A continued saga of confusion: Section 124 of Trade Marks Act

The principle of ubi jus ibi remedium - where there is a right, there is a remedy - is a cornerstone of legal theory. However, the path to achieving such a remedy is often fraught with complexities, particularly when judicial interpretations of legal provisions diverge. A prime example of this is the varied judicial treatment of Section 124 of the Trade Marks Act, 1999.

This 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. The application of Section 124, specifically regarding the stay of civil suits for trademark infringement and passing off when a rectification petition is filed, has become a focal point of legal ambiguity.

Section 124 of the Trade Marks Act, 1999, addresses the stay of civil suits when a rectification petition is pending. This Section has become a source of judicial contention, with differing interpretations contributing to legal uncertainty. The maxim interpretatio cessat in claris (interpretation ceases when the law is clear) seems to have limited application here, as recent developments have further complicated the legal landscape.

Moreover, Rule 26 of the IPD Rules, 2022 has introduced additional layers to the procedural framework governing these disputes. This analysis delves into the evolving confusion due to divergent judicial interpretations of Section 124, the procedural consequences of legislative shifts, and potential solutions to the current legal ambiguities.

Section 124 of the Trademarks Act, 1999: An overview

Section 124 is a crucial provision in the procedural framework of trademark litigation in India. It mandates the stay of civil suit proceedings when a prima facie case of trademark invalidity is presented and a rectification petition is filed before the appropriate forum. The legislative intent behind this provision is to prevent conflicting decisions on trademark validity by ensuring that the issue is adjudicated by the designated authority before the civil suit proceeds.

The central issue in judicial interpretation is whether Section 124 requires the stay of suits involving both trademark infringement and passing off claims, or if it applies solely to infringement claims. This distinction is significant, as infringement pertains to statutory rights under the Trade Marks Act, while passing off is a common law tort aimed at protecting the goodwill associated with unregistered trademarks.

Divergent interpretations of Section 124 regarding stay of infringement and passing off actions

In Puma Stationer Ltd v. Hindustan Pencils Ltd, the plaintiff held registrations for the trademarks "PLASTO" and "NON-DUST." The defendant contested the validity of the "NON-DUST" trademark and filed a rectification petition. Subsequently, the plaintiff filed a suit for infringement and passing off. The Division Bench of the Delhi High Court ruled that while the infringement action should be stayed pending the rectification proceedings, the passing off action could continue.

The Division Bench in Puma Stationer referenced earlier decisions, such as Chandra Bhan Dembla Trading v. Bharat Sewing Machine Co and Elofic Industries (India) v. Steel Bird Industries, where the Delhi High Court ruled that both infringement and passing off claims should be stayed when a rectification petition is filed.

While the Division Bench endorsed the reasoning of these earlier single-judge rulings, it made a critical distinction: the infringement action related to the contested trademark should be stayed, but the passing off action could proceed. This decision underscored the complexity of applying Section 124 in cases involving both statutory and common law claims.

Judicial divergence pre and post-Puma Stationer

Prior to the Puma Stationer decision, several courts interpreted Section 124 as requiring only the stay of infringement actions, not passing off actions. This interpretation was followed by various single-judges in cases such as Shakti Traders v. Shakti Press Ltd, Caprinhanns India Pvt Ltd v. Formica International Limited and Another, Micolube India Ltd. v. Maggon Auto Centre and others.

Following the Puma Stationer decision, some judgments continued to adopt the view that only infringement actions should be stayed. Examples include JK Oil v. Adani Wilmar. However, divergent opinions emerged, with some courts staying both infringement and passing off actions, as seen in cases like Mount Everest Mineral Water v. Kadir Khan, Nippon Soda Co Ltd v. VP Goyal, and others.

Division Benches are also not immune to diametrically opposite interpretation of Section 124. The contradictory finding by other Division Benches are given as under.

In Brahmos Aerospace v. FIIT JEE Limited passed by the Delhi High Court and Micro Labs Limited v. Eris Life Science passed by the Madras High Court, the suit proceedings were stayed by virtue of Section 124 of Trademarks Act 1999. Interestingly, these suits also pertained to infringement and passing off action both. Thus, the Division Bench in Puma Stationer returned one finding, while the Division Benches in FIIT JEE and Micro Labs gave the opposite finding.

Rule 26 of the IPD Rules, 2021, which permits the consolidation of multiple proceedings related to the same or related IPR, has further complicated the application of Section 124. This rule grants the IPD the discretion to consolidate proceedings, including those before different forums, potentially conflicting with the traditional application of Section 124.

The central question is whether Section 124 mandates the stay of proceedings for both statutory trademark infringement claims and common law passing off claims when a rectification petition is filed. This issue has become particularly contentious following the abolition of the IPAB and the subsequent transfer of its jurisdiction to the High Courts.

Recent judicial developments

Sana Herbals Pvt Ltd v. Mohsin Dehlvi [2022]

A single-judge of the Delhi High Court ruled that with the High Court now overseeing both rectification petitions and related civil suits, the risk of conflicting decisions is mitigated, and therefore, staying the suits is not mandated.

Amrish Aggarwal Trading as Mahalaxmi Product v. Venus Home Appliances Pvt Ltd [2023]

Another single-judge of the Delhi High Court disagreed with the Sana Herbals decision, questioning whether the reasoning, which suggested that a stay was no longer necessary post-IPAB abolition, was consistent with Section 124(2). This case was referred to a Division Bench for further clarification.

Division Bench Ruling: Amrish Aggarwal v. Venus Home Appliances [2024]

The Division Bench ruled that both infringement and passing off claims must be stayed when a rectification petition is pending. The Bench emphasised 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.

Despite opportunities to address Section 124 of the Trademarks Act, 1999, in cases like Patel Field v. PM Diesel and Jagjit Industries Limited v. The Intellectual Property Appellate Board and Ors, the Supreme Court has yet to provide a definitive ruling on whether infringement and passing off actions should both be stayed under Section 124, leaving this legal lacuna unresolved.

Practical realities: The burden of dual trials

The procedural challenges posed by dual trials in cases involving both trademark infringement and passing off claims are significant, particularly when both claims are rooted in the same set of facts and evidence. In practice, the evidence presented in support of infringement and passing off claims frequently overlaps. The documents, witness testimonies and other evidence that establish the plaintiff's rights in a trademark are typically the same for both types of claims. For instance, evidence demonstrating the plaintiff's use of the trademark, the goodwill associated with it, and the likelihood of consumer confusion would be central to both an infringement action under the Trademarks Act and a passing off action under common law. Given this overlap, the idea of conducting separate trials for infringement and passing off claims is not only impractical but also burdensome for the parties and the judiciary.

The impracticality of conducting dual trials was judicially acknowledged in the case of Carlsberg Breweries v. Som Distilleries and Breweries. In this case, a five-judge bench of the Delhi High Court was tasked with addressing the procedural complexities that arise when a single dispute gives rise to both statutory and common law claims. The Court recognised that forcing the parties to litigate the same set of facts in separate trials for infringement and passing off would lead to an unnecessary duplication of efforts, increased legal costs, and a higher likelihood of inconsistent judgments.

The principle of judicial economy - minimising the expenditure of judicial resources while ensuring a fair and efficient resolution of disputes -strongly militates against the separation of trials in cases where infringement and passing off claims are closely intertwined. Conducting separate trials could result in contradictory judgments on the same factual matrix, which would undermine the integrity of the judicial process and create confusion in the enforcement of trademark rights.

The suggestion: Addressing legal ambiguities surrounding Section 124

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 filed. 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 these ambiguities, it is crucial that the judiciary takes a proactive stance by referring the matter to a larger bench. This bench could also consider the broader implications of staying both infringement and passing off claims, particularly in light of the practical realities faced by litigants and the judiciary. A clear and consistent interpretation of Section 124 would enhance the overall efficiency of the trademark enforcement regime in India, reducing the risk of contradictory judgments and minimising the procedural delays that often plague trademark litigation. This, in turn, would bolster the confidence of trademark owners in the legal system, encouraging them to actively protect their intellectual property rights.

Ajay Amitabh Suman is a patent and trademark attorney.