In an ongoing trademark infringement proceeding, the Delhi High Court (hereinafter referred to as “the Court”) recently dismissed an application filed by Intercontinental Great Brands LLC (hereinafter “the plaintiff”) under Section 124(1)(b) of the Trade Marks Act, 1999 (hereinafter referred to as “the Act”) for initiating rectification proceedings in relation to Parle Products Pvt. Ltd.’s (hereinafter “the defendant”) mark “FABIO” registered under Class 30 for confectionary goods under Trademark application number 3876112 (Registration number 2356081).
The said order dated November 3, 2023, was passed under the premise that for an application under Section 124 of the Act, the sine qua non is a defence under Section 30(2)(e) of the Act by the Defendant and prima facie tenable independent plea of invalidity in the plaintiff’s pleadings.
Background Facts:
The plaintiff is the registered proprietor of the mark “OREO” and its variants (hereinafter referred to as the “OREO trademarks”), which have been used for its vanilla-filled chocolate cream cracker biscuits. In contrast, the defendant was manufacturing, selling and advertising cream-filled cookies/biscuits under the marks FABIO, FAB!O and their variants, including labels/trade dress and cookie trade dress (hereinafter referred to as “the impugned marks”). The plaintiff contended that the impugned marks are identical and/or deceptively and confusingly similar to the plaintiff’s well-known and earlier registered OREO trademarks. The defendant also filed several trademark applications for the impugned marks, which the plaintiff duly opposed.
The plaintiff successfully secured an interim injunction against the defendant vide an earlier order dated February 10, 2023 which prohibited the defendant from using the impugned marks FABIO or FAB! O for any purpose whatsoever and restrained from manufacturing, packing or selling their vanilla cream-filled chocolate sandwich biscuits under the packaging and trade dress, which was held deceptively similar to the plaintiff’s trade dress. Subsequently, the plaintiff applied Section 124(1)(b) of the Act to initiate rectification proceedings against the FABIO registered mark of the defendant.
Issue:
The issue that emerged before the Court was thus whether the application filed by the plaintiff to initiate rectification proceedings against the defendant’s mark FABIO challenging its validity tenable.
Decision of the Court:
Relying upon its earlier order in another matter, Dharampal Satyapal Ltd. v. Basant Kumar Makhija 2023 SCC Online Del 6598, the Court reiterated its interpretation of Section 124(1)(b) of the Act and dismissed the application of the plaintiff. To opine whether there is a prima facie tenable plea of invalidity, the Court examined the pleadings of the plaintiff and found that despite references to FABIO in the plaint, the plaintiff did not directly challenge the validity of the FABIO mark. However, as far as the defendant is concerned, the Court concluded that they asserted a defence under Section 30(2)(e) of the Act. Thus, since the plaintiff did not contest the FABIO mark’s legality in its plaint or its replication explicitly, the Court determined that the requirements under Section 124 of the Act haven’t been satisfied.
Section 124(1)(b) of the Act provides an instance where the defendant raises a particular defence of non-infringement owing to its trademark registration under Section 30(2)(e) of the Act, and the plaintiff challenges the validity of such trademark. Relevant portions of Section 124 and Section 30 of the Act have been provided below for the reader’s ease of reference:
“124. Stay of proceedings where the validity of registration of the trademark is questioned, etc.
(1) Where in any suit for infringement of a trademark–
(a) the defendant pleads that registration of the plaintiff’s trademark 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’ trademark,
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 trademark are pending before the Registrar or the [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 [High Court] for rectification of the register.”
“30. Limits on the effect of registered trademark
(2) A registered trademark is not infringed where-
(e) the use of a registered trademark, being one of two or more trademarks registered under this Act which are identical or nearly resemble each other, in exercise of the right to the use of that trademark given by registration under this Act.”
The Court opined that in order for Section 124(1)(b) to apply, the defendant must first assert the defence of non-infringement under Section 30(2)(e) of the Act by relying upon their trademark registration, and the plaintiff must contest the defendant’s trademark validity in its pleading.
The Court cited its disagreement with the interpretation of the coordinate bench of the same Court in Travellers Exchange Corporation Ltd. v. Celebrities Management Pvt. Ltd 298 (2023) DLT 101, which held that the plaintiff must amend the initial plaint after the defendant raises the Section 30(2)(e) defence. In the present order, the Court clarified that the amendment is not the only way, and the plaintiff can assert the invalidity plea in the replication or in its original plaint if it has pre-empted such defence of non-infringement. Further, the Court emphasised that the phrase “prima facie tenable” in Section 124(1)(b) does not require the Court to hold an extraordinarily high standard; rather, it merely requires the Court to be satisfied that the plaintiff’s assertion of the defendant’s trademark invalidity is arguable.
It was contended by the plaintiff that a fresh plea of invalidity may be made in the application filed under Section 124 of the Act, even if such plea was not included in the plaint or its replication. The Court disagreed, stating that the main argument of invalidity ought to have been brought up in the plaint or replication itself, even though a Section 124 application can go into further detail regarding the grounds contesting the defendant’s mark’s validity. Plaintiff also contended that the reservation of the right to contest the defendant’s FABIO mark registration in its plaint should be seen as a legitimate challenge; however, the Court did not accept the argument. While doing so, the Court specifically observed that the plant contains no reference to the FABIO mark’s invalidity and further emphasised that making reservations about rights does not grant the party access to new rights and that these reservations are founded on erroneous legal interpretations. Further, the Court made a glaring observation that a party must ask the Court for approval to reserve rights, and such reservations must be based on existing or foreseeable rights.
The plaintiff interestingly attempted to link a challenge to “FAB!O” with an indirect opposition to “FABIO”. However, the defendant contended that the plaintiff had expressly denied any phonetic equivalence between “FABIO” and “FAB!O” in the replication and cannot claim to have indirectly opposed “FABIO”. The Court agreed with the defendant and observed that since the plaintiff explicitly maintains that “FAB!O” is an unregistered mark and is not phonetically comparable to “FABIO”, it was required to independently and credibly declare the registration of “FABIO” as invalid. However, there was no independent challenge in either the replication or the plaint. The Court further clarified that the plaintiff’s application failed to challenge the registration of the “FABIO” mark in the present suit or provide any grounds for such a challenge.
The Court also rejected the defendant’s argument that the mark being contested is required to be mentioned in the impugned marks in the plaint. Relying upon its earlier decision in Nadeem Majid Oomerbhoy v. Gautam Tank 2023 SCC Online Del 5589, the Court held that the intent of Section 124 is to maintain an even balance between the parties and it permits any party, regardless of whether the mark being contested in the plaint is the same as the mark asserted by the opposing party, to request the framing of an issue relevant to the mark. The Court noted that even if the defendant relies on a registration for a mark that is not specifically contested in the plaint, the plaintiff has the right to question the registration’s validity if it exhibits prima facie tenable grounds. Thus, the Court observed that the defendant’s defence under Section 30(2)(e) based on the registration of “FABIO”, even if it is not the impugned mark in the plaint, allows the plaintiff to contest its validity under Section 124(1)(b) of the Act.
This ruling sets a judicial precedent and provides a clear and analytical interpretation of sine qua non for the maintainability of an application under Section 124 of the Act. It further ensures a fair and impartial implementation of the law concerning challenges to trademark validity by offering clarity and direction on the essentials of initiating rectification proceedings and, more particularly, the meaning of ‘prime facie tenable’ as envisaged under Section 124.
Authors: Manisha Singh and Swati Mittal
First Published by: Lexology Here