VIPIN SANGHI, J. E.A. No.705/2009

1. This execution petition has been preferred under section 49 of the Arbitration and Conciliation Act, 1996 (the „Act?) to seek the enforcement of a foreign award dated 27.3.2008 in case no. 14582/JHN between the parties.

Decree Holder’s case:

2. The decree holder is a company based in Arizona, USA while the judgment debtor is an Indian company at New Delhi. On 1.1.2003 decree holder entered into a Trade Mark License Agreement (TLA) with the defendant, whereunder the decree holder had granted the judgment debtor license to use the trademark “Penn” for use in certain territories for certain products. In consideration of the said license, the judgment debtor agreed to pay annual royalty to the decree holder. This agreement was effective initially from 1.1.2003 to 31.12.2005. A second TLA was executed for the period 1.1.2006 to 31.12.2009, on similar terms and conditions.

3. Clause 18 of the said TLAs contained an arbitration clause for settlement of any dispute with regard to construction, meaning and effect of provisions of the agreement by arbitration of the International Chamber of Commerce (ICC), Paris. Clause 17 of the said TLAs provided that the agreement shall be governed by, and in accordance with, the laws of Austria.

4. The royalty was due at the beginning of each year, yet payable in quarterly installments. Default in punctual payment of the royalty attracted penal interest of 1.5% compounded monthly. The judgment debtor failed to pay the installments and accordingly, the decree holder terminated the contract on 13.6.2006 and appointed another licensee. On 20.9.2006, the decree holder invoked the arbitration before the International Chamber of Commerce, Paris to seek the appointment of an independent arbitrator. Ms. Gabrielle Nater-Bass, was appointed as the sole arbitrator.

5. The plaintiff having filed its claim before the said arbitrator, the judgment debtor took the objection that it was not liable to pay royalty since the decree holder had breached both the agreements by granting a license to Nebus Loyalty Limited (“Nebus”) on 26.7.2005 for Europe, when Nebus was known to be the judgment debtor?s existing sub-licensee.

6. After considering the judgment debtor?s defence, the arbitrator, upon interpretation of the contracts, concluded that the decree holder had not breached the contracts by granting the license for loyalty programmes to Nebus, since the grant of such a license was permitted by clause 2.2.2 of the TLAs. The claim for outstanding royalties plus interest, and costs was allowed in the arbitral award. The award having been rendered in favor of the plaintiff, the plaintiff has filed th2e present execution petition to seek the enforcement thereof.

Judgment Debtor’s case:

7. The judgment debtor was granted an exclusive agreement to use decree holder?s aforesaid trademark. The license was to be an exclusive non transferable license, without the right to further sublicense the same. The decree holder had also agreed not to grant a license, exclusive or non exclusive, to any third party with the proviso that the decree holder could, however, grant such a license to a licensee only for the purposes of supplying licensed products to a consumer either free, or at a reduced cost, as a reward in retailer loyalty and continuity programmes.

8. The judgment debtor submits that the trademark “Penn” of the decree holder did not have market recognition in the sector of golf balls and accessories and inflatable balls. The judgment debtor, therefore, had to incur substantial expenditure on advertising and promotional activities to develop markets for the said products.

9. The judgment debtor entered into an agreement with a company called Nebus Loyalty of Netherlands. Nebus was purchasing Footballs, Volleyballs and Basketballs from the judgment debtor. To bypass the role of judgment debtor, Nebus commenced direct liaison and contact with the decree holder, who authorized it to pur