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Ranjan Narula Associates


Exxon stumped in fine line between Permitted User and Registered User
The Delhi High Court recently passed a series of orders to lay down strict test to invoke territorial jurisdiction of the High Court. The recent orders are being seen not only as an attempt to curb forum shopping but also to shed the image of being a pro-plaintiff court. This post discusses recent decision of the two judges bench (Division Bench) in an Appeal from the decision of the single judge of the same Court titled PK Sen V Exxon Mobil Corporation that seeks to lay down strict test for invoking territorial jurisdiction of the court and clarifies that mere averment that a foreign company's subsidiary that has been licensed/permitted to use the mark has an office in Delhi is not sufficient to bring action at the Delhi High Court.

Facts

The Plaintiff/Respondent no. 1, Exxon Mobile Corporation (Exxon USA) is the registered proprietor of the trademark Exxon and being a US corporation has no office in India. The Plaintiff no. 2, a wholly owned subsidiary of Exxon, USA (Plaintiff no. 1), has an office in Delhi and is authorized by way of a license agreement in writing to use the mark EXXON in India. The licence is not recorded with the Trademarks Registry. Thus Plaintiff no. 2 is a 'permitted user' of the mark and not the 'registered user'.

The defendant in this case is trading under the name 'Exxon Engineering Corporation' and is based in Kolkata.

Exxon, USA relying on Section 134(2) of the Trademarks Act, 1999 ("the Act"), filed the suit at the Delhi High Court on the ground that Plaintiff no. 2; (its subsidiary company); has an office in Delhi. Exxon USA contended Section 134(2) of the Act empowers a Plaintiff to institute a suit for trademark infringement at any place where its office is located, therefore, the Delhi High Court has the jurisdiction to adjudicate upon the matter.

Contentions of the parties

Before the single judge, the Plaintiff no. 1 (Exxon, USA) put forth two main grounds:
  1. Section 52 of the Trademarks Act empowers a registered user of a mark to institute a suit for infringement, therefore there is no reason why a permitted user or an unrecorded licensee of a mark would not be similarly empowered to institute such a suit.

  2. Relying on Section 48(2) of the Act, Exxon, USA contended that the use of a mark by a permitted user is deemed to be use of the mark by the registered proprietor. This being the case, and considering the permitted user of the mark by its Indian subsidiary, Plaintiff no. 2 having an office in Delhi, its use of the mark would be deemed to be use by Exxon, USA in Delhi.
On the other hand, the defendant argued that it was carrying on business in Kolkata, therefore a court in Delhi would not have jurisdiction to adjudicate upon the matter. Further, in light of the fact that Section 53 of the Act imposes an express embargo on the institution of a suit by a permitted user, Plaintiff no. 2 could not have instituted the suit for trademark infringement in Delhi. Finally, since Plaintiff no. 1 did not have an office in Delhi, Section 134(2) could not come to its aid.

The Single Judge accepted Plaintiff's above submission on the territorial jurisdiction and allowed the suit to proceed on the basis of Exxon, USA Indian subsidiary office in Delhi. The Defendants preferred an Appeal before the Division Bench of the Delhi High court on the issues raised above.

Decision of the Appeal court

The appeal court took the view that the term 'person' in the explanation to Section 134(2) must be construed as being inclusive, however, it would nonetheless not include a 'permitted user' within its ambit which would be contrary to Section 53 which prohibits permitted user to take any proceedings against infringement. Therefore, the court took the view that the Plaintiff no. 2, the Indian subsidiary of Exxon Mobile was not legally empowered to institute the suit.

While deciding whether the Plaintiff no. 1 had jurisdiction to file the present suit, the court relied upon its own judgement titled Ultra Home Construction versus Purushottam Kumar Chaubey. In this case court had come up with a matrix outlining four different circumstances in which territorial jurisdiction of a particular court could be invoked. The matrix is reproduced below:

Sr. No. Place of Plaintiff's Principal Office Place of Plaintiff's Subordinate/Branch Office Place where cause of action arose Place where plaintiff can additionally sue under section 134 (2) and section 62 (2)
1 A ----- C A
2 A B A A
3 A B B B
4 A B C A

Applying the matrix, the court held that since the plaintiff does not have a principal place of business in India and the cause of action did not arise in Delhi, the case does not qualify any of the four circumstances outlined above. Accordingly, the case was dismissed for lack of territorial jurisdiction.

Our comment

As the Trademarks Act by a deeming provision allows use of a trademark by a permitted user to accrue to the benefit of the registered proprietor of the trademark, irrespective of whether or not the permitted user has been recorded as a registered user, the brand owners did not see any advantage of allocating resources to record/register such permitted user with the Trademarks office. Further, in most cases the registered proprietor would license its Indian subsidiary to use the mark, the ownership and control exercised by them by way of corporate relationship was considered sufficient to rely upon the license agreement. In other words there was no added incentive to formally record them as a registered user of the mark. However, this case clarifies the position that the brand owners can take the benefit of licensee/permitted user location to invoke jurisdiction under Section 134(2) of the Act, if the license or permitted user is recorded at the Trademarks office. It is a separate matter that cause of action within the territorial jurisdiction of the court had still to be shown to invoke a court's jurisdiction under Section 134(2) of the Trade marks Act.
 
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