Yves Saint Laurent v. Brompton Lifestyle Brands Private Limited & Anr.

1. The above captioned suit for infringement of Plaintiff’s trademarks, copyrights and passing off, seeks inter-alia permanent and mandatory injunction against Defendant No. 1, which is stated to be unauthorisedly operating a boutique under Plaintiff’s brand name in DLF’s The Chanakya Mall, New Delhi. During pendency of the suit, Plaintiff seeks an interim injunction for restraining use of its trademarks and copyrights.

RELATIONSHIP BETWEEN THE PARTIES AND THE CONTROVERSY

2. Plaintiff is part of a multi-national global luxury group, ‘Kering’ which owns other luxury brand businesses such as ‘Balenciaga’, ‘Bottega Veneta’, ‘Gucci’, and ‘Alexander McQueen’. Plaintiff is owner of registered well-known marks, ‘Yves Saint Laurent’, ‘YSL’, ‘Saint Laurent’, ‘ ’ and variations thereof [hereinafter collectively referred to as “YSL marks”] which have been in continuous and uninterrupted use by Plaintiff and its predecessor-in-title since 1961. The details of registrations are set out in paragraph 16 of the plaint. Plaintiff also has copyrights in product catalogue and literary materials used and displayed in Plaintiff stores across the globe.

3. Plaintiff has stores across the world and with an intent to establish its presence in Delhi, entered into a franchise agreement dated 19th April, 2019 [hereinafter “Franchise Agreement”] whereby Defendant No. 2-Beverly Luxury Brands Limited [hereinafter “Beverly”] was granted a franchise to open and operate a “Saint Laurent” Boutique [hereinafter “Boutique”] at DLF’s The Chanakya Mall, New Delhi. This agreement stands terminated. However, Boutique is still operational under Plaintiff’s brand name and Defendant No. 1-Brompton Lifestyle Brands Private Limited [hereinafter “Brompton”] is presently in occupation thereof. Brompton asserts that it has heavily invested in the Boutique as a 'sub-franchisee' under Beverly and emphasises that Plaintiff all throughout, was aware, actively consented to its involvement and allowed it to operate the Boutique. Brompton in effect claims to be an ‘authorized operator’ of Boutique which is strongly refuted by Plaintiff.

CONTENTIONS

4. Submissions of Mr. Akhil Sibal, Senior Counsel for Plaintiff, are summarised as follows: 4.[1] Beverly was permitted to use the YSL marks only in accordance with terms and conditions stipulated in Franchise Agreement. On account of breach by Beverly, the agreement was terminated by Plaintiff vide notice dated 23rd July, 2021 which came into effect on 8th August, 2021. 4.[2] Pursuant to termination of Franchise Agreement, Beverly cited hardship on account of COVID-19 and engaged in discussion with Plaintiff for reconciling their differences, including, by way of return of inventory and/ or alternatively handing over of operation of Boutique. 4.[3] Plaintiff received an arbitration notice dated 22nd February, 2022 [hereinafter “Arbitration Notice”] from Brompton claiming that pursuant to Franchise Agreement, Beverly had executed a supply agreement dated 2nd July, 2019 with it [hereinafter “Supply Agreement”] undertaking to supply ‘designer clothes and apparel’ designed by Plaintiff. Said notice also alleged that Beverly had not been performing its obligation under the said Supply Agreement which included delay in delivery of goods and eventual cessation of delivery of goods altogether. 4.[4] Per Franchise Agreement, the right to use YSL marks was given only to Beverly, on a non-exclusive basis for operating Boutique and sale of products, merchandise and items bearing YSL marks. Plaintiff neither had knowledge of alleged Supply Agreement nor was Beverly permitted by Plaintiff to enter into such an agreement at any point of time without prior consent. The said agreement is violative of Franchise Agreement and is not legally binding on the Plaintiff. 4.[5] Despite termination of Franchise Agreement, Brompton is operating the Boutique claiming to be authorised by Plaintiff, a pretext which is exfacie false and misconceived. Brompton was never granted any authorisation, license or franchise by Plaintiff. Permitting Brompton to continue as unauthorised user of YSL mark even after termination of Franchise Agreement would cause serious dent and damage to Plaintiff’s reputation and goodwill. Apart from infringement, such unauthorised and continuous use would also dilute YSL marks. Reliance is also placed upon Vidya Mandir Classes Limited v. Harsh Tiwary.[1] 4.[6] Per Section 29(1) of Trade Marks Act, 1999 [hereinafter “Trade Marks Act], use of registered marks by anyone but the registered proprietor or permitted user, amounts to infringement. Irrespective of rights claimed by Brompton under alleged Supply Agreement, its use of YSL marks, in absence of authorisation by Plaintiff is clearly violative of said provision. A clear case of infringement of YSL marks is made out and an injunction should follow. Reliance is placed upon Midas Hygiene Industries (P) Ltd. v. Sudhir Bhatia and Others.[2] 2021 SCC OnLine Del 5435, see paragraph 27.

4.[7] Presently, at the Boutique: (i) there is no electricity connection, (ii) invoices are being sent via WhatsApp, (iii) price tags are being written by hand, and (iv) changing rooms are in disarray. Condition of Boutique, as also confirmed by the Local Commissioner, is such that it tarnishes Plaintiff’s image and, therefore, Brompton should be injuncted from use of YSL marks. 4.[8] Rights of a franchisee post termination are limited in terms of Clause 51.[1] of Franchise Agreement, which stipulates that, 180 days post termination of Franchise Agreement, sale of products shall be discontinued, and marketing and promotion be ceased. Further, any remaining stock, along with relevant identification elements, accessories, advertising and promotional tools and material, packaging and promotional materials bearing YSL marks shall be destroyed. The same has not been complied with in the present case. 4.[9] As regards documents relied upon by Brompton to insinuate Plaintiff’s knowledge of former’s involvement with Boutique, it is contended that (i) such documents do not, in any way, establish privity of contract between Plaintiff and Brompton. Brompton is only a “consignee” of the goods under the invoices and importer remains to be Beverly, with whom Plaintiff had Franchise Agreement, and (ii) at no stage of engagement, Brompton was permitted by Plaintiff as a ‘sub-franchisee’. There is no communication or any shred of evidence placed on record to demonstrate an agreement or Plaintiff consenting to the arrangement. Mere indication of delivery address of goods under the name of Brompton does not create any vested right in favour of Brompton to operate the Boutique.

4.10 Allegations of concealment and non-disclosure levelled strongly by Brompton are untenable and factually incorrect. To the extent necessary, Plaintiff’s pleadings make a complete disclosure of the relationship. Concealment, if any, is on part of Brompton as it has not fully revealed its relationship with Bequest Group Ltd. [hereinafter “Bequest Group”], the parent entity of Beverly. Therefore, argument of concealment/ nondisclosure is intended only to scuttle the issue of infringement and passing off, which is ex-facie demonstrated.

4.11 Documents on record indicate that Plaintiff was selling goods only to Beverly and not Brompton. In its pleadings and submissions, Brompton has argued that there is no privity with Plaintiff and thus, no restrictions can be imposed qua use of YSL marks and sale of products bearing YSL marks. However, in sharp contradiction, Brompton seeks to rely on privity with Plaintiff to sustain ongoing arbitration proceedings initiated under the Supply Agreement, wherein Plaintiff has been wrongly impleaded as a party. In light of the admitted position of no privity, the present dispute should not be referred to arbitration and instead an injunction be granted for violation of Trade Marks Act. DEFENDANT’S CONTENTIONS

5. Mr. Sandeep Sethi, Senior Counsel for Defendant No. 1/ Brompton made the following submissions – 5.[1] Plaintiff had been in constant communication with Brompton’s representatives, as is obvious from the emails relating to setting up of Boutique being marked and exchanged with ‘Mr. Tript Singh’ who is director on the Board of Brompton as is conspicuous from the Board Resolution filed alongwith the reply. The email dated 13th February, 2020 sent by Plaintiff’s representative requesting for a letter of invitation from Brompton to visit the Boutique and response dated 13th February 2020 from Brompton to facilitate issuance of visa further demonstrate that Plaintiff was having complete knowledge of Brompton’s association with Boutique. In fact, the store at the authorised location for operation of the Boutique at ‘The Chanakya Mall’, was taken up on lease by Brompton wherefrom it has been operating since 2019 with Plaintiff’s consent and knowledge and therefore, the allegation that Brompton has ‘popped up’ from nowhere is entirely belied. Thus, the injunction should be denied. 5.[2] By way of Supply Agreement, Brompton was granted the right to develop and operate the Boutique in accordance with the right granted to Beverly under the Franchise Agreement. The invoices for supply of stocks, fittings and fixtures, clearly mention Brompton’s name. It is Brompton, that has made an investment of approximately 20 crores in setting up the Boutique apart from purchase of regular inventory of goods. Plaintiff was, thus, well-informed of involvement of Brompton in operation of Boutique from the get-go and never raised any objection. 5.[3] Boutique was to be set up strictly in terms of standards, designs and guidelines shared by Plaintiff which are framed with the objective of having Boutiques with a uniform standard. In order to meet the high standards, set by Plaintiff, huge costs were incurred and after opening, copy of Boutique’s description and its association with Plaintiff and YSL marks was published on the official website of The Chanakya Mall. Plaintiff knowingly authorised Brompton to be associated with the Boutique and also benefited from the same. 5.[4] Despite Brompton’s authorisation for the Boutique being within Plaintiff’s knowledge, Plaintiff has labelled Brompton as ‘Logistics Partner’ of Beverly with a design to keep the association at arm’s length. There is thus active concealment and complete non-disclosure of material and essential facts. The strict requirement for making truthful disclosures by filing of ‘Statement of Truth’ under Commercial Courts Act, 2015, is breached and thus, the injunction should be refused and the suit itself should be dismissed. Reliance is placed upon Policybazaar Insurance Web Aggregator and Anr. v. Acko General Insurance Ltd. & Ors.3, Oswal Fats and Oils Limited v. Additional Commissioner, Bareily & Ors.4, and M/s Seemax Construction (P) Ltd. v. State Bank of India & Anr.[5] 5.[5] Reliance is placed on email dated 21st January, 2021 received from Plaintiff [Document 1 of additional documents filed vide Diary NO. 1980713], to demonstrate that Plaintiff itself instructed that payments should be made by Brompton to Beverly, who, in turn would make payments to Plaintiff. 5.[6] Brompton approached Plaintiff and provided a list of inventory/ stock at Boutique as on February, 2021, but Plaintiff failed to exercise repurchase option under Franchise Agreement. Instead, Plaintiff arbitrarily made an unfair one-sided offer of settlement, and granted only two days for acceptance of same, without taking into account the investments made by Brompton. The email dated 17 January, acknowledges that expenditure incurred by Brompton amounted to approximately 2 million Euros. 5.[7] Cause of action for the suit is the afore-said Arbitration Notice. The 2019 SCC OnLine Del 8901, see paragraphs 10, 11 and 12. 2010 SCC OnLine SC 430, see paragraph 20. agreement with Beverly was terminated in July 2021, whereas the present suit has been filed only in November, 2022 after passage of sixteen months. Evidently, Plaintiff had no grievances till initiation of arbitration and thus, acquiesced to use of YSL marks by Brompton. Reliance is placed on decision in M/s Power Control Appliances and Ors v. Sumeet Machines Private Limited.[6] 5.[8] No counterfeit goods are being sold at the Boutique as alleged by Plaintiff. All goods sold or offered for sale have been purchased from Plaintiff and there is no bar on sale of such goods under Section 30 of Trade Marks Act. Plaintiff cannot, therefore, restrain Brompton from sale of such goods. The Local Commissioner’s report clarifies that goods/ merchandise at the Boutique are original. 5.[9] Plaintiff is a party to and has participated in arbitration proceedings. Reliance is placed upon order dated 26th November, 2022 passed by Hon’ble Justice (Retd.) Bharat Bhushan Parsoon, Sole Arbitrator, Former Judge, High Court of Punjab and Haryana, to demonstrate Plaintiff’s participation. Reliance is placed on decision in Hero Electric Vehicles Private Limited and Anr. v. Lectro E-Mobility Private Limited and Anr.[7] to state that the dispute is contractual in nature and not a violation of the Trade Marks Act. Therefore, subject matter of the suit is arbitrable and should be referred to arbitration, as prayed in I.A. 20643/2022 under Section 8 of the Arbitration and Conciliation Act, 2015 [hereinafter “A&C Act, 2015”]. ANALYSIS & DIRECTIONS

6. On consideration of material on record and contentions advanced by 1991 SCC OnLine Del 668, see paragraphs 11 and 12. (1994) 2 SCC 448, see paragraphs 27 to 31. counsel, the most notable fact on which this case is hinged and remains irrefutable is that: the Boutique in question was set-up under Franchise Agreement, to which only Plaintiff and Beverly are parties. Brompton is clearly not a signatory to the said agreement, yet it is operating the Boutique under Plaintiff’s brand as an authorised store by prominently displaying YSL marks at the entrance of the Boutique. Thus, before going further, it would be apposite to first examine the rights and obligations of the parties stipulated in the Franchise Agreement, of which relevant ones for deciding the present application are as follows: - “2. GRANT OF LICENSE 2.[1] Franchisor confirms that it is entitled to grant the non-exclusive right to make use of the Concept and the Trademarks to the Franchisee and that the use of them by the Franchisee will not infringe any third party rights. Franchisor hereby grants to Franchisee, and Franchisee accepts, for the term of the Agreement and until its termination or expiration, the nontransferable right and license to use the Concept and the Trademarks listed in Annex A and such other trademarks as Franchisor may direct from time to time (the "Saint Laurent Boutique Trademarks"), which are a portion of the Trademarks, for the sole purpose of: (a) establishing and operating, according to the Concept, one boutique store (the "Boutique") to be located at the premises listed in Annex B ("Authorized Locations"), and (b) the promotion and sale of, at the Boutique only, of all original products, merchandise and items bearing the Saint Laurent Boutique Trademarks listed in Annex C[the "Saint Laurent Product(s)"] Franchisee hereby undertakes to operate the Boutique only at the Authorized Location, using the Saint Laurent Boutique Trademarks in compliance with the terms and conditions of this Agreement as well as the instructions, conforming with the terms and conditions of this Agreement, from time to time given by Franchisor to Franchisee. 2.[2] In connection hereof, Franchisor hereby grants to Franchisee, and Franchisee hereby accepts, the non-transferable right to use the Saint Laurent Boutique Trademarks and the Concept for the promotion and sale, 2021 SCC Online Del 1058, see paragraphs 45, 48 to 49 and 55. at the Boutique only, of the Saint Laurent Products. Franchisee hereby acknowledges and agrees that the granting by Franchisor of the franchise is contingent upon Franchisee's full and unconditional compliance hereof and relies upon the representations made by Franchisee to Franchisor under the present Agreement. 2.[3] The license hereby granted to Franchisee is limited to the right to develop and operate the Boutique at the Authorized Location and does not include, inter alia, any right to sell the Saint Laurent Products at any location other than the Authorized Location, it being understood that Franchisee can sell online provided that Franchisee complies with the Online Guidelines, if any, provided by Franchisor to Franchisee.

3. EXCLUSIVITY 3.[1] Subject to Articles 3.3, 3.[4] and 3.5, Franchisor will not open a boutique store, nor will grant to any other entity a franchise to locate and operate a Saint Laurent boutique store and/or to offer, sell or distribute any products or services bearing the Saint Laurent Boutique Trademarks to multibrand dealers, in the territory described in Annex B (the “Territory”) so long as this Agreement is in effect. Franchisee does not have any right to sublicense or sub-franchise, within or outside of the Territory, and/or to relocate the Boutique to any other location within or outside the Territory, unless agreed in writing with Franchisor before. xx.. xx.. xx

39.

TRANSFER 39.[1] Franchisor has entered into this Agreement with specific reliance upon Franchisee's financial qualifications, experience, skills and managerial qualifications as being essential to the satisfactory operation of the Boutique. Consequently, neither Franchisee’s interest in this Agreement nor in the Boutique or in Franchisee and/ or in the premises/land/lease on which the Boutique is established may be - directly or indirectly transferred or assigned to or assumed by any other person or entity, in whole or in part without the prior consent of the Franchisor. Subject to Franchisor's consent, It is further agreed that during the course of this Agreement, the Franchisee shall have the absolute authority to have a change in shareholding of the Franchisee within the family of the Franchisee or in the event of private equity or a financial institutional investor is required to invest in the Franchisee for further funding or strategic purposes.” [Emphasis Supplied] 6.[1] Plaintiff as Franchisor granted Beverly as Franchisee, a nontransferable right to use Plaintiff’s ‘Trademarks’ and ‘Concept’ for promotion and sale at Boutique of ‘Saint Laurent Products’. This agreement stands terminated, a fact not in controversy, rather specifically admitted by Brompton. Beverly, party to the said agreement and also to present proceedings has not assailed the termination. Instead, Brompton has initiated arbitration proceedings inter-alia for a money claim against Beverly and the Plaintiff, relying upon the Supply Agreement. 6.[2] This brings our immediate attention to the asserted rights of Brompton to operate the Boutique and use YSL marks. Brompton’s claim of being an authorised operator of the Boutique originates from the Supply Agreement, relevant clauses whereof are as under: - “WHEREAS