Continuing from the last part, we shall now look at other possible disputes concerning franchise / license agreements.
Possible Dispute
Franchisee / Licensee claims ownership on Subject TM.
In the example above, if the franchisee / licensee applies for a mark disputedly similar to Subject TM in a different class of goods / services, then, depending on the construction of the clause, it is possible that the franchisee / licensee may successfully be able to allege that the said dispute is not arbitrable as registration of the said mark is not an issue that falls within the four corners of the franchise / license agreement. So, for example, if in the case above, ‘F Pvt. Ltd.’ would have instead applied for ‘HavenZ’ for artefacts which would have been challenged by ‘A Pvt. Ltd.’, depending on the construction of the clause, it could have successfully argued that the dispute is non-arbitrable because:
The mark is not similar; and
The class of goods is different
Possible Dispute
Franchisee / Licensee implies ownership or interest in Subject TM.
Possible Dispute
The possible dispute that can arise in respect of the aforesaid clause is that the franchisee / licensee sub-franchises / sub-licenses the Subject TM to a third party without prior approval of the franchisor / licensor. In this case, franchisor / licensor can invoke arbitration if it does not see a need to array the third-party sub-franchisee / sub-licensee. However, if it does require to array the third-party sub-franchisee or sub-licensee, it will have to settle its dispute through litigation as the third-party sub-franchisee / sub-licensee is not a party to the franchise / license agreement between the franchisor / licensor and franchisee / licensee. Further, rights may be determinable only after interpreting all the agreements.
For example, ‘A Pvt. Ltd.’ executes a franchise agreement in favour of ‘F Pvt. Ltd.’ for producing and selling desserts using the mark ‘Heavens’. The IP clause therein, inter alia, stipulates that ‘F Pvt. Ltd.’ will not sub-license ‘Heavens’ to any other party. However, ‘F Pvt. Ltd.’ enters into a licensing agreement with ‘Mr. B’ permitting the latter to use ‘Heavens’ on latter’s dry cakes for a royalty to be paid to ‘F Pvt. Ltd.’. ‘A Pvt. Ltd.’ is made aware of the same only when it sends a Cease and Desist Notice to ‘Mr. B’ and the latter states that it would be willing to refrain from using ‘Heavens’. In this case, since ‘Mr. B’ has agreed to cease its usage of the mark ‘Heavens’ and no claim survives against third-party ‘Mr. B’, ‘A Pvt. Ltd.’ can invoke arbitration for breach of contract by ‘F Pvt. Ltd.’.
However, if ‘Mr. B’ would not have agreed with the Cease and Desist notice, ‘A Pvt. Ltd.’ would have to undertake litigation against ‘Mr. B’ and ‘F Pvt. Ltd.’ for not only claiming breach of contract by ‘F Pvt. Ltd.’, but for also seeking a direction qua ‘Mr. B’ for it to be restrained from using ‘Heavens’.
Over the years there have been various decisions passed by Courts in respect of arbitrability of trademark disputes. However, the controversy surrounding arbitrability of disputes seems far from settled at least in so far as its practical implications are concerned, and such dilemma continues to exist as facts become unique with every new case. The decision in K. Mangayarkarasi, which is dated 9th May 2025, only goes to show that doubts still exist whether and when trademark disputes are arbitrable. The primary reason for the same is that discerning arbitrability of trademark disputes is made subjective because of novel facts which are unique to each case. The attempt of this article was to analyse the arbitrability of possible trademark disputes and arrive at a conclusion, as objective as possible, to discern the same.
The above analysis shows that the arbitrability of trademark disputes can be discerned by, broadly, answering the following questions:
Question a. Whether any reliefs are sought against a third party who is not party to the agreement.
Question b. Whether a statutory right, purely in rem, accrues in favour of any party which will be affected if the reliefs sought through arbitration are granted.
Question c. Whether the dispute resolution requires analysis and assessment of multiple agreements involving multiple parties to determine their rights and interests.
Usually, whenever the answer to either or all of the above questions is in the affirmative, then the dispute would generally be non-arbitrable.
However, the said hypothesis may not be completely accurate if, depending on the facts of the dispute, a party is required to challenge the validity of a trademark by instituting proceedings under Section 57 of the TM Act. In this case, the dispute may be partially arbitrable, as demonstrated above.
Though I attempted to arrive at a three-question based objective analysis for discerning arbitrability of trademark disputes, the subjectivity in respect of such discernment is not eliminated. Further, the complexity of the arbitrability of trademark disputes may present novel challenges in light of the contemporary dynamic digital advancements and consequential novel regulations. However, as is seen from various decisions of various Courts, these issues can surely be tackled by clear application of first principles and existing law of both Trademark and Arbitration landscapes.
Manmeet Kaur Sareen completed the LL.M. course in intellectual property law from University of Cambridge and currently runs her independent law practice in New Delhi.