Written by: Adv. Megha Harshwal & Adv. Manoj Soni
Under this article we cover about the provisions laid down under Section 124 of the Trade Marks Act, 1999 relating to the stay of suit in case the suit has been instituted after the Rectification/Cancellation proceeding against the registered trademark have been initiated under the Trade Marks Act, 1999 read with Trade Marks Rule, 2017. Before going into the judicial pronouncement pertaining to the said Section let us understand what Section 124 of the Trade Marks Act, 1999 lays down.
Section 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 defendants 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 1[High Court], 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 plaintiff’s 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 1[High Court] 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 subsection (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 a 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 attaching any property), during the period of the stay of the suit.
In a nutshell the object of the said clause is that this clause deals with circumstances in which stay of infringement proceedings can be ordered and also states that a stay of a suit for infringement of a trade mark shall not preclude the court from making an interlocutory order during the pendency of stay.
Thus, it further seeks to prevent parallel enquiries in the same matter. The intention of the legislature is that the court trying the suit must wait for the result of the rectification proceedings before it passes any final order or decree involving the validity of the registration. The reason for introduction of this section is to avoid parallel enquiries into the question of validity of a trade mark. Indeed, sub-section (4) of Section 124 lays down that the final order made in a rectification proceeding 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”.
WHAT IS A SUIT OF PASSING OFF AND INFRINGEMENT?
A suit for passing off is instituted when the title by registration has been affected and also when the reputation of the goods has been affected meaning that registration of the trademark is not mandatory for filing a suit of passing off but priority and reputation has to be proved.
An action for infringement would lie if a registered trademark is imitated. If a false or deceitful representation is made expressly or impliedly then an action for passing off lies. In case of infringement the cause of action is founded on property in goods which has been infringed whereas in case of passing off one has to prove the reputation of his goods and prove further that reputation has been assailed.
A party may fail to make out a case of infringement of a trade mark because he cannot prove its registration, or that its registration extends to the goods or to all the goods, in question, or because the registration is invalid, and may yet show that by imitating the mark claimed as a trade mark, or otherwise, the defendant has done what is calculated to pass off his goods as those of the plaintiff.
A case of passing off is generally added as a second string to an action for infringement, and is frequently successful where the claim for infringement fails.
EARLIER JUDICIAL INTERPRETATIONS OF SECTION 124
In Formica International Ltd. V. Caprihans (India) Pvt. Ltd. AIR 1966 Cal. 247, It was held that if the plaintiff files a mixed action for infringement and passing off and the two causes of action are combined and the defendant seeks to invoke the provision of Section 124, the court shall stay the suit so far as it relates to infringement of the trade mark if the conditions of Section 124 are satisfied but the court can proceed to try the passing off action.
In SEIL Edible Oils Ltd. V. Khemka Sales Ltd. 2010 (42) PTC 154 (Del) the suit for infringement was stayed and interim injunction was vacated in terms of Section 124.
In the case of Kedar Nath V. Monga Perfumery & Flour Mills, AIR 1974 Del 12 the learned Judge of the Delhi High Court observed that the stay of action may be refused if particulars of concurrent user or prior user are not furnished. The court would not stay even a portion of the suit in respect of infringement action unless the court was satisfied that the petition under Section 124 was bona fide.
In the case of Elofix Industries (India) V. Steel Bird Industries AIR 1985 Del 258 in paragraph 6 held that the grounds incorporated in the rectification proceedings will have to be considered as to whether those were prima facie tenable or not.
In BDA Private Limited V. Paul P. John 2008 (37) PTC 41 (Del) the case was alleged infringement of registered trade mark “OFFICER’S CHOICE” by the defendant using the trade mark “ORIGINAL CHOICE”. The court held that substantial triable issues arise with regard to the validity of the registration of the defendant’s trade mark. The case was adjourned for three months to enable the plaintiff to apply to the IPAB for rectification of the register.
CONFUSION PERTAINING TO STAY OF SUIT
That the confusion pertaining to Stay of Suit has arisen due the recent contrary judicial developments by the Delhi High Court and Madras High Court which has led to legal uncertainty and further complicated the legal landscape. That further confusion has been compounded by legislative changes, notably the enactment of the Tribunal Reforms Act, 2021, which resulted in the dissolution of the Intellectual Property Appellate Board (IPAB) and the creation of the Intellectual Property Division (IPD) within the Delhi High Court. These developments have significantly impacted the procedural aspects of trademark cancellation petitions, especially in cases where civil litigation concerning the same trademark is ongoing.
RECENT JUDICIAL DEVELOPMENTS
AMRISH AGGARWAL V. VENUS HOME APPLIANCES [17/05/2024], Delhi High Court, Coram: Hon’ble Mr. Justice Yashwant Varma Hon’ble Mr. Justice Ravinder Dudeja
The Division Bench ruled that both infringement and passing off claims must be stayed when a rectification petition is pending. The Bench emphasized that Section 124 is intended to provide a unified approach to trademark disputes, preventing contradictory judgments. The decision rejected the argument that passing off actions, being a common law remedy, fall outside the purview of Section 124, reinforcing the necessity of staying both claims to maintain procedural consistency.
MS. K.P.D. RAJENDRAN V. G. SUNDARAPANDIAN, 2024 in (T) OP (TM) No. 200 to 202 of 2023 & C.S. (Comm. Div) No.118 of 2022, Madras High Court, P.B.Balaji, J.
That Madras High Court has held that there can be a simultaneous and independent trial of the rectification petitions and the commercial suit subject to the rider that the rectification petitions shall be preferably heard and disposed of before the suit. It is however open to the learned counsel for the parties to insist before the learned Single Judge, hearing the matters for any deviated process.
ANALYSIS & SUGGESTION
That looking at the contradictory scenario of the courts it has become very difficult for the litigants to institute suits. The core issue revolves around whether Section 124 mandates a stay of proceedings for both statutory trademark infringement claims and common law passing off claims when a Rectification Petition is pending adjudication.
The divergent judicial opinions on this matter have created a fragmented legal landscape, with some courts opting to stay both infringement and passing off actions, while others only stay the infringement proceedings.
To resolve this issue the courts can either not consider a combined suit of infringement and passing off or stay the suit completely instead of staying the infringement proceedings only and allowing the passing off actions. A clear and consistent interpretation of Section 124 would enhance the overall efficiency of the said suits thereby reducing the risk of contradictory judgments and minimizing the procedural delays. This, in turn, would also boost the confidence of trademark owners in the legal system, encouraging them to actively protect their intellectual property rights.