STAY WITH ME: THE SAGA OF SECTION 124 AND IPAB

Section 124 is probably the most controversial provision of the Trademarks Act ("Act") in today's time. Courts across the country have had a go at the interpretation of stay of proceedings where the validity of registration of the Trademark is questioned. When the Supreme Court in Patel Field Marshal Agencies and Ors. Vs. P.M. Diesels Ltd. and Ors., 2017 (13) SCALE 783 rendered its decision, it was felt as if the entire controversy had been finally put to rest, however is that really the case?

 

Section 124

 

The Section 124 has been defined under the Act as follows-

 

  1. Stay of proceedings where the validity of registration of the Trademark is questioned, etc.-
  • Where in any suit for infringement of a Trademark-
  • the defendant pleads that registration of the plaintiff's Trademark is invalid; or
  • 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 defendant's Trademark,
  • the court trying the suit (hereinafter referred to as the court), shall,-
    1. 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 Appellate Board, stay the suit pending the final disposal of such proceedings;
    2. 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 Trademark 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 Appellate Board for rectification of the register.

 

  • 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.

 

  • 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 Trademark 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.

 

  • The final order made in any rectification proceedings referred to in sub-section (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 Trademark.

 

  • The stay of a suit for the infringement of a Trademark 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.

 

The section envisages two situations-

 

  1. Where the registration has been challenged prior to the institution of the infringement suit
  2. Where the registration is sought to be challenged subsequent to the infringement suit.

 

The outcome under situation 1 is fairly straight-forward and the suit is stayed pending the disposal of the cancellation proceedings.

 

However, complexities arise in situation 2.

 

Situation 2 can be divided into 3 stages as represented in the following infographic-

 

 

The 1958 Act vis-a-vis the 1999 Act

 

Section 111 of the 1958 Act was the corresponding act of Section 124. The regime under the 1958 was that when in an infringement suit, the validity of registration of Trademark was challenged, an application for rectification of the register shall be made to the High Court. The primary difference in the 1999 Act was that the jurisdiction to adjudicate the validity of a Trademark registration was outsourced to the Appellate Board.

 

 

 

Patel Field Marshal Agencies and Ors. Vs. P.M. Diesels Ltd. and Ors., 2017 (13) SCALE 783

 

Trademark law witnessed a tectonic shift when the Hon'ble Supreme Court rendered its decision in Patel Field Marshal (supra) interpreting Section 124. The primary question before the Supreme Court in Patel Field Marshal (supra) was whether "In a situation where a suit for infringement is pending wherein the issue of validity of the registration of the Trademark in question has been raised either by the Plaintiff or the Defendant and no issue on the said question of validity has been framed in the suit or if framed has not been pursued by the concerned party in the suit by filing an application to the High Court for rectification Under Sections 111 read with Section 107 of the Trade and Merchandise Marks Act, 1958, whether recourse to the remedy of rectification Under Sections 46/56 of the 1958 Act would still be available to contest the validity of the registration of the Trademark."

 

The Supreme Court in unequivocal terms held that the plea of rectification, upon abandonment, must be understood to have ceased to exist or survive between the parties inter se. In its opinion any other view would be to permit a party to raise the issue of rectification at any stage even after a final decree may have been passed by the civil court in the meantime. To permit the issue of rectification, once abandoned, to be resurrected at a later stage would be to open the doors to reopening of decrees/orders that have attained finality in law.

 

As has been later interpreted by the Delhi High Court in Country Inn Private Limited vs. Country Inns and Suites and Ors. (23.04.2018 - DELHC) the plea challenging the validity of registration must be raised at the correct stage because if it is raised at a later stage then the right to raise issue of invalidity is lost forever.

 

Intellectual Property Appellate Board

 

The Intellectual Property Appellate Board (IPAB) was constituted by a gazette notification of the Central Government in the Ministry of Commerce and Industry on 15th September 2003 with a lot of fan-fare. It was believed that the institution of IP specific tribunal will expedite the snail pace of the adjudication of IP related disputes. The IPAB was bestowed with the powers to adjudicate the question of validity of a Trademark registration as mentioned in Section 124 of the Act.

 


 

Practical application of Section 124

 

Through Patel Field Marshal (supra), the Hon'ble Supreme Court has resolved the issues and controversies regarding the multiplicity of the proceedings in relation to a trademark infringement suit. The Supreme Court has clearly provided that the parties are required to seek liberty from the Court for pursuing the cancellation of the opposite party's registration(s) before the IPAB. Once the IPAB decides the validity of the registration, the Civil Court will be bound by the IPAB's order and the main suit proceedings in the trademark infringement matter will be decided in accordance with the outcome of IPAB proceedings. Further, even though the consequence of not raising the plea of validity has been set out by the Supreme Court, a few questions still remain unanswered.

 

The Supreme Court is charting into dangerous territories when it says that once the plea of rectification is rejected by the Court, or if allowed by the Court and not pursued by the party, it stands extinguished as one could only infer perpetually. What is not clear by the judgement of the Supreme Court is what would be the consequence in a situation where the plea of invalidity which was not available to the party at the time of the infringement suit becomes available subsequently. A plain reading of Patel Field Marshal (supra) would suggest that the right stands extinguished forever, however, for example if the issue of invalidity is not raised and the suit is decreed and subsequently the registered mark becomes vulnerable to cancellation on the grounds of non-use, would the party still not be permitted to challenge the validity of the registered mark?

 

It would be important to see how the Courts adjudicate upon these pending controversies, by interpreting the Patel Field Marshal (supra).