Family Business. The big battle over brand ownership

On July 16, when Rahul and Atul Kirloskar announced a refreshed brand identity for the Kirloskar group of companies under their control as part of an overall rejig across eight business areas, analysts thought that they had put the family dispute with their middle brother Sanjay behind them. But 10 days later, on July 27, Sanjay sent a complaint to market regulator SEBI alleging that his brothers’ companies were using the intellectual property (IP), trademark, copyright and material part of Kirloskar Brothers Ltd’s (KBL) logo. Sanjay, the promoter of KBL, claims his company is the true owner of the 130-year-old Kirloskar brand legacy, while Kirloskar Industries Ltd, controlled by Atul, came into existence only in 1978 and, therefore, cannot usurp the Kirloskar trademark.

In Delhi, the Munjal family is also in the middle of a bitter feud over the use of brand name Hero for electric vehicles.

Hero Electric headed by Naveen Munjal has claimed the exclusive right to use the brand Hero when it comes to electric vehicles as part of a family pact done in 2010. However, his uncle Pawan Munjal who heads the world’s largest two-wheeler company, Hero MotoCorp, is planning to enter the electric vehicle market next year. Sources close to the Pawan camp have indicated that they would want to leverage the Hero brand, those close to Naveen say that there is a clear agreement within the family on how the brand is to be used by the different branches of the Munjal family tree.

The battle over brand usage in family-led businesses that have carefully built brand equity over decades usually commences in the second or third generation.

Not easy to let go

“Unlike previous generations of business owners, business leaders of today want greater control over what they do within the family/business and have an individualistic approach to envisioning the future of their companies,” said Mehernosh Shapoorjee, co-founder of mediation consultancy Mediation Mantras. “Organisations and individuals have in recent years begun to truly grasp the value of a ‘brand’ built over time and loyal customer segments. This makes holding on to the ‘brand’ you have even more important,” he explained.

But for others such as Ajimon Francis, Managing Director of the brand valuation company, Brand Finance, family disputes are a case of poor brand governance. “While establishing these businesses, the importance of valuing the brand, creating trademarks, well-drafted and well thought out family pacts and ensuring that it is properly used would have been the last thing on the promoter’s mind,” Francis said.

A reason why it’s not easy for any side to let go of a brand is that the task of replicating a strong brand is difficult. But experts say that there could be more value erosion due to public spats than what may be lost by giving up on the brand. Francis says he has seen cases where brand valuation dropped by 30-40 per cent as a result of family disputes. “Generally a material dispute takes away a lot of management bandwidth impacting their performance. Coupled with this is the cost that the company has to incur for litigation, etc.,” said Santosh N, Managing Partner at D & P Advisory.

Collateral damage

Then there is also potential collateral damage to investors and employees of the companies involved. Take the case of Nusli Wadia-promoted low-cost airline GoAir which rebranded as GoFirst on May 13. A day later, the company disclosed in the draft red herring prospectus (DRHP) filing ahead of its proposed initial public offering, that Jeh Wadia, Nusli’s younger son had claimed ownership over all the trademarks and domain names used by the company. Jeh was at the helm of affairs at GoAir since its inception in 2005 but stepped down as its managing director in March this year.

While the airline said the purpose of rebranding was “to fully embrace the ultra-low-cost airline model” to gain an advantage over its peers, in the DRHP filing it said that Go Airlines was weighing legal action against Jeh to establish ownership over all trademarks and domain names used by the company.

Litigation experts and lawyers are of the opinion that it is best to resolve such disputes outside the court of law. “Contested litigation only damages the brand and diminishes positive recall value. The last thing any company would want is for their customers to remember them for ugly litigations” Mohit Saraf, Managing Partner, Saraf & Partners explained.

Role of mediation

Leading corporate mediator, Chitra Narayan added, “It helps for families to air out their issues to a neutral party such as a mediator, who can best aid communication that ensures that the best interests of all parties are preserved. Often families might reject good offers as a result of cognitive biases, and a mediator can help members to overcome such biases and also communicate their sentiments effectively.”

According to Shapoorjee, data available suggests that the rate of positive resolution and settlement of cases through mediation is as high as 70 per cent and most cases get resolved in two to three days or mediation sessions. But he warns that mediation cannot work if the disputant does not want it to work, “disputants need to enter mediation with a resolve that they are seeking resolution and wish to get back to business” Shapoorjee explained. For example, the larger Kirloskar brothers’ dispute over the family deed executed in 2009 could not be resolved through mediation by Vijay Kelkar and the matter went up to the Supreme Court. The top court has now again asked the warring sides to resolve the dispute through a mediator.

Even corporate lawyers agree that settling a dispute outside of court is the best way forward.

Nishit Dhruva, Managing Partner, MDP & Partners, Advocates & Solicitors said aggrieved parties should take legal recourse only if there is no other option. Every dispute that could ultimately culminate into a court battle, should first be looked at from a pro-settlement angle. Moreover, the problem presented before a court is filtered and answered from purely a legal standpoint. A settlement, on the other hand, is guided by the commercial morality attached to a problem, said Dhurva.

(With inputs from Suresh P Iyengar)

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