Customers in the Cloud: Tech Square, Starbucks, and the Goodwill Question

In a companion piece on this Blog, we examined how the Division Bench of the Delhi High Court in Toyota Jidosha Kabushiki Kaisha v. Tech Square Engineering Pvt. Ltd., canceled the Indian registration of the ALPHARD mark on the ground that Toyota had established a spillover reputation in India through unsolicited importation of its vehicles by Indian consumers, despite never having formally launched the vehicle in India. The Court revived Panhard Levassor, a 1901 English authority, by laying down that unsolicited importation demonstrates a conscious commercial decision, which is driven by the recognition and attractiveness of the Appellant’s mark. The present article aims to situate Tech Square within the comparative common-law landscape, while contrasting it with the UK Supreme Court’s decision in Starbucks v. BSkyB.

From Hard-Line to Soft-Line: Where Tech Square Differs from Starbucks

The discussion on indirect consumption of a brand’s product or service by domestic consumers is incomplete without referring to the UK Supreme Court’s decision in Starbucks (HK) Ltd v. British Sky Broadcasting Group (2015), which emphasizes jurisdiction qua consumption. Lord Neuberger drew a distinction between persons within the jurisdiction who are customers of the claimant within the jurisdiction, whose existence establishes UK goodwill, and persons within the jurisdiction who happen to be customers of the claimant elsewhere, whose existence does not. In other words, the claimant must establish the presence of its goodwill by showcasing consumption by individuals in the domestic jurisdiction only. As per Starbucks, an Indian ALPHARD consumer who had imported a vehicle indirectly from a third entity would fall within the second category, and Toyota would have failed to establish its goodwill, as the vehicle was acquired outside Indian territory, even if used in India.

The reasoning in Tech Square is in line with Lewis’s “soft-line approach” to the goodwill limb of passing off, as per which the claimant needs only to establish a significant reputation among a sufficient section of the prospective purchasing public within the jurisdiction, rather than a business with customers in the strict commercial sense. Lord Neuberger, by contrast, reaffirmed in Starbucks what Lewis describes as the “hard-line approach,” which requires goodwill in the form of business and customers within the jurisdiction at hand.

Writing in May 2017, Lewis identified India as among the common-law jurisdictions that had moved away from the hard-line approach, alongside New Zealand, Australia, Canada, Hong Kong, and South Africa. However, just seven months later, the Supreme Court’s decision in Prius (2017) complicated this picture. While Prius formally retained the vocabulary of the soft-line approach, by holding that “the presence of the claimant through its mark within a particular territorial jurisdiction in a more subtle form” could satisfy the territoriality principle, it applied a stricter evidentiary standard, devaluing digital and media-based reputation evidence on the facts before it. Hence, the post-Prius position was a hybrid; soft-line in doctrine, harder-edged in application.

Tech Square closes this gap in jurisprudence by considering unsolicited importation, niche-segment digital evidence, and forum discussion as sufficient proof of reputation within the relevant Indian consumer segment, thereby operationalizing the soft-line method Prius had theorized, but did not apply on its own facts. Hence, while both Starbucks and Tech Square invoke Christopher Wadlow’s treatise on passing-off on the territoriality principle,1 both cases draw materially different conclusions about what evidence of customer engagement suffices. The Indian position after Tech Square sits closer to the soft-line approach Lewis described than to the hard-line approach the United Kingdom Supreme Court has chosen to retain.

Takeaways for the Future

For the purpose of establishing a well-known mark within the relevant section of the public and for rectification proceedings under Section 57 of the Trade Marks Act, 1999, import-export records, data from resale platforms, and customs and shipment data now hold probative value. Overseas brands that have not actively commenced business activities within Indian territory are not left without any rights, subject to the condition that spillover reputation is established through consumer data. Resultantly, the High Court acknowledged that the actions of Indian consumers can be useful in establishing goodwill in the Indian market.

The views expressed in this article are the personal views of the authors, and do not reflect the views of any institution or organisation with which the authors are professionally affiliated.

• 1Christopher Wadlow, The Law of Passing-Off: Unfair Competition by Misrepresentation (6th edn, Sweet & Maxwell 2021).