Councillors asked the pub company to remove a carpet that bore the council’s crest at the Sir Samuel Romilly pub in Barry, Vale of Glamorgan, last year.
The carpet was part of a £715,000 refurbishment at the pub, after which pub architects wrote to the council for retrospective permission to use the design.
If legal action is launched, it would mean the first coat of arms dispute heard by the Court of Chivalry since 1954.
A spokesperson for Barry Town Council said it was hopeful that an agreement could be reached without this occurring.
The spokesperson said: “The council, however, remains hopeful that a resolution acceptable to both parties can be agreed, which will avoid the undesirable costs of court proceedings, and which respects both the council’s need to control the use of its arms, and Wetherspoon’s desire to be associated with and serve the community.”
They added: “That was why Mr [Tim] Martin (JDW chairman) was invited to attend the council meeting in January, and the council is due to explore this possibility further with Wetherspoon at the end of this month.
“In the light of those ongoing discussions, it is inappropriate for the council to comment further on the detail of the dispute at this stage”.
The council confirmed no meetings are arranged currently and it was awaiting correspondence from JDW.
JD Wetherspoon chairman Tim Martin said he felt the backlash to the carpet was an unnecessary shame, in an interview with local newspaper The Barry & District News.
Speaking to the newspaper, Martin said: “We were only trying to do something good for the area and for the business.
“It’s not good to annoy local opinion in your design. It’s a question of trying to balance the strong feeling of our customers who overwhelmingly say we should keep the carpet.
“People feel there’s been a bit of showboating by one or two councillors and it’s resulted in unnecessary and unjustified criticism of Wetherspoon.”
The council also explained why it asked the pub company to remove the carpet bearing the coat of arms.
The spokesperson said: “That is because the arms have been granted to the council by the Crown, and while the council’s practice is to authorise use of the arms by local community groups and bodies that it wishes to endorse and support, it is inappropriate for organisations and, in particular, commercial organisations, to adopt the arms without obtaining the council’s consent.”