Infringement of Trademark: Delhi High Court Restrains AI Startup From Using Deceptively Similar Mark

NEW DELHI — The Delhi High Court has restrained an artificial-intelligence startup from using the mark "Nexara" for its software products, holding at the interim stage that the mark is deceptively similar to "Nexora", registered since 2019 by a Bengaluru-based enterprise software company, and that the phonetic resemblance is likely to confuse buyers even in a market of technically literate corporate customers.

The order, passed on 17 October on an application under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure in a suit for infringement of trademark and passing off, gives the defendant eight weeks to transition its customer-facing materials but requires immediate changes to its domain name, app listings and social media handles.

"In a crowded market, a name is the first and often the only thing a customer remembers," the court observed.

The test for infringement of trademark

Section 29 of the Trade Marks Act, 1999 provides that a registered mark is infringed when a person who is not its proprietor uses, in the course of trade, a mark that is identical or deceptively similar to it for goods or services covered by the registration, in a way likely to cause confusion. Section 2(1)(h) defines a mark as deceptively similar if it "so nearly resembles" the registered mark "as to be likely to deceive or cause confusion".

The comparison is made as a whole, not syllable by syllable, from the point of view of a purchaser of average intelligence and imperfect recollection — the standard set in Amritdhara Pharmacy v. Satya Deo Gupta, AIR 1963 SC 449. In Cadila Health Care v. Cadila Pharmaceuticals, (2001) 5 SCC 73, the Supreme Court listed the factors a court weighs: the nature of the marks, the degree of resemblance (phonetic, visual and in idea), the nature of the goods or services, the class of purchasers and their likely care, the mode of purchase, and any other surrounding circumstances.

How the court applied it

1. Phonetic identity. The marks share the same structure — "Nex" followed by a two-syllable ending — and differ by a single vowel that is barely audible in speech. The court held that a word mark is infringed by its sound as much as by its spelling.
2. Same services, same channel. Both parties offer software for enterprise data analysis under Class 42, sold through online demonstrations, referrals and cloud marketplaces. The defendant's addition of "AI" and the plaintiff's use of "Labs" were treated as descriptive and disregarded in the comparison.
3. Sophisticated buyers. The defendant argued that procurement teams running multi-month evaluations would not be confused. The court accepted that final purchasing decisions are deliberate, but held that confusion at the point of first contact — a search result, a conference stall, an invoice forwarded internally — is enough, and that the plaintiff's evidence of misdirected enquiries showed it was already occurring.
4. Logo and colour. Differences in device marks and colour schemes do not assist a defendant where the plaintiff's registration is for the word itself.

In a crowded market, a name is the first and often the only thing a customer remembers.

From the order

What the court ordered

• An interim injunction restraining the defendant from using "Nexara" or any mark deceptively similar to "Nexora" in relation to software and related services, pending the suit.
• Eight weeks to transition documentation, contracts and marketing material already in circulation, with an affidavit of compliance to follow.
• Immediate steps to change the domain name, app-store listings and social media handles, with the registrar and platforms to be served with the order.
• The defendant's pending application to register "Nexara" to be brought to the notice of the Registrar of Trade Marks.

The court declined to order the defendant to disclose its customer list at this stage, leaving the plaintiff's claim for damages and accounts under Section 135 to trial.

What the ruling means for startups

• Clear the name before you build on it. A search of the Trade Marks Registry's online records, in the relevant classes (typically 9 and 42 for software), costs nothing and would have surfaced the conflict. Clearance should extend to phonetic variants, not only exact matches.
• Register early. The plaintiff's position rested on a registration obtained seven years ago. A pending application gives no right to sue for infringement, only for passing off, which requires proof of reputation.
• Coined words carry risk both ways. Invented names are the strongest marks, but a coined name that sits one letter from an existing coined name is the easiest to attack.
• Check the whole footprint. Courts now routinely extend injunctions to domains, app stores and social handles. A rebrand after launch means replacing all of them.

What happens next

An interim order in a commercial suit can be appealed to a Division Bench under Section 13 of the Commercial Courts Act, 2015. The suit itself will proceed before the Intellectual Property Division, which the Delhi High Court created after the Intellectual Property Appellate Board was abolished in 2021 and which hears trademark, patent and copyright matters under its own rules of 2022. Trial on the plaintiff's claim for damages and rendition of accounts under Section 135 of the Trade Marks Act will follow pleadings.

The Counsel will report any appeal against the interim order. Businesses choosing or defending a brand name should take advice from a qualified trademark practitioner before launch and before responding to a cease-and-desist notice.

This report is for general information only and does not constitute legal advice. Readers should consult a qualified lawyer about their own circumstances. Case citations are to The Counsel Reports (TCR) unless otherwise stated.