Thursday, August 21, 2014

Does Section 22 of the Designs Act,2000 Limit Damages in a Suit to INR50000?

It appears there is some confusion regarding the interpretation of Section 22 of the Designs Act, 2000, which deals with piracy of registered designs and reliefs available to the owner of a registered design. Specifically, there seems to be some doubt with respect to the maximum value of damages that the owner of a registered design may claim in a suit for design infringement. One school of thought is of the opinion that Section 22(2) and the first proviso thereunder limits/caps damages that a design owner may seek in a suit to INR 50,000/-. Is this truly the case?

A clear reading of each of the sub-clauses of Section 22(2) reveals the following:
1)  The provision provides two options/reliefs to a registered design owner in the event of infringement of a design. The first relief is where the design owner may recover a maximum of INR 25,000/-.from the infringer for “every contravention” in the form of a contract debt
2) The second relief is one which permits the owner of the design to institute a suit for damages and permanent injunction against the infringer   
3) It is to be noted that the reliefs are disjunctive in nature which means the owner of the design has to elect between the two
4) Critically, what is to be noted is that the limit/cap of INR 50,000/- for “every design” prescribed in the first proviso is restricted to the first relief and does not apply to the second relief. Simply put, there is no pecuniary limit whatsoever on damages that a registered design owner may seek should he opt to institute a suit for damages and injunction under the second relief

If this is the case, how does one interpret the first relief and the first proviso together? Based on a combined reading of Section 22(2)(a) and the first proviso, it follows that when the design owner opts for the first relief by way of a contract debt, although, he is entitled to recover  maximum of  INR 25,000/-  from the infringer “for every contravention”, it is to be noted that he may recover a maximum of INR 50,000/- for infringement of a design regardless  of the number of contraventions with respect to the design. In other words, under the first relief, the statutorily prescribed limit is INR 50,000/- for infringement of a single design regardless of the number of contraventions. Therefore, if in the same infringing act, the infringer violates multiple design registrations of the same design owner, the owner is entitled to recover a maximum of INR 50,000/- for each of the designs. 

However, this raises a few more questions. Since the first relief does not provide for an injunctive relief, does it mean that after the recovery of a maximum of INR 50,000/- for infringement of every design, the design owner does not have the right to recover more money in the event of a subsequent infringement? If yes, where is the incentive for the design owner to opt for the first relief if it does not act as a deterrent to the infringer? Importantly, if with respect to a first cause of action the design owner opts for the first relief, is he barred from instituting a suit for damages for a subsequent cause of action/infringement by the same infringer?


I look forward to comments and corrections from the readers.       

Friday, July 11, 2014

Are the decisions of the Competition Commission in rem?

A few days ago I had a discussion on competition law with a distinguished colleague of mine whose depth and perspicacity I deeply respect. During the course of the discussion, the question that came to my mind was whether the orders/decisions of the Competition Commission of India (CCI) are judgments in rem, or are they restricted to the parties to a given case? Following are the scenarios which need to be looked into: 

1.       If an agreement entered into by X with Y is ultimately held to be anti-competitive under Section 3 by the CCI, would the finding apply to an identical agreement entered into subsequently by X and Z?  Also, would the finding apply to an identical agreement entered into by X and P prior to the finding of the CCI? 

2.       Would the finding apply to identical/similar agreements entered into by A and B either before or after the finding of the CCI in the case involving X and Y?

Be it Section 3 of the Act which deals with anti-competitive agreements, or Section 4 which deals with abuse of dominant position, or Section 6 which deals with regulation of combinations, the attempt is to proscribe/forbid certain types of behaviour which have an adverse bearing on competition in the market. In other words, the focus is on the behaviour of the entities, as opposed to the entities themselves. Therefore, it could be said that if a certain clause or transaction or practice is held to be anti-competitive or abusive, such a finding could apply to third party enterprises indulging in identical/similar practices, even if such parties were strangers to the earlier proceedings. To that extent, it could be said that the CCI is laying down the law on legally acceptable behaviour in the market.

However, practically, does this mean the CCI can forego investigation and proceed to declare as anti-competitive the agreements between X and Z, or X and P, or A and B? Sections 42A and 53N could help address these questions. Reproduced below are the said provisions:

Compensation in case of contravention of orders of Commission
42A.Without prejudice to the provisions of this Act, any person may make an application to the Appellate Tribunal for an order for the recovery of compensation from any enterprise for any loss or damage shown to have been suffered, by such person as a result of the said enterprise violating directions issued by the Commission or contravening, without any reasonable ground, any decision or order of the Commission issued under sections 27, 28, 31, 32 and 33 or any condition or restriction subject to which any approval, sanction, direction or exemption in relation to any matter has been accorded, given, made or granted under this Act or delaying in carrying out such orders or directions of the Commission.

Awarding compensation
53N.(1)Without prejudice to any other provisions contained in this Act, the Central Government or a State Government or a local authority or any enterprise or any person may make an application to the Appellate Tribunal to adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the Appellate Tribunal in an appeal against any findings of the Commission or under section 42A or under sub-section(2) of section 53Q of the Act, and to pass an order for the recovery of compensation from any enterprise for any loss or damage shown to have been suffered, by the Central Government or a State Government or a local authority or any enterprise or any person as a result of any contravention of the provisions of Chapter II, having been committed by enterprise.
 (2) Every application made under sub-section (1) shall be accompanied by the findings of the Commission, if any, and also be accompanied with such fees as may be prescribed.
 (3) The Appellate Tribunal may, after an inquiry made into the allegations mentioned in the application made under sub-section (1), pass an order directing the enterprise to make payment to the applicant, of the amount determined by it as realisable from the enterprise as compensation for the loss or damage caused to the applicant as a result of any contravention of the provisions of Chapter II having been committed by such enterprise:
Provided that the Appellate Tribunal may obtain the recommendations of the Commission before passing an order of compensation.
 (4) Where any loss or damage referred to in sub-section (1) is caused to numerous persons having the same interest, one or more of such persons may, with the permission of the Appellate Tribunal, make an application under that sub-section for and on behalf of, or for the benefit of, the persons so interested, and thereupon, the provisions of rule 8 of Order 1 of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), shall apply subject to the modification that every reference therein to a suit or decree shall be construed as a reference to the application before the Appellate Tribunal and the order of the Appellate Tribunal thereon.
 Explanation.—For the removal of doubts, it is hereby declared that—
(a) an application may be made for compensation before the Appellate Tribunal only after either the Commission or the Appellate Tribunal on appeal under clause (a) of sub-section(1) of section 53A of the Act, has determined in a proceeding before it that violation of the provisions of the Act has taken place, or if provisions of section 42A or sub-section(2) of section 53Q of the Act are attracted.
(b) enquiry to be conducted under sub-section(3) shall be for the purpose of determining the eligibility and quantum of compensation due to a person applying for the same, and not for examining afresh the findings of the Commission or the Appellate Tribunal on whether any violation of the Act has taken place.

Following are the similarities and differences between Sections 42A and 53N: 
1. Section 42A applies to violation of specific directions/orders issued against a specific enterprise, whereas Section 53N applies to situations covered by Section 42A as well as to subsequent violations of Chapter II of the Act (which contains Sections 3, 4 and 6) by the same enterprise. In other words, the scope of Section 53N is broader and in either instance, it is the COMPAT that shall decide an application for compensation.

2.  Under both provisions, an application for compensation may be moved by “any person” who is aggrieved either by violation of the CCI’s directions/orders by an enterprise against which the directions/orders were issued, or by a violation of the Act itself by such an enterprise subsequent or prior to the its conduct being declared as anti-competitive by the CCI or the COMPAT. 

Critically, Section 53N(1) read with the Explanation (a) to Section 53N answers the queries raised in the post. An application for compensation against an enterprise such as X may be moved only after its conduct has been found violative of the Act either by the CCI or COMPAT. Further, such an application can be moved by “any person” who has suffered damage or loss as a result of the conduct. Therefore, if X’s conduct with Y has been found anti-competitive, and X has entered into identical/similar transactions with P and Z in the past or future, Y,P and Z may all apply to COMPAT for compensation against X.

However, as the explanation implicitly clarifies, the finding with respect to X’s conduct cannot be directly applied/extended to an agreement between A and B, even if the agreement is identical/similar to the X’s agreement with Y, until it is determined afresh by the CCI or COMPAT (in appeal) that such agreement between A and B is violative of the Act.

Simply put, if a certain conduct of a party has been found violative of the Act, the Commission need not revisit the illegality of the party’s conduct over and over again in order to award compensation to parties affected by the party’s conduct.  However, if a stranger to the earlier proceedings indulges in identical/similar conduct, it needs to be investigated and a fresh finding must be arrived at.

The other important caveat is that if a party’s conduct involves abuse of dominance under Section 4 of the Act, it may not be possible to extend the findings arrived at in one case to past or future conduct since it would need to be ascertained if the party was in a position of dominance in each of the impugned transactions. This is because under Section 4, only the conduct of dominant parties may be investigated. Therefore, if a party is no more dominant at the time of the subsequent transaction, the earlier finding may not be valid, which means a de novo investigation is necessary to arrive at the finding of abuse of dominance.

Comments and corrections are welcome!

Tuesday, May 27, 2014

Legality of a Contractual Estoppel against Challenge to Patent Validity

Can a licensee who has reaped the benefits of a patented invention challenge the validity of the patent? Under the Patents Act, 1970, yes. Section 140(1)(d) provides that it shall not be lawful to insert in a patent-related contract or license a clause that prevents the licensee from challenging the validity of the licensed patent. It goes on to say that such a condition shall be void.

The said provision, which flows from Article 40 of the TRIPS, was introduced in the Act as part of the 2002 amendment. Interpreting the provision in Enercon (India) Limited v. Aloys Wobben in January 2013, the IPAB observed as follows:

Licensee Estoppel
14.       The learned counsel for the respondent submitted that though S.140 of the Patents Act provides for avoidance of certain restrictive conditions, it is always subject to Ss. 115 and 117 of the Indian Evidence Act.  Having pleaded that the applicant is the transferee of the technology transferred, it cannot destroy the validity of the intellectual property that was transferred.  There is lack of good faith.  Learned counsel referred to paragraph-18 of the written statement filed by the applicant herein in the suit before the Delhi High Court. It was submitted that after revocation petition was filed, the applicant stopped paying the royalty.  Learned counsel referred to various paragraphs in the written statement. Learned counsel submitted that an order of revocation is a discretionary remedy and the discretion shall not be exercised in favour of the applicant. Learned counsel referred to the derivative action suit filed before the Bombay High Court.  Learned counsel submitted that the applicant must surrender the rights under the agreement (Intellectual Property Licence Agreement) before it attacks the patent. 

15.       In response, Mr. R. Parthasarathy, learned counsel for the applicant submitted that on 8.12.2008, the licence had been terminated and once it has been terminated, the subsequent  application for revocation  will not be barred by estoppel.  Learned counsel submitted that the respondent cannot plead in the same breath that the license has been terminated and that the applicant as the licensee is estopped from challenging it. According to him, the suit in the Bombay High Court was for a relief regarding the payment of royalty, etc. where the Court will decide the construction of documents and it is still pending before the Bombay High Court.  Learned counsel submitted that the answer to the question whether a licensee can file a revocation is ‘yes’ and referred to S. 140 of the Patents Act.  He submitted that the power under S. 64 is very wide.  He referred to the decision in Lear, Inc v. John S. Adkins [395 U.S.653, 89, S.Ct.1902].   

16.       So we will see whether even if the applicant is a person interested, he is estopped from suing for revocation being a licensee. S. 140 says that it is not lawful to insert in a licence to manufacture or use a patented article or to work any process protected by a patent, any condition of prevention to challenges to the validity of a patent.  This is the law.  This condition will govern all licences which relate to or are in relation to a patented article or a process protected by a patent.   Learned counsel for the applicant relied on AIR 2010 SC 259 in which it was held that there can be no estoppel against a statute. 

17.       In Lear Incorporated v. John S.Adkins [395 U.S.653, 89, S.Ct.1902], it has been held that the contractual rights give way to public interest in a challenge to a patent and therefore, even a licensee can attack an unworthy patent.  In Lear , the inventor was Adkins.  He was hired by Lear Incorporated to develop a gyroscope which was required in the aviation industry.  Adkins developed an invention which Lear incorporated in its production process.  In the litigation where Adkins claimed compensation for Lear’s use of the improvements which the inventor has patented, Lear sought to prove that Adkins inventions were not sufficiently novel.  The inventor argued that as a licensee, Lear must pay.  The California Supreme Court relied on the rule of estoppel to bar Lear from proving that Adkins’ invention was not patentable.  The U.S. Supreme Court granted Certiorari in this case to reconsider the Hazeltine rule which invoked estoppel to deny a licensee the right to prove that the licensor’s idea was really a part of the public domain.  The U.S. Supreme Court said that the present federal policy favoured free competition in ideas which do not merit patent protection, and  that the licensee estoppels had an uncertain status and it is a product of judicial efforts to accommodate the competing demands of the common law of contract in the federal law of patents.  It observed that instead of a creative compromise, there has been a chaos of conflicting case law. It also observed as under:

“Surely the equities of the licensor do not weigh very heavily when they are balanced against the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain.  Licensees may often be the only individuals with enough economic incentive to challenge the patentability of an inventor’s discovery.  If they are muzzled, the public may continually be required to pay tribute to would-be monopolists without need or justification.  We think it plain that the technical requirements of contract doctrine must give way before the demands of the public interest in the typical situation involving the negotiation of a license after a patent has issued.”

The U.S. Supreme Court also held that the overriding federal policies would be significantly frustrated if licensees are required to continue to pay royalty during the time they are challenging the patent’s validity.  The Court observed that enforcing this contractual provision would undermine the strong federal policy favouring full and free use of ideas in the public domain.  So we have the Act which says that the conditions which restrict the right of a licensee from challenging the patent are illegal and we have the opinion of the U.S. Supreme Court explaining why a licensee is entitled to invalidate the patent. This restriction imposed by S.140, is another indicator of the public interest angle in patent law. While the law shall protect the rights of the property owner, it will not restrict the rights of the interested person to challenge the grant, so that unworthy patents are restored to the public domain.

Because of the costs of the litigation and the very special nuances of the technology, it may very well be that the licensee alone is capable of challenging the patent. He has the funds and the knowledge to launch the attack on the subject matter of the invention. This is why the U.S. Supreme Court held that it would be inequitable to restrict him from attacking the patent by any condition in the contract. The Parliament has specifically introduced this provision in our Patents Act which is a special enactment as far as patents are concerned and hence it will prevail over the general rules relating to contract. Therefore no licensee can be estopped from challenging the patent. This objection is rejected.”

I don’t think I could have captured the spirit and objective of Section 140 better. What needs to be understood is that the freedom to challenge the validity of a patent extends to a compulsory licensee and a prospective licensee as well. Considering additionally that a licensee or a prospective licensee is also a “person interested” within the meaning of Section 2(1)(t) of the Act who has the commercial incentive and the technical wherewithal to challenge the validity of the patent, I tend to agree with the policy intent underlying Section 140. 

Monday, May 26, 2014

Will the Ministry of Commerce under the New Government Deliver the Goods?

After a marathon election campaign that started last September, the Bharatiya Janata Party (BJP) emerged victorious on May 16, 2014 winning a clear majority on its own (282 seats out of the total 543 seats in the Lower House of the Indian Parliament). Today the Union Council of Ministers formally took oath, including Ms.Nirmala Sitharaman, who is widely seen as the next Minister of State for Commerce. As most of our readers know, the Department of Industrial Policy and Promotion (DIPP) which is the nodal department for all Intellectual Property-related issues, falls under the Ministry of Commerce and Industry.

Given that the Ministry of Commerce through the DIPP is responsible for formulating manufacturing and innovation-related policies, it’d be interesting to see what the new dispensation does to revive the manufacturing sector and to boost innovation.  On this blog, we had earlier written two posts on a National Innovation Policy and the importance of investment in innovation and research in times of recession. Following are a few relevant extracts from both these posts:

As is wont, the situation today has a macroscopic perspective and a microscopic one. As far as the macroscopic view is concerned, the services sector is a tempting seductress which promises returns in a geometric progression within a narrow time window and is not as infrastructure-intensive as the manufacturing sector. This makes it an easier and “softer” option for economies which do not have the political will to invest in hard infrastructure (Indian economy being a case in point).  

The microscopic view, which is corollarial to the macroscopic one, is that investment in hard infrastructure requires a highly-skilled and reliable industrial workforce, which is willing to constantly learn and adapt to newer technologies and style of functioning (this calls for industry-friendly labour laws as well). This means, besides private enterprise, the government too needs to play a huge role in creating, training and nurturing a workforce, and in chalking out a comprehensive pan-nation industrial innovation policy.

Importantly, the latter again calls for establishment of well-networked innovative institutions which have collaboration-friendly structures to combine their research firepower in good times and in times of dire need to pull out the country’s economy from doldrums. One of the countries which has such an approach at the heart of its innovation policy-making is Germany. Not-so-incidentally, Germany happens to be those rare developed economies which did not buckle under the recession to the extent that US and UK have.

How has Germany’s industrial/innovation policy helped it cocoon itself to a significant extent from the harsh effects of the recession? There is an extremely informative and insightful paper covering the theme of this post and this specific issue. The paper entitled “Can the Relative Strength of the National Systems of Innovation Mitigate the Severity of the Global Recession on National Economies?  – The Case of Selected Developed Economies” was presented by A.Baskaran and M.Muchie this April at the DIME Final Conference at Maastricht, Germany.

On Page 11, the authors of the paper enumerate what they perceive to be the strengths and weaknesses of the German system of innovation vis-a-vis its ability to mitigate the effects of recession. Some of the strengths listed therein are relevant to the post, which are as follows:

(i) In contrast to ‘Anglo-Saxon model’ of growth based on financial services (e.g. the UK) and property market, the German economy is strongly rooted in manufacturing, companies invest in long-term growth, and workers-managers relationship is based more on close cooperation;
(ii) Structural reforms in the labour market and corporate sector before the recession helped the German economy to become more competitive;

(xiii) Germany has developed FDI strategies around incentives and clusters and developed world renowned centres of excellence and developed globally recognized position as leaders in certain growth sectors such as clean technology.  Germany has also developed well recognized excellence in innovation, and has created the best environment for R&D, which continues to attract companies from abroad to work close to the leading German companies and to access the best talents in the country

The above paper apart, what is even more educational is the recommendation of the Commission of Experts (EFI) (a commission established by the German government) to the German government in its 2009 Report. Under the head aptly titled “Education, research and innovation- a particular priority in recession”, the Commission recommends thus in no uncertain terms:

“The Expert Commission suggests that in the course of implementing the second recovery package, more attention should be paid to the concerns of education, research and innovation. If this is not done, there will be a severe shortfall in the funds available in future to improve the competitive position of Germany. Currently, the German innovation system is still competitive in an international comparison. However, competition is becoming considerably more intense as other industrialised countries and some key emerging economies redouble their efforts. Germany‘s position with respect to R&D will therefore come under pressure if the level of expenditure for research and innovation is only maintained at present levels. There is an urgent need to expand education, research and innovation.”
...
Innovation and SMEs
To finance innovation, the report implicitly recommends the creation of a vibrant and responsive equity market to fund innovation by Small and Medium-sized Enterprises (SMEs). What is interesting is that in the literature that one has come across thus far, the pervasive opinion is that innovation is primarily churned out of SMEs (and not behemoths, although it is behemoths which typically flaunt their patent filing statistics).

In Germany, the report says, 70% of its employees work in SMEs and 43 % of all SMEs in Germany are innovative. In the report, an SME is deemed as innovative if it brings new or improved products into the market.

The report further observes that investment in innovation by SMEs is integrally dependent on the state of the economy. To ensure that such investment remains insulated from the health of the economy in some measure, the report recommends an innovation-friendly tax system. Even if an innovation-friendly tax system is put in place and an active venture capital market is promoted, how does one generate demand for the products of such innovation?

The question is, what exactly is expected of such innovation? Is innovation during recession meant to create products/processes which can kick-start the economy? Or is it meant to bring back pre-recession growth figures once the recession dies its cyclical death? Or is it meant to reduce future vulnerability to recession by creating a strong post-recession technology base? Can a single approach bring about any or all of these outcomes? I guess that would be entering the realm of a trained economist, which I am not, hence opinions are welcome.

Anyways, the report recommends a combination of topic-independent R&D support in the tax system and project-specific funding, both of which are intended for SMEs.

The University Angle
Among the other recommendations, there are two which deal with universities. The first one is about creating an attractive science/technology labour market. This came as a surprise to me because I did not expect an advanced technology regime such as Germany to have trouble attracting scientific talent. 

Besides working on qualitative development of the German education system, the report recommends creating a framework to encourage retention of home-grown talent and relaxation of immigration norms for highly-skilled foreign nationals (recently, Australia welcomed highly-skilled human resources from India under its Global Non-discriminatory Immigration Programme).

The second recommendation relating to universities was to boost university-industry interaction to “intensify and improve knowledge and technology transfer”. One of the suggested steps, which I felt was nuanced, is to avoid imposing a universally binding technology transfer framework which spell out the minutiae for all research institutions and universities.

It is probably best to lay down a common policy which encourages a culture of research accountability and incentivization, without using a straitjacketed approach that is blind to the dialectics of individual technology sectors. But there is definitely a consensus on the need for universities to play a more active role in facilitating commercial application of their own research, and not restricting themselves to merely providing skilled manpower to the applied sciences industry.

Tapping the Knowledge-intensive Services Industry
The report seeks to tap the under-utilized knowledge-intensive services industry in Germany. “Knowledge-intensive services” refer to provision of services by way of high-end technology and engineering consultancy. This is one sub-sector of the services sector which ensures that there is an area of the economy which, although “soft”, still requires highly-qualified technology professionals, as opposed to other areas such as legal, business and financial consultancy services (the so-called Anglo-saxon model).

The reason knowledge-intensive services are a relatively untapped area in Germany is probably because its business houses are globally-renowned brands for product development, be it the chemicals industry or the auto industry. Considering the fact that exports drive the product-based industries of Germany, and the fact that the Chinese low-wage model makes it difficult to compete price-wise, it is strategically important for Germany to rapidly ramp up the scale of its knowledge-intensive services.

Lessons for India
From my limited understanding, most of the recommendations in the report for the German economy seem applicable to India as well. Given the on-going discussions on the need or otherwise for the Public-Funded Intellectual Property Bill (the so-called Indian Bayh-Dole), I now see the wisdom in  the calls for undertaking a thorough study on the nature of Indian research institutions and universities, and their core-strengths and weaknesses, before introducing a cut-and-dried legal framework.

As for the industrial policy, India must look at increasing the contribution of the manufacturing sector to the GDP, which is currently hovering at around 15%. Although knowledge-intensive services already form a respectable part of the Indian services sector (since quite a few Indian arms of foreign multinationals play the role of engineering services division), it is just not enough to remain content with our role as sidekicks to product developers.

India has the natural resources to play a prominent, if not dominant, role on the global manufacturing scene. Along with China, India too has embarked on a quest for more minerals in African markets; therefore, what now needs to be scaled up along with our quest for natural resources, is the ability to produce goods for domestic and global consumption.

Today our population and its increasing panache for diverse consumption give Indian players a chance to test their manufacturing capabilities before they venture into foreign markets. Indian SMEs in particular must seize the initiative, but I think the hurdle before them is to attract engineering talent which either opts for cushy management positions in business consultancy majors, or gravitates towards non-Indian manufacturing giants.”

Taking forward this train of thought, I think it may be important for the HRD Ministry and the Ministry of Commerce to work together to develop a trained workforce and to provide avenues to utilize the skills of the workforce. Further, the National Manufacturing Policy needs to lay stronger emphasis on innovation, IP creation and IP protection. The High Level Committee constituted under the Policy must include an expert on innovation and IP, preferably a committee of MHRD IP Chairs.

Having said the above, it is clear that there’s a lot that can be done and there is no dearth of suggestions coming from all quarters. But if the last ten years have proved anything, it is this- execution above all needs political will, and hopefully the new dispensation has what it takes to once and for all prove that India does not need to cite democracy as an excuse for poor execution each time it is compared with China. Here’s wishing the new Government the very best in its sincere endeavours! 

Wednesday, May 21, 2014

Delhi High Court: Prima Facie Territorial Jurisdiction for Passing Off may be based on Statements made in a Legal Notice

On May 7, 2014, in an appeal from an order of a Single Judge returning the plaint for want of jurisdiction in an action for passing off filed by LT Foods Ltd against Heritage Foods India Ltd over the mark "HERITAGE", a Division Bench of the Delhi High Court held that so long as the plaint contains necessary pleadings to establish the territorial jurisdiction of the Court, it cannot be returned for want of jurisdiction. Following are the relevant extracts from the decision:

“6. It would be evident from the above paragraphs that the appellant/plaintiff had averred the following:-
1. That the plaintiff/appellant received a cease and desist notice from the defendant alleging infringement and passing off of its trade mark HERITAGE;
2. That the defendant had started selling rice under the trade mark HERITAGE;
3. That in the notice dated 4.3.2011 issued by the defendant to the plaintiff, the defendant had stated that the goods of the defendant under the trade mark HERITAGE were being sold or supplied directly or indirectly throughout the length and breadth of the country;
4. That in view of the statement made by the defendant/respondent in the legal notice dated 4.3.2011, the plaintiff/appellant stated that the defendant had admitted that it also sold and supplied goods directly or indirectly in Delhi as Delhi would be included in the length and breadth of the country.

7. On the basis of the above four aspects which have been clearly and categorically averred by the plaintiff/appellant in the said plaint, it has been contended that this Court would have territorial jurisdiction to try the Suit even in respect of a passing off action apart from an action based on the cease and desist notice itself.

8. It is well settled that in examining the case from the stand point of Order 7 Rule 10 CPC the plaint must be taken as it is and the averments made therein must be accepted as true. Only if, on assuming the averments made in the plaint to be true and correct, the Court comes to the conclusion that it would not have territorial jurisdiction, could the plaint be returned for filing the same in a Court having jurisdiction. The Court while examining this aspect of the matter cannot go beyond the facts stated in the plaint. In other words the Court cannot examine any defence contained in the written statement filed on behalf of the defendants. The principles for rejecting a plaint under Order 7 Rule 11 or returning a plaint under Order 7 Rule 10 CPC, are more or less similar. Observations of the Supreme Court in the case of Exphar SA v. Eupharma Laboratories Ltd., A.I.R. 2004 SC 1682 are apposite and they are reproduced herein below:

"9. Besides when an objection to jurisdiction is raised by way of demurrer and not at the trial, the objection must proceed on the basis that the facts as pleaded by the initiator of the impugned proceedings are true. The submission in order to succeed must show that granted those facts the Court does not have jurisdiction as a matter of law. In rejecting a plaint on the ground of jurisdiction, the Division Bench should have taken the allegations contained in the plaint to be correct"

Para 6 of the decision reveals that territorial jurisdiction was sought to be established by the Appellant/Plaintiff on the basis of the statements made by the Respondent/Defendant in the latter’s cease and desist notice to the Plaintiff that its goods bearing the impugned trademark were available “directly and indirectly across the length and breadth of the country”. The Court held that territorial jurisdiction could be established at the prima facie stage on the basis of such statements. Below is the relevant observation of the Court:

13. Ms Prathiba Singh, the learned senior counsel, also pointed out that while in paragraph 26 of the plaint there is mention of the „cease and desist notice dated 04.03.2011, there is also mention of the appellant’s / plaintiff’s reply to the said notice dated 19.04.2011 where the plaintiff has denied the statement of the defendant in the said notice dated 04.03.2011 to the effect that the defendant sold or supplied, directly or indirectly, the goods bearing the trade mark "HERITAGE" throughout the length and breadth of the country. However, we feel that this does not enable the respondent / defendant, at this prima-facie stage, to detract from the position that the respondent / defendant had, in the said notice dated 04.03.2011, clearly stated that it had sold the goods under the said trade mark "HERITAGE" directly or indirectly throughout the length and breadth of the country which, obviously, would include Delhi as well. Whether the respondent / defendant can explain this admission and explain the circumstances so that it is not bound by it is a matter for trial. But at this prima-facie stage, the appellant / plaintiff has founded his cause of action on passing off on this admission on the part of the respondent / defendant and it is immaterial that the appellant / plaintiff had in its reply to the notice taken a contrary view.


One critical lesson that could be drawn from the decision is that statements must not be made in a legal notice without application of mind and without understanding their legal implications in a court of law. 

Thursday, May 15, 2014

Delhi High Court Restrains the use of Anchor’s mark “ALL ROUND” in P&G’s Oral B products

In an 18-page decision pronounced on May 9, 2014, a Single Judge on the Original Side of the Delhi High Court granted an interim injunction in favour of Anchor Health and Beauty Care Pvt Ltd restraining Proctor and Gamble from using Anchor’s registered trademark “ALL ROUND” in connection with P&G’s Oral-B products. The injunction was granted in a suit filed in 2013 by Anchor against P&G. 

Anchor’s grievance was that the use of the expression as part of “ORAL B ALL AROUND PROTECTION” and “ORAL B ALL ROUNDER” by P&G in connection with the latter’s toothpaste and brush amounted to infringement of Anchor’s registered trademark “ALL ROUND”. 

Following were P&G’s defences:
1.       That the mark “ALL ROUND” was descriptive and common to the trade for which Anchor had failed to establish secondary significance. Further, P&G’s use of “ALL ROUND” was descriptive in nature and not in a trademark sense.
2.       That a rectification petition had been filed by P&G against Anchor’s registration on the mark;
3.     That P&G’s use of “ALL ROUNDER” and “ALL AROUND PROTECTION” was not deceptively similar to the Anchor’s registered mark “ALL ROUND”, and that Anchor had no registration for the expression “ALL AROUND PROTECTION”;
4.       Since the descriptive expression “ALL AROUND PROTECTION” was being used as an adjunct to Anchor’s primary trademark ANCHOR, there was no malafides in P&G’s use of the expression.

Following were Anchor’s rebuttals:
1.       P&G had a registered trademark in the US on “ALL AROUND PROTECTION” and had applied for one on “ALL ROUNDER” in India;
2.       The fact that Anchor had used “ALL ROUND” along with its primary mark did not in any way undermine its claim over “ALL ROUND”. Further, the law did not require Anchor to use ALL ROUND in a stand-alone manner and that it could be in conjunction with any other mark.

The Court’s observations:
1.       P&G’s own registrations on and applications for “ALL ROUNDER” and “ALL AROUND PROTECTION” undermined their contention that “ALL ROUND” was descriptive and common to the trade.
2.       In the facts of the case, the packaging of P&G revealed that “ALL AROUND PROTECTION” was being used by P&G as a stand-alone mark, and not in a descriptive sense.
3.       Since Anchor was indeed using ALL ROUND as part of ALL ROUND PROTECTION, P&G’s argument of non-use was ill-founded.
4.       P&G’s use of ALL ROUNDER and ALL AROUND PROTECTION was deceptively similar to Anchor’s ALL ROUND since the essential feature of the latter’s mark was being used by P&G. Consequently, a case of prima facie infringement had been established.
5.       Balance of convenience was in favour of Anchor since P&G had barely introduced the product in the market at the time of the filing of the suit.
6.       Accordingly, P&G was given four weeks time to take the necessary steps to comply with the injunction.

Monday, May 12, 2014

Division Bench of the Delhi High Court Holds that a Registered TM Owner can sue another Registered Owner for Infringement

On April 29, 2014, in a Regular First Appeal (RFA) preferred against the rejection of a plaint by the Court of first instance under Order 7, Rule 11 of the CPC, a Division Bench of the Delhi High Court held that an action for infringement by one registered proprietor of a trademark against another registered proprietor is maintainable under the Trademark Act, 1999, subject to the conditions under Section 124 of the Act being satisfied.

In the facts of the case, both the Plaintiff and the Defendant had registrations on the mark "HERITAGE" in Class 30. The appeal was preferred by the Plaintiff against the order of the Learned Single Judge who held that Section 28(3) of the Act prohibited a registered proprietor of a trademark from suing another registered proprietor. In other words, according to the Learned Single Judge, the only cause of action that a registered owner may have against another registered owner is that of passing off, but not infringement. 

This proposition was rejected by the Division Bench in light of Section 124(1)(b) of the Act which clearly refers to a situation where a suit for infringement is filed by a registered TM owner against another. To this end, the Division Bench cited the decision of the High Court in Clinique Laboratories LLC and Anr. Vs. Gufic  Ltd. and Anr. (April 9, 2009) in which after a detailed discussion on Sections 28(3), 30(2)(e) and 124(1)(b) of the Act, it was held that a suit for infringement by a registered TM owner is indeed maintainable against another registered TM owner. In fact, it was further held that Section 124(5) permits the grant of an interim injunction as well in such a suit for infringement.

Extracted below are the relevant observations from the Clinique decision which was subsequently applied in Mrs.Rajnish Aggarwal & Ors. v. M/s Anantam and most recently in Abbott Healthcare v. Raj Kumar Prasad on April 25, 2014:

8. In my view, Section 29 of the Act providing for infringement of the registered trademark does not contemplate infringement by another registered proprietor. Sections 29(1), (2) & (4) expressly provide that "registered trademark is infringed by a person who, not being a registered proprietor ..........." Though, Section 29(5) which has been newly introduced in the 1999 Act does not use the same language but in my view the same would be irrelevant for the present purposes. Section 30 (2) (e) further fortifies the said position by expressly providing that the registered trademark is not infringed where the use being as one of two or more trademarks registered under the Act which are identical or nearly resemble each other and in exercise of the right to use of that trademark given by registration thereof. However, Sections 28(3), 29 & 30(2) (e) cannot be read in isolation. If the intent was that there could be no action for infringement against the registered proprietor, the legislature while giving the right for rectification before the Registrar would not have in Section 31 made the registration as only prima-facie evidence of validity thereof. If that had been the intention all that would have been said is that as long as the registration exists it is valid, without any question of prima-facie or not. Then the courts would have had to wait for the outcome of the rectification proceedings.

9. Registration has been made only prima-facie evidence of the registration otherwise being in accordance with the Act under Section 31(1) as contended by senior counsel for plaintiff but I find that even Section 28 (1) while being subject to other provisions of Act, further provides that "registration of the trademark, if valid, give to the registered proprietor" exclusive right to use the trademark. Thus the validity of registration can be gone into, wherever permissible under the Act. Section 124(1) (b) also indicates that it was within the contemplation of the legislature that there could be a suit for infringement of trademark where the defendant takes a plea under Section 30 (2) (e) i.e. that use by him is not infringement because of his mark being also registered. The legislature while further providing for stay of suit in such cases, in sub Section (5) expressly provided that such stay would not preclude the court from making any interlocutory order. Section 31 r/w the scheme of 124 leads to an un-escapable conclusion that (A) there can be a suit for infringement against the registered proprietor (B) that upon the defendant taking the plea of his registration and of there being thus no infringement, such suit has to be stayed awaiting the rectification proceedings and (C) the court is empowered in such case to pass any interlocutory order. The court while passing interlocutory order will necessarily have to prima facie adjudicate the validity of the two competing registrations. Upon inquiry, it was informed that the Registrar while trying the rectification application has no power to grant interim relief. The legislature under Section 124 (5) has thus empowered the court under Section 124 (5) to grant injunction against use of a registered trademark also if the court is satisfied of the invalidity thereof. Though in view of Section 31, the test would be much stricter;

10. In my opinion, unless the provisions are so read, effect cannot be given thereto.

11. Once having reached a conclusion that registration is only prima facie evidence of validity, it is axiomatic that if the court is satisfied otherwise on the basis of material on record and in the facts of the case, the court is empowered to injunct use of registered trademark also. I do not find any reason to limit/restrict the applicability of sub Section (5) as suggested by the senior counsel for the defendant, in the absence of the legislature providing so. If the legislature had felt that there could be no infringement by a registered trademark, there was no need to provide for such a suit as in Section 124 (1) (b) and (i). In fact, sub-clause (i) of 124 (1) shows that the suit can be instituted even where the rectification proceedings are pending i.e. where the plaintiff is even at the time of institution of the suit aware of the defendant having a registered trademark.

12. I also find merit in the contention of the senior counsel for the plaintiff with reference to Section 31 (2) of the Act. Section 31 (2) suggests that the court notwithstanding registration being prima- facie evidence of validity as provided in Section 31(1) can hold the registered trademark to be invalid. The court can hold the registration to be invalid, on any ground or for non compliance of any of the conditions for registration provided under the Act. It further provides that if the invalidity of registration is averred for the reason of non compliance of Section 9 (1), i.e. of evidence of distinctiveness having not been submitted before the Registrar, then the party pleading validity of registration shall be entitled to give evidence in legal proceedings where validity is challenged, of the mark having acquired distinctiveness on date of registration. Section 32 permits evidence of acquisition of distinctive character within the meaning of Section 9(1) post registration, also being led in such proceedings. It follows that where validity of registration is challenged on grounds other than provided in Section 9(1) of the Act, the test is whether the criteria laid down in such other provisions of the Act, for registration has been satisfied or not. Since, Section 124 otherwise provides for stay of proceedings in such suit and only permits passing an interlocutory order, such finding of invalidity naturally has to be on the touchstone of principles for interlocutory order only and not as at the time of final decision of the suit, in as much as the finding in the rectification proceedings has been otherwise made binding in the suit and on all aspects of validity i.e. under Section 9 as well as under Section 11.

13. Neither counsel has cited any direct judgment on this aspect. Nor have I been able to find any.

14. I thus conclude that a suit for infringement of registered trademark is maintainable against another registered proprietor of identical or similar trademark and in such suit, while staying the further proceedings pending decision of the registrar on rectification, an interim order including of injunction restraining the use of the registered trademark by the defendant can be made by the court, if the court is prima facie convinced of invalidity of registration of the defendants mark.”

Therefore, from the above, it is clear that so long as the validity of the defendant’s trademark registration has been challenged either prior to the institution of the suit, or such a challenge has been raised in the plaint by the plaintiff who is also a registered TM owner, a suit for infringement by a registered TM owner is maintainable against another registered TM owner.