Relevance of Dispute resolution in Franchising
Industry
Pravin AnandLahore, 18th December 2007
Introduction
• Types of Disputes• Types of Dispute Resolution models
Continued use of IP
• Use of IP after termination– Education Franchisee – Baron vs Galgotia,
SAP, CFA, KAPLAN, etc– Defence: Termination illegal (eg Ziff Davis)– Termination justified due to poor quality
(Pioneer Hybrid case)• Objective standard or sole judgement of
franchisor?
– Ex Franchisee refusing to transfer Press Registrations for magazines
Philips VCD Cases – refusal to pay royalty
Philips VCD Compression Technology – Injunctions in Two Suits: Anton Pillers executedLicenses of US$ 200,000 in One month Market need was reflected, but result came through a settlement
Employee leaving
• Joining competitor• Can Carry Skill and experience but not IP
– Trade secrets eg customer or client lists (Titus case) Confidential information must be specified – includes know how for manufacturing, managing, marketing, customer lists, pricing information etc
– Injunctions, Anton Pillar orders eg Summit case
– Doctrine of inevitable disclosure– Even the competitor may be injuncted
Injunction against JointVenture when permission tomake generation 2 productsDeclined.
No Acquiescence.
SCHNEIDER VS TELEMECHANIQUE
Best Technology not given
Franchisee suffering due to piracy
• Wants to take action quickly– Sometimes unauthorised – no locus
standii– Sometimes unprepared - may create
embarrassment – Tendency to blame shortage of sales to
piracy
Consumer or third party actions
• Actual ingredients not disclosed (eg Use of prohibited meat) – against franchisor
• Hygiene not maintained – against franchisee
• Software piracy - against both– Kerl vs Rasmussen (degree of control
forms basis of liability against franchisor)
Competition Law
• Restrictive trade practices– Won’t sell rivals goods– Territorial restriction– TELCO case – no Per Se rule but rule of reason –
certain restrictions are necessary to promote competition
– Sarabhai case – Patents excluded but know how included
– Gujarat bottling vs Coca Cola – that franchisee will not deal with competing goods is not restraint of trade
• Unfair Trade Practices– False Advertising
Dispute resolution
• Litigation – both parties desire strong trade mark protection– New principles, new torts, new remedies
• Alternate Dispute resolution (ADR) eg Settlement discussions and mediations– For speed, confidentiality, expert
handling (eg Banking institution)
• Early neutral evaluation (Bawa Masala case)
Recent Indian Cases on shapes
Louis Vuitton : Epi Leather case
Zippo Lighters
Whirlpool case - registered mark injuncted – Concept of Transborder Reputation
Different goods - Well known brands protected – Panda case– Benz case
K-Mart case - unregistered un-used service marks
The Yahoo! Case – Internet stricter standard
Remedies
Anton PillerNorwich PharmacalJohn Doe Mareva InjunctionsCombining PlaintiffsLock breaking ordersIn Camera hearings
Time Incorporated Vs. Lokesh Shrivastava and Anr.
Ratio of the Case:
• The Red Border Design is distinctive and directly associated to the magazine of the Plaintiff;
• Defendant’s magazine is a slavish imitation of the Plaintiff’s Trade mark/ Trade name;
• Distinction drawn –between Compensatory and Punitive damages & the purpose of awarding the same;
• Time ripe for award of punitive damages, with a view to discourage the law breakers;
• Quantum of Damages depends upon flagrancy of infringement;• Awarded-Punitive Damages of Rs. 5 Lakhs and Compensatory
Damages of Rs. 5 Lakhs and 6 lakh interest
John Doe order – World Cup Soccer June 2002
Novel approach eg community service
New torts eg Framing or phishing
Traditional Knowledge (TK)
Conclusion
• Even if litigation move to bring in an ADR element like mediation or ENE
• Gavin Kennedy in Negotiating Edge – don’t go red – go purple