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Written by Aashlin Maria Alex, Legal intern and verified by Sunil Jose, Managing Attorney, Suns Legal.
INTRODUCTION
Trademark law primarily focuses on protecting the goodwill and reputation associated with a brand, ensuring that consumers are not misled and brand owners will benefit from the goodwill that the brand enjoys in the market. When a party uses identical marks of already existing trademarks for their goods or services, it amounts to passing off. A lesser-known but equally significant concept within trademark law is reverse passing off. In reverse passing off, the wrongdoer markets goods or services produced by another party under their brand or label, often by removing any source-identifying elements. Such acts may also include selling unauthorised copies of a manufacturer’s product as if they were original creations of the wrongdoer. This conduct misleads consumers into believing the goods originate from the wrongdoer, undermining the original producer’s goodwill and potential market share.
For instance, if a clothing company, ‘WX,’ purchases LEVIS jeans in bulk, removes the original labels, replaces them with their own, and sells the products, this constitutes reverse passing off.
IMPACT ON MANUFACTURERS AND CONSUMERS
Reverse passing off impacts manufacturers and consumers in multiple ways. For manufacturers, it undermines their market identification character. When a competitor, such as WX, sells LEVIS jeans under their label, it prevents consumers from recognising LEVIS as the true source of the product. This misrepresentation diminishes the original manufacturer’s efforts to establish a distinct identity for their product, diminishing their brand recognition and goodwill. Additionally, the competitor gains an unfair market advantage from the reputation and quality associated with the original manufacturer to promote their label.
For consumers, reverse passing off creates confusion and misleads them about the true source of the goods. This misrepresentation increases their search costs, as they cannot associate the product with its original manufacturer, making it harder for them to make informed purchasing decisions.
TYPES OF REVERSE PASSING OFF
Reverse passing off can be broadly classified into two primary forms: express reverse passing off and implied reverse passing off. Express reverse passing off involves the direct removal or replacement of a trademark or label on a product, followed by its rebranding under the infringers’ mark. This act misleads consumers by concealing the product’s source. On the other hand, implied reverse passing off occurs when a product is marketed or presented in a manner that indirectly suggests it originates from the party marketing it without explicitly acknowledging the actual manufacturer. While it does not involve directly altering labels or trademarks, it still fosters misrepresentation.
HISTORY OF REVERSE PASSING OFF
The concept of reverse passing off was applied for the first time in the US in the case of International News Service v. Associated Press 248 U.S. 215 (1918). In this case, the court has opined that a newspaper can copy news from a rival paper but should also inform readers of the original source. Reverse passing off, codified under Section 43(a) of the Lanham Act 1946, addresses the deceptive practice where a manufacturer misrepresents goods produced by another as its own. The doctrine gained prominence in the mid-20th century, notably with the 1976 case John Wright, Inc. v. Casper Corp, 419 F. Supp. 292 (1976), which explicitly acknowledged reverse passing off as a violation of the Lanham Act. Five years later, the Ninth Circuit in Smith v. Montoro, 648 F.2d 602 (1981), broadened the scope of reverse passing off by ruling that substituting an actor’s name in film credits constituted a false designation of origin under Section 43(a). The 1988 amendment to the Lanham Act further broadens reverse passing off as a statutory violation prohibiting false designations of origin, false descriptions, and misrepresentations, whether or not they involved traditional trademarks.
REVERSE PASSING OFF IN INDIA
In India, reverse passing off is not explicitly codified under the Trademarks Act 1999 but falls under common law principles of passing off. Section 27 of the Act recognises the rights of unregistered trademark proprietors, providing remedies against misrepresentation damaging their goodwill. While reverse passing off is not explicitly mentioned, Indian courts interpret the law broadly to include such acts under passing off.
In Bajaj Automobiles v. TVS Motors, JT 2009 (12) SC 103, the court found TVS guilty of reverse passing off for marketing products originally manufactured by Bajaj. A recent case, Western Digital Technologies Inc. v. Geonix International Pvt. Ltd. (2024), JT 2009 (12) SC 103, involved Seagate Technology LLC and Western Digital Technologies Inc., global manufacturers of Hard Disk Drives (HDDs). They alleged that Daichi International, Consistent Infosystems Pvt. Ltd., and Geonix International Pvt. Ltd. imported end-of-life HDDs, refurbished them, and sold them under their trademarks after removing the plaintiffs’ labels. The court examined both parties’ contentions and ruled in favour of the plaintiffs, awarding compensation for monetary losses while allowing the defendants to sell the products with disclaimers prominently stating that the HDDs were used and refurbished.
The reverse passing off can also attract sections 102 and 103 of the Trademarks Act, which deals with falsifying a trademark. Trademark falsification occurs when an entity creates a mark to market its products without obtaining the rightful owner’s authorisation. This is a cognisable offence attracting imprisonment up to three years and a fine of 2 lakhs.
The plaintiff must demonstrate three key elements to succeed in the reverse passing off claim in India. First, they must establish that the product has acquired goodwill or reputation, signifying consumer recognition of the product as originating from the plaintiff. Second, there must be evidence of misrepresentation by the defendant, indicating that the defendant marketed the product as their own. Lastly, the plaintiff must prove that this misrepresentation caused damage to their goodwill, reputation, or business.
CHALLENGES AND CONCLUSION
Presently, there are some challenges to invoke reverse passing off by all affected manufacturers. Proving goodwill is often difficult, especially for newer or smaller businesses that lack widespread consumer recognition. In such a scenario where all the elements are not met, the claim fails.
Reverse passing off, though less discussed than traditional passing off, is a critical aspect of trademark law that protects the goodwill and reputation of businesses. As the global marketplace becomes increasingly interconnected, protection against reverse passing off is essential to ensure a fair and equitable business environment that promotes innovation and consumer confidence.