A Single Judge Bench of Delhi High Court (Court) in a recent case of V Guard Industries Ltd. v. Sukan Raj Jain & Anr. , pertaining to a trademark infringement dispute has affirmed that the territorial court can exercise the jurisdiction in cases wherein the infringing goods are accessible on e-commerce platforms within the forum state, thereby giving rise to cause of action, despite the Defendants not having place of business in the said state.

Question of law for adjudication : Whether sale of infringing goods on third party e-commerce platforms accessible within the forum state satisfies the territorial jurisdiction of that forum/Court?

Background: V Guard Industries Ltd. (Plaintiff) is a company, head quartered at Kerala in the business of marketing / selling electrical goods under the trademark ‘V Guard’. Defendant No.1 is a sole proprietor of the firm M/s N-Guard Electronic Industries (Defendant). The Plaintiff filed a suit seeking a permanent injunction against the sale of offending products on third-party marketplace websites such as Indiamart, Flipkart, Shopclues and Snapdeal (E-commerce Platforms) wherein the Defendant was shown as a verified supplier of the product. For evidencing the same, the Plaintiff had produced sale invoices of the offending products purchased online by it. The Court had passed an ex-parte ad-interim order restraining the Defendants from infringing and passing-off of the Plaintiff’s trademark “V-Guard”.

An Application was filed by the Defendants under Order 7 Rule 10 of the Civil Procedure Code, 1908 (CPC) for Return of Plaint on the grounds that the Court lacked territorial jurisdiction. The Plaintiff’s registered office was in Kerala and the Defendant’s registered office was in Karnataka. Defendants’ contention was that none of the parties had its registered office in Delhi and they do not directly sell their products in Delhi and the sale relied upon by the Plaintiff is a “trap sale” and, hence, is not admissible evidence. The Plaintiff argued that since the Defendant’s offending products were accessible on E-commerce Platforms within Delhi, the cause of action had arisen in Delhi, and that the Plaintiff had its supply offices also in Delhi.

Judgment: The Court held that self-generated sale relied upon by the Plaintiff cannot per se be termed as “trap sale”, if the Defendant is otherwise found to have targeted products at a place where the said sale was made.

Points of law discussed:

• Trademark Act, 1999: Section 134 of the Trade Marks Act, 1999 (TM Act) provides that a plaintiff can initiate a cause of an infringement action, where the plaintiff resides or has a place of business.

• Section 20 of CPC provides that the plaintiff can institute a suit where the defendant resides or carries on business, or where the cause of action wholly or in part arises.

• The Court observed that additional jurisdictions have been made available to the Plaintiff by virtue of Section 134 of the TM Act, over the jurisdictions available under Section 20 of CPC.

The occurrence of cause of action is held to be a determining factor under both the sections to attract the territorial jurisdiction of the Court. Therefore, if any part of cause of action has arisen at a place where the Plaintiff has its branch/subordinate office, Courts at that place will have jurisdiction to entertain a suit against infringement and passing off. Hence, since the Defendant’s offending products were accessible at a place where the Plaintiff had its subordinate (supply) office, the Plaintiff was held to be qualified both under Section 134 of the TM Act as well as under Section 20(c) of CPC.

MHCO COMMENT:

Delhi High Court in this judgment, has clarified the position of law regarding territorial jurisdiction of courts by acknowledging and equating the existence of virtual stores on the internet with the conventional physical stores. This is an important precedent, as due to the pandemic there has been a paradigm shift in the way the vendors and consumers interact through online platforms. This judgment also elucidates the importance of limiting the territories which a manufacturer would supply to through a distributor, in order to restrict the litigations in territories where they would not like to do any business.

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Author: Bhushan Shah - Partner

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This update was released on 17 Aug 2021.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

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