Monday, October 15, 2012

Section 124 of the TM Act: Does a Defendant Need the Court’s Permission to Apply for Rectification?

I was recently asked if a defendant/alleged infringer in a suit for trademark infringement needs the Court’s permission under Section 124 of the Trademarks Act, 1999 to file a rectification against the plaintiff’s mark.

In my opinion, the object of Section 124 is to connect filing of a rectification petition to the Court’s obligation to stay the suit proceeding, and not to impose fetters on a defendant’s right to file a rectification petition.

Before I proceed with interpreting Section 124, it needs to be pointed out that under Section 125 of the Act, where there is a trademark infringement suit pending before a court or issues of trademark validity have been raised before a court, and no rectification petition has been filed, it shall be filed only before the IPAB, and not the registrar for Section 124 to be applicable.

If however, there is a pending rectification proceeding before the registrar, that is sufficient to invoke Section 124. This is reflected by Section 124(1)(i).

Now, moving to the import of Section 124, let’s start with the provision itself:

124. Stay of proceedings where the validity of registration of the trade mark is questioned, etc.
(1) Where in any suit for infringement of a trade mark-
(a) the defendant pleads that registration of the plaintiff’s trade mark is invalid ; or

(b) the defendant raises a defence under clause (e) of sub-section (2) of section 30 and the plaintiff pleads the invalidity of registration of the defendant’s trade mark, the court trying the suit (hereinafter referred to as the court), shall,-
(i) if any proceedings for rectification of the register in relation to the plaintiff’s or defendant’s trade mark are pending before the Registrar or the Appellate Board, stay the suit pending the final disposal of such proceedings;
(ii) if no such proceedings are pending and the court is satisfied that the plea regarding the invalidity of the registration of the plaintiffs or defendant’s trade mark is prima facie tenable, raise an issue regarding the same and adjourn the case for a period of three months from the date of the framing of the issue in order to enable the party concerned to apply to the Appellate Board for rectification of the register.

(2) If the party concerned proves to the court that he has made any such application as is referred to in clause (b) (ii) of sub-section (1) within the time specified therein or within such extended time as the court may for sufficient cause allow, the trial of the suit shall stand stayed until the final disposal of the rectification proceedings.

(3) If no such application as aforesaid has been made within the time so specified or within such extended time as the court may allow, the issue as to the validity of the registration of the trade mark concerned shall be deemed to have been abandoned and the court shall proceed with the suit in regard to the other issues in the case.

(4) The final order made in any rectification proceedings referred to in sub-section (1) or sub-section (2) shall be binding upon the parties and the court shall dispose of the suit conformably to such order in so far as it relates to the issue as to the validity of the registration of the trade mark.

(5) The stay of suit for the infringement of a trade mark under this section shall not preclude the court from making any interlocutory order (including any order granting an injunction, directing account to be kept, appointing a receiver or attracting any property), during the period of the stay of the suit.

On a reading of the provision, it bears out that for Section 124 to apply, the defense of invalidity of the registration of the mark must be raised by the defendant. Now comes the interesting part.

In sub-clause (i) of Sub-section (1), the word used is “shall” i.e. if the defense of invalidity is raised, the Court “shall” do the following:

Situation A. If a rectification proceeding is already pending before the Registrar or the IPAB, the Court “shall” stay the suit until the disposal of the rectification proceeding. The point to be noted is, there is no express power under this situation for the Court to consider the prima facie tenability of the rectification proceeding i.e. it does not appear possible for the Court to form an opinion on the tenability of the rectification petition. It can only grant a stay.

Situation B. If no rectification proceeding is filed, it is in this situation that the Court may prima facie assess the tenability of trademark invalidity plea of the defendant. Only if the Court is prima facie satisfied with the plea, it “shall” adjourn the suit for 3 months to allow the defendant to file a rectification petition before the IPAB. This also means that the Court must pass a reasoned order as to why it believes there exists a prima facie case of invalidity of the mark.

Under Situation B, once the defendant proves to the Court that he has indeed moved a rectification petition before the IPAB, the trial of the suit “shall” be stayed until the rectification petition is finally decided.

If despite time extensions allowed by the Court, the defendant fails to file a rectification proceeding, the Court shall treat this as waiver of the invalidity plea. It must be noted that there is still no bar in filing of the rectification proceeding by the defendant. The only consequence is that the Court is under no obligation to stay the suit. In fact, under sub-section (3), the Court shall proceed with the suit.

What is critical is sub-section (5) because it dispels a popular myth that the Court cannot issue an interim injunction before staying the suit under Section 124. The sub-section is abundantly clear on the position that there are no fetters on the grant of equitable/interlocutory reliefs by the Court, which includes an interim injunction besides maintaining accounts.

In other words, it is possible for the Court to issue an interim injunction and stay the trial in the suit until the rectification petition is decided. Theoretically, there could be several instances where the Court may permit the defendant to file a rectification petition before the IPAB, and yet deem it fit to grant an interim injunction to maintain status quo.

I realize this could be inconsistent with the prima facie finding that there is merit in the plea of invalidity of registration. That said, the very nature of equitable reliefs is to cater to factual peculiarities in a particular case. Therefore, filing of an rectification petition before the IPAB need not necessarily translate to denial of interim injunction to the plaintiff.

1. Section 124 does not limit the Defendant’s right to file a rectification petition. It only requires him to file it before the IPAB if such filing is after the institution of the suit.
2. There is no bar on the power of the court to grant any interim reliefs before the suit is stayed.

Comments and Corrections are Welcome!

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