The trademark licensing question that won't go away: the standing of a licensee to sue

This Kat has a particular interest in all things related to the law of trademark licensing and always enjoys reading the most recent case law in this regard. Kat friend Taapsi Johri of K&S Partners, Gurgaon, India, has kindly shared this report of an Indian court decision that once again underscores how tricky the question of standing can be in this area.

The old law in India under the Trade and Merchandise Marks Act, 1958, defined “permitted use” as the use of a trademark by a person registered as a “registered user” under that Act. Use by a common-law licensee, therefore, was excluded from the definition since they were not subject to the Act. However, in 1996, while dismissing a claim of rectification of T.I. Raleigh’s registered trademark filed by its erstwhile common-law licensee, the Supreme Court of India in Cycle Corporation of India Ltd. v. T. I. Raleigh Industries [1996 AIR (SC) 3295], held that failure to register a licensee as “registered user” could not deprive a registered proprietor of his rights in the trademarks. This meant that use of a mark by a common-law licensee, such as by a “permitted user”, was recognized as having the same legal force as a “registered user”. This interpretation was later incorporated into the Trade Marks Act, 1999, which expanded the definition of “permitted use” to include use by both a “registered user” as well as a “permitted user” i.e. any person, other than a registered user, who is using the mark under a written consent from the registered proprietor (e.g., a common-law licensee). The Act of 1999, however, also introduced Section 53, which expressly prohibits a “permitted user” from instituting a suit for trademark infringement.

Section 53 came into play in an appeal filed recently before a Division Bench of the Delhi High Court, challenging the court’s jurisdiction to entertain a trademark infringement suit (P.K. Sen v. Exxon Mobile Corporation & another). The dispute arose when US-based Exxon Mobil Corporation (“EMC”) alleged infringement of its registered trademark EXXON by Kolkata- based Exon Engineering Corporation (“EEC”) and filed an action for such before the Delhi High Court. In the suit, EMC made its Delhi-based Indian subsidiary a co-plaintiff and claimed that its Indian subsidiary was using the mark EXXON in India under a license granted by EMC. It was further stated that all use of the mark EXXON made by the subsidiary would constitute use of the mark by EMC. As such, jurisdiction of the Delhi High Court was claimed under Section 134(2) of the Act, which permits a plaintiff to avail itself of the jurisdiction of a particular court, if it can demonstrate that at least one of the persons instituting the suit for infringement actually and voluntarily resides or carries on business within the territorial jurisdiction thereof.

EEC, on the other hand, challenged the jurisdiction of the Delhi High Court on the ground, inter alia, that being a common-law licensee, as opposed to a registered user, EMC’s Indian subsidiary had no right to institute a suit for infringement and hence, no jurisdiction can be conferred based on the subsidiary’s place of business. The aforesaid arguments made by EEC were rejected by the Single Judge of the Delhi High Court, which prompted EEC to file an appeal before the Division Bench.

Considering the factual background and the prevailing case law, the Division Bench overturned the Single Judge’s order and held that jurisdiction of a court in a suit for infringement cannot be claimed based on the place of business of a “permitted user” of the trademark in question. The Court noted that Section 53 explicitly bars a “permitted user”, such as a common-law licensee, from instituting a suit for infringement and therefore, the only persons entitled to bring a suit for infringement of a trademark would be the registered proprietor or the “registered user”. The Court further noted that, because EMC’s Indian subsidiary was not entitled to institute the suit and EMC itself has no direct business in Delhi, the suit cannot be filed under Section 134(2) of the Act claiming jurisdiction of the Delhi High Court.

While the aforesaid findings of the Division Bench are legally sound, they may cause logistical issues for companies based outside India and operating in India through their subsidiaries or licensees. On a positive note, however, this decision is expected to galvanize the recordal of “registered users” at the Trademark Registry, a beneficial practice that has taken a backseat over the years.