DISPUTE OVER A TRADEMARK LICENSE CONTRACT

Legal issue: This dispute is about the unlawful termination of a trademark license contract and claim for compensatory damages. 

Case Brief: 

In October 2020, Company N and Company C entered into a Trademark License Contract with a term of five years (unless otherwise decided by Company N and subject to mutual agreement on term extension). Under this contract, Company N granted Company C a non-exclusive license to use the licensed trademarks in Vietnam. Company C was to use these trademarks, either alone or in combination with products that Company C would distribute, through retail and wholesale channels.

Around June 2023, Company N issued a notice on the internet announcing the immediate termination of the Agreement with Company C. Specifically, Company N requested that Company C: (i) terminate all purchase, distribution, and supply agreements for Company N’s products; (ii) cease using Company N’s name and trademarks; (iii) immediately stop using logos, domain names, websites, and social media; (iv) be prohibited from representing or transacting business under the name of Company N; (v) immediately cease all advertising and sales activities related to Company N and remove them from all public areas; and (vi) recall all goods from warehouses.

It was not until a month after Company N’s unilateral termination notice that Company C received the official documents. Unable to reach an agreement, Company C initiated arbitration proceedings in July 2023.

In the arbitration, Company C claimed the following:

1. Breach of Contract: Company C alleged that Company N had materially breached the Contract and sought to terminate the Contract on December 31, 2023.
2. Damages: Company C demanded that Company N return the initial fee paid for the remaining term of the contract, compensate for the loss of after-tax profits from July 2023 to December 2023, and compensate for the loss of future after-tax profits due to the early termination of the contract. The total claimed amount was tentatively estimated at 688 billion VND.
3. Legal Costs: Company C seeks reimbursement for all legal costs associated with the dispute, including arbitration fees, attorney’s fees, and other related expenses.

Essentially, Company C is arguing that Company N’s unilateral termination of the agreement was wrongful and has caused significant financial harm. They are seeking damages to compensate for their losses and to enforce the terms of the original agreement.

How our lawyers helped the client:

In representing Company C at the arbitration hearing, our attorney presented the following claims and supporting evidence:

First, our attorney requested that the Arbitral Tribunal declare the Defendant’s unilateral termination of the License Agreement to be unlawful and a breach of contract, pursuant to Clauses 1 and 5 of Article 428 of the Civil Code 2015.

Second, the attorney requested that the Arbitral Tribunal declare the License Agreement terminated as of December 31, 2023, due to the Defendant’s material breach of the agreement under Clause 1 of Article 428 of the Civil Code 2015.

Third, the attorney requested that the Arbitral Tribunal order the Defendant to refund the upfront fee for the portion of the License Agreement term during which the Defendant’s breach caused the termination (from January 1, 2024 to October 31, 2025). The specific amount claimed is: 19,013,490,489.4 VND.

Fourth, the attorney requested that the Arbitral Tribunal order the Defendant to compensate the Plaintiff for damages, specifically (applying Precedent No. 21/2018/AL regarding fault and damages in cases of unilateral termination of a property lease contract, as approved by the Judicial Council of the Supreme People’s Court on October 17, 2018, and promulgated under Decision No. 269/QĐ-CA dated November 6, 2018 by the Chief Justice of the Supreme People’s Court):

• The decrease in post-tax profit from July 2023 (after the Defendant’s unlawful unilateral termination of the License Agreement) to December 31, 2023. The specific amount claimed is: 109,681,740,170 VND.
• The decrease in post-tax profit from January 1, 2024 to the end of the License Agreement term (October 31, 2025). The specific amount claimed is: 623,854,344,047 VND.
• Legal fees and arbitration costs incurred due to the Defendant’s breach of the License Agreement. The specific amount claimed is: 131,567,000 VND.

Dispute Resolution Result: 

In May 2024, the Arbitral Tribunal issued an award deciding as follows:

(1) The Tribunal partially granted the Claimant’s claim, finding that the Respondent, Company N, had breached the contractual obligations but that the breach was not so severe as to constitute a fundamental breach.

(2) The License Agreement was terminated effective December 31, 2023. 

(3) The Respondent was ordered to pay the Claimant the following amounts: (i) The initial fee of 19,013,490,489.4 VND. (ii) The decrease in post-tax profit from July 2023 to December 31, 2023, amounting to 17,000,000,000 VND. (iii) Legal fees of 50,000,000 VND. (iv) Arbitration fees of 2,065,783,500 VND.