Topic 8

Relevance of Dispute resolution in
Franchising Industry
Pravin Anand
Lahore, 18th December 2007
• Types of Disputes
• Types of Dispute Resolution models
Continued use of IP
• Use of IP after termination
– Education Franchisee – Baron vs Galgotia, SAP,
– 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
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
Injunction against Joint
Venture when permission to
make generation 2 products
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
– 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
K-Mart case - unregistered un-used service
The Yahoo! Case – Internet stricter standard
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:
The Red Border Design is distinctive and directly associated to the magazine of the
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)
• 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