GOLDEN TOBIE (P) Ltd. v. GOLDEN TOBACCO LTD: Whether the assignment of the trademark is arbitrable or not?

FACTUAL MATRIX:

The Plaintiff:  M/S. GOLDEN TOBIE PRIVATE LIMITED

The Defendant: M/S. GOLDEN TOBACCO LIMITED

Court: The Delhi High Court,

Coram: HON’BLE MR. Justice Jayant Nath.

Pronounced on: 04.06.2021

In the Present case  (GOLDEN TOBIE (P) Ltd. v. GOLDEN TOBACCO LTD), a supply agreement (dated       16.08.2019) , a trademark license agreement (dated 12.02.2020)  and an amendment agreement (dated       29.08.2020)  was entered by the parties of the case. Further, an exclusive license which was non-assignable and non-transferable in nature was given to the plaintiff. The said license was granted to the plaintiff for the purpose of supply, sale as well as the distribution of the defendant’s exclusive brands in both the domestic as well as the international markets. Here, the exclusive brands included :

• Golden’s Gold Flake,
• Golden Classic,
• Taj Chhap and
• Panama and Chancellor.

Further, the plaintiff contended that by the virtue of a termination notice (dated 13.02.2021) it was stated by the defendant company that there had been lapse at the part of the plaintiff as the plaintiff failed to make a timely payment in accordance with the terms and conditions of the said agreement. As a result of the faults in payments by the plaintiff the termination of the said trademark license agreement (dated 12.02.2020) and even the amendment agreement (dated 29.08.2020) took place by the defendant and with an immediate effect. The outcome of the termination of the contracts resulted in the stoppage of the plaintiff to exercise his right to manufacturing as well as selling of the defendant’s exclusive brands in the domestic and the international market from that point of termination of the contract. Therefore, all the above state matters led to the filling of the present suit.

In response to the suit, the defendant had put forth and cited the License Agreement’s (dated 12.02.2020)  clause 12.  The defendant by the virtue of citing the present agreement executed between the parties of the case pleaded that the present suit should be transferred to a sole Arbitrator. In addition, he prayed that the appointment of the sole Arbitrator should be done in accordance with clause 12 of the said trademark license agreement which was dated 12.02.2020 as well as the  amendment of the license agreement which was dated 29.08.2020.

Hence, an application was filed by the defendant under Section 8 of the Arbitration and Conciliation Act, 1996.

ISSUE:

• Whether the assignment of the trademark in the present case is arbitrable or not?

CASES REFERRED BY THE COURT:

The Delhi High Court while deciding on the present case took into consideration and made a reference to the following two cases:

❖ Vidya Drolia v. Durga Trading Corporation

• In the above mentioned case, the Apex Court had put light on the disputes which are considered to be arbitrable. In addition, the Apex Court in order to determine the arbitrability of any dispute propounded a fourfold test.
• The Supreme Court in this case, also held that the actions of granting and issuing patents as well as the registration of the trademarks are matters which are exclusive in nature and thus they fall within the ambit of the government as well as sovereign functions and they even possess an erga omnes effect. The said grant and issuance of patents and trademarks confer rights which are monopolistic in nature. Therefore, such grants are non-arbitrable.

❖ Hero Electric Vehicles (P) Ltd. v. Lectro E-Mobility (P) Ltd.

• The Delhi High Court took into consideration and referred to the decision of the coordinate Bench of the Delhi High Court.
• In this case, an arbitration was allowed by the Delhi High Court and it was held that in the present matter the dispute is not related to the registration or grant of trademarks. The trademarks in this case were already granted beforehand and even duly registered. This grant of trademark in this case was not done on the grounds of statutory terms rather on the basis of contractual ones. The said dispute arose in this case when a violation of the terms of the contract took place. Hence, the dispute was not a result of any violation of the Trade Mark Act as a result of which any exercise of the sovereign functions does not exist in the present case. In addition, the court held that the asserted right in this dispute by the plaintiff is a right that emerges from the set of agreements (the Trademark amendment as well as the amendment agreement) and hence is not a right that emerges by the virtue of the Trademark Act.

JUDGEMENT:

In this case, the suit was disposed of by the Delhi High Court. In addition, the court while disposing of the suit filed by the plaintiff also referred the dispute to Arbitration in accordance with the conditions of the Arbitration Agreement.

RATIO DECIDENDI (REASONING):

The court held that in the present case, the trademark’s assignment did not take place by the virtue of a statutory act of the State rather it took place by a contract (the trademark license agreement, dated 12.02.2020 as well as the amendment agreement, dated 29.08.2020) . Therefore, It does not involve any exercise of sovereign functions of the State.

Further, the court also held that the pleas which are put forth by the senior counsel for the plaintiff are considered to be without merit. According to Justice Jayant Nath the grounds which the plaintiff has pleaded for the purpose of not referring the dispute to arbitration are clearly without merits as well as misplaced. Hence, it cannot be said that the matters of dispute between the parties are not arbitrable.

Download here: Golden Tobie (P) Ltd. v. Golden Tobacco Ltd

 

Contributed by:

Saksham Kumar.