Sanuji Munasinghe
Attorney at Law – Sri Lanka
It is said that nothing succeeds like success. Thus, it is quite common for competitors to try and exploit something that has become successful, riding on the brand equity built by a successful brand. This problem is global and not just restricted to Sri Lanka. For example, the successful bottled water brand, ‘Bisleri’, has many sound-alike and look-alike competitors in India. Similar examples exist word wide. This constitutes unfair practice as the ‘original’ brand has been built on massive spending in brand building, strict adherence to quality, years of winning consumer trust establishing it in the hearts and minds of consumers. Thus, it becomes important for a legal framework to exist to protect such brands. In Sri Lanka, these practices are regulated under various legal frameworks, with a key focus
on the Intellectual Property (IP) laws. Section 160 of the Intellectual Property Act No 36 of 2003 extensive explores into this area.
THE LEGAL FRAMEWORK
As discussed in our previous articles, the Sri Lankan legal system revolving around Intellectual Property is governed by Intellectual Property Act, No. 36 of 2003, which incorporate international IP standards and enforce obligations under international treaties. When dealing with the provisions and protections focusing on unfair competition, the legal system has also taken into practice the principles set by the common law. These legal intricacies have set a considerably comprehensive legal background for the protection of consumers and businesses alike, against unfair competition.
Section 160 (1) of the Act states that “any act or practice carried out or engaged in, in the course of industrial or commercial activities, that is contrary to honest practices shall constitute an act of unfair competition”. This potentially places a broad scope of industrial and commercial activities under the microscope which will afford the protection required against any malpractice.
FORMS OF UNFAIR COMPETITION IN SRI LANKA
Several practices can constitute unfair competition under Sri Lanka’s IP law, which includes the following:
1. Causing confusion
Section 160(2)(a) of Sri Lanka’s Intellectual Property Act No. 36 of 2003 defines unfair competition as any act that creates confusion about a business, its products, or services. This includes misleading use of marks, trade names, product appearance, or well-known figures, leading consumers to associate one business with another. The law aims to prevent deception and ensure fair competition.
2. Goodwill or reputation
Section 160(3)(a) of Sri Lanka’s Intellectual Property Act prohibits acts that harm a business’s goodwill or reputation. It deems any practice that discredits or damages another enterprise as unlawful, ensuring fair competition and protecting businesses from deceptive tactics.
3. Misleading
Section 160(4)(a) of Sri Lanka’s Intellectual Property Act No. 36 of 2003 prohibits unfair competition by restricting any industrial or commercial activity that deceives the public about a business’s products or services. This covers misleading claims related to factors such as production methods, quality, quantity, suitability, origin, or pricing. By preventing such deceptive practices, the Act seeks to promote fair competition and safeguard consumers from false information.
4. Discrediting
Section 160(5)(a) of Sri Lanka’s Intellectual Property Act No. 36 of 2003 prohibits unfair competition by preventing any industrial or commercial activity that harms the reputation of another business’s products or services. This includes actions that degrade or undermine a competitor’s offerings, negatively impacting their market position. The Act enforces these restrictions to ensure fair competition and shield businesses from deceptive or damaging tactics.
5. Undisclosed information
Section 160(6) of Sri Lanka’s Intellectual Property Act No. 36 of 2003 addresses unfair competition by
prohibiting the unauthorized disclosure, acquisition, or use of confidential information-commonly known as trade secrets-without the consent of the rightful holder. This provision aims to protect businesses from the misappropriation of sensitive information, ensuring fair competition and safeguarding the value of proprietary knowledge.
6. Passing Off
Passing off is a common law right and is one of the most common forms of unfair competition in Sri Lanka. It occurs when a business misrepresents its goods or services as being those of another business, causing confusion among consumers. A successful passing-off claim usually requires the plaintiff to demonstrate that:
– There is goodwill or reputation associated with the business or product.
– There has been a misrepresentation that is likely to confuse the public.
– The misrepresentation has caused damage to the business or its goodwill.
For example, a local business in Sri Lanka may copy the packaging, logo, or branding of an established international brand to mislead consumers into purchasing their inferior products. In such cases, the aggrieved party can seek remedies such as injunctions or damages under Sri Lanka’s IP laws.
Diving a bit further into Trademark infringement, this is where a competitor uses a trademark identical or confusingly similar to a registered trademark, is a serious form of unfair competition. In Sri Lanka, the Intellectual Property Act regulates the registration and protection of trademarks.
If a competitor uses a confusingly similar mark to deceive consumers into thinking they are purchasing from a reputable brand, this can lead to court action. The National Intellectual Property Office (NIPO) enforces the registration process and investigates complaints related to trademark infringement. Remedies include injunctions, damages, and the destruction of counterfeit
goods.
Despite having strong intellectual property laws, Sri Lanka faces significant challenges in combating unfair competition. These include difficulties in enforcing IP rights due to legal delays, limited awareness among SMEs about IP protection, and increased counterfeiting driven by globalization and e-commerce. Addressing these issues through improved enforcement and greater education on IP rights is essential to ensure fair competition and support business growth.