US Court rules in bitter trademarks arbitration battle between Indian brothers
The Ninth Circuit Court of Appeals denied the non-signatory's bid to compel arbitration of Trademark Infringement Claims due to lacuna in the partnership agreement
US courts were faced recently with a vexed case of two Indian diaspora brothers, who had fallen out and set up their separate firms, fighting a legal battle over trademark infringement.
The two brothers, namely Balkrishna and Nagraj Setty, were partners in a business. The case arose when their business relationship failed. The brothers had personally entered into a partnership agreement that required them to arbitrate disputes related to partnership rights.
They parted ways and formed their own business firms. Balakrishna Setty's company came to be known as SS Bangalore while Nagraj Setty's firm assumed the name SS Mumbai.
Balakrishna's firm SS Bangalore filed a suit against Nagraj's SS Mumbai for trademark infringement and sought to compel arbitration based on the arbitration provisions in their partnership agreement.
The legal battle started in the lower court, went to the Supreme Court before it was transferred to the Ninth Circuit Court of Appeals again which finally ruled in favor of SS Bangalore.
The lower court denied SS Mumbai's motion to compel, noted that only the two brothers were signatories to the partnership agreement and their companies were not the signatories to it. Moreover, Nagraj Setty was not named as a defendant in the lawsuit which was filed against his firm SS Mumbai.
The Ninth Circuit Court of Appeals upheld the lower court's decision and held that SS Mumbai was not entitled to equitably estop SS Bangalore from avoiding arbitration, following which SS Mumbai filed an appeal with the Supreme Court.
On remand from the Supreme Court for further consideration, the question arose before the Ninth Circuit Court of Appeals if non-signatories to an agreement may use state law doctrines like the equitable estoppel to compel arbitration.
While the Appeals Court recognized that even a non-signatory may have the power to compel arbitration under certain circumstances, it found that the defendant in this particular case was not able to do so.
The Ninth Circuit Court of Appeals after it heard the case once again, reaffirmed its previous decision denying the motion to compel.
"It is essential that the subject matter of the dispute is intertwined with the contract providing for arbitration," the court stated.
The court further said that that SS Bangalore's claims against SS Mumbai for trademark infringement were not clearly intertwined with the brothers' partnership agreement providing for arbitration, and thus SS Mumbai, a non-signatory defendant, lacked the power to compel arbitration in this matter, pulling the curtain on a prolonged and bitter legal battle fought between the two brothers.