You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

December 6, 2018

Thai Supreme Court Rules on Bad Faith of Franchisee Imitating Franchisor’s Trademark

Subscribe to Updates
Informed Counsel

A franchise agreement is a legally binding contract between a franchisor and a franchisee, specifying the rights, costs, and responsibilities of the parties in the franchising relationship. A typical component of a franchise agreement is a clause allowing the franchisee to use the franchisor’s intellectual property assets, such as trademarks, to reap the commercial benefits of a successful brand or business model.   

Extensive experience in Thailand has shown that if a franchisor allows a franchisee to use its unregistered trademarks without a specific clause detailing proprietary rights, the parties can easily become embroiled in a struggle over ownership of the marks. Typically, these disputes emerge from an ambiguously written clause stating that the franchisor permits the franchisee to “use” the trademarks in Thailand, without further clarification declaring the owner’s rights to those marks. Imprecise drafting may open up an avenue for the franchisee to misinterpret the contract—intentionally or not—leading to a result unintended by the marks’ rightful owner.   

This article highlights a recent case in which the Supreme Court addressed an ownership dispute and bad-faith circumstances of a franchisee by focusing on a questionable clause in the franchise agreement regarding the IP in question.

Background of Contentious Interpretation   

The franchisor and trademark owner (the Plaintiff) had registered its trademark in another country, but had not done so in Thailand. The franchisee (the Defendant) was contractually permitted in the franchise agreement to “use” the franchisor’s trademark in Thailand. During the valid term of the contract, the franchisee sneakily filed and registered copycat marks in Thailand, imitating the true owner’s trademark.

As soon as registration of the marks was approved by the Trademark Office, the Defendant terminated the franchise agreement to concentrate on its own business operations under the newly registered trademarks. The Plaintiff, understandably irritated, took legal action against its former franchisee by requesting the cancellation of the imitated trademarks on the basis of better rights. All of the initial decisions were in favor of the true trademark owner, resulting in a court order to revoke the Defendant’s imitated trademarks. However, the Defendant took its claims to the Supreme Court.

Insight on the Court’s View

One of the central questions that arose during this case was “Who is the owner of the trademarks: the Plaintiff or the Defendant?” The court followed a well-settled legal framework to determine the answer.

The court reviewed previous franchisor-franchisee disputes related to trademark ownership in an effort to establish the grounds of better rights for the Plaintiff and bad faith of the Defendant. The court also considered written agreements, and found that they addressed the ownership of the trademark as belonging to the Plaintiff. While this evidence was already persuasive, the Supreme Court in case No. 2553-2554/2561 also looked at general factors to determine ownership of the trademark, including the following:

  • Who invented the trademark?
  • Who was the first party to register the trademark, whether in Thailand or overseas?
  • Who exported the goods bearing the trademark to Thailand?
  • Which party was authorized to allow another party to use and register the trademark in Thailand?
  • Which party was first to see, recognize, or know the trademark?
  • Was there an incident indicating acceptance of ownership by another party?

Ultimately, the court found that the above factors also weighed in favor of the Plaintiff because the Defendant could not establish rights to the trademarks prior to the time the franchising relationship began.    

In addition to determining the Plaintiff’s better rights, the court also examined the Defendant’s intention. During the proceedings, the Defendant admitted to seeing the Plaintiff’s trademarks at trade fairs in other countries before entering into the franchise agreement. Therefore, the court concluded that the Defendant had seen and known the trademarks prior to filing its trademark applications in Thailand. This fact, along with the Defendant’s inability to rebut the analysis of the court regarding the ownership of the trademarks, showed that the Defendant had filed its applications in bad faith to benefit from the Plaintiff’s reputation.   

The court ruled that the franchisor was the party who invented and owned the rights to the trademarks, and that the franchisee acted in bad faith by registering trademarks that imitated those of the franchisor, resulting in the franchisee’s trademarks being canceled.

Lessons Learned

While the trademark owner was victorious in this case, similar scenarios in the future might not have as positive an outcome. Franchise relationships are one of the most common forms of foreign indirect investment in Thailand, but franchisors should recognize the risks they bear if the franchise agreement is not precisely drafted and the franchisee is not loyal in its business practices. In some cases, franchisees are happy to transfer trademark registrations to the true owner, but the costs can be substantial. There is also a great risk that trademark applications filed by a franchisee never come to the trademark owner’s attention until there is a dispute or the parties stop working together.

Experienced IP lawyers can make significant contributions when preparing a precise and thorough franchise agreement, ensuring the inclusion of comprehensive clauses on the ownership of the IP subsisting in the products or services, the franchisor’s right to use such IP—including the commonly granted right to use the franchisor’s trade name as part of the franchisee’s company name or domain name—and setting strict limitations on such rights during the term and after the expiration of the franchise agreement.

By carrying out the simple acts of trademark registration in the name of the original owner and careful drafting of agreements, a franchisor can easily avoid an unnecessary trial or the possibility that a former franchisee may infringe on the rights to its marks.
 

Download Full Article
Related Professionals

Practices

Dispute Resolution and Litigation

Intellectual Property

Location

RELATED INSIGHTS​ 

October 30, 2025
Thailand has introduced a comprehensive overhaul of its tax litigation procedures that will significantly impact how tax disputes are handled. The Regulations for Tax Cases B.E. 2568 (2025) take effect on November 24, 2025, and repeal the prior B.E. 2544 (2001) regulations in full. These regulations support the implementation of the Act on the Establishment of the Tax Court and Tax Case Procedure (No. 3) B.E. 2568 (2025), which expands the Tax Court’s jurisdiction to certain criminal tax matters. Published in the Government Gazette on October 14, 2025, the regulations have been reorganized into three parts covering civil cases, criminal cases, and forms, and are designed to accelerate proceedings, tighten evidentiary discipline, and modernize court operations. Structural Reform and Scope The prior regime governed only civil tax disputes. Under the new framework, the regulations introduce a dedicated chapter for criminal cases alongside updated civil procedures, as the Tax Court now has express authority to adjudicate specified criminal tax offenses. Select mechanisms applied in civil case proceedings, such as electronic communication, recording testimony, and appointing experts, also apply to criminal proceedings mutatis mutandis where they do not conflict with criminal procedure. Civil Cases: Evidence Submission, Deadlines, and Scheduling Parties must submit, together with the witness list, originals of all documentary evidence, media, or electronic data (such as files, USB drives, or CDs), and all physical evidence in the party’s possession. Failure to submit any original within the deadline (see below) results in a loss of the right to adduce that item at trial, subject only to narrow exceptions where submission is impossible due to force majeure or where receipt of the evidence is indispensable to the interests of justice. The practical impact is that parties are now obligated to assemble and verify all original documents and data at the very
Read More
October 26, 2025
AI-generated songs are now making waves in Vietnam on platforms like TikTok, with tracks such as “Say mot doi vi em” quickly gaining popularity and sparking widespread attention. This phenomenon raises a host of legal and ethical questions: Who is the author of these songs? Can they be protected by copyright? Who is responsible if there is an infringement? These questions are becoming increasingly urgent as AI music becomes more mainstream in Vietnam. Copyright Protection for AI-Generated Music in Vietnam Under current Vietnamese law, copyright protection is reserved for works that bear the mark of human creativity. The 2022 amendments to Vietnam’s Intellectual Property Law reaffirm that only works created by humans are eligible for copyright. In practice, if a human meaningfully contributes to the creative process—by providing prompts, making selections, editing, or arranging—their contribution may be protected. However, if a song is generated entirely by AI without significant human input, it is unlikely to qualify for copyright protection. When an AI-generated song does not qualify for copyright protection, the question arises as to whether the person who writes the prompts, edits, or compiles the work can still be considered the owner of an asset under the Vietnamese Civil Code. According to Article 105 of the Civil Code 2015, assets include objects, money, valuable papers, and property rights. While AI-generated music that is not protected by copyright is not considered money or valuable papers, it may be regarded as an object (in the form of a digital file or recording) or as a property right if it can be possessed, used, transferred, or exploited for value. Use of AI-Generated Works Without Copyright Protection If a song is not protected by copyright, does that mean anyone can use it freely? Not necessarily. The absence of copyright does not mean the
Read More
October 24, 2025
The Thai Arbitration Institute (TAI), a division of Thailand’s Office of the Judiciary, has taken a step toward harmonizing the tools available for dispute resolution. On August 8, 2025, the institute formally launched the TAI Mediation Center (TAI-MC). Although the amendments to TAI’s Arbitration Rules that will govern the TAI-MC have not yet been finalized, the framework now under consideration suggests that TAI is positioning itself to become a more attractive venue for commercial dispute resolution. In the regime contemplated under the current version of the amendments, TAI proceedings will adopt an “arbitration-annexed mediation” mechanism—commonly termed the “Med-Arb” model—while preserving the procedural safeguards indispensable to arbitral neutrality. Mediation will be entrusted to a separate, dedicated mediator appointed under the TAI-MC who is precluded from serving on the arbitral tribunal in the same matter. By clearly separating the functions of mediator and arbitrator, the institute eliminates any risk that confidential information disclosed during mediation could influence the adjudicatory outcome if the parties do not settle. Only when all parties subsequently make a request may that same mediator assume arbitral duties in the case. The parties will retain substantial autonomy in selecting the mediator. They may either designate a mediator by mutual consent or invite the TAI-MC to appoint one from its authorized panel. TAI has announced its intention to curate that panel with particular emphasis on commercial expertise and cross-cultural negotiation skills, supplemented by ongoing professional training. Where the parties cannot agree on remuneration, the mediator’s fee will default to a tariff comparable to the TAI-MC’s cost schedule, which under the current version of the amendments will be approximately THB 45,000 for disputes in which the aggregate claims do not exceed THB 10 million, with incremental increases tied to higher claim values. This predictable cost matrix is aimed at enhancing
Read More
October 24, 2025
In Vietnam, litigation is generally treated as a last resort in dispute resolution. Businesses often strive to avoid court proceedings, given the potential for disrupted relationships, higher costs, and lengthy timelines. Yet, litigation is sometimes unavoidable, whether to secure a remedy or respond to a claim. Familiarity with Vietnam’s court system and procedures is therefore crucial for any party involved in such matters. Civil Litigation in Vietnam offers a concise overview of the country’s civil court system and litigation process. The guide a highlights essential points for navigating legal disputes in Vietnam, whether as a plaintiff or a defendant. Tilleke & Gibbins also publishes a similar guide for Thailand. The full Civil Litigation in Vietnam guide is available as a PDF through the button below.
Read More