THE BANKING SYSTEM AND DEPOSITOR PROTECTION
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Building and maintaining the confidence of investors, both domestic and foreign, requires a credible bank regulatory system that closely supervises banks, strictly and timeously enforces banking law, helps restore ailing banking institutions to financial health, and expeditiously expels insolvent banks from the financial system. Such regulatory pruning and weeding helps preserve and promote vigor and growth in a financial system.
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Commissioner, Law Commission of Sri Lanka
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1 am using the term ‘bank’ to include any other financial institution that is regulated similarly to banks.
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Difficult questions of public policy arise when the public interest in a sound banking sector and the expeditious decommissioning of failing banks that this requires, are weighed against the interests of depositors and creditors and indeed of bank owners and the need to afford a reasonable degree of protection of those interests under the law.
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These questions come to a head when a bank becomes insolvent, as we would have noticed in very recent times.
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The principal objective of bank supervision is of course the protection of depositors funds which is extremely important in the absence of any type of depositor protection scheme. With all the good looking and confident front office staff and shining walls banks may appear more solid than they really are.
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Another important objective is the reduction of the risk of bank failures which could have such a devastating impact on the rest of the economy.
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The flip side of the concern for the security of the depositors funds is of course that those funds should be securely invested. If they are not then the interest rates on loans to be charged would be prohibitive if the banks were still to make a profit and attract further depositors and investors funds. This again requires supervision by a regulator balancing several interests
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Whilst the purpose of supervision and regulation is. to protect the depositors with banks from the risk of losing their money, it must nevertheless be emphasised that it does not provide a guarantee against loss to make banking so completely safe as to stop the banks from taking any risks at all. Supervision, therefore is directed towards reducing failure. It does not eliminate it. Consequently there is no single villain of the piece The Three Golden Pillars
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It is my belief that protection stands on three golden pillars. Remove one, all hell will break loose.
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i The first is information. The second, regulation. The third, liquidation.
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Protection, like charity must begin at home Consumers of financial services and products must make an informed decision in the selection of the financial services and products. Caveat emptor is stills good advice. Buyer beware !
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However, this presupposes that sufficient information 1 is available in the market about the financial services and products, as well as the associated risks. Is this so? If not how is this to be achieved ? I would suggest that there must therefore be an Agency in place charged with the duty of raising public awareness about such services and products, especially of those whose level of professional education on financial issues is insufficient in order that an informed decision may be made. The availability and provision of such information is vital to protection. I believe it to be the obligation of the State to ensure this.
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It should be the obligation of this Agency to stimulate compel the participants of the financial and capital market, who provide the services and the products, to publish without delay highly qualitative information on their financial standing, operational results and risks related to their activities, thus facilitating market transparency, trust of the customers and market discipline.
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The legal frame work for regulation of Banks is to be seen in two enactments. The Monetary Law Act No . 58 of 1948 (as amended) and the Banking Act No. 30 of 1988 (as amended). However, I am not going to bore you with the detailed provisions in this regard, section by boring section, but be content to give you an overview of the regulatory scheme, so you may understand how it works and its limitations..
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The first step in the birth of a bank is the grant of the licence. Birth you will readily acknowledge is a crucial event. The future of the bank is largely determined by it and a very great responsibility is cast on the regulator at this critical stage.
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Assessment of the suitability of an applicant is at the very heart of the problem of securing the protection of the depositor. It is of paramount importance therefore to pay regard to certain fundamentals, such as, the nature of the proposed business, parent company, sufficiency of financial resources, quality of management, their proven track record, interests of directors in related companies etc., and the adequacy of the systems and controls necessary for the proper running, of the proposed business.
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Once licence is granted the management of the Bank is handed over to the Board of Directors. They are in control. The future of the deposits primarily rests in their hands. However other systems come into position to safe guard the interests of the depositors, which help monitor the progress of the bank with an eye on the protection of the depositor. Nevertheless, it always remains the responsibility of the management of the bank and not of the regulator, to determine how the bank should be run in its day to day business.
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This is because the regulator is not a police man
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It is therefore of fundamental importance for the safety of the depositor that applicants for licences are properly vetted, due diligence done and that licences are granted not on political considerations. That is the responsibility of the regulator. Whether this can always be achieved is anybody’s guess.
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Supervision and regulation is broadly directed towards ensuring the maintenance of certain prudential requirements, such as capital adequacy ratios, liquid assets, single customer lending, lending to directors etc.
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How is this done? This is done by what is called ‘off-site surveillance’ and ‘on site examination’.
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Off-site surveillance includes an early warning system whereby statistical data on licensees are compiled from financial returns . This provides the means whereby the health of each institution can be monitored, the frequency of inspection can be determined and the nature and kind of follow-up or remedial action can be recommended or imposed.
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On-site examination of financial institutions occur approximately every two years. The focus is generally on the quality and real value of assets through physical inspection of the records of the institution. The six key factors, commonly referred to as the CAMELS system i.e., Capital, Assets, Management, Earnings, Liquidity and Sensitivity to Risk/Risk Management, are used to assess the overall condition of the institution.
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Regulatory interventions when required are initially made by moral suasion – expecting voluntary corrective action to be taken
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Where notwithstanding such directions the management continues to carry on business without heeding same and / or without taking corrective action satisfactory to the regulator, and if in the circumstances the regulator is of opinion that, the institution is insolvent or is likely to become unable to meet the demands of its depositors and creditors, he is empowered to suspend the business forthwith and prevent its continuation in business. That is protective action.
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Thereafter the regulator has certain choices as to the future of the institution, which includes permitting it to resume business, conditionally or unconditionally, or making arrangements for the institution’s amalgamation with another institution, re-construction or re-organisation as he may think appropriate. Or cancel the licence and liquidate the institution in the exercise of his discretion and judgement.
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Liquidation is like testamentary- proceedings upon the death of a natural person. It is an orderly fashion of preserving the assets of the institution for distribution amongst those entitled under the law as determined by Court, It prevents the management and others from laying their hands on the funds and assets of the institution in preference to those to whom assets may legitimately be distributed.
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It will therefore be seen that the regulator’s intervention with the view to depositor protection is effective only in a context where the financial institution submits itself to a regulatory regime. Where it seeks to defy or evade the regulation and also engages in fraud, the regulatory process losses its efficacy. No amount of external supervision or regulation can correct an institution that is unresponsive to regulation and engages in fraudulent activity while misleading the regulator and the public with false information. Liquidation is the answer. Expeditious decommissioning is the only way out to protect the depositor and the financial system.
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If I am now asked to answer the question -‘ are the depositors adequately protected V I will say yes and I will say no.
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Yes, because a system for protection is in place. Effectively administered it gives the optimum protection available.
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No, because something else could be looked at in addition. And that is the provision of a scheme for protection of depositors. This contemplates the creation of a meaningful and not an illusory Deposit Protection Fund, financed by the banks, which provides for depositors to get back a large percentage of their deposits subject to a maximum payment to any one individual of a pre-determined sum.
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The creation of such a Fund, should be a corporate obligation, for it is difficult for a layman to know whether a bank is financially sound or not until it has closed. A bank that has loaned money to a borrower who is unable to repay may keep the bad loan on its balance sheet as long as possible, though the loan may never be paid back. Moreover, bank deposits are also somewhat precarious. A bank normally cannot refuse to accept deposits, but if, for whatever reason, its depositors lose confidence in the bank’s soundness, they may withdraw their funds not only from that bank but also from other perfectly sound banks. This might have a systemic effect. A scheme for protection of depositors might therefore be salutary.
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The Consumer Affairs Authority Act No. 9 of 2003 was heralded as going someway towards addressing this issue. But I am not so sure about that. The Act no doubt is made applicable to banking and financing services. And the person who provides such services is made subject to implied warranties in respect of the supply of such services. Such implied warranties include the warranty that such services will be provided with due care and skill
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How far these provisions will go towards alleviating the travails of the consumer/depositor is difficult to say. Nevertheless it is an interesting provision and i remains to be seen how it is going to be worked.
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Another experiment in the direction of deposited protection was the long mooted proposal for the establishment of an Ombudsman to look into the complaints of depositors. This has now been achieve “The Office of the Banking Ombudsman, Sri Lanka has been established as a guarantee company will voluntary membership of financial institution including Finance companies. A complaint allegation deficiency in banking services (defined) can be may to the Ombudsman who is empowered to hold inquiry (lawyers not allowed) and “pass an award The award is not binding on the financial institution unless the complainant accepts it in full and final settlement of his claim in the matter. The financial institution must then honour the award. If it does then one has to go to court and probably litigate claim, for the award passed is not an award persuade to an arbitration agreement, to be able to attract Arbitration Act,
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The Ombudsman cannot be looked upon as panacea for all the ills of the depositor, as the man of the Ombudsman is limited in its scope and grounds of complaint are listed. A complaint on one of the following grounds alleging deficient banking services may be filed with the Ombudsman
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* Non payment / inordinate delay in pay me: cheques, drafts, Bills etc.,
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* Non issue of drafts to customers and others,
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* Failure to honour Guarantee/Letter of Credit commitments by banks.
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* Claims in respect of unauthorised or fraudulent with drawls from deposit accounts, current accounts, savings accounts,
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* Fraudulent encashment of a check/bankdraft,
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* Complaints pertaining to the operations in any customer account maintained with the bank,
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* Complaints from export customers on the handling of Export Bills, Collection of Bills and delays in receipt of export proceeds,
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* Complaints from non residents having accounts in Sri Lanka in relation to their remittances to Sri Lanka, deposits and other bank related matters,
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* Complaints relating to the violation of directives of the Central Bank of Sri Lanka in relation to banking services,
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* Complaints in respect of delays, sanction, disbursal or disposal of loan applications,
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* The Banking Ombudsman may also deal with any-such other relevant matters as may be specified by the Central Bank from time to time.
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The final recourse that the depositor has is of course litigation to recoup his losses if the bank is sound and in liquidation if its license is cancelled and it is wound up.
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However, it might be of interest to know whether the consumer / depositor can sue the regulator for neglecting to perform or failing to adequately perform his regulatory function – being a statutory authority charged with that function in the interests of the depositors.
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This raises the question, whether a regulator can be sued in tort – the tort of negligence. It will gladden the hearts of regulators and sadden the hearts of depositors, to know that the regulator owes no duty of care to the depositors. Therefore no action can be founded on the ground of negligence.
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This is because regulators make decisions which involve the exercise of judgement of a delicate nature affecting not only the whole future of the relevant bank, its customers and creditors, but also of the future of the financial services of the country and the making of such decisions is a characteristic task of modern regulatory agencies
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I have no doubt that this line of thinking will be accepted in Sri Lanka too.
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However, English Courts have recognised the fact that statutory functionaries purporting to exercise a power which they knew they did not possess may be sued for damages. This is recognised in English law as the tort of misfeasance in public office. A name given to this tort of deliberate abuse of power
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A very thorough examination of this tort and of the authorities was undertaken by the English Courts recently in a case where persons who had lost money in a bank failure claimed damages from the Bank of England, which had powers of regulation over banks. The House of Lords eventually held that the core concepts of this tort were, abuse of power, bad faith or improper purpose
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The principle is nevertheless established in the U.K. What we will do with it in Sri Lanka remains to be seen. In the final analysis it is my view that the safety net of the three golden pillars is all that we may rely on for depositor protection.
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The law relating to the protection against unfair competition was first introduced to Sri Lanka in 1979 under the provisions of Section 142 of the Code of Intellectual Property Act No. 52 of 1979. Any act of competition contrary to honest practices in industrial or commercial matters, in terms of Section 142(1), constituted an act of unfair competition. Moreover, Section 142(2) recognized a non-exhaustive list of acts of unfair competition including all acts of such a nature as to create confusion by any means whatsoever with the establishment, goods, services or the industrial or commercial activities of a competitor. Those who aggrieved by any act of unfair competition could institute proceedings in Court to prohibit the continuance of such act.1 Section 160 of the Intellectual Property Act of 2003 governs the current law on the protection against unfair competition2. It embraces a variety of comparatively broader and novel features, which are highlighted in this article.
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The competitiveness among enterprises is essential in the interest of the consumers as well as of the economy as a whole in any country where a system of market economy prevails. However, as the competitiveness may result in the acts of unfair competition, it is always advisable to encourage the protection against unfair competition.
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The industrial property rights alone cannot effectively control the acts of unfair competition. The industrial property rights such as patents, registered industrial designs and registered marks which are granted on application by the Industrial Property Office confer on the registered owner certain rights in connection with the particular subject matter. On the other hand, the protection against unfair competition which is not based on such rights recognizes that any act of competition contrary to honest practices in commercial and industrial activities is unlawful. The law relating to the protection against unfair competition attempts to ensure fairness in commercial and industrial competition.
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The industrial property rights and the protection against unfair competition are not totally unrelated. The link between the two may be seen in certain cases. For example, the interests of the owner of an unregistered mark or of a trade name may be protected under the law of unfair competition.”
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The law of unfair competition…” originated in the conscience, justice and equity of common law judges…. It is a persuasive example of the law’s capacity for growth in response to the ethical, as well as the economic needs of society. As a result of this background, the legal concept of unfair competition has evolved as a broad and flexible doctrine with a capacity for further growth to meet changing conditions… .There is no complete list of the activities which constitute unfair competition. The general principle, however, evolved from all of the cases is that commercial unfairness will be restrained when it appears that there has been an appropriation, for the commercial advantage of one person, of a benefit or property right belonging to another……”4
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The protection against unfair competition first received international recognition in 1900 under the Paris Convention for the protection of Industrial Property.5 Article 10bis of the Paris Convention stated: “Nationals of the Convention shall enjoy in all states of the Union, the protection against unfair competition.” Having undergone a process of revision, the said Article 10 bis reads at present as follows:
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(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.
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(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.
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(3) The following in particular shall be prohibited:
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(1) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor
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(2) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor
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(3) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.”6
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The development of the law of unfair competition has taken different paths in different countries. The English law has not developed a separate legal mechanism for the protection against unfair competition. The tort of passing off in the common law has been instrumental in the protection of competitors. Even in the United States of America the judicial activism has primarily caused the development of the unfair competition law mainly from the common law tort of passing off. However, the U.S. law has not recognized a comprehensive tort of unfair competition. The statutory provisions have shaped the US Unfair Competition Law.7
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Section 160 (1) (a) of the Act declares 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.”8
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The following observations in this regard are warranted:
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(a) These provisions which are broad enough to cover any act or practice that is contrary to honest practices in industrial or commercial activities involves three major elements:
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(ii) contrary to honest practices and
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(iii) carried out or engaged in, in the course of industrial or commercial activities.
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(b) The wording of Section 160 (1) (a) clearly suggests that intention, knowledge or any other similar elements are not relevant and applicable.9
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(c) As Fernando J. observed in Sumeet Research & Holdings Ltd. v. Elite Radio & Engineering Co. Ltd it is sufficient if what was done in fact unfair in relation to the real competitor, whoever he was.10
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(d) The decisive element of the protection against unfair competition is “an act or practice which is contrary to honest practices” in industrial or commercial activities. Due to the extremely complicated nature of commercial and industrial activities, it is hard to define the phrase ”contrary to the honest practices” in this context. The determination of whether a particular act or practice is contrary to honest practices depends upon the facts and circumstances of the particular case.”
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(e) The law refers to both “act and practice”. The expression “practice” is used in addition to “act” in order to clarify that not only an act in the strict sense, but also behaviour that consists of an ‘omission’ can constitute an act of unfair competition.12 For example, the failure to give sufficient information concerning the correct operation of a product or concerning the possible side effects of a product can constitute such act of unfair competition.13
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(f) It is a fundamental requirement that such act or practice is carried out or engaged in “in the course of industrial or commercial activities”. The term “industrial or commercial activities” encompasses a broader spectrum of activities in industry and commerce including the activities of the enterprises providing products or services as well as of the professionals offering services such as medical practitioners in private practice.
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(g) As the acts of unfair competition are always carried out or engaged in, in “industrial or commercial activities”, the law of the unfair competition is not limited to direct competition between two parties. There can be instances, for
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example, where the particular act or practice is not directed against an identifiable competitor but influences the competition in general. Such acts or practices also fall within the ambit of the law relating to the protection against unfair competition.114
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(h) The following observations made by Fernando J. in the Sumeet Research & Holdings Ltd.v. Elite Radio & Engineering Co, Ltd are valid even under the current law: “Apart from that, what is meant by “contrary to honest practices in industrial or commercial matters”? If this includes only conduct contrary to obligations imposed by statute law (criminal or civil) or common law (especially the law of delict) Section 142 would seem to be superfluous – because anyway such conduct is prohibited by law. It seems arguable, therefore, that Section 142 mandates higher standards of conduct – some norms of business ethics – and does not merely restate existing legal obligations. If so, what those standards of conduct are would be a matter for determination by the trial judge.”15
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(i) The Sri Lanka law does not have extra – territorial effect.16 Thus, any act or practice of unfair competition carried out or engaged in outside Sri Lanka would not be covered under the provisions of Section 160 of Act. However, the Courts of Sri Lanka have the territorial jurisdiction in respect of any act of unfair competition carried out or engaged in, in Sri Lanka, whoever the affected party may be.17
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(j) It is expressly provided that the protection against unfair competition recognized under Section 160 of the Act is applicable independently of, and in addition to, other provisions of the Act protecting inventions, industrial designs, marks, trade names, literary, scientific and artistic works and other intellectual property.18
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Specified acts and practices
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While establishing a general principle of unfair competition applicable to a wider range of acts and practices19, Section 160 of the Act specifies certain acts and practices of unfair competition. As those specified acts and practices emanate and result from the general principle so established and recognized, they necessarily become merely a set of examples of acts and practices of unfair competition. They do not constitute an exhaustive list of acts and practices of unfair competition.
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Nor do they become restrictive on the general principle of unfair competition. Those specified acts and practices which cover a variety of activities in relation to industry and commerce are referred to below in turn.
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In terms of Section 160 (2) (a) any act or practice carried out or engaged in, in the course of industrial or commercial activities, that causes, or likely to cause, confusion with respect to another’s enterprise20 or its activities, in particular, the products or services offered by such enterprise, constitutes an act of unfair competition. This section attempts to protect the rights and interests not only of the enterprises but also of the consumers. The confusion-actual or likely-would naturally damage the consumer rights and interests as well.
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Such confusion can simply arise from a particular physical act or practice.21 Even in the absence of a mental element such as intention or knowledge on his part, the defendant can be held liable. It is the ordinary purchaser who should be taken into account in the determination of the issue whether the confusion has caused or is likely to cause.22
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The confusion may, in particular, be caused with respect to the following23:
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(i)A mark whether registered or not.24 (ii) A trade name.(ii) Business identifier other than a mark or trade name. A variety of designations such as symbols and slogans which serve to identify the business25 are in this instance covered. Even a sound, though not protected under the law of marks, may receive protection provided it serves to identify a particular business, (iv) The appearance of a product.26(v)The presentation of a product or services.27(vi)A celebrity or a well known fictional character.28
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Section 160 (3) (a) makes any act or practice earned out, or engaged in, in the course of industrial or commercial activities, that damages or is likely to damage the goodwill or reputation of another’s enterprise an act of unfair competition, whether or not such act or practice actually causes confusion.
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In term of section 160 (3) (b), damaging goodwill or reputation may, in particular, result from the dillusion29 of the goodwill or reputation attached to the following:
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(i)A mark whether registered or not.30 (ii) A trade name.(iii) A business identifier other than a mark or a trade name.(iv)The appearance of a product.(v)The presentation of products or services.(vi)A celebrity or a well known fictional character
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According to Section 160 (4) (a)31 “any act or practice carried out or engaged in, in the course of any industrial or commercial activity, that misleads, or is likely to mislead, the public with respect to an enterprise or its activities, in particular, the products or services offered by such enterprise, shall constitute an act of unfair competition.”
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The most striking feature of this instance is “misleading” or “likelihood of misleading” the public. The element of “misleading” or the “likelihood of misleading” is related to the enterprise or its activities including the products or services offered by the enterprise. The mode that produces the misleading effect -whether written, oral or any other mode- is not material. Nor is the medium used such as marks, labels, television, radio or the Internet. The intention or any other metal element is not relevant either.
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The “misleading’1 may arise, in terms of Section 100 (4) (b), out of advertising or promotion, and may, in particular, occur with respect to
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(i)The manufacturing process of a product
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“Discrediting” an enterprise or its activities in the course of industrial or commercial activities constitutes an act of unfair competition. Marking the necessary provisions in this regard Section 160 (5) (a) states :
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‘Any false or unjustifiable allegation, in the course of industrial or commercial activities, that discredits, or is likely to discredit, an enterprise of another person or the activities of such enterprise, in particular, the products or services offered by such enterprise, shall constitute an act of unfair competition.”32
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This Section covers false or unjustifiable allegations made in the course of industrial or commercial activities that discredit or are likely to discredit an enterprise or its activities. The false allegation may, for example, be committed by conveying the false information on an enterprise or its products, services or any other industrial or commercial activities. Moreover, an unjustifiable allegation is also covered. Such an allegation may not be strictly false but may under certain circumstances be considered unjustifiable.33
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Discrediting may arise out of advertising or promotion and may, in particular, occur with respect to –
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(i)The manufacturing process of a product
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The undisclosed information is accorded statutory protection under Section 160 (6)35 of the Act which covers a broader range of instances of disclosure, acquisition or use of undisclosed information by unauthorized persons. This is the first ever attempt made in Sri Lanka to extend statutory protection to undisclosed information.36
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For the purpose of the Intellectual Property Act, information is considered “undisclosed information” if-
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(1) it is not, as a body or in the precise configuration and assembly of its components, generally known among, or readily accessible to, persons within the circles that normally deal with the kind of information in question
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(2) it has actual or potential commercial value because it is secret
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(3) it has been subject to reasonable steps under the circumstances by the rightful holder to keep it secret.37
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The undisclosed information for the purpose of the Act includes:
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(i) technical information related to the manufacture of goods or the provision of services
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information which includes the internal information which an enterprise has developed so as to be used within the enterprise.38
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Making provisions for the protection of undisclosed information, Section 160 (6) (a) declares: “Any act or practice, in the course of industrial or commercial activities, that results in the disclosure, acquisition or use by others of undisclosed information without the consent of the person lawfully in control of that information (in this section referred to as “the rightful holder”) and in a manner contrary to honest commercial practices shall constitute an act of unfair competition.”
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The prohibition on disclosure, acquisition or use of undisclosed information without the consent of the “rightful holder” is operative against all the persons. Such persons may include those who have special relationship with the “rightful holder” such as employees, partners, independent contractors, suppliers of goods or services, lawyers, and customers.
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Disclosure, acquisition and use of undisclosed information may take different and varying forms. Section 160 (6) (b) recognizes certain examples39 of such forms as follows :
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(i) Industrial or commercial espionage.
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The industrial or commercial espionage, which is a deliberate attempt to appropriate undisclosed information belonging to another person, may occur under different circumstances and diverse forms. The formation of a relationship with the rightful holder of the information, such as obtaining, in order to fraudulently obtain the information, employment, use of listening devices, obtaining photographs or getting access to computer files and databases are normally cited as examples of the means of carrying out the industrial or commercial espionage.40
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A contractual obligation to protect undisclosed information may be made under the agreements of employment, partnership agreements or agreements between the employers and independent contractors and the like. Such obligation may be expressly included in the agreement or be inferred from the terms of the agreement. The breach of contract may result in the liability in disclosure, acquisition or use
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of the undisclosed information under the law of unfair competition as well as in breach of contract under the law of contracts.
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(iii) Breach of confidence.
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The breach of confidence may result from the confidential relationship between the parties41 independently of the contractual obligations.
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(iv) Inducement to commit any of the acts referred to in the above mentioned paragraphs (i) – (iii). For example, a person who does not have access to the undisclosed information of his competitor may induce an employee of such competitor to disclose the information. An act of such inducement amounts to an act of unfair competition.
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(v) The acquisition of undisclosed information by a third party who knew, or was grossly negligent in failing to know, that an act referred to in the above four paragraphs was involved in the acquisition of such information.
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Section 160 (9) expressly provides that the rights conferred by the provisions of Section 160 (6) relating to undisclosed information exist in addition to, and not in delegation of, any common law rights.
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The protection against the acts of unfair competition can be primarily enforced by means of civil remedies. The criminal sanctions may be used against the unauthorized disclosure of undisclosed information. The respective provisions are made under Sections 160(7) and (8) of the Act.
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Any person or enterprise or association of producers, manufacturers or traders aggrieved by any act or practice of unfair competition may institute proceedings in court to
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(i) prohibit the continuance of such act or practice and
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(i) obtain damages for losses suffered as a result or such act or practice.
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1 Sumeet Research & Holdings Ltd. v. Radio & engineering Co. Ltd .(1997) 2 Sri LR 393, Malhotra Int (Pvt) Ltd. v Anglo -Asian Distributors Ltd (2000) 3 Sri LR 116 Societe DesProduits Nestle SAv.Multitech Lanka (Pvt) Ltd- (1999) 2 Sri LR 298.
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2 These provisions are based on the WIPO Model Provisions on Protection against Unfair Competition.
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WIPO Publication No. 832(E) 1996.
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3 See S. 104(1 )(e). Sumeet Research & Holdings Ltd, v. Elite Radio & Engineering Co. Ltd, (1997) 2 Sri LR 393.
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4 Dior v. Milton (1956) 110 USPQ 563-566.
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5 Introduced at the Brussels Diplomatic Conference, 1900.
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6 The same obligation is recognized under Article 2 of the TRIPS Agreement.
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7 For Ex. LanhamAct of 1946 and Federal Trade Commission Law of 1914. See Thomas McCarthy on Trade Marks and Unfair Competition.
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8 See Jewish Employment & Vocational Service Inc. v. Pleasantville Educational Supply Corporation (1984) 220 USPQ 613-23-24 for basic elements of unfair competition.
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9 See Sumeet Research & Holdings Ltd v. Elite Radio & Engineering Co. Ltd (Supra) P. 405.
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11 For Ex. The registration and use of a mark by an agent identical to the mark of his principal (Sumeet Research & Holdings Ltd. v. Radio & engineering Co. Ltd.(Supra), Using a similar get up by a competitor (Societe Des Produits Nestle SA v. Multitech Lanka (Pvt) Ltd.) (Supra) and Application of a similar mark for registration by a competitor (Malhotra Int (Pvt) Ltd. v. Anglo Asian Distributors Ltd (Supra) Compare Lipton Ltd. it Stassen Exports Ltd. C A 602/92 (F) (unreported). Where H.W. Senanayake J. stated that a shrewd entrepreneur who would resort to practices, which normally a gentlemen would not rsort to did not commit and act of unfair competition. He made these observations in the context of the use of a colourable imitation of a get up and the possible resultant confusion. However, the validity of his statement is doubtful today due to the new provisions relating to unfair competition and other judicial decisions such as Societe Des Produits Nestle SA v. Multitech Lanka (Pvt) Ltd.) (Supra) and Malhotra Int (Pvt) Ltd. v. Anglo – Asian Distributors Ltd (Supra)
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Explanatory notes: WIPO Model Provisions (Supra).
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Ibid, producers, manufacturers or traders aggrieved by an act or practice of unfair competition can seek judicial intervention for remedial measures. It is not limited only to the aggrieved competitors.
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Stassen Exports Ltd. v Hebtulabhoy & Co. Ltd. – (Supra).
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Sumeet Research & Holdings Ltd v. Elite Radio & Engineering Co. Ltd (Supra), at p400 la S- 160 (I) (b) of the Act.
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-° For the purposes of Section 160 the word ‘enterprise’ has the same meaning as in Section 101 of the Act (S. 160 (b) (e) ). Accordingly enterprise means : “any business, industry or other activity carried on by an individual, partnership, company, or co-operative society wherever registered or incorporated and whether registered or not under any law for the time being in force relating to companies, co-operative societies or businesses engaged in or proposing to engage in any business and includes any business undertaking of the Government or any State Corporation whether carrying on business in Sri Lanka or otherwise.”‘
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21 See Parker – Knoll v. Knoll International (1962) RPC 265 -273-74.
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22 See Lipton Ltd. v. Stassen Exports Ltd. CA 602/92 (F) (unreported).
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23 Section 160 (2) (b). These are certain examples of confusion.
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24 As the confusion can occur in respect of both registered marks and unregistered marks, the unregistered marks are protected within the framework of ‘confusion’ under the law of unfair competition. This protection is particularly important in respect of the unregistered well-known marks. The registered marks can also receive the same protection independently of the law relating to the registered marks. The protection against unfair competition is operative and effective even against the owner of a registered mark in favour of the user of an unregistered mark. See Sumeet Research & Holdings Ltd v. Elite Radio & Engineering Co. Ltd (Supra) In order to determine the existence of unfair competition, it would not be adequate to consider only the form in which the propounded mark is applied for, but a consideration of the actual use of that mark becomes necessary in given circumstances
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25 The enterprise or the products etc.
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26 This may cover mainly the advertising. The confusion may occur due to the information provided in respect products, services or relationship of different enterprises or in some other forms such as the appearance of a shop.
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27 The appearance of a product may include packaging, shape or colour etc. of a product.
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28 For example, unauthorized use of the picture of such person whose picture is used in advertisement by an enterprise with due authorization.
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29 The word “dilution” is defined by Section 160 (3) (c) of the Act which provides “For the purposes of these provisions, “dilution of goodwill or reputation” means the lessening of the distinctive character or advertising value of a mark, trade name or other business identifier, the appearance of a product or the presentation of products or services or of a celebrity or well-known fictional character.”
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30 The principle of dilution of marks has thus entered the legal system of Sri Lanka. The law of dilution attempts to fill the
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“No Law or Ordinance is mightier than understanding” Plato
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“The Laws sometimes sleep, but never die” Anonymous
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“Wherever Law ends Tyranny begins” John Locke
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lacuna created by the law relating to the infringement of marks where there is no likelihood of misleading the public or trade circles. The anti-dilution principles are active against the deterioration of the distinctive character of a mark caused by its use in respect of dissimilar goods which are not generally competing in trade. The dilution of a mark can, in particular, occur in relation to a well known mark where a sign identical or similar to it is used for goods or services that are not similar to those for which it is well-known. As far as dilution is concerned the issue whether mark is registered or not is immaterial.
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31 This is based on Article 10 bis (3) 3 of the Paris Convention.
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32 These provisions are based on Article 10 bis (3) (2) of the Paris Convention.
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33 For example in the case of comparative advertising.
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35 This Section conforms to Article 39 of this courts Agreement.
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36 The courts of Sri Lanka has looked for the English law principles of confidential information in dealing with similar matters. See For ex. Hently Garments Ltd v. J.S.A Fernando (1980) 2 Sri LR 145, H.V.R Caldera v. John Keels Holdings Ltd (1986) 1 CALR575, and Finlay Rentokil Ltd v. Vivekananda (1995)2 SriLR346
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39 These examples correspond to foot note 10 to Article 39 (2) of the TRIPS Agreement.
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40 See WTPO Model Provisions (Supra).
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41 Such as employers and employees and partners in a partnership.
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” No Law or Ordinance is mightier than understanding”
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“The Law sometimes sleep, but never dies”
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“Whenever Law ends Tyranny begins
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