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ITC Limited vs. Nestle: ‘Magical’ Trade War – Trademark



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Facts

ITC Limited (‘Plaintiff’) and Nestle India Ltd.
(‘Defendant’) have been in dispute due to the usage of the
term ‘Magic/Magical Masala’ for instant noodles by the
defendant. The conflict had arisen in 2013 between the Fast-Moving
Consumer Goods (FMCG) companies: ITC Limited (hereafter
“ITC”) and Nestle India Limited (hereafter
“Nestle”). It was alleged that Nestle’s adoption of
the phrase ‘Magical Masala’ for the purpose of marketing
its instant noodles was phonetically similar to the phrase
‘Magic Masala’ that was utilised by ITC for their instant
noodles namely, ‘Sunfeast Yippee! Noodles’. Following which
ITC filed the present suit against Nestle for passing off. The
court had to focus on the cardinal objective whether exclusive
claim over ordinary words like Magic and Masala can be made either
alone or in combination.

Contentions of Both Parties

It was contended by ITC that the phrase ‘Magic Masala’
had achieved distinctive and supplemental meaning and was linked
with the instant noodle segment of ITC alone. They further
contended that Nestle’s usage of the deceptively similar phrase
‘Magical Masala’ in 2013 would result in the passing off of
their instant noodles to that of ITC. The plaintiff also laid down
the contention that just because the term ‘Magic’ is used
by others from the industry, it has no significance in the present
case as the dispute is limited to instant noodles. Thus, no matter
what, in law, third party use fails to be a defence.

On the other hand, Nestle contended that ITC used the phrase
‘Magic Masala’ as a “product/flavour descriptor”
that describes the nature and character of the masala that is sold
in addition to the bland noodles contained in the packet. Nestle
has used the phrase ‘Magical Masala’ as a “flavour
descriptor” for their instant noodles. Furthermore, Nestle
contended that the words ‘Magic’ and ‘Masala’ or
‘Magic Masala’ are recurrent to the trade whose
significance is laudatory. Therefore, it cannot claim
distinctiveness in order to restrict others from utilising them.
Moreover, section 9(1)(b) of the Trademarks Act, 1999 mentions that
a trademark fails to be registered in case it is applied to
indicate the quality, quantity, intended purpose or the kind of
goods.

Observations of the Honourable High Court

The Hon’ble Madras High Court dismissed the suit after
taking into consideration the pleadings and arguments of both
parties. The Bench of C. Saravanan, J., disagreed with the
contentions raised by the defendant which stated that the phrase
‘Magic Masala’ was adopted to highlight a flavour of the
item, as there is no flavour known as ‘Magic’. Rather, the
court pointed out that the phrase was adopted to acknowledge the
quality of masala present in the product. Therefore, it is
laudatory and cannot be monopolised. Further, the court held that
ITC did not file any trademark application for the phrase
‘Magic Masala’ as a word mark which shows that there was no
intention to use the phrase as a trademark or a sub-brand by them.
The High Court also pointed out that a trademark can be permitted
for registration under the trademark law, only if the mark gained
secondary meaning. However, in this case, the phrases ‘Magic
Masala’ and ‘Magical Masala’ are being used to
determine the various flavours provided by both parties. The bench
also held that a number of manufacturers have been using the phrase
‘Magic’ and ‘Masala’ prior to ITC’s
‘Sunfeast Yippee!’ thereby making it common to the trade.
Moreover, the visual similarities are absent between both the
wrappers with reference to their overall layout, colour scheme and
style thus leaving no scope for passing off.

Judgement Analysis

As per the observations made by the High Court, the phrase
‘Magic Masala’ is descriptive of the contents, common to
the trade and laudatory. Even though the basis upon which the
learned single judge made the decision appears to be fair, there
are some observations in the present case that do not seem fit.

The court mentioned that the phrase ‘Magic Masala’ is
laudatory as it is used as a way to differentiate between flavours,
therefore making it unrecognisable as a trademark. But, the court
also went on to say that if the defendant had not utilised the
phrase ‘Magical Masala’ back then, there could be a
possibility that in the future, the plaintiff’s phrase
‘Magic Masala’ could have achieved distinctiveness.
However, both the considerations appear to be contrary thereby
leaving a spot on the intentions of the court. Therefore, by taking
into account that the phrases at issue are flavour descriptors as
highlighted by the court, the same would fail to have a
monopoly.

Further, in the present case, the point of whether the mark of
the plaintiff is registered or not is irrelevant as it is a suit of
passing off. Hence the chief point that had to be proved with
respect to the phrase ‘Magic Masala’ was its goodwill. Even
if the plaintiff’s trademark was registered, it wouldn’t
have made any difference because it would still be necessary to
prove the presence of goodwill, the likelihood of confusion and
misrepresentation.

Moreover, even if the words ‘Magic Masala’ are
considered protectable as a trademark for the sake of argument, the
defendant’s use of the phrase is only descriptive. The
expression is not used in the sense of a trademark by the defendant
and hence should be allowed to utilise the same.

Conclusion

The present case has pointed out that a mark that has become
common to the trade or is laudatory cannot be registered as a
trademark. But as per section 9(2)(c) of the Trademarks Act 1999,
in case the mark has obtained distinctiveness, i.e. a secondary
meaning with reference to the goods of the manufacturer, then it
can be recognised as a valid trademark.

It was necessary to establish a ‘long and arduous
uninterrupted use’ over the phrase ‘Magic Masala’. It
was also imperative to show that the phrase has acquired a
secondary meaning. Failure to prove such observation led to the
court competently settling the matter in favour of the defendant,
Nestle India Limited.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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