Post Abolishment Of Intellectual Property Appellate Board; A Re-Look At Section 124 Of The Trade Marks Act, 1999

The Trade Marks Act, 1999 provides for two statutory rights besides others namely, a right of a registered proprietor to exclusively use the registered trademark^[2] and to seek protection against its misuse^[3] and on the other hand, an aggrieved person has a right to seek rectification of a registered trademark of another person on the grounds of non-use^[4], on ground of no bonafide intention^[5] to use the mark and that the registration is violative of provisions of Section 9 and 11 of the Trade Marks Act, 1999. The two statutory rights are intertwined by Section 124 of the Trade Marks Act which provides for stay of proceedings of an infringement suit where the validity of registration of the trade mark is questioned, etc^[6] . The Supreme Court in the case titled as Patel Field Marshal Agencies and Anr. vs. P.M. Diesels Limited and Ors^[7] has laid down the law of the land that where a rectification petition is filed prior to the suit, the suit has to be mandatorily stayed and the Rectification Proceedings has to be first adjudicated upon. So, in a case where a suit is stayed and the rectification petition is adjudicated first, the decision in the rectification petition is binding on the Court trying the suit. Now, rectification petition can be filed either before the Trademarks Registry^[8] or before the High Court^[9] (prior to the Tribunal Reforms Act, 2021 the rectification petition could have been filed before the Intellectual Property Appellate Board). The Patel Field Marshal case in the second limb of the judgment laid down the law that post filing of the suit, a petition for rectification can be filed after an issue is raised and a prima facie case is established for existence of grounds of rectification. Thus, by operation of Section 125 of the Trade Marks Act, 1999, the rectification petition, post filing of the suit can be filed only before the High Court.

A reference may be made to an article penned by late Shri Anoop Singh, Advocate ^[10], wherein, he opined that

It is always considered advisable that before filing a suit, a notice may be served upon the infringers to discontinue the infringement of a registered trade mark. It saves costs and unnecessary litigation, if the infringer responds positively and discontinues the infringement.

In practice it has been noted that as soon as, a notice is served, the first step taken by the infringer is to file a rectification of the mark under the relevant provision of the Trade and Merchandise Marks Act 1958. It may be under Section 46 and 56 on one ground or the other.

If rectification application is filed then under Section 111 (1) (b) (i), the suit is bound to be stayed as word shall is used in the sub-section. Thus the suit is stayed.

It was noted long back that Rectification sometimes is used as a tool to de-rail the suit proceedings and it was revealed by the Ld. Counsel in his article that the stay of the suit can cause inconvenience to the Plaintiff.

It is submitted that time has come for the Legislature to step in and borrow from the related Act being the Designs Act, 2000. Section 22(4) of the Designs Act, 2000 encompasses that in a Design Suit where a Defendant raises a defence as to the invalidity of the registered design, the suit is referred by the District Court to the jurisdictional High Court^[11]. The High Court in that circumstance examines the question of validity of Design parallely with the question whether there is any infringement of the Design and no stay of suit is required. Hence, two parallel proceedings are avoided.

It is further submitted that the IPD Rules as framed by the Delhi High Court Intellectual Property Rights Division, 2021 provides a very specific rule which reads as under:

26. Consolidation of IPR subject matters or cases or proceedings or disputes Where there are multiple proceedings relating to the same or related IPR subject matter, irrespective of whether the said proceedings are between the same parties or not, the Court shall have the power and the discretion, wherever appropriate, to direct consolidation of proceedings, hearings, and also to direct consolidated recording of evidence/common trial and consolidated adjudication. If the Court is of the opinion that any matter pending before a Commercial Court is to be consolidated with a matter pending before the IPD, it may exercise powers of transfer under Section 24, Code of Civil Procedure, 1908 for transfer and consolidation of such matter to itself.

The aforesaid rule shows that the Rule makers are conscious of the fact that there ought not to be multiplicity of proceedings and power has been given to the IPD to exercise powers under Section 24 of Code of Civil Procedure, 1908 to transfer a suit pending before the District Court (Commercial Courts). However, the said provision contains no reference to Section 124 of the Trade Marks Act, 1999 meriting stay of the suit and continuation/ filing of rectification proceedings or the decision of the Apex Court in Patel Field Marshal Case, where the Court had observed that the if the Rectification Proceedings are pending prior to the institution of the suit, the suit has to be mandatorily stayed. It is opined that no purpose is being served by stay of the suit and continuation of only the Rectification Petition. Better purpose would be served if Section 124 of the Trade Marks Act, 1999 is replaced by a provision which is akin to Section 22(4) of the Designs Act, 2000 leading to consolidation of the suit with the rectification petition.

A reference may also be made to the rules framed by the Punjab High Court (and then applicable to Delhi under the provision of Section 110 of the Trade and Merchandise Marks Act 1958 Act), wherein rule 9 provided as under:

9. Counter-claim for rectification of Register in a suit for infringement- A defendant in a suit for infringement filed in the High Court may in regard to any registered trade mark in issue counter-claim for the rectification of the register and shall within the time limited for the delivery of the counter claim serve the Registrar with the same, and the Registrar shall be entitled to take such part in the suit as he may think fit without delivering a defence or other pleading.

Thus, a stipulation was there in the 1958 Act, read with Delhi High Court Rules that the Defendant could choose to file Rectification as Counter Claim in an infringement suit. Needless to add, they would not have been a necessity for stay of the suit. The suit and Counter Claim could be tried together.

Last but not the least, a reference may also be made to a situation where the suit qua infringement is stayed due to Rectification Petition but the suit for passing-off is allowed to continue as observed in various cases^{[12] [13]}. Thus, under the aegis of Section 124 of the Trade Marks Act, 1999, only the partial suit qua infringement is stayed but suit pertaining to passing off suit is continued. Hence, a division of litigation is made into 3 limbs: infringement portion and passing off portion of the suit and the rectification. This only leads to multiplicity of litigation.

A reference may be made to an old case titled as M/s Swaran Singh & Sons, Ludhiana vs M/s Rico Industries & ors, Ludhiana ^[14] wherein it was observed as under:

--It is obvious that there are two causes of action in the present suit and one of them has to got to be stayed and if the whole suit is stayed then the other also gets stayed and so obviously the trails is embarrassing or inconvenient because if the suit goes on qua the said issue naturally the statutory stay under sec.111will be defeated. Therefore, it is neither easy to stay the whole suit nor easy to proceed with the suit. It is in this situation that two trials should be ordered. The Learned counsel for the Plaintiff states that he is not anxious to have two separate trials.--

That in this, matter the Court was mindful of the fact that it would cause inconvenience if the suit for one of the cause of action is stayed and the other is proceeded with, and hence, the whole suit was stayed till the rectification petition was adjudicated upon first. Since then the Intellectual Property Law has travelled a long distance and the legal position that has been crystalized is that the court which is adjudicating the infringement suit at stage of the determination of interim injunction application, can examine the validity of the registered trademark^[15]. It is relevant to point that the Trial Court can examine the question of validity at the interim stage or while granting permission to file the rectification petition but the rectification petition would then be filed in a High Court which would further delay the suit proceedings. This anomaly can be addressed by adopting an equivalent to Section 22(4) of the Designs Act, 2000 i.e., if in validity of Trademark registration is pleaded in the written statement, the suit be transferred to the jurisdictional High Court for joint adjudication on proposed rectification/ suit. Of Course, some inbuilt check can be provided so that frivolous plea of invalidity stated in the written statement can be nipped in the bud. That can be done under exercise of powers under Order XV-A of the Code of Civil Procedure, 1908 as amended by the Commercial Courts Act, 2015 i.e., Case Management Hearing.

In light of this, the courts ought to not stay the suit where the Rectification Petition is pending but club/ consolidate the suit as well as Rectification Petition, record evidence in both the matters as one matter and finally adjudicate the matter in entirety. Of course, the suit, if pending before District Court would require to be transferred to the jurisdictional High Court like design suit. This would save expense, judicial time and avoid conflicting decisions.

Another Anomaly In The Current Scenario

There is yet another issue which maybe faced while dealing with the suits and corresponding rectifications. The same is set out by the following illustration:

"A" is based in Indore, he is the owner of a registered trademark, and the trademark registration was achieved in the Trade Marks Registry situated at Mumbai as per Section 5 of the Trade Marks Act, 1999. Now "A" files a case against "B" in Delhi claiming jurisdiction of Delhi Courts (which he is entitled to do so by virtue of several judicial pronouncements)^{[16] [17]}. The difficulty that "B" will face as to whether the Rectification Petition is to be filed before the Hon'ble Bombay High Court (where the registration of trademark was successfully achieved) or in Delhi High Court, when the suit has been filed in the Delhi District Court.

Since the suit is filed by "A" in Delhi, "A" has claimed in its Plaint that it is doing business in Delhi, hence "B" should be allowed to file rectification in Delhi. A similar proposition came up before Madras High Court where the Plaintiff was holding registration and the Defendant was also holding trademark registration. The suit was instituted in Madras High Court^[18]. The Plaintiff registration was in Chennai, Defendant registration was obtained from Trade Marks Registry, New Delhi. Madras High Court observed that it would be forum inconvenience to agitate one rectification proceeding in Chennai and another in Delhi with suit also filed in Chennai. Hence, both the petitions were ordered to be decided by same forum i.e. High Court of Madras. Hence, if the Plaintiff becomes adventurous and files a case at a place different from the place which is not within the jurisdiction of the High Court under which the Trademarks Registry is situated (where he obtained registration of its trademark), he must then make himself vulnerable to a challenge to his registered trademark in the same far flung place where he instituted the suit in the first place. In any case, Section 3 as provided in the Trade and Merchandise Marks Act, 1958, laying down the Jurisdiction of High Court for appeal/ rectification has no corresponding provision in 1999 Act, probably because at that time jurisdiction for rectification vested in IPAB/ Trade Marks Registry.

Suggestions

In nutshell we suggest:

(a) The suit and rectification petition be tried and adjudicated together by single trial.

(b) Section 124 of the Trade Marks Act, 1999 be treated as redundant.

(c) The rectification be filed in same High Court in whose jurisdiction, the suit is filed, irrespective of whether the registration was granted by Bombay branch of Trade Marks Registry, Ahmedabad branch of Trade Marks Registry, Chennai branch etc. This would be in consonance with spirit of enactment of Commercial Courts Act, 2015 i.e., speedy justice in the IPR matters.

(d) This will be in interest of the public (both Plaintiff and Defendant) because one trial would suffice for both Rectification Petition and Suit. Issues like validity of registered trademark, whether the trademark is Publici-juris, priority in adoption/ user, etc can be adjudicated in one proceeding only. Issues overlap in suit/ replication. Hence, precious judicial time would be preserved in the proposed regime.

The authors are Advocates practicing at Delhi and views are personal.