Court holds post-termination use of licensed trademark dispute arbitrable; rejects plaintiff's attempt to avoid arbitration by impleading affiliates and framing suit as infringement
In a significant judgment delivered on October 28, 2026, the Delhi High Court, presided over by Justice Purushaindra Kumar Kaurav, referred a trademark infringement and passing off dispute between Utracon Corporation Pte Ltd and its ex-licensee Ucon PT Structural System Private Limited to arbitration. The decision clarifies the scope of arbitrability in intellectual property disputes arising from license agreements and underscores the mandatory nature of arbitration clauses even after the expiry of the underlying contract.
The dispute originated from a Licence Agreement dated March 22, 2012, under which Ucon PT Structural System Private Limited (formerly Utracon Structural Systems Private Limited) was granted rights to use Utracon's registered trademarks and other intellectual property in India. The Licence Agreement was executed in furtherance of a Sale of Shares Agreement (SOS Agreement) on the same date. The Licence Agreement was for a fixed term ending March 31, 2021, after which the plaintiff alleged that the defendant continued to use the "UTRACON" mark and related intellectual property without authorization.
Utracon Corporation contended that post-termination use of its trademarks by the ex-licensee and its affiliates constituted infringement, passing off, and violation of contractual obligations to cease use, change company names, and deliver up materials bearing the marks. The plaintiff also impleaded affiliates, directors, and other related entities, alleging they formed a "single economic unit" misusing the mark.
The defendant challenged the suit by filing an application under Section 8 of the Arbitration and Conciliation Act, 1996 ("A&C Act"), seeking referral of the dispute to arbitration pursuant to the arbitration clause contained in Clause 14 of the Licence Agreement. The defendant argued that the dispute was essentially contractual and fell squarely within the arbitration agreement, and that the plaintiff could not avoid arbitration by framing the suit as one for trademark infringement or by joining non-signatories.
Justice Kaurav conducted a detailed analysis of the scope of inquiry under Section 8 of the A&C Act, emphasizing the Supreme Court's rulings in Vidya Drolia v. Durga Trading Corporation and other landmark cases. The Court held that the inquiry is limited to a prima facie examination of the existence and validity of the arbitration agreement and whether the dispute is covered by it. It is not a mini-trial on merits or jurisdiction.
The Court found that the Licence Agreement and the SOS Agreement both contained valid arbitration clauses, with the former providing for arbitration under the Singapore International Arbitration Centre (SIAC) Rules with Singapore as the seat, and the latter providing for arbitration in Chennai under Indian law. The Court observed that differences in the seat or procedural rules do not negate the existence or enforceability of the arbitration agreement.
Crucially, the Court addressed the plaintiff's contention that trademark infringement and passing off claims are non-arbitrable as they relate to rights in rem (rights against the world at large). Relying on the Supreme Court's distinction between rights in rem and rights in personam (rights against specific persons), the Court held that the dispute concerned subordinate rights in personam arising from the Licence Agreement between identified parties. Therefore, it was arbitrable.
The Court further rejected the plaintiff's argument that impleading affiliates, directors, and other non-signatories prevented reference to arbitration. Noting the plaintiff's own pleadings that these entities formed a single economic unit and derived rights through the defendant, the Court held they are "persons claiming through or under" a party to the arbitration agreement under Section 8(1) of the A&C Act. Whether these non-signatories are ultimately bound by the arbitration agreement is a matter for the arbitral tribunal.
The Court also clarified that the expiry of the Licence Agreement by efflux of time does not extinguish the arbitration clause contained therein. Any limitation defense or claims of extension of the licence period are factual issues to be decided by the arbitral tribunal. The Court dismissed objections based on prior orders of the Supreme Court and the Madras High Court in related proceedings as not affecting the present reference.
Accordingly, the Court allowed the application under Section 8 of the A&C Act and referred the parties to arbitration in accordance with Clause 14 of the Licence Agreement dated March 22, 2012. The suit and all pending applications were disposed of. The Court emphasized that its observations were prima facie and without prejudice to the merits of the case.
This judgment reinforces the principle that disputes arising out of license agreements relating to intellectual property rights between parties are arbitrable, including claims framed as infringement or passing off, provided they concern rights in personam between defined parties. It also highlights that arbitration clauses survive contract expiry and that parties cannot circumvent arbitration by joining affiliates or framing claims as statutory infringement. The decision aligns with the Supreme Court's jurisprudence favoring the enforcement of arbitration agreements and the separation of merits adjudication for arbitral tribunals.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Section 8/Section 45 - Trade mark infringement and passing off dispute between licensor and ex-licensee arising from licence agreement - Held, dispute as to continued use of licensed mark after expiry/termination of licence is essentially a dispute inter se parties and concerns subordinate rights in personam - Such dispute is arbitrable - Plaintiff cannot avoid arbitration by framing suit as one for infringement/passing off or by impleading affiliates/directors/non-signatories - Parties referred to arbitration in terms of arbitration clause in licence agreement.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 - Sections 8, 14, 18, 45; Trade Marks Act, 1999 - Section 134; Copyright Act, 1957 - Section 62; Code of Civil Procedure, 1908 - Section 151
