How to Escape the Jurisdictional Demons of the Past: DHC’s Lesson on Territorial Claims in the Digital Bazaar
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How to Escape the Jurisdictional Demons of the Past: DHC’s Lesson on Territorial Claims in the Digital Bazaar
By Srishti Gaur
In Vikrant Chemico Industries Pvt Ltd v Shri Gopal Engineering and Chemical Works Pvt Ltd & Ors, the DHC grappled with the thorny question of jurisdiction in a trademark infringement dispute. It set the record straight on what counts as a cause of action and how it is to be applied with evidentiary rigour in the context of online shopping forums.
The dispute arose out of a once-unified family business gone sour. The plaintiff, Vikrant Chemico Industries, alleged infringement of its trademark by the defendant, Shri Gopal Engineering and Chemical Works, and sought the relief of a permanent injunction. Both the entities were family-founded which emerged from a common business before they parted ways in 1985.
The Court, after a full trial, decided that the DHC does not have the territorial jurisdiction to entertain the suit. In this blogpost, I examine the Court’s approach to the issue of cause of action in online marketplaces and situate the ruling in the broader trend of jurisdictional manufacturing through misapplication of law by tracing the tussle that the Court has undergone in recent years.
Unwrapping the Background
The story begins when Mr. JB Gupta brought the younger of his two sons into his company, Vikrant Chemico Industries (henceforth “Vikrant Chemico”). In 1975, the father and his other son forged a new venture, Shri Gopal Engineering and Chemical Works (henceforth “Shri Gopal”), which was later joined by the younger son.
Initially, the mark ‘DOCTOR BRAND PHENYLE’ was registered in the name of the partnership firm ‘Shri Gopal Engineering and Chemical Works’. This was followed by a split in business in 1985 and a family settlement assigned the aforesaid trademark in favour of Vikrant Chemico. In 2014, Shri Gopal launched its product under the trademark ‘DOCTOR HAZEL’S BRAND PHENYL’, which went on becoming a bone of contention. Vikrant Chemico alleged that this registered mark is deceptively similar to theirs and filed the suit in 2015. The Court decided that since the plaintiff company was not able to establish that the cause of action arose in Delhi, it cannot determine the case.
The Court’s Reasoning
The Court, in this case, noted that the plaintiff failed to produce any bills, invoices, or any other evidence to substantiate its claims of being sold in Delhi (to prove that the cause of action arose in Delhi). Further, the products sold on Shri Gopal’s website were under the mark ‘CHEMIST’ and not the contested ‘DOCTOR HAZEL’s BRAND PHENYLE’.
Another contention raised was that Shri Gopal’s products were available for sale on an online forum – IndiaMart. To which the Court concluded that mere listing of products does not prove that any order was placed from Delhi. Lastly, the plaintiff argued that trademark registration and assignment took place in Delhi to prove a causal connect. Following Dhodha House v SK Maingi where the Supreme Court held that mere registration would not form cause of action but its use, the Court held that Vikrant Chemico failed to establish territorial jurisdiction of the DHC over the suit (¶ 38). Justice Amit Bansal, taking in cognizance Order XIV Rule 2 of CPC (warranting a Court to pass a judgement on all the issues) and Sathyanath v Sarojamani, concluded that the DHC does not have territorial jurisdiction to entertain the suit but still went on to pass the judgement on all the issues before it.
The Jurisdictional Juggernaut
On this blog, concerns have been raised previously (here and here) that in a slew of IP disputes, the law has been abused on many counts to create jurisdiction before a specific High Court. In the present matter, however, the Court departed from this tendency, as without assuming jurisdiction it ventured into scrutinising the relation of the parties to the dispute vis-à-vis jurisdiction.
Section 20 of the Civil Procedure Code, 1908 provides territorial jurisdiction for a court to entertain disputes, including trademark infringement, when the defendant “resides, carries on business, or personally works for gain, or a part of or the entire cause of actions arises.” Section 134 of the Trademarks Act, 1999 (“Act”) does not oust jurisdiction under the CPC but supplements it, allowing the plaintiff to have flexibility in choosing a convenient forum for suit.
With the inflow of online marketplaces, floodgates have opened with respect to jurisdictional questions where mere accessibility of activities of parties in a particular jurisdiction has been admitted as a sufficient cause of action, making a case for weak causal connection required for proving territorial jurisdiction.
In the seminal ruling of Banyan Tree Holding v A. Murali Krishna Reddy, the Division Bench of the DHC held that for a cause of action to arise, the product concerned needs to be engaged in a commercial activity of some sort. A mere act of posting an advertisement or hosting the product on a website without engaging in any commercial transaction will not result in the court having jurisdiction over the court (read here). In this case, the DHC applied the ‘purposive availment test’ to ascertain jurisdiction where the plaintiff has to prima facie establish: first, actual harm arising to the Plaintiff in the forum state, second, Defendant targeted users in the forum state, and last, this has to be assessed on a case-by-case basis. The judgment set a rigorous standard required to make the jurisdictional claim.
Over the years, the standard set to determine cause of action under Banyan has been watered down. As previously discussed on this blog, in case of Imperio Entertainment and Hospitality v Urban Masala, the Court did not take the burden of considering jurisdictional claims and accepted the argument that DHC has jurisdiction since the Defendant advertised its services on websites which were accessible in Delhi without investigating into the occurrence of any commercial activity. In Sholay Media v Yogesh Patel, the Court concluded that merely displaying a trademark at an exhibition grants jurisdiction of the forum. In these cases, apart from actual sales, advertisements and promotions in a particular location were considered sufficient to constitute a cause of action.
Even in the case of Icon Health and Fitness v Sheriff Usman, which is similar in facts to that of the case in discussion, the DHC held that the presence of Defendant’s business on third-party online portals such as Amazon and Google Pay is sufficient to establish the court’s jurisdiction (more can be read here and here). The Court reasoned that the act of virtually listing products on such forums is equivalent to having a place of business wherever they are accessible, setting a precedent that departs from law laid in Banyan Tree Holding.
A welcome decision came in News Nation networks Private Ltd. where the DHC held that a Facebook page, irrespective of its degree of interaction, circulating a newspaper online is not on the same plane as engaging in commercial transactions. The Vikrant Chemico case adds to the pool of cases exhibiting straightforward and rightful application of Banyan Tree Holding. The ruling effectively maintained a rigorous evidentiary threshold to establish a cause of action in the evolving ecosystem of e-marketplaces, drawing a firm line between mere online presence and actionable commercial activity.