Explained: PhonePe v. BharatPe Trade Mark Dispute — “Pe”/Pay-as-you-go

I. Background

Recently, a Single Judge Bench of the Delhi High Court comprising of  Mr Justice C. Hari Shankar, pronounced a notable judgment in a commercial suit filed, namely, — Phonepe (P) Ltd. v. Ezy Services.[1] The plaintiff sued the defendants, for permanent injunction, against use, by the defendants, of “Pe” or any deceptive variant of “PhonePe” which is identical and/or similar to the plaintiff’s trade mark “PhonePe”, in respect of payment services or in any other manner amounting to infringement of the plaintiff’s trade mark, or of passing off, by the defendants, of their services as those of the plaintiff.

 

The plaintiff and the defendants provide online payment services and are billion-dollar companies and market leaders in digital payment services, providing all types of consumer-to-consumer and consumer-to-merchant payment services via their applications (“apps”, in short). It is pertinent to note here that the defendants’ services are available exclusively to merchants, whereas the plaintiff’s services are available to anyone who downloads the app.

 

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.

 

The defendants were, however, directed to maintain accounts of the amounts earned as a result of use of the impugned “BharatPe” mark and file six-monthly audited statements, before the Court.

 

The marks in question are depicted as below:

 

II. Arguments

On behalf of the Plaintiff

 

  • Has registrations of the marks PhonePe[1] and its variants in Classes 9, 35, 36, 38 and 42 with effect from March 2016, being the earliest date of registration.
  • Trade marks PhonePe and its variations, whether in English or in Devanagari, have been coined and adopted since 2015 and have been in use since then.
  • The app has been downloaded over ten crore times.
  • Transliteration of the Devanagari “पे” as “Pe” is an innovative and fanciful adaptation and would be translated as “Pay”.
  • Prior user of the trade marks employing the said distinguishing feature, in respect of which the plaintiff has earned substantial goodwill and reputation.
  • “Pe” is an invented word, not to be found in the English dictionary and it has no obvious meaning.
  • 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 trade mark “PhonePe”.
  • 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.
  • Defendants’ app “BharatPe[2]” provides identical services and can be downloaded from the same platforms from which the plaintiff’s app can be downloaded i.e. Google Play and Apple App Store.
  • Prior adopter and user of the trade mark “PhonePe” and its variants. 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.
  • The use of the capital “P” in “Pe” additionally emphasises the “Pe” suffix. This being the common feature between the two trade marks, the defendants’ trade mark is rendered deceptively similar to that of the plaintiff.
  • A consumer of average intelligence and imperfect recollection, on seeing the defendants’ mark “BharatPe” would notice, particularly, the “Pe” suffix. The use of the “Pe” suffix by the defendants is bound to result, in the mind of such a consumer, of an impression of association/connection/nexus of the services provided under such mark, with the plaintiff, as the plaintiff’s established trade mark also contains the suffix “Pe”.
  • The impugned “BharatPe” mark copies the essential and distinguishing “Pe” suffix in the “PhonePe” trade mark of the plaintiff and the services of the defendants are identical to those of the plaintiff.

 

On behalf of the Defendants

 

  • The plaintiff was not the registered proprietor or permitted user of the words, “Pe”, “Pay” or the Devanagari “पे”. The registration had been acquired by the plaintiff over the entire word “PhonePe”, and other variants of the said mark.
  • 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.
  • The “BharatPe” word mark was a mark which was coined and invented by the defendants, and is highly fanciful and inherently distinctive of the goods and services provided thereunder. The idea behind the mark was to build a single quick response (QR) code for merchants, to facilitate 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”.
  • The “BharatPe” app had been downloaded over 50 lakh times till the end of December 2020.
  • Competing trade marks could not be vivisected and had to be compared as a whole. Therefore, it was not permissible, for the plaintiff to allege infringement or passing off merely on the basis of the “Pe” suffix in the “PhonePe” mark.
  • Neither the plaintiff nor the defendants used “पे” or “Pe” as a standalone mark, in the course of their business activities.
  • The dominant elements of the competing marks were not the suffix “Pe” but the words “Phone” and “Bharat”, which were phonetically, visually and structurally different.
  • The first examination report, issued by the Trade Marks Registry, while examining trade mark application of the defendants for registration of the “BharatPe” marks, did not cite any of the plaintiff’s marks as an earlier trade mark, for raising objections under Section 11 of the Trade Marks Act, 1999.
  • In its response to these examination reports, the plaintiff had contended that the mark of the plaintiff was required to be considered as a whole and that the suffix “Pe” could not be extracted out of the mark so as to make out a case for objection. This, however, was precisely the stand being taken by the plaintiff, to question the “BharatPe” mark of the defendant. The plaintiff was, therefore, estopped from taking such a stand.
  • Relied on a list of trade marks 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 user prior to the plaintiff. As such, the plaintiff could not claim to be the adopter of the “Pe” formative mark.
  • After filing the present suit, the plaintiff acquired the “CardPe” marks by way of assignment deed dated 19-9-2019. The plaintiff had, thereby, admitted that “CardPe” was the prior user and adopter of the “Pe” formative mark. This, again, belied the plaintiff’s submission that it was the innovator.
  • Viewed as a whole, the marks of the plaintiff and the defendants are completely different.
  • The suffix “Pe” was merely a misspelling of the word “Pay”. This was admitted by the plaintiff in the plaint. 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.
  • Acquisition of a secondary meaning is a matter of evidence and trial and in any event could not be pleaded on the basis of three years’ use. Several entities use the expression “Pay” as a suffix, such as Google Pay, Amazon Pay, Samsung Pay, WhatsApp Pay, etc.
  • 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 plaintiffs apps.

 

III. Law of the Land

 

(a) Marks must be compared as a whole — The Anti-Dissection Rule

 

  • Section 17[3] deals with the effects of registration of parts of a mark. Though, in the present case, the plaintiff has not separately registered any part of the allegedly infringed “PhonePe” mark, that is, precisely the reason why this provision assumes significance. Section 17(1) specifically confers the right, to the proprietor of a registered trade mark “consisting of several matters”, the exclusive rights “to the use of the trade mark taken as a whole”.

 

  • 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 trade mark on an ordinary prospective buyer is created by the mark as a whole, not by its component parts. However, it is not a violation of the anti-dissection rule to view the component parts of conflicting composite marks as a preliminary step on the way to an ultimate determination of probable customer reaction to the conflicting composites as a whole. Thus, conflicting marks must be compared in their entireties.
  • The anti-dissection rule is based upon a commonsense observation of customer behaviour: the typical shopper does not retain all of the individual details of a composite mark in his or her mind, but retains only an overall, general impression created by the composite as a whole. It is the overall impression created by the mark from the ordinary shopper’s cursory observation in the marketplace that will or will not lead to a likelihood of confusion, not the impression created from a meticulous comparison as expressed in carefully weighed analysis in legal briefs.

 

Para 29 of Durga Dutt Sharma v. Navaratna Pharmaceutical Laboratories[4]:

  1. When once the use by the defendant of the mark which is claimed to infringe the plaintiff’s mark is shown to be “in the course of trade”, the question whether there has been an infringement is to be decided by comparison of the two marks. Where the two marks are identical no further questions arise; for then the infringement is made out. When the two marks are not identical, the plaintiff would have to establish that the mark used by the defendant so nearly resembles the plaintiff’s registered trade mark as is likely to deceive or cause confusion and in relation to goods in respect of which it is registered (vide Section 21). A point has sometimes been raised as to whether the words “or cause confusion” introduce any element which is not already covered by the words “likely to deceive” and it has sometimes been answered by saying that it is merely an extension of the earlier test and does not add very materially to the concept indicated by the earlier words “likely to deceive”. But this apart, as the question arises in an action for infringement the onus would be on the plaintiff to establish that the trade mark used by the defendant in the course of trade in the goods in respect of which his mark is registered, is deceptively similar. This has necessarily to be ascertained by a comparison of the two marks – the degree of resemblance which is necessary to exist to cause deception not being capable of definition by laying down objective standards. The persons who would be deceived are, of course, the purchasers of the goods and it is the likelihood of their being deceived, that is, the subject of consideration. The resemblance may be phonetic, visual or in the basic idea represented by the plaintiff’s mark. The purpose of the comparison is for determining whether the essential features of the plaintiff’s trade mark are to be found in that used by the defendant. The identification of the essential features of the mark is in essence a question of fact and depends on the judgment of the Court based on the evidence led before it as regards the usage of the trade. It should, however, be borne in mind that the object of the enquiry in ultimate analysis is whether the mark used by the defendant as a whole is deceptively similar to that of the registered mark of the plaintiff.

 

(b) Dominant Test

Paras 19 and 21 of South India Beverages (P) Ltd. v. General Mills Mktg. Inc.[6]:

  1. Though it bears no reiteration that while a mark is to be considered in entirety, yet it is permissible to accord more or less importance or “dominance” to a particular portion or element of a mark in cases of composite marks. Thus, a particular element of a composite mark which enjoys greater prominence vis-à-vis other constituent elements, may be termed as a “dominant mark”.
  1. 21. The view of the author makes it scintillatingly clear, beyond pale of doubt, that the principle of “anti-dissection” does not impose an absolute embargo upon the consideration of the constituent elements of a composite mark. The said elements may be viewed as a preliminary step on the way to an ultimate determination of probable customer reaction to the conflicting composites as a whole. Thus, the principle of “anti-dissection” and identification of “dominant mark” are not antithetical to one another and if viewed in a holistic perspective, the said principles rather complement each other.

 

It held that even while a trade mark is not to be dissected into parts, and the parts compared with corresponding parts of the allegedly infringing trade mark in order to assess the existence of 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.

 

IV. Key observations of the Court

 

  • “PhonePe” and “BharatPe” are both composite marks — therefore, these marks cannot be dissected into “Phone” and “Pe” in the case of the plaintiff and “Bharat” and “Pe” in the case of the defendants.
  • The plaintiff cannot claim exclusivity solely over the “Pe” suffix, as no infringement can be claimed on the basis of part of a registered trade mark — exclusivity can be claimed, and infringement/passing off alleged, only in respect of the entire mark of the plaintiff, and not in respect of part thereof.
  • “Pe”, as used by the plaintiff, admittedly connotes the expression, and meaning, “pay” — and as such, the expression “pay” is clearly descriptive of the services provided by the plaintiff and the defendants.
  • By misspelling “Pay” as “Pe”, the legal position cannot change. The plaintiff would, therefore, be as entitled to claim exclusivity over the suffix “Pe”, as it would have been, had the suffix in its trade mark been “Pay”.
  • Barring the common “Pe” suffix, it cannot be said that the “PhonePe” trade mark of the plaintiff and the “BharatPe” trade mark of the defendant are confusingly or deceptively similar. As words, they are entirely different, except for the “Pe” suffix. “Phone” and “Bharat” are not even phonetically similar.
  • The nature of services provided by the plaintiff and the defendants is also different. The plaintiff provides a plaintiff online payment portal. On the contrary, the defendants provide a single QR code, on the basis of which the customer could work with all consumer UPI-based applications, including the “PhonePe” application of the plaintiff. Consumers who deal with such applications may be expected, prima facie, to know the difference. No prima facie case of passing off can, therefore, be said to exist, even on this ground.
  • Agreed with the view that courts should lean against holding that the descriptive trade mark has become distinctive or has acquired a secondary meaning, and that such a conclusion would be justified only where the trade mark has been used for such a long period of time “of many many years” that “the mark is unmistakably and only and only relatable to one and only source”[7]. The evidence presently at hand is insufficient to come to a definitive conclusion that the “Pe” suffix would, in the public consciousness, indelibly be associated with the plaintiff’s services. The plaintiff has been in business only since 2016, using the “PhonePe” mark. The defendants have also claimed extensive use of their “BharatPe” mark. This, too, inhibits the Court from arriving at any prima facie conclusion that the “Pe” suffix had acquired secondary meaning, invariably associated with the plaintiff.

 

V. Review

 

There can be little doubt from such a judgment that the  Single Judge has tracked, and considered, the variations of different approaches adopted by different courts and clearly written explication of the competing and overlapping rules at play, given the wealth of information with regard to confusion or deceptive similarity, the anti-dissection rule, acquisition of secondary meaning by descriptive or generic marks and so and so forth — under the rubric of Indian trade mark law.

 

This judgment serves as a primer on all things on trade mark law and illustrates various legal principles while examining the basic tenets thereof in full, thus, providing a decidedly improved understanding while simultaneously providing practitioners with a blueprint of compendium of case laws and precedents — that can be helpful to all budding lawyers in modern practice.

 

†Yashvardhan Rana, Intellectual Property Lawyer, Esteemed Member, FICCI IP Forum. He can be contacted at  yash0843@gmail.com.

[1] IA No. 8084 of 2019 in CS (COMM) No. 292 of 2019, decided on 15-4-2021 (Del).

[2] <https://www.phonepe.com>.

[3] <https://bharatpe.com>.

[4] <http://www.scconline.com/DocumentLink/n0d8xj55>

[5] AIR 1965 SC 980.

[6] 2014 SCC OnLine Del 1953.

[7] Marico Ltd. v. Agro Tech Foods Ltd., 2010 SCC OnLine Del 3806 : (2010) 44 PTC 736.

One comment

  • Great article. You always come up with a different and amazing article..Thanks for always sharing good stuff..

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