In a recent landmark case, the Delhi Commercial Court reaffirmed the importance of intellectual property protection by granting an interim injunction to KDH Food (OPC) Pvt. Ltd., the proprietors of the matter of the famous ‘Kake Di Hatti’ trademark dispute, against a franchisee for trademark infringement and breach of contract.

Background: The Franchise Agreement

KDH Food (OPC) Pvt. Ltd., known for its iconic ‘Kake Di Hatti’ brand, entered into a franchise agreement with the respondent, Amir Khan, on September 11, 2020. The agreement allowed Amir Khan to operate a restaurant under the ‘Kake Di Hatti’ trademark and associated branding, stipulating a monthly royalty fee of ₹1,00,000 plus applicable GST. A revised royalty agreement followed in December 2020.

However, the relationship soured when the franchisee failed to fulfil financial obligations and allegedly continued to use the ‘Kake Di Hatti’ brand without authorization post-termination.

Key Legal Issues

Trademark Infringement:

The primary contention centred around the continued unauthorized use of trademarks, including ‘Kake Di Hatti,’ ‘Kake,‘ ‘KDH,‘ and ‘King of Naan,‘ even after the franchise agreement was terminated.

Breach of Contract:

KDH Foods highlighted that the franchisee had defaulted on royalty payments amounting to ₹34,27,000 by March 2024. Despite multiple defect cure notices issued in February, April, and September 2023, the franchisee did not comply.

Reputation and Goodwill:

The plaintiff emphasized the potential damage to their brand’s reputation due to the unauthorized use of trademarks, which could mislead consumers and erode goodwill built over the years.

Court’s Findings and Decision

After reviewing the petition and hearing the arguments presented by the counsel for the petitioner, the court made several critical observations:

1. Prima Facie Case Established:
2. The court recognized that the petitioner had established a clear case, noting that the franchisee had no surviving rights to use the trademarks post-termination.
3. Balance of Convenience:
4. The court found that allowing the respondent to continue operating under the disputed trademarks would cause irreparable harm to KDH Foods, thereby tilting the balance of convenience in favour of the petitioner.
5. Ex-Parte Interim Injunction:
6. An ex-parte interim injunction was granted, restraining the respondent from:
   • Operating any business under the ‘Kake Di Hatti’ trademarks.
   • Using logos, service marks, or any deceptively similar branding.
   • Displaying any advertisements or signs related to the ‘Kake Di Hatti’ brand.

Legal Implications and Industry Impact

This case underscores the significance of enforcing franchise agreements and protecting intellectual property rights in India. For businesses, it serves as a reminder to:

1. Ensure Robust Contracts:
2. Clearly define terms, obligations, and consequences for breaches in franchise agreements.
3. Monitor Franchise Compliance:
4. Regular audits and compliance checks are essential to prevent unauthorized use of trademarks.
5. Act Swiftly Against Infringement:
6. Timely legal intervention, including seeking injunctions, can prevent further damage to brand reputation.

Conclusion

The ‘Kake Di Hatti trademark dispute case highlights the judiciary’s critical role in safeguarding IP rights and maintaining the integrity of franchise systems. As Indian businesses expand through franchising, this judgment reinforces the importance of stringent IP enforcement and contractual adherence.