Relevance of Dispute resolution in Franchising Industry Pravin Anand Lahore, 18 th 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

Injunction against Joint Venture when permission to make generation 2 products Declined. 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 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 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