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PhonePe Vs. BharatPe Case: No Exclusivity Over a Part of a Mark, Not Even by Misspelling It

Registration of the (whole) mark does not confer an exclusive right over a part of a registered mark. Similarly, no exclusivity can be claimed over a descriptive mark or a descriptive part of the mark, not even by misspelling it. This was the ruling of the Delhi High Court in a recent Trademark Infringement & Passing Off matter between PhonePe Pvt. Ltd. (Plaintiff) & Ezy Services & Anr. (Defendants). Hon’ble Justice C. Hari Shankar affirmed some of the fundamental principles of the Trademark Law, which have been asserted by various Courts from time to time.
PhonePe’s Perception:

PhonePe in its plea before the Delhi High Court stated that: a consumer of average intelligence and imperfect recollection, on seeing the defendants’ mark BharatPe would immediately associate it with PhonePe.

Well, how often is our intelligence questioned and challenged, even without our knowledge? Considering the deep inroads that technology has made into our lives now, I reckon all of us are reasonably aware of the prominent digital wallets in the market. Knowing that, it is contestable how many of us would have wondered about any association between these two marks purely based on the similarity in their suffix “Pe”.

Background:

The plaintiff had filed a suit before the Delhi High Court seeking a permanent injunction and other remedies against the defendants’ use of ‘Pe’ or any deceptive mark identical and/or similar to the plaintiff’s trademark ‘PhonePe’. The plaintiff alleged that the use of the word “BharatPe” itself, infringed the plaintiff’s registered trademark and amounted to passing off.

The plaintiff in its suit claimed that “Pe” is an essential, dominant, and distinguishing feature of the plaintiff’s registered trademarks. Plaintiff further claimed that “Pe” is an invented word, not to be found in the English dictionary and when combined with “Phone”, which is an ordinary dictionary word with a well-known meaning, “Pe” becomes the dominant and essential feature of the plaintiff’s trademark “PhonePe”.

Court’s Findings and Rulings:

The Hon’ble Delhi High Court’s decision in this matter seems to be premised based on following three principles, which have already been established earlier in multiple Judgments by various Courts:

a) The Anti-Dissection Rule:
The Hon’ble High Court observed that the registered mark ought not to be dissected for the purpose of comparison with the conflicting mark. However, the Court acknowledged the exception of “dominant mark” test, under which, if any part of the plaintiff’s mark was found to be dominant, the Court was required to examine whether such dominant part of the plaintiff’s mark was infringed by the defendant’s mark.

The plaintiff contended that “PhonePe” was a combination of the words “Phone” and “Pe”, where “Phone” was a common dictionary word and the suffix “Pe” was not a dictionary word, which made it the dominant feature of the plaintiff’s trademark. Similarly, in the defendant’s trademark, the word “Bharat” was publici juris and “Pe” formed the dominant element of the mark “BharatPe”. However, the Court was not convinced on the argument and did not find “Pe” to be the dominant part, therefore, the marks were not allowed to be dissected for the comparison.

The Court ruled that while applying the above principles to the facts in hand, the following positions emerged i.e. (i) “PhonePe” and “BharatPe” were both composite marks. (ii) the marks could not be dissected into “Phone” and “Pe” in the case of the plaintiff and “Bharat” and “Pe” in the case of the defendants; and (iii) the plaintiff could not claim exclusivity over the word “Pe”, as it was merely a misspelling of the word “Pay”, hence no infringement could be claimed on the basis of part of a registered trademark.

b) Separate Registration of a Part of a Composite Mark:
The Hon’ble Court further observed that since the plaintiff did not have any registration over the suffix “Pe”, therefore, it could not claim any exclusivity on the same. As a result, the question of infringement did not arise because of the alleged similarity between the non-essential, unregistered part of the composite mark.

In the cases of South India Beverages1 and P.K. Overseas Pvt. Ltd.2, the Delhi High Court explained the relation between the anti-dissection principle and the “dominant/essential feature” principle. The division bench relied on a passage from McCarthy on Trademarks and Unfair Competition, earlier cited in the case of Stiefel Laboratories3, which stated that “The rationale for the rule is that the commercial impression of a composite trademark on an ordinary prospective buyer is created by the mark as a whole, not by its component parts. However, it is not a violation of the anti-dissection rule to view the component parts of conflicting composite marks as a preliminary step on the way to an ultimate determination of probable customer reaction to the conflicting composites as a whole”.

c) Non-exclusivity of Descriptive or Generic Marks or Parts of Marks:
The Hon’ble Court observed that a party cannot claim exclusivity over a descriptive or generic mark or a part of the mark that is considered descriptive. The Court went on to observe that the plaintiff could not claim that the mark was non-descriptive merely by misspelling the descriptive word. However, the Court admitted an exception to this principle in situations where the descriptive or generic mark had acquired distinctiveness or secondary meaning.

The Court further observed that had the plaintiff been able to establish that the word “Pe” had acquired distinctiveness and secondary meaning, it might have been able to make out a case of infringement. However, in this case, the plaintiff’s use of the mark “PhonePe” was only since 2016 and even the defendants claimed to have extensive use of their mark “BharatPe”. Therefore, the plaintiff had not been able to make out a prima facie case.

In the case of Marico Limited4, the Court dived deep into the concept of acquired secondary meaning of a descriptive mark and held that while deciding whether a descriptive mark is registrable or not the “Courts should ordinarily lean against holding distinctiveness of a descriptive trademark unless the user of such trademark is over such a long period of time of many-many years that even a descriptive word mark is unmistakably and only relatable to one source i.e. the same has acquired a secondary meaning”.
1 South India Beverages v. General Mills Marketing, AIR 1965 SC 980
2 P.K. Overseas Pvt. Ltd. v. Bhagwati Lecto Vegetarians Exports Pvt. Ltd., 2016 SCC OnLine Del 5420
3 Stiefel Laborataries v. Ajanta Pharma Ltd, 211 (2014) DLT 296
4 Marico Limited v. Agro Tech Foods Limited, 2010 (44) PTC 736 (Del.) (DB)
The Marico case also discussed the nature and character of a misspelt word when used as a trademark and held that “if partly tweaked descriptive words and expressions of English language are claimed to be coined words, the same would result in a grave and absurd situation because a non-tweaked word being a completely descriptive word will in fact be deceptively similar to the tweaked descriptive English language word or expression of which registration is obtained”.

Conclusion:

The Hon’ble Court ruled that there was no case for grant of interim injunction against the defendants. The Court observed that except the common word “Pe” (suffix) it cannot be established that the marks “PhonePe” and “BharatPe” are confusingly or deceptively similar. Barring the suffix “Pe” these are two different words altogether with no commonality whatsoever.

The important legal positions that emerge from this decision are:
(i) In accordance with the “anti-dissection” rule, it was held that the composite marks were to be considered in their entirety rather than truncating or dissecting them into individual components/elements.
(ii) The registration of a composite mark cannot confer any exclusive rights over any part of such registered mark unless otherwise, such part is the dominant part of the registered mark.
(iii) No exclusivity can be claimed, over a descriptive mark, or a descriptive part of a mark, not even by misspelling it, unless otherwise the descriptive mark or descriptive part has attained distinctiveness, or it has acquired a secondary meaning.

This case has surely reaffirmed some of the basic principles of trademark laws that prohibit adaptation and exclusive claim over descriptive and generic marks or part of the mark.
Read about the important legal positions that emerge from the PhonePe V. BharatPe decision in this article.

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Trademark Bullying: A Legal Means to Illegal Ends

The law of Trademark Protection was developed to grant exclusive proprietary right to Trademark owners, the monopoly of the Trademark owners over their trademarks and safeguard the collective goodwill. In a nutshell, Trademark Protection originated to restrain the sale of counterfeit products under an existing reputed brand name, but what happens when the same owners who are protected go above and beyond their legal capacity to protect their mark? The exact term for such an act is “Trademark bullying”.
Off late it has become a persistent problem with big companies, whereby they try to strong-arm small enterprises for business gains. Proprietors having high stakes go out of their way to protect their marks, even though the target entities do not use marks that are remotely similar to theirs. When a proprietor becomes an aggressive protector of his Trademark, lines between actual infringement and absurd contestations blur. To understand whether the same is bullying or an actual trademark infringement we will have to understand what constitutes bullying and the subtle difference between infringement and trademark bullying.

Definition & Ingredients

Definition of Trademark Bullying
The United States Patent and Trademark Office (USPTO) has defined trademark bullying as “the act where the trademark owner that uses its trademark rights to harass and intimidate another business beyond what the law might be reasonably interpreted to allow.”1 The practice of a proprietor being overprotective of their mark and enforcing trademark rights beyond the required limit and scope of trademark law is called Trademark Bullying. 2 For instance when a powerful company or a big MNC like Amazon or Apple, that has immense funds, files a suit against local or smaller companies for infringement. Legal proceedings have a humongous cost attached to them and cannot be afforded by everyone. A small company that does not have adequate finances to fight a legal battle tends to budge under the influence of these powerful companies and give up on using their mark along with the products and services used under the mark, which they are legally entitled to. However, these threats are more than often groundless and baseless.

The course of action for entities that suspect infringement should be to verify whether the rival mark is actually similar to the proprietors’ mark. The next step would be to understand the trade circle, the market area and the similarity in the goods and services and further understand whether there is actual infringement or dilution. Similarly, one needs to determine whether there is a likelihood of confusion that might arise when a man with average intelligence looks at the rival marks. After the conclusion of the said due diligence, the proprietors would be in a position to understand whether they need to proceed with a legal action.

Who is a Trademark Bully and What Constitutes Trademark Bullying?
Various elements are to be considered before concluding whether it is a good faith trademark enforcement or bullying. A bully is someone who crosses the outer limit of “likelihood of confusion” en route to its trademark enforcement by prosecuting proprietors that are using an allegedly similar mark for non-competitive goods and services. In the case of deceptively similar marks and competitive goods and services, any act of aggressive enforcement will fall within the ambit of good faith litigation, and it holds true even if the mark is relatively weak but the market segment is competitive. Likewise, when owners of dissimilar marks enforce their rights against marks in the use of non-competitive goods, it is trademark bullying. But what happens when the owner of deceptively similar marks tries to enforce their rights against non-competitive goods and services? The owners in such scenarios seek to rely on the related goods or complementary goods doctrine, which tries to establish a link between two non-competitive goods. Since such links are difficult to establish, the enforcers usually rely on unfounded claims of “famous and well-known trademark”.

Modus Operandi of Bullying and the Effect on Small Entities Big companies have been observed to follow a similar pattern when they try to eradicate their competition out of the markets. They send out a common cease and desist notice which contains threats in legal language alleging trademark infringement and dilution. They also mention that they have been successful in prosecuting other enterprises using similar trademarks and then initiate either opposition proceedings or rectification proceedings against the small enterprise.3

The effect on the small enterprises that do not have any economical or legal support is they sit for a settlement wherein they are asked to withdraw their marks and the same is accepted by the small enterprises. The small enterprises tend to incur a huge financial cost of rebranding, removal of products from the markets, and loss of reputation because of the suit.

Comparative Analysis of Judicial Approach to Trademark Bullying in India and the US

The Approach by US Courts
While in India the cases which surround the issue of trademark bullying are still fewer, the instances are much higher in the United States. Here are a few cases that helped the courts of the United States to look at the situation of trademark bullying from a different perspective.

In Monster v. Vermonster, the manufacturer of a renowned energy drink “MONSTER”, Hansen Beverage Co., sent a cease-and-desist notice to Rock Art Brewery for using “Vermonster” to market its brewed beer. Rock Act Brewery was a small company that sold its beer in a few states in the United States of America. Hansen asserted a likelihood of confusion over the term Vermonster for beer and Monster for an energy drink.

Even though the marks were completely dissimilar and unique in their own way, Rock Art was asked to comply with the notice, however, the proprietors of Rock Art stood against the bullying and issued a public statement and started advertising as well as marketing their product. They also took to social media which persuaded Hansen to back down and come to a settlement.4

After this particular case the U.S. Commerce department in coordination with the USPTO came up with a report which addressed the wrongful harassment of small entities by big companies.5

In Apple v. Prepear, Apple being a leading producer and seller of electronic products tried to manipulate a small entity – Prepear, a recipe sharing application, into letting go of their mark. At the outset, the logo of Prepear and Apple are pretty distinctive with Prepear having a drawing of a pear outlined in green against a white background and leaf facing downward and the logo of Apple being a half-eaten apple with the leaf facing upward. Further, the goods and services provided were also dissimilar.

Prepear took to social media to fight against the bullying and shared how Apple had managed to do the same with other entities who has created a fruit logo. Prepear also stated that they had to let go of various employees because they could not afford their pay alongside defending the costly suit. Although this case has not been decided yet, it is clear that both the logos are dissimilar, and the goods and service offered are also distinctive therefore there should be no cause of confusion for any man with average intelligence. Nonetheless, the factors that are to be taken into consideration while deciding whether there is a plausible infringement or bullying are fairly obvious.

Indian Jurisdiction
Indian legislators had forethought the possibility of such misuse and provided a viable resolution under section 142 of the Trademark’s Act, 1999 which outlines the law against groundless legal threat.

The provision states that when a person through circulars, advertisement, or otherwise threatens another person with an action or proceeding for infringement of a registered or alleged to be registered trademark, the aggrieved person may bring a suit against such person and obtain a declaration to the extent that such threats are unjustified.

The available legal remedy for such threats is that an injunction may be issued in favour of the aggrieved party to restrain the other person from the continuance of such threats and also to recover damages. This remedy is available for only those whose trademarks are registered.

One of the first case that may be identified as bullying in India is Milmet Oftho Industries and Ors v. Allergan Inc [(2004)12 SCC 624], wherein the Indian Pharmaceutical company Allergan sold a drug named ‘Ocuflux’. The Appellant, an international pharmaceutical company sold a drug with a similar name in different countries and therefore sought a passing off suit against Allergan. The Supreme Court held that “if multinational companies do not have any intention of coming to India or introducing their products in India, they should not be allowed to throttle Indian Companies if the Indian Company has been genuinely using their mark in India and developed the product and was the first in the market”.

Another notable case is Jones Investment Co v. Vishnupriya Hosiery Mills [2015-4-L.W.30], where the Appellant was an American company which had been using the trademark ‘Jones New York’ internationally for manufacturing and producing clothing, hosiery and footwear. The respondent on the other hand was a small textile firm based in Erode, a city in Tamil Nadu. The Respondent had filed an application for their mark ‘Jones’ in relation to the textile products, which was opposed by the Appellant and the Registrar of Trademark had dismissed the same which gave rise to an Appeal.

The Appellants contended that they had transborder reputation and that the respondents did not have enough sales of their products and therefore, would not be able to compete with the Appellant. However, the IPAB took a similar stand which was taken by the Supreme Court in the previous cited case and stated that “a multinational company cannot claim infringement of trademark by a local Indian company purely based on international presence, unless they can expressly establish that their presence extends to India or precedes that of the Indian company.”

In a similar case of Bata India Limited Vs Vitaflex Mauch GmbH (CS(OS) No. 1112/2006), wherein the plaintiff instituted a case against the defendant for restraining them from making baseless groundless threats of legal proceeding. The main question that the court had to deal with was whether the legal notice sent by the defendant amounted to a legal threat and if the plaintiff was entitled to injunction and damages. The Delhi High Court held that the legal notice amounted to threat and the same was unjustifiable, therefore, the defendants were ordered to restrain themselves from issuing any further baseless threats.

The recent spat between BigBasket and DailyBasket is the latest example of prevalence of Trademark Bullying in India. BigBasket slapped DailyBasket with a cease-and-desist notice directing DailyBasket to (1) Stop business operation under the trademark “Daily Basket” and the domain name dailybasket.com ,and transfer the same to Big Basket; (2) discontinue the mobile application; (3) discontinue use of similar domain or trademark with the term “Basket” as a dominant feature of the domain name or the trademark; and lastly, (4) Pay INR 2,00,000.00/- as legal fees. This would be a fit case of bad faith enforcement, since the term “Basket” can be easily regarded as a term common to trade, and hence any proprietor in the trade of consumer goods is free to use it.

Although India had already made a provision for such threats, the act does not clarify what amounts to groundless and baseless threat. However, the above judgments decided by the Court and IPAB are clear on a few elements including whether the marks are actually similar and cause confusion, whether the international companies have an intention to bring their product into the country, first to use over first to file, etc. which have been taken into consideration when assuming if the same is to be considered as bullying or infringement. The Indian judiciary has not second guessed in slamming MNC’s and other powerful companies when it was clear that the local businesses were being wrongly and illegally affected by the infructuous cease and desist notice being sent to them.

The Road Ahead
Every legal notice of cease-and-desist would not amount to trademark bullying. The dynamics of each case are different, making the court re-think every scenario and look-out for the issue of trademark bullying or to check whether the plaintiff is seeking an injunction to avoid the actual consequence of an infringement. The primary purpose of the provision under the trademark act was to make sure that small entities and local businesses do not lose out on what they are legally entitled to own. However, there are ways in which the issue could be further curbed i.e. by providing resources to small entities including legal aid camps, creating awareness, law firms taking initiative and handling more pro bono cases etc. Small entities off late have sought some respite by resorting to social media wherein their plight is understood by a community of like-minded people who support through backlash at bigger companies which harms their reputation and goodwill gained over the years. While the laws in US on standard of proof for claims of trademark dilution shows a way to restrain trademark bullying on superficial claims of famous and well-known trademarks, the laws in India are still not clear on how far a litigant may go on such unfounded claims before being termed as a bully.
This article tries to explain what constitutes bullying and the subtle difference between infringement and trademark bullying.

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