Understanding Arbitrability Of Trademarks

22nd October, 2022 - 6:14 am Categories: Trademark 0 Comments

INTRODUCTION

In its judgement in M/S. Golden Tobie Private Limited v. M/S. Golden Tobacco  Limited[1][2021], the Delhi High Court recently delved into the interpretation of Section 8 of the Arbitration and Conciliation Act, 1996, in regard to trademark disputes. Before delving into the topic of trademark-related arbitrability, it is important to evaluate the existing state of affairs in relation to the arbitrability of IPR-related problems and the relevance of the same in India.

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Arbitrability of IPR has always been a source of concern in India because of Section 62 of the Copyright Act 1957, which states that an infringement matter cannot be brought before any court lower than the jurisdictionally competent District Court, which caused confusion because the common interpretation was that IPR-related matters could not be arbitrated. Different postures and rulings of different Courts across India can be used to examine the entire dilemma of arbitrality in IPR issues. While laying forth the test of arbitration in Booz Allen & Hamilton Inc. vs. SBI Home Finance Ltd[2][2011], the Hon’ble Supreme Court stated that conflicts that fall under the category of right in rem are non-arbitrable, however though issues that fall under the category of right in personam are arbitrable. Further in its decision in A. Ayyasamy v.s. A. Paramasivam and Ors[3][2016], the Hon’ble Supreme Court cited OP Malhotra’s book “The Law & Practice of Arbitration and Conciliation” and stated that patent, copyright, and trademark disputes are not arbitrable. The Bombay High Court however opined differently when adjudicating the matter of arbitrability of trademarks in the case of Eros International Media Ltd. v. Telemax[4][2016]. In its judgement the bench stated Section 62 did not prohibit arbitration since IPR disputes are private in nature, and that IP rights are a type of property right that could not be separated as a separate body of law after the court’s interpretation of the section. The court made the important comment that an arbitrator could do anything a civil court could do. As a result, IPR conflicts would be subjected to arbitration.

FACTS

In the instant case, the parties entered into a supply agreement, a trademark licence agreement, and an amendment agreement under which the plaintiff, Golden Tobie Private Ltd. (here on referred to as GTPL), was granted an exclusive licence to sell, supply, and distribute the defendant, GTL’s cigarette brands in domestic and international markets. GTPL invested much in the project and spent heavily on advertising and promotion. GTPL, on the other hand, terminated the licence agreement and tried to remove the plaintiff’s authorization to manufacture GTL brands. The plaintiff filed a wrongful termination claim. In response, the defendant referred to the arbitration clause in the licence agreement and requested that the dispute be resolved by a single arbitrator. The plaintiff contended that the termination of the assignment agreement constituted an issue in rem, affecting interests other than the trademark’s transfer, and so was not arbitrable[5].

JUDGMENT

The court carefully considered the judgments cited and the arguments advanced by both parties, while considering the judgement in the case of Hero Electric Vehicles Pvt. Ltd. & Anr. V.s. Lectro E-Mobility Pvt. Ltd. & Anr.[6][2021], which held that “the dispute did not concern trademark infringement by the defendant as a result of using deceptively similar trademarks, but rather that the right to use the trademark was conferred on the plaintiff as a result of the parties agreement.” Plaintiff had claimed that the infringement was not of the Trademark Act, but of the provisions of the agreement in question, this dispute arising from the parties agreement was determined to be arbitrable.[7] The Court further determined that, while the Supreme Court specifically stated in the Vidya Drolia and Ors. V.s. Durga Trading Corporation[8][2020] case that “matters arising directly from issues of Intellectual Property would not be arbitrable, the current case however concerned the terms of the agreement rather than the trademark itself.”

The Court concluded that the right in question was derived from the licence agreement rather than from trademark law. Furthermore, the court clarified that the current case’s controversy was unrelated to the grant or registration of trademarks, as the trademark was both granted and registered. It was also stated that the assignment of a trademark was done through a contract rather than by statutory fiat and thus it does not entail the exercise of any sovereign functions. As a result, the court referred the parties to arbitration in accordance with the arbitration agreement.[9]

CONCLUSION AND A WAY FORWARD

The current case, in my opinion, reinforced what was established in the case of Hero Electric Vehicles Pvt. Ltd.v.Lectro E-Mobility Pvt. Ltd. that “when a dispute arises as a result of an infraction of the trademark agreement between the parties, it cannot be alleged to be an infringement of the provisions of the Trademark Act, and thus the rights arising from the disputes cannot be claimed to be as a result, trademark registration is a sovereign function, but licencing or assigning is done through the instrument of contract, and the rights and obligations arising from the contract are limited to the parties to the contract, with no rights granted. ”When the parties have an arbitration agreement and the cause of action arises as a result of a breach of a contract provision between the parties, and if one of the parties to the dispute wishes to refer the dispute to Arbitral Tribunal, the arbitration agreement cannot be ignored and an opportunity for the same must be provided, and the court should not absorb the dispute as that would amount to usurping the powers of the Arbitral Tribunal. This case provides more clarity on when a dispute becomes non-arbitrable, and the scope of what was held in Vidya Drolia and Ors. vs. Durga Trading Corporation is further amplified, so that the “broad scope of the Vidya Drolia judgement cannot be misconstrued or misinterpreted to bypass the arbitration clause or arbitration agreement and approach the courts.”

Author: Devika Dev, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[1]Id

[2] 2011 5 SCC 532

[3] AIR2016SC 4675

[4] Eros International Media Limited vs Telemax Links India Pvt Limited … on 12 April, 2016.

[5] “SMOKE CLEARS OVER ARBITRATION IN TRADEMARK DISPUTES” https://www.lexorbis.com/smoke-clears-over-arbitration-in-trademark-disputes/

[6]Hero Electric Vehicles Private … vs Lectro E-Mobility Private … on 2 March, 2021

[7]“TRADEMARK DISPUTE BETWEEN GOLDEN TOBIE VS. GOLDEN TOBACCO – A COMPLETE ANALYSIS” https://swaritadvisors.com/blog/trademark-dispute-between-golden-tobie-vs-golden-tobacco/

[8]Vidya Drolia vs Durga Trading Corporation on 14 December, 2020

[9] “GOLDEN TOBIE (P) LTD. V. GOLDEN TOBACCO LTD: WHETHER THE ASSIGNMENT OF THE TRADEMARK IS ARBITRABLE OR NOT?” https://iprlawindia.org/golden-tobie-p-ltd-v-golden-tobacco-ltd-whether-the-assignment-of-the-trademark-is-arbitrable-or-not/