Delhi High Court decides on want of territorial jurisdiction in trademark infringement and passing off case

In January 2021, the Delhi High Court passed an ex-parte interim injunction order in favour of V-Guard Industries Ltd against Defendants (Mr. Sukan Raj Jain and Anr.) restraining the latter from manufacturing, selling, offering for sale, advertising, dealing in machines, electronic, electrical, parts and fittings or any other products under ‘N-GUARD’ mark and related domain name which may amount to infringement of V GUARD’s trademarks and passing off its goods as those of the Plaintiff.

Via its July 2021 judgement, the Delhi High Court disposes off the Defendant’s application to return the plaint for lack of territorial jurisdiction of this Court. The Court revisited various principles set out in several judicial precedents to ascertain its competence in adjudicating the suit involving present set of facts.

The Plaintiff was stated to be in business of electrical goods and the proprietor of the trademark V-GUARD and other variants, and Defendant was sole proprietor of M/s N-Guard Electronic Industries. In support of his application, the Defendant pleaded several grounds including the claim that he did not carry business in Delhi and that the registered offices of both sides are in different states altogether (Kerala and Karnataka). Furthermore, the Defendant stated that the one-time purchase made by the Plaintiff from a vendor, who was not associated with him on e-commerce portal. The Defendant claimed that could not attract the Court’s jurisdiction because no cause of action had arisen within the jurisdiction of the Court. In its plaint, the Plaintiff claimed the Court’s jurisdiction by primarily stating that Defendant’s products were available on online portal and third-party marketplace websites which could be accessed from Delhi, that purchased products could be delivered in Delhi, that Defendant had substantial customers here and finally, that Plaintiff also had a supply office is in Delhi. The Plaintiff filed screenshots to showcase Defendant’s presence on third-party marketplace websites, and in fact, two of these websites clearly listed the Defendant as the seller of his products and that such products were available in Delhi.

Upon detailed assessment of the case and interpretation of judicial principles, the Court prima facie concluded that it had territorial jurisdiction to try the lawsuit. Territorial jurisdiction provision is covered under Section 20 of CPC (Code of Civil Procedure) and Section 134(2) of Trade Marks Act. The Court lined up various contributing factors from jurisdictional perspective including permissibility of trap order from the forum state where the Court’s jurisdiction is being invoked, instances of use of trademark in particular territory, virtual presence versus physical presence and place of causation of injury to the Plaintiff, etc. to reach this conclusion.

It was noted that while neither of the sides had their principal businesses in Delhi, the Defendant’s products were being offered for sale on online marketplace websites wherein he was also listed as a seller and that Plaintiff’s supply office was in Delhi. In the judgement, the Court relied upon principles laid down in Banyan Tree Holding (P) Limited case to decide if the Defendant purposefully availed the jurisdiction of the Court, what ‘constitutes use’ as laid down in Burger King Corporation v. Techchand Shewakramani & Ors case and ‘injury’ test laid down in case of Millennium & Copthorne International Limited v. Aryans Plaza Services Private Limited & Ors.

  • Cause of action in Delhi

In assessing the issue of single purchase made in form of trap sale as stipulated in Banyan Tree Holding (P) Limited case, it was observed that the Plaintiff has to plead and establish its prima facie case that the Defendant used its universally accessible website to target and to conclude a commercial transaction with the website user and that the specific targeting of the forum state by the Defendant resulted in an injury or harm to the Plaintiff within the forum state.

The Court disagreed with the Defendant’s reliance on Banyan Tree Holding (P) Limited case who pleaded that the solitary purchase made by the Plaintiff cannot be relied upon, as such purchase was made to create a cause of action in Delhi. The Court observed that trap transactions are not allowed in the instances where one adopts unfair means only for the purposes of creating a cause of action, which is the matter of trial. Sales generated by Plaintiff cannot be construed as trap sales, if the Defendant is also targeting its products at a place where the sale is made. The Court observed that it has been set out that the Plaintiff must plead about the interactive nature of websites and specific targeting of customers in the forum state and substantiate it as well. In the present case, Plaintiff had prima facie established that Defendant’s products were available for sale to customers in Delhi via online portals and third-party marketplace websites which were universally accessible including Delhi. The Court noted that on 2 websites, the Defendant himself was shown as the seller. The Court prima facie concluded that cause of action had arisen within the jurisdiction of this Court.

  • Use of the mark

It was observed that a lawsuit could be filed in any place where the cause or part of the cause of action arises i.e., each and every place where there is any form of use of the mark. In Burger King Corporation case, it was concluded that jurisdiction of a Court in a trade mark action, could be invoked where there is use upon or in relation to goods. The phrase ‘in relation to’ has been interpreted to include advertising, promotion, publicity, etc.

  • Injury caused to Plaintiff

Referring to the principle laid down in Millennium & Copthorne International Limited case, the Court observed that to invoke Court’s jurisdiction in a trademark infringement and passing off suit, the Plaintiff should plead and show that a wrong was done to it within the local limits of the said Court’s jurisdiction. The Plaintiff should state the place where deception of customer has taken happened and that place would certainly have jurisdiction.

Referring to the instances of four situations laid down in the case of Ultra Home Construction Pvt. Ltd. v. Purushottam Kumar Chaubey & Ors, the Court concluded that the Plaintiff was qualified under both provisions of Section 20(c) CPC (place where cause of action arises) and Section 134(2) of the Trade Marks Act (where Plaintiff voluntarily resides/carried on business/works for gain) to invoke jurisdiction of the Court. The Courts will have jurisdiction to entertain a suit against infringement and passing off when the cause or part of the cause of action has arisen in the place where the Plaintiff’s subordinate place (the supply office in the present case) is located.

The far-reaching radar of the internet is a known aspect, and the concept/practice of forum shopping is also not anything new. The Court’s judgment reaffirms that there are several determining factors in deciding on the jurisdiction of the Court which are to be cumulatively considered and interpreted before making an assessment on the plaint. The Hon’ble Courts of India have laid down several celebrated judicial precedents which have stipulated detailed analysis of various factors which come into play in deciding upon territorial jurisdiction of a Court.

Delhi High Court decides on want of territorial jurisdiction in trademark infringement and passing off case. Manisha Singh & Akanksha Kar elaborate on the judgment passed in the case of V-Guard Industries Ltd versus Mr. Sukan Raj Jain and Anr. where the Court revisited various principles set out in judicial precedents making detailed analysis of cumulative factors which come into play in deciding upon territorial jurisdiction of the Court.