour scheme, a slogan or the get up of the packaging, so long as it has become distinctive of the plaintiff's goods.
Damage includes dilution. A defendant who erodes the distinctiveness of a mark damages the goodwill even if he takes no sales, and a defendant whose goods are inferior damages the plaintiff's reputation as well.
In a quia timet action the likelihood of damage suffices, and the plaintiff need not wait until the harm is done.
Section 27(2) of the Trade Marks Act, 1999 preserves the action, providing that nothing in the Act shall affect the right of action against any person for passing off goods or services as those of another, or the remedies in respect of it.

2. Cadila and the Test of Deceptive Similarity

📖 Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd., (2001) 5 SCC 73

Facts Both parties were successors to the business of a company that had been divided, and both were entitled to use the word Cadila as part of their corporate names. The appellant marketed a drug for cerebral malaria under the mark Falcigo; the respondent proposed to market a drug for the same condition under the mark Falcitab. The appellant sought an injunction in a passing off action, contending that the marks were deceptively similar.

Held The Court declined to interfere with the concurrent orders below, but laid down the factors to be applied and directed an expeditious disposal of the suit.

Ratio In deciding whether there is a likelihood of deception or confusion in a passing off action, the following are to be considered: the nature of the marks, whether word marks, label marks or composite marks; the degree of resemblance between them, phonetic and visual and in the idea conveyed; the nature of the goods in respect of which the marks are used; the similarity in the nature, character and performance of the goods of the rival traders; the class of purchasers likely to buy the goods, their education and intelligence and the degree of care they are likely to exercise; the mode of purchasing the goods or of placing orders; and any other surrounding circumstances. The Court emphasised that for medicinal and pharmaceutical products a stricter standard is to be applied, since confusion may be fatal rather than merely costly, and that the conditions prevailing in India, of varying literacy and many languages and dialects, make phonetic similarity a greater danger here than in countries where the purchaser can be assumed to read the label.

3. Passing Off and Trade Mark Infringement

	Passing off	Infringement
The source	The common law, preserved by section 27(2) of the Trade Marks Act, 1999	Statutory, under section 29 of the Act
Registration	Not required	Required. The remedy is available only to a registered proprietor
What is protected	Goodwill	The statutory right conferred by registration
What must be proved	Goodwill, misrepresentation and damage	Use of a mark identical or deceptively similar in relation to the goods for which it is registered
Beyond the registered goods	The action follows the goodwill wherever it extends	Confined to the goods or services covered by the registration, subject to the provisions on well known marks

4. Injurious or Malicious Falsehood

The essential	What must be shown
A false statement	About the plaintiff's goods, business, property or title. The plaintiff must prove it false
Published to a third person	As in defamation
Malice	An improper motive, or the absence of honest belief in the truth of the statement
Special damage	Actual pecuniary loss. The tort is not actionable per se

5. Slander of Goods and Slander of Title

Slander of goods is a false and malicious statement disparaging the plaintiff's goods: that a rival's product is adulterated, unsafe, defective, ineffective or counterfeit.
Mere puffing of one's own goods is not actionable. A trader may say that his goods are the best in the world, and nobody believes him. He may not say that a rival's goods are poison.
The line is between comparison and disparagement. Comparative advertising that honestly compares is permitted; a statement that falsely attributes a defect to a rival product is not.
Slander of title is a false and malicious statement casting doubt on the plaintiff's title to property: asserting a mortgage that does not exist, a lien that has been discharged, or an encumbrance that was never created, so that the plaintiff cannot sell or can sell only at a lower price.
The loss in a slander of title case is usually the sale that fell through, and must be pleaded and proved as special damage.

6. Injurious Falsehood and Defamation

	Injurious falsehood	Defamation
What is protected	The plaintiff's property, goods, business or title	The plaintiff's reputation
Who proves falsity	The plaintiff must prove the statement false	Falsity is presumed; the defendant must prove truth
Is malice required	Yes. It is essential	No. It is irrelevant except as it affects certain defences
Is damage required	Yes. Special damage must be pleaded and proved	No for libel, and no for slander in India
The effect on the person	It need not lower the plaintiff in anyone's estimation at all	It must lower him in the estimation of right thinking persons

A single statement may be both. To say that a trader knowingly sells adulterated goods carries an imputation on the goods, which is injurious falsehood, and an imputation of dishonesty on the man, which is defamation.
A plaintiff will frequently plead both in the alternative, and the difference in the burden of proof makes defamation the easier claim where the words reflect on the person.

⚠ Why passing off requires goodwill and not merely a good idea

The first element of passing off is the one most often misunderstood. What the tort protects is not the mark, and not the idea behind the packaging, but the goodwill: the accumulated willingness of customers to return, which the trader has built up over time and which the law treats as his property. That has two practical consequences. The first is that a new entrant with an attractive get up and no trading history has nothing to protect, however original his design, and must look to registration, to copyright or to design law instead. The second is that goodwill is local and specific: it extends to the territories where the plaintiff actually trades or where his reputation has spread, and to the goods with which the public associates him, and not beyond. A plaintiff who can show a long history of trading, substantial sales and advertising, and public recognition of his get up has almost won the case; one who begins with the defendant's conduct and works backwards usually has not.

7. The Position Stated Shortly

1. Passing off protects goodwill against a misrepresentation that the defendant's goods are the plaintiff's.

2. The classical trinity is goodwill, misrepresentation, and damage or the likelihood of damage to that goodwill.

3. The misrepresentation need not be intentional, and innocent passing off is actionable.

4. The test is the likelihood of confusion in the mind of an average consumer of imperfect recollection, not a side by side comparison.

5. Section 27(2) of the Trade Marks Act, 1999 expressly preserves the action, which is available whether or not the mark is registered.

6. Cadila Health Care v. Cadila Pharmaceuticals lays down the factors for deceptive similarity: the nature of the marks, the degree of resemblance, the nature and similarity of the goods, the class of purchasers, the mode of purchasing, and the surrounding circumstances.

7. A stricter standard applies to medicinal products, and Indian conditions of varying literacy and many languages make phonetic similarity especially dangerous.

8. Injurious falsehood requires a false statement about the plaintiff's goods, business or title, published maliciously and causing special damage.

9. Slander of goods disparages the goods; slander of title casts doubt on the plaintiff's title. Mere puffing of one's own goods is not actionable.

10. Injurious falsehood differs from defamation in that the plaintiff must prove falsity, malice is essential, and special damage must be proved.