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How Can Unfair Competition Affect Trademarks?

Khurana and Khurana, Advocates and IP Attorneys India


When in a market a lot of traders and businesses deal in the same group or category of products or items, then there arises the possibility of some misconduct, cheating or dishonest practices taking place as well. People start their businesses with the hope of gaining profit and with the greed to achieve success as quickly as possible, they often are seen engaged in unfair trade practices.  In the Brussels revision of the Paris Convention in 1900, unfair competition was mentioned for the first time.

 

Unfair competition generally means practices that are contrary to honest, good faith and ethical practices that businesses should follow. It involves deception, fraud, cheating and dishonesty. It is considered that it is the duty of the customers to act as judges and wisely choose which product they should buy and which one they should refrain from buying but in this economy where there are so many sellers, it is not an easy task. Dishonest Sellers often indulge in unfair practices where they infringe the trademark, copy the trade dress, use comparative advertisements and disclose trade secrets this creates a lot of confusion in the mind of the public and puzzled customers aren’t able to reasonably identify the good quality products and falls prey to unfairness. They aren’t able to distinguish between real and infringed goods which leads them to suffer from losses, health hazards and loss of trust in the company.

 

Unfair competition is not only disadvantageous for customers’ interests as it risks quality and safety assurance, but it is also very destructive to the company’s reputation and customer base. Customers usually rely on a company’s goodwill while buying goods from the market, and if the product quality of that deceptively similar good doesn’t match the expected quality, the customers lose their trust in the products and even though the goods are not produced by the original company, they still suffer from loss of customer base.

 

Trademark is an IPR that helps to protect any mark that can be represented graphically and can distinguish goods and services from one another. Trademarks can be any logo, symbol, shape etc. The trademark is a very useful IPR especially in the industrial sector as it helps to distinguish one brand from another, therefore helping in promoting the product, increasing goodwill of the company and creating a brand value and sense of safety in the mind of consumers. Trademark is a very essential IPR to protect the work of one company and stop another from infringing their trademark and violating their hard work.

 

It is important that Trademark remains protected and safeguarded but it can be infringed by various unfair competitive practices.

 

Unfair competition infringing Trademark

 

  • Comparative/ Misleading Advertisement- Advertisements play a very influential role when it comes to attracting customers to buy the company’s product. Where these advertisements are used to attract customers, they can also be used to ruin the image of their competitors’ products or mislead the general public. Companies mislead customers through the way of advertisements where they falsely claim that their products have something that the other products don’t and they are better than others or try to claim that the other product is of low quality and lowers the reputation of the product in the market. In the second case, they either directly use the brand name or photo of the product or indirectly try to indicate a particular product or use blur shots or similar packaging products as their competitors. The most recent example of a misleading advertisement is in which Patanjali claimed that their product Coronil is a cure for corona, it was declared to be a misleading advertisement. Another example is Dove where Dove claimed that their product is soft on the skin and doesn’t harm it, unlike its competitors who use toxins in their product, it is an example of comparative advertisements.

 

  • Discloser of Trade Secrets- Trade secrets are also part of a business’s key to success as they make them distinct and unique from other products. Be it Maggi’s masala secret or Coca-Cola’s secret recipe, the unique flavour separates them from everyone else. Companies usually sign a non-disclosure agreement with their employees that prohibits them from disclosing any secretive information about the company but a lot of times, the competitors try to break the code and know the secret. Violation of a Non-Disclosure Agreement happens when the employees leak the secret in exchange for money or the company tries unethical means to know about the secret. Article 39(2) of the TRIPS Agreement states that non-disclosure agreements should be protected against the disclosure of trade secrets. 

 

  • Disparagement- Competitors use tactics where they try to defame or discredit the competitors. Here the aim is not the product but the owner or some key personnel of the company. Companies issue untruthful aspersions about competitors that harm their reputation and eventually harm the goodwill of the company. The competitors try to lower the image of their competitors in the minds of the general public so that they can lose their trust in the company and will not buy their goods.

 

  • Infringement/ dilution of trademark- Establishing goodwill and building a brand name is not an easy task. Sometimes it takes years of hard work and money for a company to build the reputation that they have today. A lot of people try to use that established reputation by deceptively imitating or mimicking the trademark and gaining customers. They try to take advantage of the competitor’s achievement and gain customers by falsifying their mark and letting the customers believe that those infringed goods come from an authentic source, hence defrauding the customers. For example, Ominos mimicking Dominos, Abibas infringe Adidas etc.

 

  • Counterfeiting of trademarks- it is also a great problem that harms even the nation. In this, the product or service that is not one of the legitimate trademarks is sold by the name of the original owner.

 

  • Illegal Ways- The company can also indulge in illegal ways where they might destroy a competitor’s stocks or destruction of a competitor’s returnable bottles. They might also try to cheat or use defamation as a tool.

 

  • Cheap Copies- this is also a way where unfair practice takes place. The competitors’ sales of second-hand products on the name of the brand name and the product might not even come from an authentic source. This not only affects the goodwill of the company but also has an economic impact as those cheap copies are sold at much lower prices and therefore, people tend to buy them more causing great damage to the original company’s economy.

 

  • Monopoly- the big players try to keep the monopoly in their field by trying to eliminate the small competitors that enter into market. Either the big players would not let the small players enter the market or they would buy their IPRs and business by pretending to effectively eliminate the upcoming competition.
  • Reverse Engineering- it is a process in which the competitors try to figure out the process by the way of the final product. This used to happen when the product patent was not granted to the inventors but since 2005, the product patent has reduced the chances of reverse engineering but in trade secret, this can be used to find out the products used by the company and ultimately, infringing their IPR.

 

These are the ways where the company use unfair methods to increase their consumer base, popularity and profit. Unfair practices of course are unethical and illegal and it not only harms the interests of customers and the company but also of the nation.

 

Remedies for unfair practices

 

Article 10bis (3) of the Paris Convention obliges the members to prohibit all acts that can cause confusion in the minds of the public. The Competition Act of 2002 and the Consumer Protection Act of 2019 deal with unfair competition.

 

Where IPR usually creates a monopoly in the market by giving exclusive rights, competition law tries to promote fair practices by eliminating monopoly. IPR is an exception to the Competition Act. It ensures that IPR is not exploited or abused by competitors and market works by fair means. The Competition Act protects the rights of the company and makes sure that no one can indulge in any unfair means. It promotes fair competition. Section 3 of the Act prohibits Anti-Competitive Agreements, the section forbids any such trade agreement that has the potential to cause an appreciable adverse effect on competition within India.

 

Consumer Protection Act safeguards the rights of customers from business exploitation and unfair practices. It increases the rights of the consumers against defects in service or violation of their rights and it also increases the liabilities of the sellers and pushes them to only act in ethical ways. Consumers can use the consumer protection forum to complain against unfair practices and claim remedies against them.

 

Along with these, the Trademark Act of 1999 gives remedies for also protects the trademark owners and allows the person whose trademark is infringed to file a suit for infringement if their mark is registered and if unregistered, they can go for the Law of Tort remedy of Passing off.

 

Surely, there are unfair methods taken into practice by some people but Law also tries to protect the interest and rights of everyone.

 

Conclusion

 

Trademark is one of the most essential IPRs for a business entity especially if they are dealing with goods or services. Though it should be the duty of everyone to respect and not violate the trademarks of others but many do violate them. In our daily lives, we see the trademarks of famous brands getting infringed by other people who try to deceive people into thinking that they are coming from legitimate sources. This poses a grave risk as using unfair competition can cause great economic and reputation damage to the company and even the health, safety and security of the consumer is at stake as they purchased the product by believing the trademark name from which it is sold.

 

Therefore, violating the trademark by unfair practices poses a serious threat to each and every stakeholder and these practices should be curbed by taking strict action against the infringer by way of different remedies given by different laws. Infringing a trademark is a much more dangerous threat than we assume it to be. It can even harm a country’s economy or its reputation in the international standing.

 

Unfair competition should be dealt with seriously and strictly so that it can create a deterrence effect so that nobody tries to infringe the trademark of anyone again and the interests of consumers and trademark owner can be protected.

 

References

  • https://lawresearchguides.cwru.edu/IP/unfair-competition
  • https://blog.ipleaders.in/protection-of-ipr-against-unfair-trade-practices/
  • https://www.wipo.int/edocs/mdocs/sme/en/wipo_kipo_kipa_ip_ge_08/wipo_kipo_kipa_ip_ge_08_www_109885.ppt
  • https://www.wipo.int/wipolex/en/legislation/details/1782

 

Khurana and Khurana, Advocates and IP Attorneys



About the Firm

Khurana and Khurana, Advocates and IP Attorneys

AddressD-45, UPSIDC, Site IV, Kasna Road, Greater Noida - 201308, National Capital Region, India
Tel91-120-313 2513, 91-120-350 5740
Fax91-120-4516201
Contact PersonTarun Khurana
Emailinfo@khuranaandkhurana.com
Linkwww.khuranaandkhurana.com


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