Relevance of Dispute resolution in
Franchising Industry
Pravin Anand
Lahore, 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 executed
Licenses 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
Best Technology not given
SCHNEIDER VS TELEMECHANIQUE
Injunction against Joint
Venture when permission to
make generation 2 products
Declined.
No Acquiescence.
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
– Benz
case
case
K-Mart case - unregistered un-used service
marks
The Yahoo! Case – Internet stricter standard
Remedies
Anton Piller
Norwich Pharmacal
John Doe
Mareva Injunctions
Combining Plaintiffs
Lock breaking orders
In Camera hearings
Time Incorporated Vs. Lokesh
Shrivastava and Anr.
Ratio of the Case:
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•
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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