[The Viewpoint] Suit for groundless threats and declaration of non-infringement: A real mischief

The Trade Marks Act, 1999 not only provides protection to brand owners against misuse of their registered/unregistered trade marks, but also safeguards businesses from unlawful interference and groundless threats of legal proceedings in the course of business.

Section 142 of the Act provides:

(1) Where a person, by means of circulars, advertisements or otherwise, threatens a person with an action or proceeding for infringement of a trade mark which is registered, or alleged by the first-mentioned person to be registered, or with some other like proceeding, a person aggrieved may, whether the person making the threats is or is not the registered proprietor or the registered user of the trade mark, bring a suit against the first-mentioned person and may obtain a declaration to the effect that the threats are unjustifiable, and an injunction against the continuance of the threats and may recover such damages (if any) as he has sustained, unless the first-mentioned person satisfies the court that the trade mark is registered and that the acts in respect of which the proceedings were threatened, constitute, or, if done, would constitute, an infringement of the trade mark.”

Section 142 of the Trade Marks Act, 1999 is pari materia to Section 120 of the repealed Trade and Merchandise Marks Act, 1958.

In plain words, the law provides that if a person/entity is threatened by someone of legal proceedings for infringement of a registered trade mark, he has the remedy to file a civil suit under Sections 142(1) and 134 of the Act, against the person so threatening, seeking a declaration that such threats were unlawful and injunction against continuation of such threats in the future, apart from recovering damages. The defence to such a suit is also provided in the later part of this Section - that the person who has been sued under this provision has to satisfy the court that his trade mark is registered and has been infringed by the other person. Therefore, a plain reading of this Section implies that it would kick in if there is an actual act of infringement or an apprehension of an act of infringement.

The remedy of taking action under Section 142 (1) of the Act is also not unfettered, and comes with an antidote. Section 142(2) of the Act provides:

“the last preceding sub-section does not apply if the registered proprietor of the trade mark, or a registered user acting in pursuance of sub-section (1) of section 52 with due diligence commences and prosecutes an action against the person threatened for infringement of the trade mark.”

Therefore, as per sub-section (2), the action/remedy mentioned in sub-section (1) will not be applicable if the registered proprietor or the registered user, with due diligence, initiates legal action for infringement of its trade mark against the person so threatened.

However, there are several questions which need to be answered before understanding the purpose of these provisions completely. These include:

1. What action of a person constitutes threat?

2. Whether every action of approaching an alleged infringer by way of cease and desist letter, caution notice, website disclaimer, filing notice of opposition against a pending application etc. would be termed as a ‘ groundless threat’ under this section?

3. When can an action under this sub-section be said to be taken with due diligence?

4. What will be fate of the suit under Section 142(1), upon filing of the suit under sub-section (2)?

5. Whether a registered proprietor can be injuncted in proceedings under Section 142(1) from filing an infringement suit?

6. Is Section 142(1) of the Trade Marks Act, 1999 contrary to Section 41(a) of the Specific Relief Act, 1963?

To answer all these questions, it is important to first understand the purpose and scope of this provision and the legislature’s intent behind enacting it. Sometimes, brand owners may exploit their statutory IP rights to suppress competition by threatening others with legal proceedings alleging infringement for using a similar mark, or by way of publication in newspapers, advertisements, private circulars or otherwise, without taking legal recourse. These threats may continue despite the opposite side lodging their objection. In that case, only a court of law is competent to decide on the rights and contentions of the parties and the brand owners cannot continue with their threats without approaching the court. This provision was enacted to allow aggrieved persons to obtain a decree from a court of law that the threats are unjustifiable, as well as an injunction against the first mentioned person to stop the continuation of such threats.

Such an interpretation of this provision was given by Justice RS Endlaw of the Delhi High Court in The Chartered Institute of Taxation v. Institute of Chartered Tax Advisers, in which it was held,

“The intent of the legislature in drafting Section 142 of the Trade Marks Act appears to be, to provide remedy against a person, who without instituting legal proceedings, metes out threats of legal proceedings. This is clear from Sub-Section (2) of Section 142, which brings to an end, an action even if initiated under Section 142(1), the moment a proceedings for infringement of trade marks is initiated. The Scheme of the Section is, that adjudication of rights asserted should be through legal proceedings and not in public arena.”

To answer the first two questions, reference is made to the judgment of the Madhya Pradesh High Court in Value Invest Wealth Management (India) Private Limited v. Value Invest Wealth Management (India) Private Limited, which held,

“The applicant/plaintiff in the plaint itself has not disputed that the trade mark, as claimed in the notice, is a registered trade mark of the defendants. Though the notice can be treated to be a threat, but in the facts and circumstances of the present case, it is clearly proved that after issuance of notice and reply, no further notice has been received. This Court, in exercise of powers under Section 142 of the Act cannot restrain the holder of the registered trade mark to bring out action in accordance with law. The suit under Section 142 of the Act cannot bar the defendants from filing the suit under Section 29 of the Act, where trade mark is registered.”

In Re Siva Industries And Holdings Ltd v Tata Teleservices Ltd & Ors, the Delhi High Court commented,

“Whenever the Legislature felt a need to constitute a legal notice as a cause of action, it has provided so. Mention in this regard may be made of Section 60 of the Copyright Act, 1957 and Section 142 Trade Marks Act, 1999 pari materia which enables a suit to be filed against threats of infringement. However as per proviso thereto, the said provision also does not apply once the legal proceedings as consequence of threat are instituted.”

However, in the context of filing a notice of opposition in a trade mark application, Justice Endlaw in The Chartered Institute, held,

“Section 142 of the Trade Marks Act is the remedy provided by the legislature against the mischievous acts, by means of circulars, advertisements or otherwise, threatening a person with an action or proceeding for infringement of trade marks. Certainly oppositions filed in statutory proceedings cannot be equated with circulars or advertisements with reference whereto remedy of Section 142 of the Trade Marks Act has been provided. “Once the Registrar of Trade Marks, being a statutory authority empowered to decide the opposition, is seized of the matter, the pleas if any of the plaintiff, of the grounds taken in the opposition being frivolous, groundless and baseless, have to be adjudicated by the Registrar, and / or in proceedings against the order of the Registrar, and not by way of a separate suit.”

Therefore, it is implied that issuing of a legal notice can be said to be a ‘threat’ within the meaning of Section 142 of the Trade Marks Act. However, initiating quasi-judicial proceedings by filing opposition or rectification does not amount to issuing a threat under this Section.

Coming to the third and fourth questions, a Division Bench of the Delhi High Court in Arjies Aluminium Udyog v. Sudhir Batra held,

“Section 120 [Section 142 under the Trade Marks Act, 1999] would not apply also if a registered proprietor or registered user does not stop-merely at having issued threats for an action or proceeding but also commences and prosecutes an action against the person threatened for infringement of the trade mark. The commencement of the action must follow the threat and show the quality of due diligence. Prosecuting the action should also have the quality of due diligence. In short, the threat followed by duly diligent commencement and prosecution of an action for infringement of the trade mark would exclude applicability of Section 120 and disentitle the person threatened from initiating an action thereunder.”

Further,

“A suit filed under Section 120 of the CPC would be liable to be dismissed the minute the defendant has been able to satisfy the Court that his trade mark was registered and the act of the plaintiff (occasioning the threat) amounts to infringement of such trade mark. There may be several other relevant pleas and defences legally permissible in a trade mark action but they will be beyond the scope of inquiry in a suit under Section 120. Once the Court is satisfied that the threats were neither irresponsible nor unjustified they cease to be ‘injury’ so far as Section 120 is concerned and the person threatened cannot be said to be a person aggrieved. The action under Section 120 would be liable to be dropped. The parties shall be left free to seek adjudication of their rights in an otherwise duly constituted suit.”

Therefore, it is clear from the above that the moment a registered proprietor files a suit for infringement of its registered trade mark under Section 29 of the Act, the first suit for groundless threats filed under Section 142(1) of the Act becomes infructuous and ought to be dismissed. Trights and contentions of the parties should be decided in the second suit, which is substantive and has a much broader in scope.

Answering the last couple of questions, reference is made to The Chartered Institute, in which Justice Endlaw quoted the judgment of the Supreme Court in Cotton Corporation of India Limited v. United Industrial Bank Limited, holding that,

"...expression “court” in Section 41 of the Specific Relief Act should be given the widest amplitude, comprehending every forum where relief can be obtained in accordance with law; and, (b) that anyone having a right that is a legally protected interest and complaining of its infringement and seeking relief through Court, must have an uninhindered, uninterrupted access to law Courts and that Courts ordinarily will not impede access to Courts. It was held that access to justice must not be hampered even at the hands of judiciary; no other Court can by its action, impede access to justice.”

The same dicta of law was also followed in Metro Tyres Ltd v. Advertising Standards Council of India, wherein Justice Endlaw, deciding the issue under Section 60 of the Copyright Act, 1957, which is pari-materia to Section 142 of the Trade Marks Act, held that the plaintiff in a suit for groundless threat could not be permitted to scuttle the proceedings in the complaint filed by the defendant before the ASCI, by instituting the suit.

The above judgements clarify the last question that an action under Section 142(1) of the Act seeking injunction against issuance of groundless threat cannot be misused and will not act as a bar against a registered proprietor from exercising its legal right of filing an infringement suit.

Section 142 of the Act is often misused by infringers (rather than real aggrieved persons) as a tactic to harass registered proprietors of a trademark by implicating them in frivolous litigation. It is thus pertinent for the registered proprietor of a trademark to be vigilant and take the required action against the infringer within due time after sending a cease and desist notice.

Vikrant Rana is the Managing Partner and Tanvi Bhatnagar is an Associate at S.S. Rana & Co

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