The world today is a world of consumerism. Consumerism is on its rise, and the pace is too high. Each year, over 20,000 products are added to the world market from over 50 countries. The common goal of the companies producing such goods is to maximize their profit. They invest enormous amounts in research and development of their products. The marketing is primarily done through advertisements. Advertisements are a way to make consumers aware of their products. On the other hand, they want to make the consumers believe that the product they already use is outdated and that they ought to upgrade to the latest and best product. Subsequently, a campaign starts to promote the new product and undermine the older ones. It increases the quality of the products in the market, and innovation keeps on happening. Besides, it keeps consumerism growing. To remain ahead of the competition, brands often indulge in comparative advertising that compares their products or services with those of others in the market, sometimes resulting in product disparagement.
The word ‘disparage’ means to connect unequally, or to dishonor (something or someone) by comparison, or to unjustly discredit or detract from the reputation of (another’s property, product or business); or a false and injurious statement that discredits or detracts from the reputation of another’s property, product or business. Although it is one thing to say that your product is better than that of a rival and it is another thing to say that his product is inferior to your product, still while asserting the latter, the hidden message may be the former, but that is inevitable in the case of comparison. Trademark Law permits comparative advertising of products, but in doing so, the advertiser cannot disparage the goods or services of another.
Comparative advertising can be of two kinds – one that indirectly compares products by indirectly referring to competing products or one that directly compares products by specifically naming a competing product. While some countries allow both kinds of comparative advertising, some do not allow either of the two. Comparative advertising is useful for the consumer because it compares features such as price, value, quality, etc., thereby allowing the consumer to make an informed choice. However, in doing so, the advertisement should not give out misinformation. Hence, a trader is entitled to compare his goods with the goods of others and to establish the superiority of his goods over that of others, but in doing so, he cannot say that the goods of his rival are bad, inferior, or undesirable. In case he makes such a statement, it would amount to an act called ‘product disparagement.’ Any such act disparaging the goods or services of another shall not only constitute Trademark Infringement but shall also constitute trademark disparagement.
Businesses have filed product disparagement lawsuits over:
International Perspectives and Decisions on Disparagement
On an international level, the Paris Convention for the Protection of Industrial Property was a crucial harmonization effort that dates back to 1883. In this regard, Article 6quinquies B of the treaty allowed signatory states to refuse to register a trademark if it was “contrary to morality or public order.” Signatory states modified their laws to meet their obligations under the treaty, and many countries adopted this provision into their national laws.
In the United States, consumer welfare and promoting a free and competitive economy is the goal. Hence, comparative advertising is an accepted table form of advertising and is justifiable by the freedom of speech laws. The Federal Trade Commission (FTC) Policy Statement of 1969 indicates that under comparative advertising, the comparison of advertisements of different competitors with their name and their products is a favorable act. Clarity was required from FTC to deal with the negative consequences of unfair practices. FTC, in its statement, indicated that it would support advertisers on the prevalent issues of comparative advertising. The Lanham Act of 1946 was amended in 1988. Even in this amendment, there was limited guidance on dealing with false advertising and product disparagement as a part of comparative advertising under Section 43(a).
In Tommy Hilfiger vs. Nature Labs, the defendants were dealing with pet perfumes, which had named ‘Tommy Holedigger’ as its trademark and incorporated the slogan “If you like Tommy Hilfiger, your pet will love Tommy Holedigger.” Tommy Hilfiger filed a suit against Nature Labs alleging that it was infringing the rights in their trademark by unfair means, and hence, it would result in trademark dilution and commercial fraud. The court held that in the United States, the similarity does not amount to infringement of Tommy Hilfiger’s trademark as Nature Labs used it as a means of entertainment and a technique to make their consumers laugh. Therefore, it was claimed to be a fair parody as it used the concept of freedom-of-speech, and hence, rejected the plaintiff’s claim of infringement against the defendant.
In the significant case of Matal vs. Tam in 2017, the Supreme Court held that the ban on disparaging trademarks is unconstitutional. It held that the Lanham Act, which allows the USPTO to refuse to register ‘disparaging’ trademarks, violated the First Amendment, and was unconstitutional. An Asian-American band named ‘The Slants’ filed a Trademark Application with the United States Patent and Trademark Office and was denied because the mark was considered ‘disparaging.’ Section 2(a) of the Lanham Act, called the ‘disparagement clause,’ prevents the registration of a trademark that “may disparage persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute.” The USPTO reasoned that Tam’s trademark, ‘The Slants,’ disparaged those of Asian heritage (even though Tam and his band are all Asian-American). The Court held that the disparagement clause “offends a founding First Amendment principle – Speech may not be banned on the ground that it expresses ideas that offend.”
Under the Trademark Act of the United Kingdom, 1994, the comparative advertising concept is very liberal, and additionally, the UK Parliament stated that the government regarded it as a legitimate and useful tool that can be adopted in marketing, which eventually aids in the process of stimulating competitive environment and makes consumers aware. The prime objective is to allow comparative advertising as a fair means of promoting one’s product. In the case of British Airways vs. Ryanair, British Airways alleged that Ryanair had infringed its trademark. Ryanair had prepared a comparative advertisement through a banner ad, which had “EXPENSIVE BA….DS” written on it, and above all, on the top part of the banner, a comparison on the pricing was made, which said that British Airway’s airfare was 05 times costlier then Ryanair, which in reality, was only 03 times costlier. Although Ryanair made a wrong statement of comparison, the High Court felt that it did not infringe the plaintiff’s trademark as the final result would be the same as indicating that British Airways was expensive. However, the Advertising Standards Authority (ASA) stated that the statement did make false offenses against British Airways.
Under the European Commission Directive on Comparative Advertising: Misleading and Comparative Advertising Directive (MCAD), the following criteria are laid down for advertisements:
Thus, the European Union MCAD promotes comparative advertisement until it is a healthy competition between the traders.
In India, disparagement is not permitted. The moment comparative advertisement claims false information about the competitor’s product, it amounts to disparagement and violates the competitor’s trademark. Comparative advertising is acceptable as long as it does not amount to a disparagement of the competitor’s product.
In the case of Colgate Palmolive Company & Anr., vs. Hindustan Unilever Ltd., it was held that in comparative advertising, a certain amount of disparagement is implicit, and, as long as the advertisement is limited to puffing, there is no actionable claim against the same. Therefore, the comparison between the products can be positive and negative. Positive comparison, wherein one shows his or her products or services to be superior to his or her competitors, is allowed. However, negative comparison, where one compares his or her products or services with the competitor’s, which, in turn, belittles or denigrates the competitor’s products or services, amounts to disparagement, which is not allowed since it violates the goodwill of the competitor, and thus, is in contradiction of the general trademark rules as well as trademark holder’s rights.
In a very recent case, Cerveciria Modelo De Mexico, the company which sells the alcoholic beer Corona, filed a suit in India against Whiskin Spirits, which released an advertisement about the product Corona and linked it with the COVID-19 pandemic to deplete the goodwill and reputation of the beer Corona. The court granted an ad-interim injunction in favor of the plaintiff, preventing it from reproducing, broadcasting, communicating to the public, screening, publishing, and distributing the advertisement on any media platform, including social media.
Thus, comparative advertising is permitted, and in certain instances, even encouraged in the various countries. It helps consumers in knowing the differences between two competing products and making a sound and informed choice for selecting a product of their desire or need. However, at the same time, laws make it illegal to disparage the product of a competitor who does so to gain monetary benefits dishonestly. Thus, comparative advertising aims to help consumers in making an informed choice. It is for this very reason that comparative advertising is allowed; however, it is limited to a comparison of showing why one’s product or service is better than that of the competitor’s, and it does not include the right to belittle the other party.
Recent precedents have shown that courts everywhere appear to be acknowledging the flexibility that an advertiser ought to be permitted to exaggerate the strengths of a product and indulge in puffery as long as the same is not false and misleading, unfair or deceptive, and does not derogate the competitor’s product. An advertiser may use its creativity and indulge in the puffery of his or her products, and demonstrate that the product is superior in comparison to its peers. It is not crucial whether an advertiser depicts a competitor’s trademark to compare a product. The pertinent thing to note is whether the said comparison is truthful and whether or not it falsely disparages a rival product or even a class of products. The United States has taken a unique stand with its recent decision in the case of Matal vs. Tam by holding that disparagement of trademarks cannot be banned. However, other jurisdictions still follow the principle laid down in the Paris Convention that a trademark can be refused registration if it is contrary to public order or morality and the general rule that it belittles the marks of another.