Explained: PhonePe and BharatPe Trademark Dispute — “Pe”/Pay-as-you-go

PhonePe and BharatPe Trademark Dispute

I. Background

Recently, the Delhi High Court’s Single Judge Bench, led by Justice C. Hari Shankar, delivered a significant judgment in the commercial lawsuit PhonePe (P) Ltd. v. Ezy Services. The plaintiff, PhonePe, sought a permanent injunction against the defendants to prevent the usage of “Pe” or any deceptively similar variation that could be seen as infringing its trademark or creating confusion among users.

Both PhonePe and BharatPe operate as market leaders in India’s digital payment ecosystem. While PhonePe is accessible to all users via its mobile app, BharatPe targets merchants exclusively. The court rejected PhonePe’s plea for an interim injunction, highlighting that descriptive or generic terms, even with minor spelling modifications, do not warrant exclusive ownership without substantial evidence of acquiring distinctiveness over time. The court instructed BharatPe to maintain records of revenue generated under the contested trademark and file semi-annual audited financial statements.

II. Arguments from the Plaintiff

PhonePe presented several key arguments:

1. Trademark Registration: The company holds registrations for “PhonePe” and its variations under various classes since March 2016. The Devanagari transliteration “पे” as “Pe” was claimed to be a creative and novel adaptation.
2. Established Usage: PhonePe has been in continuous use since 2015, with over 100 million app downloads.
3. Distinctiveness: The company asserted that “Pe” was an invented term not found in dictionaries. When paired with the word “Phone,” it formed a distinctive identifier.
4. Market Presence: Evidence, including advertisements, celebrity endorsements, and partnerships, was presented to demonstrate goodwill.
5. Allegation of Similarity: The plaintiff contended that BharatPe’s app, offering similar services and downloadable from the same platforms, created confusion due to the use of the “Pe” suffix. They argued that the capitalized “P” in “Pe” accentuated its importance, making BharatPe deceptively similar to PhonePe.
6. Consumer Perception: PhonePe claimed that consumers with average intelligence might associate BharatPe’s services with their brand due to the shared “Pe” suffix.

III. Arguments from the Defendants

BharatPe countered these allegations with the following points:

1. Trademark Ownership: PhonePe did not have exclusive rights over the terms “Pe,” “Pay,” or the Devanagari “पे.” Their registration was limited to the composite mark “PhonePe.”
2. Good Faith Adoption: BharatPe claimed to have used the mark since August 2016, with the domain name registered in 2017 and services launched in 2018.
3. Distinctiveness: The defendants described BharatPe as a coined term that uniquely represented their services, aimed at creating a universal QR code for merchant payments.
4. Market Usage: By December 2020, BharatPe had achieved over 5 million downloads.
5. No Confusion: BharatPe argued that consumers could distinguish between the terms “Phone” and “Bharat” as the dominant elements of the trademarks. The similarity in the “Pe” suffix was insufficient to cause confusion.
6. Common Trade Practice: The defendants highlighted that multiple players, such as Google Pay and Amazon Pay, used the “Pay” suffix. The plaintiff’s admission that “Pe” was merely a phonetic variation of “Pay” weakened their exclusivity claim.
7. Prior Usage: References were made to other trademarks involving the term “Pe” predating PhonePe’s registration.

The mark in question is mentioned below;

IV. Legal Principles

Anti-Dissection Rule (Section 17 of the Trademarks Act, 1999)

This principle requires conflicting trademarks to be compared in their entirety rather than dissected into individual components. The rationale is that consumers form an overall impression of a mark rather than focusing on its parts.

The court observed that PhonePe’s trademark could not be dissected into “Phone” and “Pe,” nor could BharatPe’s mark be broken into “Bharat” and “Pe.” Trademarks must be evaluated as a whole for determining infringement or confusion.

Court Held That;

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

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.  

Dominant Test Paras 19 and 21 of South India Beverages (P) Ltd. v. General Mills Mktg. Inc.:

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”. 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.

V. Key Observations of the Court

The court acknowledged that both PhonePe and BharatPe are composite marks.

1. PhonePe could not claim exclusive rights over the “Pe” suffix.
2. The word “Pe” was found to be a phonetic variation of the descriptive term “Pay.” Minor spelling variations of descriptive terms do not warrant exclusive rights unless they acquire distinctiveness.
3. The court noted the difference in services: PhonePe offers direct payment services, while BharatPe provides a QR code system for merchants compatible with multiple payment apps.
4. There was insufficient evidence to conclude that “Pe” had acquired a secondary meaning exclusively associated with PhonePe.

VI. Review and Conclusion

The judgment underscores the complexities surrounding trademark disputes, particularly involving descriptive or generic terms. The court’s adherence to established legal principles, such as the anti-dissection rule and the requirement for acquiring secondary meaning, serves as a valuable precedent.

This case highlights the evolving landscape of trademark law in India and offers insights for practitioners navigating similar disputes. It emphasizes the need for substantial evidence when claiming exclusivity over descriptive terms and underscores the importance of examining trademarks as a whole. The ruling provides a roadmap for understanding key legal principles, making it an essential reference for legal professionals and businesses alike.

Read Judgement: PhonePe and BharatPe Trademark Dispute

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