Indian High Court rules on standing of a trademark licensee to sue

A recent decision of the Division Bench in the High Court of Delhi has sought to answer the question of what standing a trademark licensee has to bring trademark infringement proceedings.

By way of background, the 1996 decision of the Supreme Court of India in Cycle Corporation of India Ltd. v. T. I. Raleigh Industries meant that use of a mark by a common-law licensee, defined as a permitted user, was held to have the same legal force as a registered user and thus both types of user could carry out permitted use. The 1996 decision was later incorporated into the Trade Marks Act 1999. However, the 1999 Act limited this wide scope via the introduction of Section 53, by expressly prohibiting a permitted user from instituting a suit for trademark infringement.

In the current decision, Section 53 was key in determining the standing of the trademark infringement proceedings launched by US-based Exxon Mobil Corporation against Kolkata- based Exon Engineering Corporation. In order to bring proceedings which would fall under the jurisdiction of the Delhi High Court, Exxon Mobil Corporation made its Delhi-based subsidiary a co-plaintiff and claimed that it was using the EXXON trademark in India under a license granted by them.

However, Exon Engineering Corporation challenged the jurisdictional remit of the Delhi High Court in hearing the infringement. Exon argued that as Exxon Mobil Corporation's Indian subsidiary was operating as a common law licensee and not a registered user, it had no right to bring a suit for infringement and thus no jurisdiction could be conferred based upon the subsidiary's place of business.

A Single Judge of the Delhi High Court initially refused the argument of the Exon Engineering Corporation but the Division Bench overturned this judgement. The Division Bench made clear that Section 53 bars a permitted from bringing a suit for infringement and therefore only a registered proprietor or a registered user would be able to bring such proceedings.

The decision means that companies operating within India but through an umbrella of subsidiaries or licensees can no longer launch proceedings in the country by claiming jurisdiction through these corporate structures.

If you have any questions on the above, please do not hesitate to contact the team at McDaniel & Co. on 0191 281 4000 or legal@mcdanielslaw.com.