New Formula One Edition

In a very recent ruling of the Delhi High Court the trade mark of the Formula One came up with flying colors again. The Court has overruled the ruling of the Advance Authority Ruling (AAR) on the issue of usage of trade marks and logos owned by the Formula one racing by Jaypee Sports Limited. The trade mark and the logos were exclusively permitted to use by the Formula One racing for the hosting and organizing of the Formula one Grand Prix in India. The trade marks and logos were allowed to use for the events in India, and the agreement did not intend to exceed beyond such purpose.

Even though the Grand Prix which saw three major events consecutively in the year 2011, 2012 and 2013 was consequently ceased to take place due to some tax matters. But there is a chance that it will come back with a new avatar as soon as “Jaypee” restores it financial stability.

Formula One racing entered into Race Promotion Contract with “Jaypee” Sports Limited in for the events to be held in India. Through this contract Formula One granted the right to host, stage and promote Grand Prix in India. Beside this Contract, they also entered into an Artwork licensing Agreement (ALA). This later agreement gave permission to “Jaypee” to use the Intellectual Property of Formula One for usage in the event logos, promotions, media purpose etc. It is to be noted that the RPC was signed for a consideration of USD $40 and the ALA $1.

Coming down to the ruling of the AAR, it considered the payment for RPC and ALA as a royalty payment for the use of the IP rights of Formula One. Moreover, after the intention of the parties to the agreement was pondered upon, it revealed that, main intention of the agreement was the use of the IP right for the purpose of organizing, promoting the Grand Prix in India (Clause 23.2 of the Contract made between the parties). Further, as the Agreement for the ALA was an oral agreement, the use of the trade mark by “Jaypee” does not fall under the “permitted use” under the Trade Marks Act, 1999. Though the definition of “Permitted use” covers the use by any unregistered user for commercial reasons in lieu of licensing or agreement, in this case as the agreement is merely an oral one, the definition of permitted use is irrelevant and misplaced.

Now, it is the time to ponder upon the decision of the Delhi High Court. The Delhi High Court has delved into the exploration of the RPC and ALA and has discussed elaborately on the issue surrounding the IP right that accrued to “Jaypee” in the context of the agreement. As per the clause of the Agreement the IP right was solely transferred for the hosting and promotion of the events and nothing else. On the termination of the agreement “Jaypee” was liable to pay the entire contractual amount. Also the use of the trade mark and logos were to be stopped after the termination of the contract. The terms of the contract were crystal clear. “Jaypee” was not supposed to use the IP right attached after such termination at any cost.

The ALA did not assured any extra or additional rights in form of license or any sealed agreement. Thus, the grant of ALA cannot be termed as license agreement between the parties in absence of any such express license agreement. The Court held that the payment of the lump sum money paid under the RPC agreement did not amount to payment of royalty. The trade mark right was only constricted to be used on the tickets for the event and it was only incidental or a related right and not an IP right.

The Delhi High Courthas made a detailed analysis of the term “permitted use” and has come up with the conclusion that, in the present proceedings the use of the trade mark as evident from the terms of the contract was very narrow and limited. The permission to use the mark was only to expedite the promotion of the event in India. The main point was to publicize Grand Prix which could only be successful with the use of the trade mark on promotional materials. It was clarified by the Court that, any amount of use of the trade mark on any products or services by “Jaypee” would be an unauthorized use of the trade mark.

However the above decision of the Delhi High Court has left many questions unanswered as to the use of IP right by an unregistered user in lieu a mere agreement. There have been instances where trade mark is used on basis of agreement not amounting to license but the payments were made in form of royalties. So again this ruling opened the forum for such cases to be filed as it is very imperative to determine the contours of the licensing agreement with respect to IP rights and, its incidental use for commercial purpose by unregistered but restricted user. It often happens that, the third party when granted the use of IP right for a specific purpose exceeds their authority and use them on their own merchandise. Hence, it is the need of the hour to settle this issue once and for all to prevent such misuse.