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