Trademark disputes arising from franchise agreements often involve questions about the scope of permitted trademark use, post-termination restrictions, and the likelihood of confusion from deceptively similar marks. Such disputes may also raise the issue of arbitrability, particularly where the parties disagree over whether the claims concern contractual rights or statutory intellectual property rights. Courts examining applications for interim relief must therefore consider the contractual obligations between the parties, the overall impression created by the competing marks and the need to protect goodwill pending final adjudication.
The Bombay High Court granted interim protection to Zee Learn Limited in its dispute with former franchisee Beauty Singh over the continued use of the names “KIDZEE” and “KIDGEE” for a preschool after the franchise agreement expired. While considering the petition under Section 9 of the Arbitration and Conciliation Act, 1996, the Court noted that the similarity of the names had to be evaluated in view of the previous franchise relationship between the parties, the use of the same educational activity in the same locality and the likelihood that parents would perceive an ongoing connection with the original brand. It further clarified that government approval to run the school did not exempt the former franchisee from her contractual obligations and directed her to discontinue the disputed branding pending arbitration.
Background
Zee Learn Limited, which runs the KIDZEE preschool network, entered into a franchise agreement with the respondent, Beauty Singh, on January 20, 2014, to operate a KIDZEE centre at Bisunpur, Koderma, Jharkhand. The agreement was for six years and expired on January 20, 2020. Zee Learn Limited stated that the respondent was obliged to cease using its trademark and other intellectual property rights when the agreement expired.
The petitioner alleged that, in January 2023, it found that the respondent continued to use the KIDZEE name and had adopted “KIDGEE” for the same kind of educational activity. Despite a legal notice and subsequent police complaints, the alleged use carried on. The petitioner contended that the similarity between the names was likely to confuse parents and the public and harm its goodwill and reputation.
The petitioner approached the Bombay High Court seeking interim protection, including an injunction against the use of KIDZEE and deceptively similar marks; requests for the preservation and disclosure of financial records; a bank guarantee amounting to ₹7,85,56,728; or, in the alternative, for the appointment of a Court Receiver to collect the fees from the school.
Contentions of the Parties
The Petitioner contended that the respondent’s right to use its intellectual property was limited to the term of the franchise agreement and that, upon expiry of the agreement, the respondent could neither continue to use its intellectual property nor claim any association with the franchisor. This argument was based on Clauses 14.4 and 4.1(c), read with the definition of intellectual property rights under Clause 1.8.
It argued that “KIDGEE” remained phonetically and structurally similar to KIDZEE and could mislead parents into believing the school remained associated with the petitioner. The petitioner maintained similarity must be assessed from the point of view of an ordinary consumer, considering pronunciation and the overall impression created by the marks rather than focusing only on the spelling difference.
On arbitrability, the petitioner stated that the dispute arose directly from the franchise agreement and concerned the contractual rights and obligations of the parties. Since the agreement contained an arbitration clause for disputes arising out of or in connection with it, interim relief could be obtained under section 9 of the Arbitration and Conciliation Act, 1996. It also sought financial disclosures to assess its alleged losses.
The respondent contended that the dispute involved independent statutory trademark rights and was therefore not arbitrable. She submitted that, following the expiry of the agreement, she had stopped using “KIDZEE Play School” and then ran the institution as “KIDGEE School” through Bihan Foundation.
She also obtained permission from the Government of Jharkhand and pointed out that the school was registered under the Unified District Information System for Education (UDISE), on the grounds that the institution was running under a different name and had the necessary approvals. The respondent also maintained that “KID” was a generic term used by several educational institutions and that the petitioner could not claim it exclusively. She also alleged that threats and harassment had been carried out by people allegedly associated with the petitioner.
Court’s Findings
The Court held that the real dispute concerned the respondent’s contractual rights and obligations following the expiry of the franchise agreement. The petitioner was not seeking a declaration of trademark ownership binding on the world at large; rather, it sought relief against a former franchisee who had previously been authorised to use the mark. The Court therefore held that the dispute, as framed, concerned rights in personam and was capable of being referred to arbitration.
The Court placed particular emphasis on Clause 14.4, which prohibited the respondent, after termination, from claiming or advertising an association with the franchisor. It noted that the contractual restriction went beyond simply reproducing the exact registered trademark. Moreover, Clause 4.1(c) was also pertinent to the petitioner’s argument that the respondent had no further right to use its intellectual property after the agreement had expired.
On the issue of similarity, the Court considered the prior franchise relationship, the continued operation of the same educational activity in the same locality and the phonetic as well as structural closeness of KIDZEE and KIDGEE. It observed that the assessment could not be confined to differences in English spelling and that the possibility of an ordinary parent believing that the school remained associated with the petitioner had to be considered. The respondent’s argument that “KID” was generic did not, by itself, answer the allegation concerning the overall impression created by the two names in the specific circumstances of the case.
The Court also clarified that government permission, or a UDISE registration, did not determine whether the respondent had complied with her private contractual obligations. Such administrative approvals could not revive an expired trademark licence or override the restrictions contained in the franchise agreement. Similarly, the remarks made during the anticipatory bail proceedings in the Jharkhand High Court did not amount to a final decision on the contractual dispute or the alleged deceptive similarity.
The Court concluded that the petitioner had established a strong prima facie case for interim protection against the continued use of KIDZEE or a deceptively or phonetically similar name in a manner suggesting an ongoing association with the petitioner. It clarified, however, that its findings were preliminary and would not bind the arbitral tribunal, which would independently determine the parties’ disputes.
Directions of the Court
The Bombay High Court partly allowed the petition and restrained the respondent, pending commencement and final adjudication of the arbitral proceedings, from conducting or implementing the petitioner’s KIDZEE programme. The respondent was also restrained from using KIDZEE, KIDGEE or any other deceptively or phonetically similar mark or name in connection with the school or educational services in a manner covered by the order.
The Court further directed the respondent not to use any name, logo, publicity material or other representation suggesting that her school, services or programmes were associated or affiliated with Zee Learn Limited. She was required to remove the relevant marks and representations from the school premises, signboards, advertisements, brochures, uniforms, stationery, websites, social media accounts and other promotional or educational material under her control.
The respondent was directed to preserve documents and electronic records relating to the school’s operations from January 20, 2020 onwards, including admission records, fee receipts, bank statements, marketing material, photographs, videos and digital records. She was also directed to file an affidavit within four weeks, disclosing details of the institution, the names under which it had operated, student admissions and fees collected for each academic year from 2020 onwards, bank accounts used for receiving fees and material showing the use of the disputed marks.
However, the Court rejected the request for a bank guarantee of ₹7,85,56,728 and declined to appoint a Court Receiver to collect the school’s fees. It held that the precise financial liability and quantum of loss remained disputed and would require determination in arbitration. The petitioner was directed to take steps to commence arbitral proceedings in accordance with the agreement and applicable law.
Practical Implications
The decision stresses the importance of clear post-termination provisions in franchise agreements, particularly those governing the continued use of trademarks, goodwill and representations of association. A former franchisee’s adoption of a different name may not, by itself, resolve a dispute where the overall impression created by that name, viewed against the parties’ prior relationship, suggests a continuing association with the franchisor.
The judgment also clarifies that not all trademark-related disputes are necessarily non-arbitrable. Disputes originating from licence agreements and concerning the contractual rights and obligations of identified parties may be arbitrable, even when they involve the use of a registered trademark. Further, regulatory permissions to operate an establishment do not automatically confer contractual rights to use another party’s intellectual property.
The Court’s approach to interim relief also demonstrates that preservation of records and disclosure of financial information may be appropriate measures to protect a monetary claim, even where more intrusive relief, such as a bank guarantee or appointment of a receiver, is not justified at that stage.
Conclusion
The Bombay High Court’s decision illustrates the relationship between franchise agreements, trademark protection and arbitration. By granting interim relief against the use of KIDZEE and deceptively similar names, the Court sought to protect the petitioner’s contractual interests and goodwill pending arbitration, while leaving the final determination of liability, damages and other monetary claims to the arbitral tribunal.
Authors: Manisha Singh and Kratika Patel