The apple ID and password used to set up the watch does not exist

the activation lock is not really on the ipad it's a theft protection measure on apples servers

it needs to be removed

About Activation

Lock on your Apple Watch - Apple Support

if you don't know your appleID Recover Your Apple ID - Apple

if that does not help you then you need the assistance of apple

Additional Support - Activation Lock (apple.com)

and or

Get Support (apple.com) ,

And or

 Genius Bar Reservation and Apple Support Options - Apple

You can ask apple to remove the activation lock online on this page;

Remove the Activation Lock Here.

Or this;

If you can't remember/gain access to the apple id that paired the watch to the phone.Take the watch and it's receipt with the serial number along with some photo id and any other proof of ownership to an Apple Store and request that they remove the Activation Lock for you.