This article is written by Poonam Nahar pursuing Diploma in Intellectual Property, Media, and Entertainment Laws from LawSikho.

Introduction

In a recent matter between PhonePe Pvt. Ltd. (plaintiff) vs. Ezy Services & Anr. (defendant) i.e. on 15th April, 2021 a single-judge bench of the Delhi High Court comprising of Hon’ble Justice C. Hari Shankar, pronounced a notable judgment in a commercial suit filed decided an interim application between ‘PhonePe’ and ‘BharatPe’ concerning whether the use of the suffix ‘Pe’ in ‘BharatPe’ mark amounted to infringement of the registered mark ‘PhonePe’ and passing off. The proceedings of this case relate to an interim application seeking an interim injunction under Order XXXIX Temporary injunctions and interlocutory orders Rules 1 and 2 of the Civil Procedure Code.

The plaintiff had filed a suit against the defendant seeking a permanent injunction and other remedies against the defendant’s use of “Pe” or any deceptive mark identical and/or similar to the plaintiff’s trademark ‘PhonePe’ before the Delhi High Court. In respect of payment services or in any other manner amounting to infringement of the plaintiff’s trademark. Both parties are online payment service providers. While plaintiff (PhonePe) works with both merchants and consumers and the defendant (EZY Services/BharatPe) has a merchant exclusive business.

Download Now

The court dismissed the application and denied to grant an interim injunction against the defendants and rightly held that parties cannot misspell descriptive/generic words in order to claim exclusivity over them especially at this prima facie stage unless there is extensive evidence that such misspelling has acquired secondary meaning through continuous commercial use, that is, different from the literal meaning, which is an aspect the High Court has held to be a matter of trial and evidence when the suit is finally heard and decided.

In this article, we will be analyzing the interim order recently issued by the Delhi High Court in a trademark infringement and passing off dispute between online payment apps PhonePe and BharatPe, arguments by plaintiff and defendants, and key observations of court.

Insights into the trademark dispute

On behalf of the plaintiff

  1. 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.
  2. Prior adopter and user of the trademark “PhonePe” and its variants i.e. from 2015. On the other hand, the defendants, admittedly, started using the mark “BharatPe” only in 2018, by which time the plaintiff’s reputation and goodwill were already well established.
  3. PhonePe has been the earliest date of registration as it has registered its marks and variants since 2016. Therefore, the PhonePe app has been downloaded over 10 crore times.
  4. The plaintiff in its suit claimed that “Pe” is an essential, dominant, and distinguishing feature of the plaintiff’s registered trademarks. 
  5. 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’.
  6. The plaintiff has earned substantial goodwill and reputation as a large volume of material placed on record, including articles, advertisements, evidence of tie-ups/partnerships with others across various sectors/industries, involvement in public activities such as the VIVO IPL 2019, and endorsement by celebrities, as evidence of the reputation and goodwill amassed over the years.
  7. The impugned BharatPe mark copies the essential and distinguishing “Pe” suffix in the “PhonePe” trademark of the plaintiff and the services of the defendants are identical to those of the plaintiff. Hence, the offering of identical services by the defendant is amounting to infringement and it also amounts to passing off.

On behalf of the defendant

  1. Neither the plaintiff nor the defendants used “पे” or “Pe” as a standalone mark, in the course of their business activities.
  2. Adopted and was using, honestly and with bona fide intent, the mark “BharatPe”, at least since 1-8-2016. The domain name <www.bharatpe.com> was registered in the name of its founder on 15-11-2017 and online payment services under the said mark commenced in August 2018.
  3. The “BharatPe” wordmark was a mark that was coined and invented by the defendants and is highly fanciful and inherently distinctive of the goods and services provided thereunder. Several entities use the expression “Pay” as a suffix, such as Google Pay, Amazon Pay, Samsung Pay, WhatsApp Pay, etc.
  4. The idea behind the mark was to build a single quick response (QR) code for merchants, to facilitate the making of payments, which would work across all consumer unified payments interface (UPI)-based applications, such as Google Pay, Paytm, WhatsApp Pay, Amazon Pay, Samsung Pay, and PhonePe. It was for this reason that the defendants used the tagline, “Bharat pe sab chalta hai”.
  5. The “BharatPe” app had been downloaded over 50 lakh times till the end of December 2020.
  6. The first examination report, issued by the Trademarks Registry, while examining the trademark application of the defendants for registration of the “BharatPe” marks, did not cite any of the plaintiff’s marks as an earlier trademark, for raising objections under Section 11 of the Trademarks Act, 1999.
  7. Relied on a list of trademarks registered prior to the “PhonePe” marks of the plaintiff, involving “Pe”, such as “Phone Pe Deal” “Phone Pe Store”, “Phone Pe Crore” and other third-party marks. These earlier marks claimed users prior to the plaintiff. As such, the plaintiff could not claim to be the adopter of the “Pe” formative mark.
  8. The suffix “Pe” was merely a misspelling of the word “Pay”. This was admitted by the plaintiff. Phonetically, “Pe” and “Pay” are identical. The idea of using the suffix “Pe” was only to enable the consumer to phonetically pronounce “Pay”. Such misspellings, which are phonetically identical to the original misspelt term, do not confer any statutorily enforceable rights, where the original term is descriptive in nature. No exclusive rights can be enforced, in respect of such a misspelt word, under the Act, unless it has acquired a secondary meaning with respect to the plaintiff’s business.
  9. The suffix “Pe” was, therefore, common to the trade and was also laudatory and descriptive to the services provided by the plaintiff, which was to afford the consumer an option to make payments from a phone using the plaintiff’s apps.

Key observations of the court with relation infringement under Trademarks Act

In determining whether or not the defendants should be injuncted from using the ‘BharatPe’ mark, the court considered the issue of similarity between the two marks. The Hon’ble Delhi High Court’s decision in this matter seems to be premised based on the following three principles.  In this respect, the comparison of the marks as a whole, and comparison of ‘dominant’ portions of the mark were particularly considered by the court, as explained below.

  • First principle: The anti-dissection rule

The question arises whether trademarks must be compared as a whole? The court noted that the plaintiff had not separately registered parts of the ‘PhonePe’ mark.

Section 17(1) of the Trademarks Act, 1999 (‘Act’) “specifically confers” the exclusive rights to use of the whole trademark and Section 17(2) clarifies that the registration of such a composite trademark would not confer exclusive rights over any part of the registered trademark where the part was not subject of a separate application or where the part contained any word or term which was common to the trade or was non-distinctive.

The court referred to the Kaviraj Pandit Durga Dutt Sharma case where the Supreme Court had held that trademarks were to be compared as a whole.  This is often called the ‘anti-dissection’ rule.  The court referred to a catena of decisions approving this ‘anti-dissection’ principle, such as The Registrar Of Trademarks vs Ashok Chandra Rakhit Ltd and Stiefel Laboratories, Inc & Anr vs Ajanta Pharma Ltd.  Conflicting composite marks are to be compared by looking at them as a whole, rather than breaking the marks up into their component parts for comparison. This is the “anti- dissection” rule. 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. Thus, conflicting marks must be compared in their entirety.

The court ruled that while applying the above principles to the facts in hand, the following positions emerged i.e. 

  1. “PhonePe” and “BharatPe” were both composite marks.
  2. 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 
  3. 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.

  • Second principle: The dominant mark test

Here, the court analyzed the law on the dominant mark test. The court referred to a judgment of a Division Bench of the Delhi High Court in South India Beverages. In South India Beverages, the court had explained the ‘dominant mark’ test. The court held that while a mark is to be considered as a whole, importance or ‘dominance’ could be accorded to parts of a mark in the case of composite marks, and where a particular element enjoys prominence with respect to other elements, it would be a ‘dominant mark’.  The court had ruled that while the general rule under Section 17 of the Trademarks Act was that marks must be considered as a whole, courts were required to keep in mind the relative dominance of parts of a mark.  The test was whether any part of the plaintiff’s mark was dominant or was an essential feature, and if so, whether such dominant part was infringed by the defendant. In fact, the court ruled that there may be substance to the claim that ‘Pe’ constituted a dominant part or essential feature of the marks, especially as it was written with a capital ‘P’.

It held that even while a trademark is not to be dissected into parts, and the parts compared with corresponding parts of the allegedly infringing trademark in order to assess the existence of an infringement, nonetheless, if a “dominant part” or “essential feature” of the plaintiff’s mark is imitated by the defendant, the court may legitimately examine whether, by such imitation, infringement has taken place.

  • Third principle: Non-exclusivity of descriptive or generic marks or parts of marks

The question arises on confusing or deceptive similarity of the defendant’s mark. The court observed that while exclusivity could not be claimed in parts of a registered mark, imitations of the dominant or essential features of such registered marks could constitute infringement. It also clarified that descriptive or generic marks (or parts thereof) are not exclusive and misspelling of descriptive words would not grant exclusivity. 

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. 

In the case of Marico Limited, the court dived deep into the concept of the 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”.

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”.

The court held that such factors were insufficient to constitute a case for deceptive or confusing similarity.  Interestingly, the court ruled that the nature of services provided by the parties were different, as the plaintiff was an online payment portal while the defendants provided a single QR code basis which customers could work with consumer-facing UPI-based apps, including the plaintiff’s app. The court found that such customers who deal with the apps could be expected to know the difference. Thus, the court denied the grant of injunction.

Conclusion

The court ruled that there was no case for grant of interim injunction against the defendants. The court observed that except for 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. This judgment serves as a primer on all things on trademark law and illustrates various legal principles, especially on trademark laws. 

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

RELATED ARTICLESMORE FROM AUTHOR

LEAVE A REPLY

Please enter your comment!
Please enter your name here