How MNCs using cross-suits to gain corporate edge
At least four consumer packaged goods companies filed cross-suits in the Delhi high court over the past month against rivals suing them
New Delhi: On 25 August, ITC Ltd filed a suit before the Delhi high court claiming copyright and trademark infringement by Britannia Industries Ltd, which it said was trying to pass off Britannia NutriChoice Zero digestive biscuit as ITC’s Sunfeast Farmlite Digestive All Good biscuit.
The blue-and-yellow pack of Britannia’s biscuit, said the suit, was similar to that of ITC’s.
Britannia’s arguments were expected to be defensive in nature. Instead, the company went on the offensive, claimed 66% share and leadership in the digestive biscuits category, and told the court that it was in the process of filing a cross-suit against ITC Ltd for the use of yellow colouring in digestive biscuits. Britannia’s own digestive biscuits do so and are yellow.
The court heard both the original suit and the so-called cross-suit. It issued an order restraining Britannia from selling its digestive biscuits NutriChoice Zero and phase out existing stocks.
Cross-suits have become the flavour of the season. At least four consumer packaged goods companies filed cross-suits in the Delhi high court over the past month against rivals suing them.
“These days companies have extensive in-house and external legal assistance available to them and are also well aware of their rights. Most have a well laid out litigation strategy. When legal actions are initiated against a company, there is an increasing tendency to raise counter claims or cross actions for breach of contractual or common law rights.” said Shankh Sengupta, partner at Trilegal.
Many a times, these cross actions serve as an effective offensive strategy to put the counter party on a back foot. For instance, in contractual disputes, counter parties have increasingly started raising a counter claim or cross action for breach of the rights provided to them, more often as a pressure tactic. In many such cases, the claims and counter claims are decided together by the courts, he added.
A cross-suit is a suit filed by the party against which the original suit was filed, and which is then heard as part of the same case.
Many of these cross-suits, claiming damages in excess of Rs 1 crore, are being used as a strategic tool by these packaged goods companies to gain a fair advantage in the original cases against them, say lawyers.
Indeed, “enforcing legal rights” is perhaps becoming as “important” as “marketing”, senior advocate, Prathibha Singh, said.
Britannia was yet responded to Mint’s email seeking comments sent Thursday afternoon.
An ITC spokesperson declined to comment on the issue.
The companies behind the original soap wars are at it too filing several cross suits against each other.
Hindustan Unilever Ltd and Procter & Gamble are both claiming that the other’s ads are disparaging its brand. The brands in question are HUL’s Clinc Plus shampoo and P&G’s Head & Shoulders shampoo.
On 9 September, the Delhi high court restrained HUL from airing any advertisements of Clinic Plus but the dispute, and two cross-suits remain unresolved.
“Litigation is the last resort for us. We believe in strengthening self regulatory bodies and redressal of disputes through alternative dispute settlements. We have also set up, and over the years, institutionalized the Ombudsman Scheme to resolve commercial disputes with customers, suppliers and consumers through a process of mediation facilitated by independent and reputed judicial minds who are retired High Court judges.”, said an HUL spokesperson.
A P&G spokesperson declined to comment on the issue.
Lawyers expect several more packaged goods companies to resort to cross-suits as the courts become the newest battleground for them.