Smart strategies to protect your marks inside and outside the courts. Vandana Chatlani reports

Last July, the Supreme Court observed “a disturbing trend” of intellectual property (IP) disputes failing to reach the disposal stage due to lengthy interim orders. The Supreme Court’s remarks were sparked by Delhi High Court’s 50-page interim order in AZ Tech India v Intex Technologies (India) & Anr, which it said appeared to be “virtually a decision on merits of the suit”.

“We wonder whether the high court has thought it proper to write such an exhaustive judgment only because of acceptance of the fact that the interim orders in intellectual property rights matters in Delhi High Court would govern the parties for a long duration of time and disposal of the main suit is a far cry,” observed Justices Ranjan Gogoi and Navin Sinha.

“Decisions that run over 50 pages are expected to reckon not only a thorough analysis of evidence but also offer, at the very least, some finality of an outcome,” says Sujata Chaudhri, the founder of Sujata Chaudhri IP Attorneys. “While granting interim injunctions, courts are expected to take only a first impression view on the merits of the case and not delve into a detailed analysis of evidence.”

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Determined to crack down on this culture of delay, the Supreme Court directed Delhi High Court’s registrar-general to report back with the total number of pending IP lawsuits, informing it of the stage of each suit and the period for which injunction and interim orders were issued. The goal was to ensure the speedy disposal of IP disputes.

“The Supreme Court … addressed special areas that contributed most to lawsuits being delayed in the lower courts,” says Vaishali Mittal, a partner at Anand and Anand in Delhi. “For example, it identified trial proceedings and final hearing stages as those more responsible for delaying the life of a lawsuit [and so] … sought very specific data on Delhi High Court’s treatment of lawsuits during these stages.”

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Jolted into action, Delhi High Court recently amended its rules and the Delhi High Court (Original Side) Rules, 2018, came into effect on 1 March. “These rules have brought about comprehensive changes in the governing procedure of suits filed under the original jurisdiction of Delhi High Court, all aimed at expeditious disposal of the suits,” says Nirupam Lodha, a partner at Luthra & Luthra in Delhi.

Some of the key changes include:

  1. Stricter timelines for completion of pleadings and the stipulation that framing of issues, which takes place after completion of pleadings and admission/denial of documents, should not be delayed on account of pendency of interim applications;
  2. Speeding up the progress of trial by allowing parties to record evidence in premises outside Delhi High Court;
  3. Allotting parties a fixed time to argue their cases, keeping in mind other matters listed for hearing in a given day;
  4. Granting the court power to dispose of a suit, once issues are framed, if it is satisfied that no further argument or evidence is required for a decision in the suit;
  5. The introduction of rules stating that adjournments will be the exception rather than the norm, with consent of parties considered insufficient grounds for an adjournment; and
  6. Imposition of heavy costs upon a party whose actions cause a delay in the proceeding of suits.

The statute has also made amendments to civil procedural law. As Sudeep Chatterjee, a Delhi-based partner at Singh & Singh, explains, the amended order XV-A of the Code of Civil Procedure, 1908, requires the court to conduct a case management hearing within four weeks from the date on which issues are framed. “The case management hearing sets a timetable for trial as well as for the final hearing, thus speeding up the disposal rate of trademark suits,” says Chatterjee.

This new framework offers a starting point for oiling other cogs within the court system by creating a benchmark so that a model for the disposal of civil suits may be replicated across the rest of the country.

PICKING UP THE PACE

The setting up of commercial courts and divisions across high courts under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, opens other avenues for quicker disposal of IP-related cases. “This act contemplates speedy and efficacious enforcement, and requires that arguments are closed no later than six months from the date of the first case management hearing, with any appeals to be disposed of within six months from the date on which the appeal was filed,” says Sudhir Ravindran, the CEO of Altacit Global in Chennai.

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In addition, a bill to amend the Commercial Courts Act, introduced in March, reduces the value of an eligible commercial dispute from ₹10 million (US$150,000) to ₹300,000, widening the net to capture a broader range of cases. “This is a very encouraging feature and will lead to almost all IP matters being referred to the commercial courts,” says Ashok Ram Kumar, a senior partner at IP Markets in Hyderabad.

For trademark owners battling contentious issues, all of this is good news.

However, Chaudhri urges trademark owners to have their hands on the reins in order to drive matters forward using the Commercial Courts Act, since she says it only helps litigants who help themselves. “Since the introduction of the act, there has been much hype about how IP litigation has, or will, benefit,” she says. “Given that the statute is still fairly nascent, the development of jurisprudence in respect of its provisions is an ongoing endeavour, and by no means settled. That said, the benefits of the statute accrue largely to litigants who proactively press the statute into action, rather than wait for courts to do so of their own accord.”

Because litigation in India is generally time consuming, almost all trademark litigation involves filing interlocutory applications and obtaining restraining orders, according to Rajesh Ramanathan, a partner at Factum Law in Chennai. “Successful interlocutory applications are contingent upon a claimant establishing a prima facie case, balance of convenience in favour of granting an interlocutory injunction, and an irreparable injury if an injunction is not granted pending trial and disposal of the suit.”

In trademark litigation, a prima facie case can only be established if there is enough evidence documented to show goodwill and reputation of the claimant’s trademark, says Ramanathan. “More often than not, brand owners struggle to produce evidence … including invoices and promotional materials at the time of adoption and/or inception of the concerned trademark’s use. It is even more important to produce customer feedback, and awards and recognition that the brand owner had received. All this will go a long way in establishing a good prima facie case and make it easier to obtain a favourable order.”

Himanshu Deora, a senior associate at ZeusIP in Delhi, says his firm has encountered a number of clients, particularly large foreign companies, which have faced difficulties in providing evidence in a timely manner. “Sometimes they fail to provide evidence despite having it because it is buried somewhere in their records, or perhaps because the evidence is old or voluminous and takes time to trace,” he says. “They spend a huge amount of resources on marketing, but without a proper strategy in place.”

Lawyers consistently emphasize the need for meticulous recordkeeping to ensure evidence of a trademark’s use can be accessed swiftly when needed. This is particularly important in India, where first use is always given prominence over registration in the case of a dispute.

“In India, a trademark can acquire distinctiveness through use,” says Chatterjee. “Even if a mark lacks inherent distinctiveness, it can still be registered if it acquires distinctiveness, and secondary significance due to continuous and extensive use. This is different from the concept of ‘first to file’, which is practised in countries like China, Germany and France, where registration is the only avenue for protection of a mark.”

TOYOTA’S TRIALS AND TRIBULATIONS

Proving the use of a trademark can be a time-consuming task for trademark owners, but demonstrating trans-border reputation can be an even more challenging exercise as Toyota discovered when it faced a Haryana-based automotive accessories manufacturer, Prius Auto Industries, in court.

In a prominent development for trademark law, the Supreme Court declared last December in Toyota Jidosha Kabushiki Kaisha v M/S Prius Auto Industries that IP rights are “territorial” and not “global”. The court refused to grant an injunction restraining the defendant from using its registered trademark Prius, even though Toyota was a prior user of the mark. The court recognized that Toyota’s mark was well known outside India, however, it noted that the Japanese carmaker failed to prove its reputation in the Indian market in 2001, when Prius Auto Industries began using the mark in India.

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“The court based its decision on the principle of territoriality of trademarks, as opposed to the doctrine of universality,” says Rajendra Kumar, a senior partner and head of the trademarks practice at K&S Partners in Gurugram. “The principle of territoriality requires that a trademark should be recognized as having a separate existence in each sovereign country. The doctrine of universality, on the other hand, states that a mark should signify the same source all over the world.”

Ramanathan says the “far-reaching judgment” indicates that courts will have to give preference to the territoriality principle rather than the universality principle, and protect only those trademarks that have sufficient goodwill or reputation in India. He says the court stated that to successfully establish goodwill in a particular jurisdiction, a claimant must have customers within the jurisdiction, as opposed to people in the jurisdiction who happen to be customers elsewhere.

Toyota fell to its knees for several reasons, a key one being its inability to prove that it had advertised widely the launch in Japan of its hybrid Prius car in 1997. Toyota argued that Indian consumers would have gained awareness of its mark in 2001 through news stories, advertisements and online information relating to the car. However, Prius Auto Industries contended that these efforts would only have reached a very small audience in India.

“The news items relating to the launch of the product in Japan appeared only twice in the Economic Times in 1997,” says Naqeeb Nawab, a partner at ZeusIP in Delhi. “Evidence of advertisements in automobile magazines, international business magazines, and availability of data through information-disseminating portals like Wikipedia (which would have been limited given the low internet penetration in India in 2001) … were not enough to prove the existence of the necessary goodwill and reputation of the product in the Indian market.”

Kumar, at K&S Partners, further points out that although Toyota had launched its car under the Prius mark in several other countries as early as 1997, it was launched in India only in 2010. Until 2009, Toyota had not attempted to register the trademark in India.

“During the trial, claiming well-known status for the mark Prius, Toyota had relied on a few stray advertisements and news reports in car magazines in India,” says Kumar. “Prius Auto Industries, on the other hand, justified its adoption of the mark Prius on the ground that it was the first in India to manufacture add-on chrome-plated accessories and, therefore, had conceptualized its attempt as pehela prayas – a Hindi term meaning ‘first attempt’, and then further modified the name to Prius.”

The decision “reiterates the story of evolving IP jurisprudence and shows the importance of a thorough inquiry, scrutiny and appreciation of evidence led by the parties,” says Manisha Singh Nair, a partner at LexOrbis in Delhi.

But what message does this send to international trademark owners? Chaudhri believes the case has potentially lowered the evidentiary value of: (1) advertisements and promotional materials in demonstrating goodwill and reputation in a mark; and (2) the defendant’s failure to explain why it adopted Toyota’s highly distinctive mark. “While the court’s reasoning in respect of the evidentiary value of advertisements appears somewhat academically sound, [its] failure to address the plaintiff’s allegation that the defendant’s adoption of a highly distinctive mark was dishonest is inconsistent with precedent,” says Chaudhri. “Counsel for defendants in trademark infringement suits could certainly use this case as precedent to downplay the importance of bad faith analysis.”

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Ashwin Julka, the managing partner at Remfry & Sagar in Gurugram, believes the court’s decision on territoriality seems to weigh against commercial and business morality principles. “Foreign multinational brands that enjoy immense reputation and goodwill outside India and have future plans for business expansion in India may now fear and be discouraged by prior use of an identical or similar mark by a local entity in India,” he says. “Under the present scenario, the onus placed on the former to establish substantial goodwill in the domestic market is a bit too high.”

SETTLING OUT OF COURT

Most lawyers agree that trademark battles can be settled outside the courtroom, particularly through cease and desist letters, which can often persuade infringers to stop using a registered mark. “A large percentage of instances do get resolved by simply approaching the misuser and persuading them to settle the matter and give up the misuse,” says Ranjan Negi, national head and partner in the IP practice at Cyril Amarchand Mangaldas in Delhi.

But, as Ramanathan warns, cracking down on infringers quickly is vital. “Immediate action is essential … even a small delay will affect the outcome and may end up diluting a very strong brand.”

Mittal says directly confronting an infringer can be highly effective. “This confrontation is better left to an attorney, since they will be able to explain the extent and gravity of the violation of rights. The attorney then advises the counterfeiter to stop engaging in such activities and sign an undertaking to this effect on the spot. Most counterfeiters, when caught red-handed, choose to sign the undertaking and avoid crossing paths with the trademark proprietor again.”

Suhrita Majumdar, a trademark attorney at S Majumdar & Co in Kolkata, says trademark owners could also consider buying out the infringing mark, preferably via intermediaries.

According to Kumar at IP Markets, mediation is a good alternative to a prolonged trademark dispute in court. “Unlike an arbitration, where one counsel is engaged for each side and the process is more or less similar to the court, in a mediation the mediator would have more flexibility to talk to both parties and settle the matter,” he says. “Mediation also gives the parties a chance to seek options of co-existence.”

Sripriya Padmanabhan, a senior associate at Fox Mandal & Associates in Bengaluru, says drawing up “mutual co-existence agreements, based on confinement to a particular territory, goods or services, or other agreed terms” is a worthwhile option for trademark owners to deliberate.

WHAT’S IN A NAME?

The use of a mark in relation to goods and services concerning dissimilar classes is another important area for international trademark owners. India follows the Nice Agreement on the International Classification of Goods and Services under which there are 45 categories. Each of these categories grants legal usage of trademarks for specific types of goods and services. Trademark owners must register their mark in the specific classes in which they wish to maintain rightful ownership.

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However, there are currently matters pending litigation that pertain to the use of a mark in, and as part of, a domain name or corporate name in relation to goods and services in dissimilar classes.

“Judicial decisions in this field are likely to set the tone for the industry at large,” says Shiraz Patodia, a senior partner at Dua Associates in Delhi. The present position emerges from Bombay High Court’s decision in Cipla v M/s Cipla Industries, which states that there is no cause of action for infringement when a registered trademark is used only as a corporate or trading name for dissimilar goods. The same applies to well-known trademarks. “The takeaway from this decision is that stakeholders, companies and enterprises must ensure they file and seek registration of trademarks in every class in which they trade and operate,” says Ashish Singh, a manager at Dua Associates.

TRADEMARK FIRSTS

Courts have passed orders protecting trademarks based on trade dress, international reputation, shape and texture. Last June, the Taj Mahal Palace hotel acquired an “image trademark” under the Trade Marks Act, 1999, for its architectural design. It is the first building in the country to be accorded such status, and joins other trademarked buildings such as the Eiffel Tower, the Empire State Building and Sydney Opera House. “The trademark was registered for the image of the sea-facing frontage of the Taj Mahal Palace and Tower Wing Exterior for ‘services providing food and drink, and temporary accommodation’, giving it trade dress protection and identification of the source,” says Chatterjee.

“With this trademark being granted, commercial users must now pay a licensing fee and obtain consent from the Taj Group to use images of the Taj Mahal Palace,” says Mittal.

According to Julka, registration has been granted on the “image” of the Taj Mahal Palace and does not extend to the shape, structure or 3D drawings of the hotel. Third parties may therefore argue that 3D depictions would not amount to infringement. “However, much depends on the stance taken by the court as and when such a dispute arises in the future,” he says. “Nevertheless, registration granted to a building marks an interesting beginning in the scope of trademark enforcement in India, especially since the hotel is synonymous with the city and skyline of Mumbai.”

Lawyers say courts could begin to offer protection for colour combinations, olfactory and motion marks in the near future.

Last December, Delhi High Court awarded a designer shoe brand, Christian Louboutin, well-known trademark status on account of its trademark red sole high-heels. In Christian Louboutin SAS v Pawan Kumar and ors, the court granted an injunction against the defendants who sold shoes with red soles, awarding ₹1.5 million in damages.

“I believe this case should have been tested in an adversarial proceeding rather than declaring the single colour to be well known based only on the evidence led by the plaintiff,” says Vaibhav Vutts, a partner at Vutts & Associates in Delhi. “Nevertheless, this case opens the door for more such claims and I am sure trademark jurisprudence will develop around this aspect.”

The Trade Mark Rules, 2017, replace the Trade Mark Rules, 2002. Previously, brand owners had to approach courts or tribunals to obtain well-known trademark status, and to tackle those infringing or passing off their marks. Now, they can also apply directly to the Indian Trade Marks Registrar to obtain this status. “The rules have paved a simple way by which an application can be filed to request the registrar for the determination of a trademark as well known,” says Padmanabhan.

INTERPRETING SECTION 124

The high courts and the Intellectual Property Appellate Board (IPAB) have rendered conflicting opinions on the interpretation of section 124 of the Trade Marks Act, which deals with whether an application for rectification of a registered mark can be filed only with prior permission of a civil court before which an infringement suit of that mark is pending.

According to Kumar at K&S Partners, Madras High Court and the IPAB stated that seeking rectification of a registered mark under sections 47 (non-use) and 57 (invalidity) of the act are statutory rights and could not be taken away by the provisions of section 124, which means that permission of the civil court would not be required to file a rectification application. However, the High Courts of Delhi and Gujarat held a contrary view; that where a civil suit is pending, rectification proceedings could not be initiated without taking leave of the concerned civil court under Section 124 of the Trademarks Act, 1999.

These conflicting views saw the matter referred to a full bench of Delhi High Court which, in 2016, unanimously overruled the earlier opinion of Delhi High Court that rectification proceedings could be initiated only after obtaining leave of the concerned civil court. The full bench also held that an applicant who fails to approach the IPAB within the specified time, after obtaining such leave, is deprived of the defense of invalidity of the trademark in the infringement suit. However, the party is free to approach the IPAB outside of the suit.”

Last November, while considering an identical issue under section 124 and the full bench order, the Supreme Court in Patel Field Marshal Agencies & Anr v PM Diesels & Ors, ruled that proceedings before the IPAB could be initiated only if the civil court is satisfied that an issue regarding invalidity ought to be framed in the suit. “Further, it held that if, despite the order of the civil court, the parties failed to approach the IPAB within the prescribed period, the plea regarding rectification would no longer survive, because if such a right to rectification were to subsist, there could be uncertainty and anarchy,” says Kumar at K&S Partners. “The order of the Supreme Court favours the views of the high courts of Gujarat and Delhi. These findings … have effectively barred the rights of parties in a suit to file rectification proceedings outside of the suit, in respect of a trademark against which an invalidity claim was raised in the suit.”

KNOW YOUR JURISDICTION

There have been constant developments with regard to the issue of claiming jurisdiction in trademark infringement cases since the Supreme Court’s ruling in IPRS v Sanjay Dalia, in 2015. “The case not only impacted the plaintiff’s option of claiming jurisdiction under section 134 of the Trade Marks Act – i.e. on the basis of the plaintiff’s place of business or where the plaintiff carries on business – but also the option of claiming jurisdiction under section 20 of the Civil Procedure Code, i.e. based on the defendant’s place of business or where the cause of action has arisen,” explains Nawab. “Litigants have tried to twist their facts in such a manner so that they can claim jurisdiction appropriately. The court has given contrary conclusions in cases where jurisdiction claims rest on an online transaction.”

With the IPRS v Sanjay Dalia decision, ‘forum shopping’ has been curtailed, says Aamna Hasan, a partner at Vutts & Associates. “Parties are now required to go to courts based upon the cause of action and the defendant’s place of business, provided the plaintiff also has a place of business there.”

Lodha advises brand owners to look closely into the question of jurisdiction, and also the evolving jurisprudence by courts, before deciding where to file an action. “The question of jurisdiction is being scrutinized more closely by courts in recent times and the above suggestion is to ensure that the action is not vitiated or delayed due to questions relating to jurisdiction.”

Chaudhri advises avoiding filing a lawsuit in courts where the risk of rejection on the grounds of territorial jurisdiction is high. “While the statutes remain the same, the interpretation of provisions governing territorial jurisdiction of trademark suits by civil courts is both fickle and disconcertingly inconsistent,” she says. “While Delhi High Court is the preferred forum of choice for trademark litigants, owing to its IP-savvy commercial divisions, litigants should be willing to part with their preference if recent trends indicate a higher risk of rejection on such grounds. Since the law in this regard is constantly in flux, one can only hope that someday courts endorse a consistent interpretation of the statute.”

QUICK TIPS FOR TRADEMARK OWNERS

Sudeep Chatterjee, partner, Singh & Singh: Conduct a proper search of the mark. Most agents do a “word” search. However, many times a “phonetic” search reveals a large number of marks closer to a mark that you may have intended to use.

Suhrita Majumdar, trademark attorney, S Majumdar & Co: Register and use your trademark in India. You can obtain registration in less than 10 months. If you do not use your trademark within five years, it will be cancelled owing to non-use.

Rajesh Ramanathan, partner, Factum Law: Be proactive; keep monitoring by using watch services and take immediate steps to initiate action against infringers to nip it in the bud even if they are small players. Prius failed on account of delays.

Manisha Singh Nair, partner, LexOrbis: If you have knowledge of infringing use, start with an on-the-ground investigation to identify the target businesses and all its subsidiaries, agents, etc. It is common practice in India to engage a private investigator to uncover the nature and extent of passing off/infringement. Gather and file all the relevant evidence along with the complaint, as this can play a vital role in the determination of proceedings.

Nirupam Lodha, partner, Luthra & Luthra: Include strong contractual provisions in any agreements entered into with third parties (including distributers, retailers, etc.) who will be using your trademark. Such provisions could include an obligation on the concerned party to refrain from using and applying for registration of a trademark that is identical or similar to yours.

Shiraz Patodia, senior partner, Dua Associates: Make use of the IPR (Imported Goods) Enforcement Rules, 2007, in conjunction with the Customs Act, which allows rights holders to register their IP with the customs authorities to restrain and combat the import of infringing products.

Anshul Sunil Saurastri, associate, Krishna & Saurastri: Disputes relating to licensed marks and franchised businesses are rising and therefore it is important to be careful while drafting clauses relating to dispute resolution, governing law and jurisdiction in such businesses to avoid undesirable scenarios.

Rajendra Kumar, senior partner and head of trademarks practice, K&S Partners: Wherever possible, try and file actions before the high courts of Delhi, Mumbai, Kolkata and Chennai, as they exercise original jurisdiction in IP matters and are well conversant with IP laws. If the defendant is based in a remote jurisdiction where courts are generally not conversant with IP laws, issuing a desist letter and negotiating a settlement is a better option than filing a court action.

Sujata Chaudhri, founder, Sujata Chaudhri IP Attorneys: The importance of putting the infringing party on notice of your trademark rights shortly after you learn of them cannot be emphasized enough. It is also good practice to always send a cease and desist letter, as judges tend to look favourably upon parties that try to settle a matter before coming to court.

Vaibhav Vutts, partner, Vutts & Associates: In IP matters, use the provision for summary judgment under order 13A of the Civil Procedure Code as leading evidence, cross-examination and final hearing are not required. Summary judgments are also useful as the court has the powers to grant damages.

Vaishali Mittal, partner, Anand and Anand: While filing a claim in court and in the run-up to trial, a litigant must calculate the damages that it actually suffered at the hands of the defendant, otherwise they risk walking away without any damages being awarded. You can showcase actual damages through the defendant’s sales and revenues based on the infringing trademark, your own lost profits, or loss of market share as a result of counterfeiting or infringement.

 

The appellate court’s purview