Alternative Dispute Resolution

Hero Electric Vehicles Pvt. Ltd. v. Lectro E-Mobility Pvt. Ltd.

2021 SCC OnLine Del 1058

Facts

Members of the Munjal family divided the Hero business through a Family Settlement Agreement.
They also entered into a Trademark and Name Agreement.
These arrangements allocated the right to use the “Hero” mark among different family groups for specified products and businesses.
The agreements contained arbitration clauses.
Hero Electric claimed rights to use the “Hero” and “Hero Electric” marks for electric vehicles.
Lectro E-Mobility and Hero Cycles began dealing in electric bicycles and related products.
Hero Electric filed a trademark-infringement and passing-off suit.
Lectro sought reference under Section 8.
Hero Electric argued that:
trademark infringement concerns statutory rights in rem;
registered trademarks are granted by the State;
infringement suits are exclusively judicial; and
the dispute was therefore non-arbitrable.
Lectro argued that the real dispute concerned contractual allocation of the mark under the family settlement.

Whether a trademark dispute is necessarily non-arbitrable.
Whether the court should examine the substance rather than the form of the pleadings.
Whether the rights asserted were in rem or in personam.

Questions concerning:
validity of trademark registration;
cancellation;
rectification; or
rights against the world may be non-arbitrable.
A dispute is arbitrable where it concerns:
contractual allocation;
licence;
assignment;
permitted field of use;
coexistence obligations; or
breach of an inter-party trademark agreement.
The court must identify the source of the right claimed.
A party cannot avoid arbitration merely by drafting a contractual dispute as a statutory infringement action.
Relief operating only between the parties concerns rights in personam.

Hero Electric did not challenge the validity of the defendants’ trademark registration before the public registry.
Nor did it seek cancellation of a mark against the world.
The central question was which family group had been allocated the right to use “Hero” for:
electric bicycles;
throttle-assisted vehicles;
particular product segments; and
associated branding.
Answering that question required interpretation of:
the Family Settlement Agreement;
the Trademark and Name Agreement;
definitions of business fields;
product categories; and
contractual restrictions.
The rights claimed therefore arose principally from contract.
Any finding would bind the family groups and their companies.
It would not determine whether the “Hero” mark was valid against every third party.
The Court rejected the argument that the word “infringement” automatically creates a right in rem.
The same conduct may constitute:
breach of a private agreement; and
infringement under trademark legislation.
Where the dispute can be resolved by determining contractual permission between the parties, arbitration remains available.
The arbitration clauses were broad enough to cover disputes arising from the settlement arrangements.
The Court therefore referred the parties.
The judgment is consistent with:
IPRS v. Entertainment Network;
Deccan Paper Mills; and
Vidya Drolia.
It preserves exclusive public jurisdiction over registration and validity while allowing private allocation disputes to be arbitrated.

The Delhi High Court held that the dispute was arbitrable.
Its true subject was contractual allocation of trademark use among family groups, not validity of the mark against the world.
The suit was referred to arbitration.
Use this case for: a trademark dispute is arbitrable where it concerns contractual division or licence of use rather than registration or validity in rem.