How MNCs are using cross-suits to gain corporate edge

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New Delhi: When most people think of a courtroom, they imagine a warzone with both parties sufficiently armed to take down the enemy. Although this situation may be far from truth, multinational companies (MNCs) can be seen pulling out big guns to preserve their legal rights.

In competitive times such as these, MNCs are leaving no opportunity to sustain their position in the market. Apart from investing in production, sales, expansion and marketing strategies, they are willing to spend hefty sums in legal fees to ensure they are one step ahead of their rival companies.

A recent trend illustrating this is the advent of cross-suits by MNCs in the Delhi high court. Over the last month, the Delhi high court has seen four MNCs embroiled in legal battles by filing cross-suits.

These suits, with damage claims of over Rs.1 crore, are being used as strategic tools by MNCs to gain fair advantage in a case that was originally brought against them. Companies are using the option of a cross-suit as a tit-for-tat approach to put pressure on the company which sues first.

Cross-suit means a suit brought by the party against which the original suit was filed, which is then heard as part of the same case.

“As big companies are becoming more conscious of their rights, even a slight aberration is not tolerated. Apart from commercial and marketing strategies, legal compliance is getting integrated with the company’s objectives. Earlier, the trend within companies was to give more importance to marketing strategies but now enforcing legal rights is also becoming important,” said senior advocate, Prathibha Singh.

Picture a gunshot from the rival party when you thought they had run out of bullets. This is exactly what happened when ITC Ltd filed a suit claiming copyright/trademark infringement and passing off against Britannia Industries Ltd on 31 August. It was alleged that Britannia’s NutriChoice Zero digestive biscuit brand had copied the packaging of ITC’s Sunfeast Farmlite Digestive All Good biscuit.

Both are currently sold in a blue and yellow packaging.

While arguments from Britannia were expected to be defensive in nature, the company claimed 66% market leadership in digestive biscuits, and told the court that it was in the process of filing a cross-suit against ITC Ltd for its use of yellow colour on digestive biscuits. Subsequently, both the original and cross-suit were heard together by the court; and a restraint order is invoked against Britannia.

A similar course was taken by fast moving consumer goods (FMCG) major, Procter and Gamble (P&G), when it filed a cross-suit against rival, Hindustan Unilever Ltd (HUL), within days of the former bringing a case against P&G alleging disparaging shampoo advertisements being aired by it. The products being battled over are HUL’s Clinic Plus and P&G’s Head & Shoulders shampoo. Damages of over Rs. 2.9 crore have been sought by HUL in its original suit against P&G for allegedly ‘tarnishing its goodwill and reputation’.

On 9 September, the Delhi high court restrained HUL from airing any advertisements of Clinic Plus. The matter did not end there as HUL took the shampoo advertisement battle ahead through a cross-suit against P&G. This was based on a total of seven advertisements being aired by P&G since April, which compare Clinic Plus’s shampoo sachet with Head & Shoulders and claim that the brand was more effective on dandruff.

The comparison sought to be made was deemed to one of “comparing apples to oranges”, P&G submitted. They added that it would encourage unfair competition because Clinic Plus is a non-anti dandruff shampoo and never claimed to remove dandruff, unlike Head & Shoulders which has always pitched itself as an anti-dandruff specialist. If this was not enough, another cross-suit was brought by P&G in the days that followed.