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Legal Update

Have You Registered Your Trademark License Agreement?

23 January 2007
Mayer Brown JSM Legal Update

Summary

The Supreme Court decision in ESSO (Thailand) Public Company Limited vs Thai Company XYZ (No. 5196/2549, 27 October 2006) highlights the importance of registering a trademark license agreement with the Trademark Office. The Plaintiff licensed his trademark "ESSO" to the Defendant under a Gas Station Operation License Agreement (the "Agreement"). During the term of the Agreement the Defendant did not distribute any fuel or oil products supplied by the Plaintiff; instead it distributed products from other companies. The Plaintiff terminated the Agreement and requested the Defendant to return all products and equipment required to operate the gas station. The Defendant did not comply with the request alleging that the Agreement was invalid as it has not been registered with the Trademark Registrar. The Supreme Court held that the part of the Agreement regarding the trademark licensing was invalid due to it not being registered with the Trademark Registrar. However, the Court deemed that the rest of the Agreement remained valid and enforceable.

Full Update

Introduction

A trademark owner whose trademark is registered in Thailand, may license other persons to use the trademark. However, the trademark license agreement must be made in writing and registered with the Trademark Registrar according to section 68 of the Trademark Act B.E. 2534 (1991) as amended by the Trademark Act (No. II) B.E. 2543 (2000) ("Trademark Act"). An application for registration of a trademark license agreement must contain the following information:

1.  The agreed terms and conditions between the registered trademark owner and the applicant who is the licensee which allow the registered trademark owner a control over the quality of the goods to be produced by the applicant; and

2.  The goods for which the trademark is to be used.

The requirement that a trademark license agreement must be made in writing and registered with the Trademark Registrar may be regarded as a form of contract requiring a strict adherence. Failure to comply with the requirement will nullify the trademark license agreement.

Facts Of The Case

The Plaintiff is a fuel company carrying on the business of manufacturing and selling fuel and other oil products bearing the registered mark "ESSO". The Plaintiff had entered into the Agreement with the Defendant granting a license to the Defendant to distribute fuel and other oil products and operate gas stations under the brand "ESSO". The Plaintiff agreed to provide the necessary equipment for the gas station and would supply fuel and oil products bearing the brand "ESSO" to the Defendant. 

The Defendant breached the Agreement by hiding the name "ESSO" while distributing fuel and oil products supplied by other companies and continuing to use the equipment provided by the Plaintiff. As a result, the Plaintiff notified the Defendant to comply with the terms and conditions as described in the Agreement, but the Defendant ignored the request.  The Plaintiff served a demand notice on the Defendant to terminate the Agreement and requested the return of all equipment or the payment of damages to the Plaintiff. The Defendant failed to comply with the request. 

The Plaintiff filed a complaint with the Central Intellectual Property and International Trade Court (the "IP & IT Court").

The Defendant alleged in its Answer to the IP & IT Court that the Plaintiff was not the owner of the equipment in question and was not entitled to demand its return as the Agreement contained unfair terms and conditions. In addition, the Agreement was said to be invalid as it was not registered with the Trademark Registrar pursuant to the Trademark Act.

The IP & IT Court ruled that the Agreement was invalid as it was not registered with the Trademark Registrar pursuant to the Trademark Act. However, the Defendant had to return all equipment to the Plaintiff. Failure to comply with this order would result in the Defendant paying damages to the Plaintiff. The Defendant filed an appeal with the Supreme Court.

The Supreme Court Judgment       

The Supreme Court dismissed the appeal of the Defendant and upheld the decision of the IP & IT Court. In addition, the Supreme Court provided more clarification on the invalidity of the Agreement. The Supreme Court deemed that the Agreement contained both an invalid part (trademark licensing) and a valid part (use of the equipment in the gas station operation). As only the part of the Agreement regarding trademark licensing was registrable, but not registered, with the Trademark Registrar and therefore invalid, the Court held that the rest of the Agreement remained valid and enforceable.

Comment  

Some transactions also include a licence agreement of a trademark as a part of the whole agreement, such as franchise agreements, distributorship agreements and management agreements. Often the party who is the trademark owner forgets to register its trademark licence agreement, as they may have mistakenly believed that they are protected under the main terms and conditions of the agreement. In this case, the other party will use such non-registration of the licence agreement to defend their case and claim that the whole agreement is invalid. Fortunately, the Supreme Court has set a ruling that such invalidity will affect only a part of the contract and not its entirety. As a result, the remaining parts are still enforceable and effective. However, as the trademark licence is not registered, we understand that collection of the license fee for such trade mark license is consequently also invalid. Accordingly, you should ensure that all terms and conditions comply with the requirement and formality of the Trademark Act, such as the requirement for the trademark licence agreement to be registered.

Therefore, if you are planning to grant a license to another person to use your registered mark you must ensure that you comply with the Trademark Act by registering the licensing agreement with the Trademark Registrar. Please note that the above case is only a precedent by the Supreme Court / IP & IT Court regarding trademark license agreements and should not be used as a precedent for any other commercial agreement.


For further information, please contact:

Name: Anurag Ramanat
Phone: +662 677 7555
Fax: +662 677 7599

Name: Wanchai Raksirivorakul
Phone: +662 677 7555
Fax: +662 677 7599

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