Trademark Disputes That Purely Arise Out Of Contractual Rights And Obligations Are Arbitrable: Delhi HC

The High Court of Delhi has observed that all the disputes that arise out of the Trade Marks Agreement are not outside the scope of arbitration. The Single Bench of Justice Vibhu Bakhru clarified that disputes that purely deal with the interpretation of the terms of a trademark agreement and are not related to the grant or registration of the trademarks can be decided in arbitration. The Court further clarified that unless it is a dispute relating to registration of trademarks, there is no legal requirement of raising the same before the Registrar of Trade Marks or the IP Division of the High Court and the disputes that purely arise out of contractual rights and obligations under a Trade Mark agreement can be adjudicated in arbitration. The Court relied on the judgment of the Apex Court in Vidya Drolia v. Durga Trading and BSNL v. Nortel Networks, to hold that the jurisdiction of the Court at the pre-arbitral stage is very limited and the Court should ideally refer the parties to arbitration unless it is satisfied that the claims are Ex-Facie barred by limitation or non-arbitrable and when there is no vestige of doubt regarding the claims being barred by limitation. Whenever the issue of limitation is a contentious one, the court must refer the parties to arbitration. It further clarified that the Court is only to do a Prima Facie review and not conduct a full-fledged trial to determine the validity and existence of the arbitration agreement. The Court relied on Shin-Etsu v. Aksh Optifibre, to clarify that the findings of the Court, while appointing an arbitrator or making a reference, on the existence and validity of the arbitration agreement is only a prima facie view and it does not preclude the arbitral tribunal to decide on the same issue. The Court also observed that a non-signatory to arbitration an agreement can be made a party to arbitration if it is any of the following: A beneficiary of the principal agreementAlter ego signatoryThe non-signatory is found to be a party by the lifting of the corporate veil Part of the same group of companiesA party to the composite transactionIn cases of implied consent The Court observed that if the appointment procedure stipulated in the arbitration agreement has become illegal, the parties are at liberty to approach the court for appointment of the arbitrator. The Court held that a person who has become ineligible to be appointed as an arbitrator after the coming into force of S. 12(5), cannot be appointed as an arbitrator except for an express agreement between the parties after the dispute has arisen. The court also observed that the pre-arbitral steps like mediation or conciliation are only a voluntary process, therefore, only directory in nature. Facts The dispute pertained to a Family Settlement Agreement dated 20.05.2010 (FSA) and Trade Marks and Name Agreement dated 20.05.2010 (TMNA) entered into between the four brothers of the Munjal Family by which they agreed to separate ownership and control of the properties owned by the Munjal Group of Entities. Schedule 7 to the FSA set out the details of the division of the business and the properties. Similarly, Clause 1.1.7. of the TMNA set out the details pertaining to the use and distribution of the trade mark "Hero" between the four families. The clause specified the categories and classes of the trademark that each family was exclusively entitled to. The present dispute was between F1 Family Group and F3 Family Group related to the use of the trademark "Hero" to conduct the business relating to electric/eco-friendly vehicles. Clause 19.5 of the FSA and Clause 5.6 of the TMNA were the disputes resolution clauses. Contention of the Parties The respondent(s) challenged the application on the following grounds: That the dispute in question relates to the right of the respondent to the use of Trade Mark registered in its name, the same would have an erga omnes effect, therefore, the same would be non-arbitrable.That the said disputes could only be adjudicated by the IPR Division of the High Court and no other forum could decide the said disputes.That the claims of the petitioner are barred by limitation. That respondents no. 2 and 3 were not a party to the arbitration agreement. That the petitioner has failed to include the necessary parties, therefore, the petition is liable to be dismissed for non-joinder of necessary parties. That the petitioner has not acted in terms of the arbitration agreement and the petition is premature for the reason that the petitioner did not attempt the conciliation as stipulated in the arbitration clause. In addition, the petitioners had removed the Facilitator as the named Arbitrator, in terms of the Arbitration Agreements. The petitioner contended that: The Scope of the Court's jurisdiction under S. 11 is...

Trademark Disputes That Purely Arise Out Of Contractual Rights And Obligations Are Arbitrable: Delhi HC

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