Plea of Invalidity: Court Clarifies Statutory Provision For Stay Of Infringement Proceedings

Introduction

Recently in the case of Travellers Exchange Corporation Limited v. Celebrities Management Private Limited[1], the Delhi High Court adjourned proceedings for a period of three months to allow the Plaintiff to raise a plea of invalidity by preferring rectification proceedings and shed some clarity on the application of section 124 of the Trade Marks Act, 1999. The present suit pertains to the Plaintiffs’ claim that the Defendants’ mark “TRAVELXP” infringed upon their mark “TRAVELEX”.

Background

The Plaintiffs had filed the present suit seeking permanent injunction against the Defendants claiming trademark infringement and passing off for their mark “TRAVELEX”. They claimed that they had adopted the mark “TRAVELEX” in 1976 for providing services in relation to the currency exchange business including supplying currency at airports, shopping malls, etc. They also claimed that they trade in over 80 countries around the world, with approximately 1100 stores and 900 ATMs. Furthermore, they stated that they were involved in the business of providing Travel and Trip insurance services since 2002 and operate the domain name www.travelexinsurance.com.

In 2016, the Plaintiffs had obtained two ex parte and interim injunction orders in their favor observing that the Defendants’ mark had visual and phonetic similarities and the services offered by the Defendants were also related (allied and cognate) to that of the Plaintiffs’.

The Defendants argued that they had obtained trademark registrations for the mark “TRAVELXP” in classes 38, 39, 41, 42 and 43. They also claimed to be continuous users of their mark since 2009 and stated that they were involved in the business of booking tickets and lodgings for travelers under the mark “TRAVELXP” and running a TV channel “TRAVELXP HD”.

Upon learning of the Defendants’ trademark registration, the Plaintiffs took the plea of invalidity of the Defendants’ registration in the mark “TRAVELXP” and filed an application under section 124 of the Trademarks, Act, 1999[2] (the “Act”), which provides for proceedings to be stayed when the validity of the registration of a trademark is questioned.

On January 31, 2019, the Court took the view that in order to plead section 124, the same must be pleaded in the plaint itself. Thus, the Court allowed the Plaintiffs to withdraw their application and seek amendment of their plaint. Pursuant to which, the amended plaint was filed and taken on record.

Accordingly, the Plaintiffs sought rectification/ cancellation of the Defendants’ trademark registrations. In support of this, they argued that their mark “TRAVELEX” is a coined word and inherently distinctive. They further argued that they were the prior adopters and users of the mark “TRAVELEX” since they adopted the mark in 1976 whereas the Defendants’ adoption of the mark “TRAVELXP” was in 2009. Moreover, they also claimed phonetic and visual as well as structural similarity and the fact that the service sectors and trade channels of both parties were also the same.

On the other hand, the Defendants argued that the Plaintiffs’ plaint did not place material particulars sufficient for filling such a claim. They stated that although the Plaintiffs claimed that the registration had been sought fraudulently, there was no evidence to support the same. Further, they also argued that no particular materials were filed in order to prove the arguments made using sections 9 and 11 of the Act, that is, to support the argument that there was a similarity between the rival marks and the services were allied and cognate or that there was any likelihood of confusion. The Defendants also relied on various precedents including the case of Patel Field Marshal Agencies and Another v. P.M. Diesels Limited and Others[3], where the Supreme Court had held that an “application under Section 124 of the Act can only be allowed if the civil Court is satisfied that an issue with regard to invalidity ought to be framed in the suit and issues can only be framed under Order XIV Rule 1 CPC on the basis of averments in the plaint.”

Furthermore, the Defendants also argued that there was no phonetic or visual similarity between the marks “TRAVELEX” and “TRAVELXP”. They also stated that since they had adopted the mark in 2009 and the Plaintiff only challenged registration in 2019, they were barred by acquiescence, delays and latches. Moreover, they also stated that the services offered by them were dissimilar as compared to that of the Plaintiffs'. Finally, they stated that the Plaintiffs had chosen a generic and descriptive word “travel” to feature prominently in their trademark and thus they could not claim monopoly over the same.

Decision

The Court stated that, “Plain reading of Section 124(1)(b)(ii) of the Act shows that two ingredients are required to be met for an Applicant to succeed viz: (a) plea of invalidation; and (b) prima facie tenability.” The Court further went on to decide that the plea of invalidity is “prima facie tenable” in the present case. Disposing of the application, the Court thus adjourned proceedings stating that the Plaintiffs may take appropriate steps to raise a plea of invalidity by preferring rectification proceedings, before the appropriate forum.

Comment

Section 124 of the Act provides for stay of suits involving trademark infringement where,

(a) the defendant pleads that the registration of the plaintiff’s trademark is invalid, or (b) if the defendant raises a defence to the plaintiff’s plea regarding invalidity of the defendant’s mark, until proceedings for rectification of the register are pending before the Registrar or the Appellate Board. If no such proceedings are pending, then this proviso provides for the court to adjourn the case for a period of three months in order to allow the party concerned to apply for rectification of the register, so long as the court is satisfied that the plea regarding the invalidity of the trademark registration is “prima facie tenable”.

Thus, in the present decision, the Delhi High Court has shed some clarity on the provisions of section 124 and essential elements for such a plea. It is clear that in order to raise invalidity, prima facie tenability should be established. On a prima facie basis, perhaps it may not be required to provide a host of material evidence to support such a claim, however, at later stages in the proceedings, such information shall also be required to substantiate the plea.

The Court opined that no doubt the injunction orders passed before were a prima facie view of the Court, they continued to stay effective and reflect the view of the Court. Thus, at the present proceedings, the matter to be decided before the Court with regards to actual invalidity of the registration was an issue to be decided during rectification proceedings once a rectification petition was filed. The role of section 124 is merely to allow the stay of proceedings by filing a plea of invalidation and establishing prima facie tenability of the claim.

[1] Travellers Exchange Corporation Limited v. Celebrities Management Private Limited 2022/DHC/004442 [2]https://indiankanoon.org/doc/1331119/#:~:text=(2)%20If%20the%20party%20concerned,until%20the%20final%20disposal%20of [3] Patel Field Marshal Agencies and Another v. P.M. Diesels Limited and Others (2018) 2 SCC 112