Case Summary: PhonePe Private Limited v. Ezy Services & Anr.

I. Case Details

• Case Name: PhonePe Private Limited v. Ezy Services & Anr.
• Court: Delhi High Court
• Judge: Justice C. Hari Shankar (Single Judge)
• Case Number: CS(COMM) 292/2019
• Date of Judgment: 15 April 2021

II. Introduction

A. Background of Digital Payment Industry in India

The digital revolution in India also spread to digitisation of payments and banking services. Various fintech companies rose in the market, giving easier and faster payment routes from various devices, including smartphones. One after another, companies adopted or integrated a UPI form of simpler and cashless transactions. Such services grew especially at the time of the pandemic and later formed a habit.

B. Importance of Trademark Protection in Fintech Sector

The fintech companies also benefit from marketing and better consumer outreach, making trademark an essential ingredient in their company’s growth. These companies profit mainly due to the “name” they establish in the market, which is to be protected.

C. Overview of the Present Dispute

In the present case, two such companies’ dispute was based on their trademarks and brand names, which are “PhonePe” and “BharatPe”. The common component, i.e., the “Pe” suffix, was being challenged in the court. The plaintiff filed for injuncting the defendant from using the “Pe”, while the defendant argued that no infringement had taken place.

III. Facts of the Case

1. PhonePe’s business model included services for all kinds of users, consumers or traders, who would like to pay or receive payments through digital means. It also provides services related to insurance, digital gold, UPI, digital wallet, recharge and bill payments, mutual fund distribution, etc.[1]
2. BharatPe’s business model mainly works for small business owners, merchants and shopkeepers who would like to receive payment from their consumers or other businesses using any UPI, including PhonePe, by providing them with a QR code for their business efficiently managed with its POS (Point of Sale) service. It has a B2B model and helps in merchant lending and accessing loans apart from other digital services. [2]
3. Both the parties, though working in the same sector, were providing some distinct nature of services.
4. Registration of PhonePe’s trademarks was established in March 2016, and its usage took place since it was coined in 2015. BharatPe was registered in 2018, and hence PhonePe claims the use of “Pe” in the name is a passing off, filing for permanent injunction from using “Pe” and argued it is a trademark infringement. BharatPe defends that no infringement has occurred and the use of “Pe” cannot be injuncted. [3]

IV. Issues Before the Court

A. Protectability of the Suffix “Pe”

1. Whether the suffix “Pe” can be protected as a trademark and monopolised?
2. Whether PhonePe can claim infringement only on a part of their trademark and not as a whole?
3. Whether “Pe” is a common word “Pay” misspelled or an innovation?

B. Likelihood of Confusion and Infringement

1. Whether confusion by consumers can be established?
2. Whether the similarity causes infringement?

C. Entitlement to Interim Injunction

1. Whether PhonePe is entitled to gain full ownership of “Pe” and impose injunction?
2. Whether BharatPe is causing loss to PhonePe?

V. Arguments of the Parties

A. Arguments of the Plaintiff (PhonePe)

• The “Pe” in PhonePe was an innovative approach in branding. It aimed at establishing a distinct identity through the suffix from other UPI applications. Due to the widespread success of it, consumers associated “Pe” with PhonePe, which can create confusion among them. BharatPe established the name in a similar manner and adopted the suffix dishonestly. The similarity of the wording and use of “Pe” likely created confusion of BharatPe being associated with PhonePe or a part of it, redirecting potential consumers familiar with PhonePe.

B. Arguments of the Defendant (Ezy Services / BharatPe)

• The “Pe” is merely a misspelling of the common word “Pay”, which is widely used in the field of UPI-related services like “Google Pay”. It describes the nature of service and such descriptive words cannot be monopolised. The logo, colour scheme, visual presentation, service provided, and the name as a whole are very distinct and distinguishable. The main words i.e. “Bharat” and “Phone” are completely different and do not sound the same.
• Digital payment apps are used by sophisticated people who would not be deceived by such differences.

VI. Judgment of the Court

1. The Court refused the interim injunction based on various reasons. The plaintiff failed to bring out a prima facie case, and monopoly cannot be established on a common word-like suffix which describes the nature of business. The overall nature of the case favoured the defendant as the words as a whole were completely different and even sounded different. The trademark registration was on the name itself, and infringement was filed for a part of it, which cannot grant injunction. The kind of customers are also different due to the varied services provided, causing less scope of confusion. The trademark is a recently established mark and not in existence for a very long time, which would make anything definitively associable to it.
2. Yet, the Court directed the defendant to maintain a record and accounts of earnings made due to the mark of “BharatPe”, along with six-monthly audited statements.

VII. Ratio Decidendi

A. Anti-Dissection Rule in Trademark Law

• It is a significant trademark principle that marks must be evaluated as a whole, and not divided or dissected into parts where the parts are tried for infringement. In the present case, “PhonePe” dissected the words into two and argued for injunction on “Pe”, which is against the rule.[4]

B. Non-Protectability of Descriptive Elements

• The element “Pe” is also a misspelling of “Pay”, a descriptive word that showcases the form of services given and cannot be protected, even if worded differently. Plus, it is not established since a very long time to acquire a “secondary meaning” to it. [5]

C. Test for Grant of Interim Injunction

• There is no prima facie case established against the defendant and the non-grant of injunction maintains balance of convenience, as there is no visible irreparable injury. [6]

VIII. Critical Analysis

1. The decision of the Court in the present case is consistent with established principles of trademark law, especially the doctrine of anti-dissection and the limitation on protection of descriptive elements. The Court has correctly emphasised that a trademark must be assessed as a whole and not broken into parts to claim exclusivity over a single component. This approach aligns with the principle laid down in Kaviraj Pandit Durga Dutt Sharma v. Navaratna Pharmaceutical Laboratories, where the Supreme Court clearly distinguished between passing off and infringement and held that in infringement actions, the comparison must be of the marks as a whole rather than dissecting them into individual elements.[7]
2. Further, the Court’s reasoning also reflects the ratio in Cadila Health Care Ltd. v. Cadila Pharmaceuticals Ltd., where the Supreme Court laid down that likelihood of confusion must be assessed from the perspective of an average consumer with imperfect recollection, and factors such as nature of goods, class of purchasers, and surrounding circumstances must be considered.[8]
3. In the present case, the Court has taken note of the fact that the services, though falling within the fintech sector, cater to different user bases and operate through distinct business models. This reduces the possibility of confusion when the marks are viewed as a whole.
4. The Court has also rightly observed that “Pe” is a phonetic adaptation of the word “Pay”, which is descriptive in nature and cannot be monopolised unless it has acquired a secondary meaning through long and exclusive use. In the present case, such distinctiveness was not established. Therefore, allowing exclusivity over such a term would have unfairly restricted competition in a rapidly growing digital payment market.
5. The application of the anti-dissection rule and refusal of interim injunction reflects a balanced approach between trademark protection and market freedom.

IX. Conclusion

1. In conclusion, the Court has correctly refused to grant an interim injunction in favour of PhonePe, as no prima facie case of infringement or passing off was established. The decision reinforces the settled principle that descriptive or commonly used elements in a trade name cannot be monopolised, especially when they are derived from industry-related terminology.
2. The judgment also strengthens the principle that trademarks must be evaluated as a whole, and not by isolating individual components to create artificial similarity. By relying on established principles of trademark law and considering the actual likelihood of confusion in the market, the Court has maintained a fair balance between protecting intellectual property rights and preventing unjustified monopolisation of common terms.
3. Overall, the ruling promotes healthy competition in the fintech sector while ensuring that trademark protection does not extend beyond its legitimate scope.

X. References

[1]  PhonePe Bus. Model Explained, The Bus. Rule, https://thebusinessrule.com/phonepe-business-model-explained/

[2] BharatPe Bus. Model Explained, StartupTalky, https://startuptalky.com/bharatpe-business-model/

[3] Explained: PhonePe v. BharatPe Trademark Dispute, SCC Online Blog, https://www.scconline.com/blog/post/2021/05/19/explained-phonepe-v-bharatpe-trade-mark-dispute-pe-pay-as-you-go/

[4]  PhonePe (P) Ltd. v. Ezy Servs. & Anr., CS(COMM) 292/2019, 2021:DHC:1360 (Del. HC Apr. 15, 2021)

[5] Trade Marks Act, 1999, No. 47 of 1999, § 9 (India)

[6] PhonePe (P) Ltd. v. Ezy Servs. & Anr., CS(COMM) 292/2019, 2021:DHC:1360 (Del. HC Apr. 15, 2021)

[7]  Kaviraj Pandit Durga Dutt Sharma v. Navaratna Pharm. Lab., AIR 1965 SC 980 (India)

[8]  Cadila Health Care Ltd. v. Cadila Pharm. Ltd., (2001) 5 SCC 73 (India)