ICC International Court of Arbitration issues partial award in trademark arbitration relating to AgfaPhoto

The International Court of Arbitration of the International Chamber of Commerce (ICC) issued a decision in the dispute between Agfa-Gevaert and AgfaPhoto Holding with respect to the terminated trademark license agreement regarding the AgfaPhoto trademark. The majority of the court did not uphold, despite the strong dissent of one of the three arbitrators, Agfa-Gevaert’s decision to terminate the trademark license agreement on October 1, 2005.

On November 2, 2004, Agfa-Gevaert sold its consumer imaging division to AgfaPhoto Holding GmbH, an entity controlled by German investor Dr. Hartmut Emans. Following that divestiture, the consumer imaging business has been operated through a group of companies under the name of AgfaPhoto, with AgfaPhoto GmbH in Germany as the primary manufacturing entity. As part of the transaction and for the purpose of supporting its former consumer imaging business and employees, Agfa-Gevaert agreed to grant a license for the use of its ‘AgfaPhoto’ trademark in connection with the ongoing operation of the consumer imaging business.

After the insolvency filing of AgfaPhoto GmbH in May 2005 and subsequent unsuccessful attempts by the insolvency receiver to sell (parts of) the business, Agfa-Gevaert was of the opinion that the third-party sublicensing activity conducted by the shell AgfaPhoto Holding GmbH independent of the former consumer imaging business was not in line with the spirit or the meaning of the trademark license agreement. Agfa-Gevaert thus decided to terminate the trademark license agreement in October 2005.

The sublicensing activity by AgfaPhoto Holding GmbH was only temporarily suspended, however because the arbitral tribunal decided during 2006 in an interim order to temporarily allow AgfaPhoto to use the trademark until the rendering of a final arbitral award. In the meantime, all royalties collected in connection with such sublicensing activities by AgfaPhot Holding GmbH were placed into an escrow account resulting today in a balance of approx. 500.000 Euro.

After extensive arbitration proceedings, including an evidentiary hearing in December 2006, the majority of the court, despite the strong dissent of one of the three arbitrators, has now declined to uphold the termination of the trademark license agreement. Although the court did not question the good faith basis for Agfa-Gevaert’s termination of the trademark license agreement or the company’s belief that the license was granted and existed for the sole purpose of supporting its former consumer imaging business and employees, the majority concluded that the technical terms of the trademark license agreement did not permit such a termination. Nevertheless, the tribunal confirmed that any sublicensing activity by AgfaPhoto must remain limited to the consumer imaging market.

A decision regarding payment claims by AgfaPhoto Holding will be addressed during the next phase of the arbitration proceedings and will be decided by the Arbitral Tribunal in a later stage.

Agfa-Gevaert’s President and CEO, Jo Cornu, stated: “We obviously regret this decision and continue to analyze the award. As a first reaction, I can only confirm that it has always been the intention of Agfa-Gevaert to give the use of the trademark royalty-free in order to help our former consumer imaging division and employees. That business is no longer there. The fact that Mr. Emans can continue to use the trademark is contrary to the spirit of the agreement and comes down to an unjust personal enrichment of Mr. Emans.”