Society of Motor Manufacturing Traders Case

Introduction

A company has trademark rights upon its name, which prevents others from using the same or a similar name under the trademark/company law. If such rights are not provided, others can wrongfully benefit by disguising themselves as the company, by simply taking up their names. An unwanted act by the second company can also cause harm to the dignity of the original company. This holds true even in the present.[1] Nevertheless, there are certain exceptions to trademark laws.

The above-mentioned case[2] was presented before and heard by Justice Lawrence at High Court of Justice, Chancery Division from January to February 1925. The case was again presented in the Court of Appeal before Master of the Rolls and Lord Justice Warrington and Sargeant, on May 6th and 7th, 1925. The issue between the parties was regarding the name of the companies and similarity between them, which, as alleged, could eventually cause damage to the first company’s reputation from the acts done by the second company.

Facts of the Case

The plaintiff, the Society of Motor Manufacturers Trade Limited (hereinafter “the Plaintiff Society”) was founded in 1902, while the defendant company, Motor Manufacturers’ and Traders’ Mutual Insurance Co. Ltd.(hereinafter “the Defendant Company”) was founded in 1924. The purpose of their establishments was different. The plaintiff society was founded with the purpose of protecting and promoting the interest of manufacturers of motor vehicles within and outside the United Kingdom, as stated in their memorandum of association. The plaintiff society was the first of its kind in the United Kingdom. The society had some insurance companies as its member, to undertake the risk-assurance matters of the persons it wanted to protect. The defendant company, on the other hand, was in the business of insurance and worked on the case of damages caused to motor vehicles of any kind. It didn’t engage in manufacturing, production, or trade of such motor vehicles.  The defendant company was in no way connected with or promoted by the plaintiff society.  In this case, the plaintiff society didn’t file any charge of fraud but contended that the defendant company’s name would cause damage.

Issues in the Case

Has the trademark right of the plaintiff been violated by the use of the words “Motor” “Manufacturer” and “Trader” by the defendant? Further, another issue was if there was any scope of competition between the parties. Did the two companies have similar kinds of business and if yes, would the similarity of names, harm the business of the other?

Contentions in the Case

Contentions by the Plaintiff

The plaintiff sought an injunction against the defendants from using their company’s name or a name formed from the combination of words “Motor Manufacturers and Traders’” or any other similar combination of words. They contended that the name of the company caused confusion and thereby misled the public. There was a possibility of damage to business reputation if the defendant company acted in any unwanted manner.

The representatives of the plaintiff society contended that they were well-established and recognized at an international level and any damage to such reputation can be caused by the failure of a company, which can be confused to be a part of the society. They also contended that although they didn’t engage in the insurance business, there would be no objection by their members, in them forming a company for such business of insurance, as mentioned in their articles of association.

Contentions by the Defendants

The council for the defendant claimed that the evidence from the plaintiff had completely failed to prove their claim. The society had the power to carry on insurance business as per their memorandum but they hadn’t actually initiated the business in any way. Therefore, there was no existing competition between them. Mere desire to do such business is not enough to establish any competition.

The plaintiffs also alleged that if they did start such business, they would use the same name as the defendant company. The words used by the defendant company are descriptive in nature which means, the use of the words merely describes the work done by the company. Moreover, the words are not unique or fancy in any manner. Probability of confusion arises in cases of use of fancy words and not in case of use of ordinary words of a language, as done by the defendant company. They refrained from calling any witnesses on the grounds that there was no contention of fraud made by the other party.

Judgement

The action was dismissed and a further appeal was also dismissed with costs. It was held that there was no violation of the trademark. The judges hearing the case in the Court of Appeal agreed with the judgment of Justice Lawrence in the High Court of Justice.

Analysis

Under the Companies Act, it is well established that courts should protect the business reputation of persons against risk and probability of injury. Violation of rights and reputation of a person or a company can be caused when any other person takes upon the name of the company which makes another person think that the second company is associated with the first one. The likelihood of damage to the reputation must be proved by a person so as to access any kind of protection. The probability of risk must be ascertained.[3]

The court decided not to embark upon fraud until and unless there is a reasonable explanation by the defendant for use of the name and for refusal of change in the name. In case of fraud, it is seen that the onus of proof required is comparatively less than the proof required in the case where fraud is not claimed but harm to reputation by the appropriation of a name is. Such difficulty of proof increases further when protection is sought for use of name which is descriptive in nature as used by the defendant company.

The name was suitable to the business and the court decided that the use of the name or the refusal to change the name was not fraudulent. The name of the defendant company was comprised of common words used in the English Language. The public could not be confused or misled and therefore, there existed no possibility of damage to the plaintiff society’s reputation, in case of unwanted and derogative activities by the defendant. The name of the defendant company was not calculated to deceive despite having included similar words in their name as of the plaintiff society. In addition, the words were not a prominent or distinctive feature of the plaintiff company. The additional use of the words “the society of” before the words “Motor Manufacturers and Traders” also distinguished the plaintiff society from the defendant company. Further, the use of the word “mutual insurance” added to such a distinction between the undertaking of the party both in name and function.

The plaintiff society had contended that the abbreviation of the name of the companies i.e. SMMT and MMTMI could cause confusion. To this, the court said that such an argument has made it clearer that the names were distinct and supported the claims of the defendant instead. The plaintiff’s counsel had also contended that the defendant was using stickers with its company’s name which can cause confusion among the public, as the plaintiff society practiced such use of stickers. To this, the court replied that the stickers were different in color, name, and content. Further, a company can’t claim a monopoly on the use of stickers.

Under the Companies Act, a company has a monopoly over its name and no other company can use identical names as to be calculated to deceive. Here in the present case, the court focused on the usage of words “calculated to deceive”. They decided that no deceiving intent was seen on the part of the defendant.

The plaintiffs had contended that the circular of the defendant company provided that they would be at disposal at the yet-to-take-place Motor Exhibition. They contended that such an activity can make people think that the two parties are associated. The court decided that such activity of representation at the exhibition was common for insurance companies and their business.

The defendant company had different business undertakings than the plaintiff society’s and there was no scope of competition. It was said by plaintiffs that there was a possibility for members of the society, to promote a company to carry on an insurance business that had already been carried out by the defendant. It was decided that even if it was assumed that the society had such power to promote companies, it would be against the objects of the society. It also meant to promote competition among its own company members, who were insurance companies. Further, the court decided that a court can never restrain a person from using a trading name merely because it might be used by someone else at a future indefinite time.

Analysis of Oral Evidences

The court also analyzed the oral evidence provided by people on behalf of the plaintiff. Witnesses contended that they were confused by the defendant company’s circulated notices and circulars. They said that they mistook the company to be associated with the plaintiff society.

The court referred to the case of Dunlop Pneumatic Tyre Company Ltd. v. Dunlop Motor Company[4] where it was decided that if anyone took trouble to look into the matter, he/she can clearly differentiate between the two parties. One dealt with business of tyres while other dealt with business of motors. Similarly, in the present case it is evident by the name itselfthat the two companies’ businesses differs fundamentally. The Court decided that it was unreasonable for a company to change its names based on the fact that a thoughtless person concluded that the two parties dealt in the same. This was seen as not only as good sense but as a good law by the higher court. Therefore, another oral evidence which provided that it was unreasonable for the court to expect that a person seeking insurance would necessarily seek or enquire either of the companies for clarification, was denied.

The court then decided that if any confusion arises, it is due to use of common words on English language like “motor” “trade” and “manufactures” by the plaintiff himself. For the Plaintiff to achieve what it claims, monopoly must be provided to the plaintiff to the words in use which is not possible.

In the case of Ewind v. Buttercup Co.Ltd.,[5] the plaintiff had succeeded in his claim for injunction against another party with similar name. But the judgement was provided on the grounds that the word “buttercup” was unique and un-necessary for the defendant to use. The plaintiffs in the present case had relied on this case and cases like Lloyd’s v. Lloyd’s (Southampton) Limited[6] and Harrods Limited v. R. Harrod Limited,[7] where the protection was provided on the grounds that the names were similar and unique, unlike in the present case, where the words were similar but general. Therefore, the case cited by the plaintiffs didn’t apply to the present case.

In a case of 1981, namely, Exxon Corporation v. Exxon Insurance Consultants International Ltd.,[8] the court decided that injunction would be granted to prevent the use of the word “Exxon” as passing off took place. Here as well, the name was similar and unique. In a case of 1990, namely, Reckitt & Colman Ltd. v. Borden Inc.,[9] Lord Oliver gave grounds for passing off to take place and subsequently, for an action against the passing off. First, there must be an established goodwill to their goods or services.  Second, intentional or not, misrepresentation must be established, which might mislead the public. Third, there must a possibility of damage to the reputation. Therefore, cases have followed to substantiate on the decision of the present case.

Conclusion

As there was no risk of injury to the reputation of the plaintiff and since the words used were descriptive, action for passing off was defeated.[10] It was also noted that the case was not of fraud, that the businesses were entirely different with no scope for competition and that the usage of words were merely descriptive. In the present, Section 64 and 66 of the Companies Act, 2006 of the UK provides for such trademark protection. In India, Section 20 (1) of the Companies Act of India, 1956 provided similar protection.

The case provided that the monopoly right of trademark is not absolute. Similar decision were seen after the decision of the present case in Asiatic Govt. Security Life Insurance Co. Ltd. v. New Asiatic Insurance  Co. Ltd. (1939).[11]The decision has also been followed in Indian cases by the High Court of Madras[12]as well.Therefore, this case has helped other courts, internationally, to understand trademarks of a company, which uses general ordinary words of a language.

References:

[1]Companies Act, section 4 (2013); Companies Act, section 53 & 66 (2006).

[2] Society of Motor Manufacturing Traders v. Motor Manufactures and Traders Mutual Insurance Co. Ltd. [1925] 1 Ch. 675 (Eng.).

[3] Walter v. Ashton [1902] 2 Ch. 282 (Eng.).

[4] Dunlop Pneumatic Tyre Company Ltd. v. Dunlop Motor Company [1907] 24 RPC 572 (Eng.).

[5] Ewing v. Buttercup Margarine Company [1916-17] All ER 1012 (Eng.).

[6]  Lloyd’s v. Lloyd’s (Southampton) Limited [1912 ] 29 RPC 433 (Eng.).

[7]  Harrods Limited v. R. HarrodLimited [1924] 41 RPC 74 (Eng.).

[8] Exxon Corporation v. Exxon Insurance Consultants International Ltd. [1981] 2 All ER 495 (Eng.)

[9] Reckitt & Colman Ltd v. Borden Inc [1990] 1 All ER 873 (Eng.).

[10]Company Law, Lecture Notes https://www.uni-trier.de/fileadmin/fb5/FFA/KURSUNTERLAGEN/Anglo-Amerikanisches_Recht/Company_Law/WS_2014_15/Handout_-_Company_Law_-_Lecture_Notes_WS_14-15.pdf

[11] Asiatic Government Security Life Insurance Co. Ltd. v. New Asiatic Insurance Co. Ltd.(1939) 1 MLJ 635 ⁋15 (India).

[12] Westinn Hospitality Services Limited v. Caeser Park Hotels and Resorts Inc. (1998) 3 CTC 149 ⁋ 18-20 (India).https://thecorporate.ninja/wp-admin/post.php?post=2118&action=edit