Legally speaking, competition is not clear cut

The Supreme Court Complex in Hulftsdorp, Colombo 12.

For those who see the Food City sign in remote towns and think it’s their familiar Food City, only to find it’s an imitation corner shop with a copycat sign, remember, you are falling for one of the oldest tricks in the book.

From giant Corporates to SMEs, there are business experts being flummoxed every now and then due to the dangers of ‘passing off.’

Those who thought there is only one Pilawoos eatery now see hundreds of Pilawoos by the wayside, and no there’s no official franchise. Imitators sprung up and took up the name, and the original establishment was either overwhelmed and didn’t take action, or was supremely confident of its own stature that they thought imitation was the sincerest form of flattery.

But cases of ‘passing off’ in this way as an established business, aside from being a societal phenomenon-has been a legal minefield. No doubt there are litigants who succeed in staving off competitors.

But those who too jealously guard their businesses have found out the hard way that up to a point, similarities in branding can exist and that this is not necessarily a cause for shutting down your opponent in business.

In the liquor manufacturing business - arrack to be precise - a landmark case was fought between Randenigala Distilleries with Distilleries Co. Distilleries Co had secured a judgement in their favour that a case of passing off existed against Randenigala Distilleries, but the latter appealed to Supreme Court.

To be sure, by any businessman’s yardstick for success, his branding should be his property. But there are obvious imitators who carry off copying other brands because they know how to pass off their brand as someone else’s without making things too obvious. A good legal defence helps.

The party that sues has to establish that their brand has earned goodwill among the public.

Distilleries Co. had an established brand and that was acknowledged by the Supreme Court in Appeal.

The point that went against Distilleries Co. was that the Company seemed to litigate on the basis that mere copying or cut throat competition was good enough to win a case of ‘passing off.’

But the Supreme Court Bench decided otherwise, overturning the Commercial High Court order. The courts citations were blunt to the point of being snide. In quoting a decided case, the Judges observed:. At the heart of passing off lies deception or its likelihood, deception of the ultimate consumer in particular...Never has the tort shown even a slight tendency to stray beyond cases of deception.

“After they copied our label and our name they have got very big profits”, the Counsel for the Respondent Distilleries Co. alleged. The Court seems to scoff at the idea.

It is the goodwill of the Respondent’s mark that may be protected under the law, and not acts of copying, the then Chief Justice Mohan Peiries wrote in judgement.

The judges made a rather subjective judgement as they are entitled to, on the facts of the case. The Chief Justice in his judgement observed by placing themselves in the shoes of reasonably well informed consumer that, ‘It is clear to this Court that looking at the overall characteristics of the two products, they are sufficiently distinct from each other to satisfy ourselves that the likelihood of confusion will be low.’

The Judges went to the extent of determining that the bottles are generally displayed in shelves in wine stores, and that they are given when people ask for specific brands which meant that the labeling or similarity of labeling did not have much of an impact on the decision of the consumer to purchase one brand over another.

The registration of trademarks in Sri Lanka is governed by the Intellectual Property Act but that’s a different story. Passing off is not only about trademarks but the similarity at various levels and the “get up’ of the product.

It is all about perception one may say, and much like election symbols, the value of a trademark can vary. The Hand election symbol or the Elephant election symbol are not relevant anymore to the Sri Lankan voter who would vote on any symbol as long as that’s associated with the two mainstream political trends of the day.

No person can acquire a trade mark which confers an exclusive right to use a name or word that is used in ordinary, everyday language and, similarly, no person can, by alleging `passing off’, prevent another from using a name or word that is used in ordinary, everyday language. The principle is that, ordinary words should be available for use by everyone.

“English Law does not, however, protect brands as such. It will protect goodwill (via the law of passing off); trade marks (via trade mark infringement) the use of particular words, sounds and images (via the law of copyright); and configuration of articles (via the law of unregistered design rights) and so on. But to the extent that a brand is greater than the sum of the parts that English law will protect, it is defenceless against the chill wind of competition.”, the Supreme Court decided in Rani Grinding Mills vs. Swadeshi Industrial works.

Thus it was that the Samagi Jana Balawegaya was able to successfully use the colour green in its campaign material because nobody can have branded rights as such over a colour. The UNP decided to lodge a protest with the Elections Commissioner over the use of the green brand by the SJB, but didn’t pursue the matter in Court.

So, in the said case of Distilleries Co.vs Randenigala Distilleries, it appears that the judge of the Commercial High Court did not go over the facts of the case but passed judgement on the basis of the similarity i.e: the spectacular copycat effort they thought the Randenigala Distilleries engaged in.

But it’s remarkable the extent to which these devious practices of passing off and unfair competitiveness can impinge on business.

Unfair competition is judged rather severely in Sri Lanka, at least in a legal reading of it. But, that does not mean that the law regarding such unfair trading practices is comprehensive. But Courts do take these matters seriously. There was a client that once approached me and my partner Counsel over the issue of whether he could go to Court over a matter of unfair competition, even though he was a consumer and not one of the businesses involved. Believe it or not, consumers do have locus standi — the justification to come to Court, in cases of unfair trading practice.

Competitiveness is at the core of enterprise, and mimicry of a competitor is part and parcel of vying for markets. It’s deception outright that may get your goat as a consumer, and if you are avid enough in your enthusiasm for a brand, you may sue by all means.

(abeynayake@gmail.com)



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