ESSO unregistered licensing agreement invalid

The Supreme Court decision in Esso (Thailand) Public Company Limited v Thai Company XYZ (Case 5196/2549, October 27 2006) highlights the importance of registering a trademark licence agreement with the trademark registrar.

Esso (Thailand) Public Company Limited entered into an agreement with Thai Company XYZ, granting the latter a licence to distribute fuel and other oil products and operate a petrol station under the ESSO trademark. Esso agreed to provide the necessary equipment for the petrol station, and supply fuel and oil products bearing the mark ESSO to XYZ.

XYZ breached the agreement by distributing fuel and oil products supplied by third parties while continuing to use the equipment provided by Esso. As a result, Esso notified XYZ to comply with the terms and conditions as described in the agreement, but XYZ ignored the request. Esso served a demand notice on XYZ to terminate the agreement and requested the return of all equipment or the payment of damages. XYZ failed to comply with the request. Esso subsequently filed a complaint with the Central Intellectual Property and International Trade Court (IP & IT Court).

XYZ alleged in its answer to the court that Esso was not the owner of the equipment in question and was not entitled to demand its return as the agreement contained unfair terms and conditions. It also claimed that the agreement was invalid as it was not registered with the trademark registrar.

The IP & IT Court agreed with that latter point, finding that under the Trademark Act the agreement must be registered with the trademark registrar to be valid. However, it held that XYZ must return all equipment to Esso or pay damages in case of failure to comply with the order. XYZ filed an appeal with the Supreme Court.

The Supreme Court dismissed the appeal. It held that only the part of the agreement regarding trademark licensing must be registered; the rest of the agreement, which concerned use of the Esso equipment in the petrol station, remained valid and enforceable.

This case is a reminder that transactions that include a trademark licence agreement as a part of a broader agreement, such as a franchise, distributorship or management agreement, need to comply with the Trademark Law requirements regarding trademark licence agreements. Trademark owners often forget to register the trademark licence agreement part, as they mistakenly believe that they are protected under the main terms and conditions of the general agreement.

The decision discussed above is a precedent for the Supreme and IP & IT Courts only for trademark licence agreements and should not be used as a precedent for any other commercial agreement.

Anurag Ramanat and Wanchai Raksirivorakul, Johnson Stokes & Master, Bangkok