Open Access Research Article
ARBITRATING INTANGIBLES: INTELLECTUAL PROPERTY RIGHTS AS CATALYSTS FOR LEGAL INGENUITY BY: DHVANI KAMRA & DR. BHAVNA BATRA
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AUTHORED BY: DHVANI KAMRA & DR. BHAVNA BATRA
ABSTRACT:
This study undertakes a thorough investigation into the arbitration
process specific to intellectual property (IP) disputes, broadening its
analytical scope from a domestic Indian context to a more expansive
international framework. Central to this exploration is the nuanced concept of
'arbitrability'—the capacity of a given dispute, particularly within the domain of IP, to
be resolved via arbitration
rather than through traditional court proceedings or alternative legal forums.
This study methodically assesses the practicality and overall efficacy of
employing arbitration as the primary dispute
resolution mechanism for IP conflicts, considering both the unique Indian
legal framework and the wider, diverse global legal
landscapes.
Embarking on this scholarly journey, the study underscores the inherently international character of IP
disputes. This global nature is largely attributed to the ease with which
intellectual property can be transferred across national boundaries, thus
necessitating a more critical examination of international arbitration
practices. The study meticulously examines various case laws within the Indian
context, setting these against a backdrop of international legal perspectives.
This approach highlights the fact that while IP rights are typically
established and governed at the state level, there is a significant variance in
how different national legal systems address the arbitrability of such
disputes.
Delving deeper, the research intricately outlines the specific types of
IP rights that are susceptible to arbitration.
It then ventures into an in-depth analysis
of the myriad challenges and unique considerations encountered when
arbitrating these IP rights, drawing on examples and comparative studies from
various common law jurisdictions.
Through this detailed examination, the study
aims to shed light on the diverse degrees to which different legal systems
either accommodate or limit the arbitration of IP disputes.
“In the realm of intangible rights, where innovation
and law intersect, arbitration
stands not merely as a method of dispute resolution but as a testament
to legal creativity and adaptability." This perspective is central to the
study's overarching goal, which is to elucidate the complex and
multidimensional relationship that exists between the arbitration process and
intellectual property rights.
This study posits that despite existing challenges, arbitration is
anticipated to serve as a viable and effective approach for resolving
intellectual property (IP) disputes, applicable both domestically and
internationally. It not only enriches the academic discourse
surrounding IP rights and arbitration but also
serves as an invaluable reference
for practitioners in the field,
navigating the complex
and dynamic landscape of
international IP arbitration.
## Introduction to Intellectual Property
Arbitration
Intangible assets like patents, copyrights, trademarks, and trade secrets invariably involve intricate legal issues. Arbitrating disputes associated with these assets requires a deep understanding of both the legal
framework and the technical aspects of the assets involved. This complexity can
stimulate legal professionals to develop
innovative arguments and approaches to deal with these problems effectively. The combination of laws that seemingly function
in various domains
has posed a frequent challenge
to arbitration, traditionally in the form of concerns over the
arbitrability of disputes.
Here, arbitrability connotes the notion that a dispute, by its nature, is
capable of being adjudicated beyond public fora, through a private tribunal
chosen by parties. This ‘objective’ arbitrability
differs from ‘subjective’ arbitrability, which is the scope of arbitrable
disputes as defined in an arbitration agreement. This discussion focuses
on objective arbitrability. In the context
of IPR disputes, concerns of
objective arbitrability stem from the impact arbitral awards may have on
non-consenting parties. Owing to insufficient legislative engagement with this
issue, judicial positions on the arbitrability of IPR disputes in India remain
unsettled.
Arbitration as a mode of alternative dispute resolution allows parties to
resolve their commercial disputes within a stipulated timeline. We know the
benefits that arbitration provides to the parties; however, certain types of disputes are incapable
of being resolved via arbitration and the only remedy is litigation. In this study,
the judicial approach to the arbitrability of copyright disputes in India is analyzed.
Before delving into the issue,
it is crucial to understand the concept of arbitrability or the disputes
which are capable of being resolved
through arbitration. Arbitrability of a matter means whether it is capable of arbitration. The legislation neither defines arbitrability
nor illustrates the matters which are capable of arbitration. However, the
Supreme Court in Booz Allen not only defined arbitrability but also illustrated
the matters which are incapable of settlement through arbitration.
The Hon'ble Supreme
Court laid down a basic principle to decide the arbitrability of any matter,
stating that matters which
relate to actions
in personam, i.e., actions
determining the rights
and interests of the
parties themselves in the subject matter of the case, are capable of being
resolved via arbitration. However, matters related to actions in rem, i.e.,
rights exercisable against the world at large, are incapable of being resolved
through arbitration. The Supreme Court emphasized
that the decision of the arbitrator is not binding
on non-signatories but only on the parties
to the contract. Therefore, actions in rem, which are exercisable
against the public at large, are incapable of being resolved through
arbitration, and an arbitrator's decision cannot bind the public at large.
Moreover, the court has held that "Disputes relating to subordinate rights
in personam arising from rights in
rem have always been considered to be arbitrable." Therefore,
conclusively, actions in rem are in-arbitrable, and actions in personam are
arbitrable.
Arbitrability of Intellectual Property Disputes has been a controversial
topic in the Indian legal landscape. The courts have held that disputes
concerning Intellectual Property Rights are non- arbitrable. The Arbitration
and Conciliation Act, 1996, which is the specific domestic legislation
concerning Alternative Dispute
Resolution in India, does not make any specific provision for excluding any
category of disputes from ADR,
including Intellectual Property Disputes. Hence, there is a large reliance on
judicial pronouncements to understand the scope and extent of arbitration in
India.
The Supreme Court has held that disputes arising out of trademarks,
copyrights, and patents are in- arbitrable per
se. However, since this categorization was limited to the Court’s
obiter dictum, it cannot be conclusively followed as precedential authority. There are varying schools of thought on the matter, and essentially, from various
decisions, it can be observed that there is no absolute bar on the
arbitrability of IP disputes.
As per the Civil Procedural law of the country, if the court deems fit, it can allow arbitration, mediation, or conciliation for settlement
of disputes between parties outside
the court, which expressly means that
the court has the power to refer IP matters to
ADR. Arbitration and other ADR mechanisms tend to provide speedier
resolutions of disputes than going through litigation in courts. This typically
occurs either because arbitration and ADR proceedings can commence without
delay or because of the flexibility in administering arbitration and other ADR proceedings. The speed of dispute resolution is an important consideration when it involves
intellectual property rights.
The reason for this is that court litigation can take much longer than the period of protection for the product
involved. For example, if the dispute concerns a patent, which is protected for
a maximum period of twenty years, court proceedings can last five years, thus
rendering the case useless or reducing the patent's lifespan and affecting the
patent holder's profitability.
The term ‘intellectual property’ is comprehensive and encompasses largely
all creations of human intellect. As
the name suggests, any creation of one’s mind, a product of their intellect, is
considered their intellectual property. Nearly everything around us can be
considered the intellectual property of someone, whether it is the computer
screen you are reading this on, the software used to run the computer, the design of clothes you are wearing,
or the lightbulb acting as a source of light.
Predominantly, everything around us is the intellectual property of someone else. The World Intellectual Property Organization (WIPO) defines Intellectual Property (IP) as
"creations of the mind, such as inventions; literary and artistic works; designs; and symbols,
names, and images used in commerce."
Arbitrability of Disputes in India and
IPR
The relationship between
Competition Law and IP rights may inherently seem conflicting but in reality, it is not. Rather, it promotes
investments in dynamic competition by limiting static competition. IP rights provide
their holders a head-start over others by granting them the right to exploit
commercially their product within a specific duration. During this
period, the IP right holder will always have monopoly power and a position of
dominance. Competition Law has never excluded monopolistic behavior from its
purview but asserts that the abuse of such a position will amount to a
violation of anti-trust laws.
Throughout long-term changes
in law and experiences from numerous cases, there has been a congruent
and non-conflicting evolution of these twin laws. To understand the
complexities of applying competition systems and IPR, it is crucial to note the
legal guidelines of various countries and their approaches to counter these issues. For instance, Section
3 of the Indian Competition Act, 2002, states: "No enterprise or
association of enterprises or person or association of persons shall enter into
any agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provision of services, which causes or is likely
to cause an appreciable adverse effect on competition within India." Section 3(5) provides a broad exception for IPR, indicating that
competition provisions do not interfere with IPR strategies unless there is an abuse of dominant
position under Section
4 of the Act.
Like the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, India can enact provisions
like Compulsory Licensing in cases of excessive pricing. Tying arrangements
should be managed by the Competition Commission of India (CCI),
which must consider
stringent standards and rules
based on discoveries from the US and EU. The courts
have adopted the principle that "the interest of the consumer is of paramount importance" and cannot be sacrificed for the
sake of the rights holder. India can learn from the practices and cases in the US and EU to develop
robust responses to IP-related
competition issues.
The academic efforts of IP creators are measured based on the rights
attached to their creations. Intellectual property insurance instructs creators
to exercise control over third parties. Without their consent, third parties
will attempt to use the creation, causing
a disincentive for creators. IP laws encourage innovation by making
sure creators can control the
use of their works. Conversely, it is often misconceived that these laws create
monopolies, whereas, in reality, they protect creators' rights and encourage
further innovation.
In the Indian context, the Delhi, Mumbai, and Madras High Courts have
rendered various judgments regarding the arbitrability of IPR disputes, which
have not always been consistent. The Delhi High Court, in the case of **Eros
International Media Ltd. v. Telemax Links India Pvt. Ltd.**, held that disputes
pertaining to IP rights are arbitrable if they relate to the contractual terms
between parties. Conversely, the Bombay High Court, in the case of **Steel
Authority of India Ltd. v. SMS Siemag AG**, expressed a different view,
suggesting a more restrictive approach towards the arbitrability of IP disputes.
These differing opinions
highlight the evolving judicial attitude towards this issue and the ongoing
debate in Indian jurisprudence.
The WIPO Arbitration and Mediation Center
The WIPO Arbitration and Mediation Center, established in 1994, offers
an array of alternative dispute resolution (ADR) services,
primarily tailored to IP and technology-related disputes. The Center
facilitates arbitration and mediation processes, providing model agreements and
guidance to ensure effective and efficient
resolution. Given the cross-border nature
of many IP disputes, the WIPO Center's emphasis on confidentiality and
neutrality is particularly advantageous. It also provides specialized training
for arbitrators and mediators, ensuring that they possess the requisite
expertise to handle complex IP matters.
The WIPO Center’s
role is crucial in promoting
ADR for IP disputes, aligning
with international best practices and fostering a conducive environment
for the resolution of such disputes outside traditional court systems.
WIPO Arbitration Procedure
The WIPO Arbitration process begins with an agreement between parties to
resolve their dispute through arbitration. This agreement can be pre-existing,
embedded within a contract, or agreed upon after a dispute arises. The WIPO Center assists in the selection of
arbitrators, ensuring they have the necessary expertise in IP law and the technical aspects of the
dispute. The arbitration proceedings are confidential, allowing parties to protect sensitive information and trade secrets.
The process is flexible and can be tailored
to the specific needs of the parties involved, ensuring a fair and efficient resolution.
The WIPO Arbitration Rules provide
a comprehensive framework
for the arbitration process, including provisions for the appointment of arbitrators, conduct
of proceedings, interim
measures, and the rendering
of awards. These rules ensure that the arbitration process is conducted in a
manner that is consistent with international standards and best practices.
Temporary Relief in IP Arbitration
Speedy and effective legal
remedies are crucial in IP disputes
to prevent significant asset
devaluation. ADR mechanisms provide quicker resolutions compared to lengthy
litigation processes, which is essential in time-sensitive IP matters such as patents,
where delays can severely impact
the commercial value of the protected
innovation. The flexibility of arbitration allows for
interim relief measures, such as injunctions, to be granted swiftly to prevent
further infringement or damage. This is particularly important in IP disputes,
where the value of the protected asset can diminish rapidly if not protected
promptly. The ability to obtain temporary relief through arbitration can
provide parties with the necessary protection while the dispute is being
resolved.
Challenges in Arbitrating IP Disputes
Arbitrating IP disputes presents
unique challenges, primarily due to the inherent nature
of IP rights and the
public interest involved. One of the main challenges is ensuring that arbitral
awards do not affect third parties who are not part of the arbitration agreement. IP rights,
by their nature,
often have a broader
impact beyond the immediate parties to the dispute. For example, a patent
dispute may involve considerations of public health and access to technology,
which extend beyond the interests of the disputing parties. Arbitrators must carefully balance
these broader interests while resolving the dispute,
ensuring that the award does not infringe on the rights of third parties or
contravene public policy.
Additionally, the technical complexity of IP disputes
requires arbitrators to have specialized knowledge and expertise in both the legal and technical aspects
of the subject matter. This can be challenging, as finding arbitrators with
the necessary expertise can be difficult and may increase the costs associated
with the arbitration process. Moreover, the global nature of many IP disputes
necessitates an understanding of multiple legal systems and international IP
law, adding another layer of complexity to the arbitration process.
Mustil and
Boyd emphasized that there is a difference between personal rights caused by
property rights, which can be arbitrated, but property rights themselves
cannot. To clarify this distinction, the author proposes examples of disputes
related to rights under patent licenses, as opposed to disputes involving the
validity of patents. The first type of dispute is arbitrable, and the other
type is not arbitrable. The limitation of arbitrability is not established by the intervention of foreign mandatory legal norms,
but only by the limitation imposed by public policy in international affairs.
In other words, the author believes that the
restriction is self-imposed, not the express prohibition of Law.[1]
The above discussion
pointed out the conclusion that the big angle should be the first consideration
is the idea of debate. If the idea of the problem is combined with the
legitimacy or recruitment of intellectual property rights, the debate is beyond dispute. There is no issue
of arbitrability for disputes
involving infringement of intellectual property
rights from the agreement or when the agreement exists. However, in any other discussion
of intellectual property rights, including legally binding rights or
intellectual property rights
arising from agreements, it must be assumed that the issue can be arbitrated.
The general rule that can be defined
is that when the legality of intellectual property
rights is yet to be debated
and the issue is limited to intellectual property requirements, the issue can
be safely ordered arbitrarily.[2]
It is also obvious
that there are still some difficulties in this process.
Generally speaking, the debate on intellectual property is related to
intrusion/implementation activities against parties to unauthorized commitments
in a transcendent way. In the absence of an arbitration agreement, ordinary
courts are standard meetings for raising questions. The debate on intellectual
property rights caused by the agreement is gradually standardized. Usually,
incredible problems and many different problems also arise with the requirements of intellectual property rights,
and the requirements of intellectual property rights may be inseparable from the legality
of intellectual property
rights. In addition
to increasing these difficulties, the legality of intellectual property
rights is often maintained on intellectual property
issues. It is interesting that countries have very different legal status on this issue. Switzerland adopts
the most liberal method. In 1975, the Swiss Federal
Office for Intellectual Property explained that the arbitration court is capable of determining the legality of intellectual property
rights. Furthermore, some countries
such as South Africa prohibit any arbitration that fully covers intellectual
property issues. Different countries such as France, Italy and Japan
have adopted a more prohibitive strategy, taking into account
the arbitration of intellectual property infringement, rather than the legality
of intellectual property rights.
Despite this,
the internationally recognized view is that meetings on a global
scale in an ever-evolving
world have created miracles of hosting IP debates and solving their problems in
ADR, including arbitration, including IP debates. The number
of
IP arbitrations guided by W.I.P.O is developing rapidly.
W.I.P.O describes the special
principles of arbitration for intellectual property matters. Some regions
similar to the United States,
Hong Kong, Switzerland, and Israel have made further
progress and outlined unusual regulations on the
arbitrability of intellectual property issues, thus setting aside discussions
about the arbitrability of intellectual property debates.
The determination of whether a specific intellectual property rights (IPR) issue can be resolved
through arbitration is a complex and nuanced matter that lacks a
one-size-fits-all solution. Each case must be carefully examined in light of
its unique circumstances, considering factors such as the nature of the
dispute, the parties involved, and the underlying legal and factual issues.
In India, the
drafting of arbitration clauses in agreements has evolved to be comprehensive
and meticulous, aiming to ensure clarity
and effectiveness in dispute resolution. This approach has
led to a consistent interpretation of these clauses
by arbitration tribunals
and courts alike, contributing to a more predictable and efficient
arbitration process.
The trend
towards a more pragmatic and comprehensive approach in handling cases,
including those involving IP disputes, is evident in recent legal developments.
Courts and tribunals are increasingly recognizing the benefits of alternative
dispute resolution mechanisms, such as arbitration and mediation, in resolving
complex IP disputes.
The Bawa
Masala Company case provides a notable example of this trend. The use of early
neutral evaluation in this case demonstrates a willingness to explore
innovative approaches to dispute resolution. This method, which involves a
neutral evaluator assessing the merits of a case at an early stage, has the
potential to expedite the resolution process and reduce the time and cost
involved in traditional litigation.
Arbitration
and mediation clauses have become increasingly common in intellectual property
transactions, reflecting a growing recognition of the benefits of these
alternative dispute resolution mechanisms. By allowing parties to tailor the
resolution process to their specific needs and circumstances, arbitration and mediation offer a more flexible and efficient way to resolve complex
IP disputes.
Overall, the
evolving landscape of intellectual property dispute resolution in India is characterized by a shift towards a more
holistic and innovative approach. By embracing alternative dispute resolution
mechanisms and adapting to changing legal and commercial realities, India is
paving the way for a more efficient and effective resolution of IP disputes in
the future.
This shift towards
alternative dispute resolution is also influenced by the recognition
of the limitations of traditional litigation in handling complex
IP disputes. Traditional court
proceedings are often time- consuming, costly, and may not always result in a satisfactory outcome for all parties involved.
By contrast, arbitration and mediation offer a more streamlined and
flexible process, allowing parties to resolve their disputes in a more
efficient and cost-effective manner.
Additionally, the growing use of arbitration and mediation in IP disputes
is reflective of a broader
trend towards the globalization of intellectual property
rights. As businesses increasingly operate
on a global scale, disputes involving
IP rights are becoming more complex and multi-jurisdictional. Arbitration and mediation offer a forum for resolving these disputes that is
not bound by the limitations of national courts, allowing for more efficient
and effective resolution of disputes across borders. In a landmark judgment in the case of Bawa Masala Co. vs. Bawa Masala Co. Pvt.
Ltd. and Anr.[3], After
several legal debates were resolved through
the interaction of agency issues,
the Delhi High Court approved
a period of funding order
called early fair evaluation in an intellectual property-based case. In 1908,
the court in response to this situation, under the protection of the 89th Session of the Communist
Party of China, proposed to consider this method to resolve the debate brilliantly. The court also said that the early
non- partisan assessment method
had "similar highlights to the mediation
cycle... The important thing is that in the case of mediation, the
settlement is usually reached at a meeting, and the arbitrator agrees to pursue the proper
arrangement." In the early fair evaluation, the evaluator will check the strengths and weaknesses of each meeting
as an impartial individual.” The court also made a reservation between
the early non-partisan evaluation and the arbitration, stating that in
the early fair evaluation, there was “no statement, promise or evaluation,
and no such fair evaluation was recorded." The court also held that the
early non-partisan assessment was “secret, and neither party can use the other
party’s meetings. There is no honor or evidence of results.” This is an original case. In this case, the Indian court Attempt
to include a selective debate purpose tool to solve problems related to
infringement of intellectual property rights. This case
further demonstrates the trend that Indian courts have begun to share,
which is to include objective measures of alternative debates in the objectives
of such issues.
In any case, an
objective method of selective issues should be used to ensure that discussions
related to intellectual property rights can resolve certain issues. In the
first place, since the guarantee of intellectual property rights is regional in nature, the public order
based on ONGC v.
Serra Pipes placed around the LIC, provided that it is carried out in accordance with the
order of the IP, can constitute
an obstacle for the enforceability of
the arbitration award. Related
questions. In addition, the issue of the legality of intellectual property
rights focuses on protecting the rights
of all people. This may represent another obstacle to the use of
targeted hardware in intellectual property discussions. However, when deciding on rights between
two meetings, safeguards against infringement of intellectual property
rights can be actively used through the use of selective discussion
hardware.
“Delhi High Court
in the case of Mundipharma AG v. Wockhardt Ltd[4]. Responsible for administering the arrangements for Chapter 12 of the
Copyright Act of 1957 and determining
whether there should be common methods of copyright infringement. The ruling is
that any litigation or other joint proceeding
involving the infringement of the copyright of any work, or the infringement of other rights granted by the Copyright Law will
be determined in the district court with jurisdiction.
The Madras High
Court in the case of RK Production Pvt. Ltd. v. M/s. NK Theatres Pvt. Ltd”[5] He is dealing with a case
arising from an inter-sessional agreement on copyright tasks, which contains an
arbitration clause. Some issues include ideological non-delivery and the
parties’ ignorance of the appropriateness of the arbitration statement. The
court held that each of these issues cannot be separated, nor can these issues be submitted to arbitration. The judge did not
elaborate on the reasons. Therefore,
it is uncertain whether the explanation is based on the question of whether the
question includes people who have not settled, or whether the discussion also
addresses copyright.
In a recent judgment
of Lifestyle Equities CV v. QD Seatoman Designs Pvt. Ltd.[6] The
Madras High Court held this event
and discussed this issue in
detail. The judge took note of the rulings of the Delhi
High Court and Mumbai High Court mentioned
above, as well as the few different
rulings recalling the Supreme Court decision.
is from Common Cause v. UOI's
interpretation, when interpreting the infringement obligation, the Supreme
Court implied the meaning of "misconduct" and demonstrated that the
copyright of misconduct is an infringement of the privilege of rem.
. In his Booz Allen
Hamilton v. SBI Home Finance Ltd., most of the Supreme Court's rights against
property rights must be chosen by the court and not by the arbitration
committee. This is considered "in any case, it is not a principle of inflexibility or determination." "It
is clearly stated that" the debate on the determination of secondary rights of the
personality derived from real law has always been considered arbitrable. "The interesting thing is that it
is attributed to the inclusion of the real right
after the real right that cannot be mentioned. Illustrative question type.,
Identifies problems related to intellectual property rights without prior
notice.
It is essential
that the Supreme
Court relies on A Ayyasamy
v. Paramasivam proposed
a non-arbitrable category of
issues, one of which is the debate on licenses, trademarks and copyrights.
At this
stage, it is necessary to clarify that the previous categories mentioned in the
Judgment have been determined. Excerpted from the book "Indu Malhotra", "OP Malhotra
on the Law and Practice
of Arbitration and Reconciliation", Thomson Reuters Third Edition,
2014, not based on any dialogue or thought. Subsequently, this classification can, at best, be regarded
as the opinion of the author,
not the opinion of the Supreme Court.
Likewise in
India, arbitral awards relating to patent infringement or validity could be
denied as being against public policy.
In the ONGC v Saw Pipes case (2003), the
Court noted that the concept
of public policy
connotes some matter which
concerns "public good and the public interest” and that “what is public
good or public interest has varied from time to time..." also noting that
an arbitral award, "patently in violation of statutory provisions cannot
be said to be in public interest".
Public policy was given a far wider
meaning than as held previously in the Renu
Sagar v. General Electric Co. case (1993), increasing the scope thereby of
judicial intervention and undermining the scope of IP arbitration.
In yet another ruling, the Constitutional Bench of the
Supreme Court on September 6, 2012 in Bharat Aluminium Co. v
Kaiser Aluminium Technical Service, Inc. (where IPRs were also in dispute)
overruling the Bhatia International ratio, decided that Part I of the Arbitration and Conciliation Act, 1996, had no application to arbitrations which were seated
outside India, irrespective of the fact whether
parties chose to apply the Act or
not. This decision having far-reaching implications will now impact and affect decisions on whether to have the seat
of arbitration outside India and thereby, international intellectual property
transactions. The Parties
in an international commercial arbitration having the seat of arbitration outside India cannot
agree to have jurisdiction to be exercised by Indian Courts.
However, the
argument against arbitrability of IP disputes, especially where international
ones are concerned, stems from the constraints of the territoriality of IP laws, especially in subjects like patents where perhaps issues linked to
patent validity and public interest come under the scanner. In international
patent arbitrations, the courts may refuse to enforce a foreign award based on
a foreign law as being contrary to public policy and Indian interests. Patent
matters in particular are considered
not arbitrable as courts hold the exclusive jurisdiction to hear them in India.
Though section 103 of the Indian Patent Act allows
the Court to refer any question on patent validity to arbitration, generally speaking,
the said Act and the Arbitration and Conciliation Act are silent
on the enforceability of
arbitral awards for infringement or validity.
With delays and
judicial interference hampering the progress of successful arbitration in
India, the essence of dispute resolution is minimized. This could be the factor
for the slow movement of arbitration as an ADR
measure in the IP sector too. The Centre has
formulated the National Litigation
Policy 2010 to reduce the cases pending in various courts throughout India
(more than 30 million according to recent estimates) with the mission to reduce the average pendency time from 15 years to 3 years.
The policy also highlights that ADR should be "encouraged at every
level" as long as arbitrations would be cost effective, efficacious,
expeditious and conducted with high rectitude."
In India as the recent E&Y
report suggests, arbitration is being rationalized as sector specific
expertise, with for instance, the construction industry having created
the Construction Industry Arbitration Council (CIAC) and the Bombay Stock
Exchange having developed specific arbitration cells that provide relevant
technical expertise. With greater competition and growing awareness about intellectual property
rights giving rise to an increased volume of disputes, mechanisms of
Alternative Dispute Resolution such as arbitration has been gaining ground
across the globe.
What stops then, the
Department of Industrial Promotion and Policy in proposing necessary amendments in the IP/patent laws and enabling and encouraging institutional arbitration in intellectual property disputes? The same
could be modelled on the lines of that set-up by WIPO. Enforcement of arbitral awards is as important as the
finality of the awards themselves. Looking forward, intellectual property
rights are that patents, copyrights, trademarks and other statutory forms or
those like trade secrets and confidential information that are simply
determined by contracts, in any country are only as strong as the means
available to enforce them.
Lack of a Supreme Court precedent settling
the issue
The Supreme
Court of India has not
conclusively settled the issue of arbitrability of IP disputes. In the Ayyasami Case, patents,
trademarks and copyrights were listed in the category
of inarbitrable disputes. However, the main issue before
the court was of arbitrability of fraud. Thus, categorization of IP disputes as
inarbitrable was only obiter dictum. Therefore, this decision cannot be read to
bar arbitrability of IP disputes.
Different positions of Indian High Courts
Both the
aforementioned tests of arbitrability have been used to hold IP disputes
inarbitrable. In the Mundipharma Case, the issue was whether a claim of
‘copyright infringement’ was arbitrable. The Delhi High court held the dispute to be inarbitrable given that infringement of copyright is a
statutory claim, having definite statutory remedies that are to be granted
exclusively by civil courts. This ruling thus seems
to echo the second test of arbitrability that bars arbitrability of disputes arising
out of special statutes which are reserved exclusively for civil
courts.
Subsequently, in the SAIL Case [Suit
No. 673/2014], a claim of ‘trademark
infringement’ was held to be inarbitrable by Bombay High Court reasoning, “the rights to a trademark and remedies in connection
therewith are matters in rem and by their very nature not amenable to the jurisdiction of a private
forum chosen by the parties”.
Accordingly, the dispute was held to be inarbitrable on the basis of the first
test of arbitrability that makes actions in rem inarbitrable.
The Eros Case marked a significant departure from this trend. In this case, the Respondent was granted a copyright license to distribute the Petitioner’s
films. The license included a negative covenant prohibiting the use of copyrighted films upon termination. The Respondent
violated this term, leading the Petitioner to initiate arbitration for the
‘violation of the contractual covenant.’ This claim,
rooted in contract, still
required establishing copyright infringement.
The recent
ruling by the Bombay High Court has profound implications for resolving
intellectual property (IP) disputes,
particularly concerning their arbitrability. By affirming
that IP disputes arising from
contractual agreements are arbitrable as actions in personam, the court
expanded private arbitration in IP law. This
decision recognizes the contractual dimension of many IP disputes,
promoting efficiency and flexibility in dispute resolution.
Moreover, the
court's assertion that arbitrators can adjudicate infringement claims is
significant, highlighting the specialized nature of IP disputes and the need
for expertise in resolving them. It also reflects a trend in arbitration
towards granting arbitrators greater authority in deciding complex legal issues.
Furthermore, the court's rejection of the second test of arbitrability, which deems disputes
from special statutes as
inarbitrable, is notable. This test is applied where public policy warrants
disputes to be adjudicated by courts.
However, the court's
decision suggests such considerations may not always
apply in IP disputes, recognizing their often private nature suitable
for arbitration.
The evolving
IP dispute resolution landscape in India, seen in the Eros Case and the recent
Bombay High Court ruling,
demonstrates a growing recognition of arbitration's viability. This trend reflects
the need for efficiency and flexibility in dispute resolution,
highlighting arbitration's potential to benefit the IP ecosystem.
Since the Eros and Euro Kids cases, other IP disputes that
are purely born out of such negative covenants
in contracts have also been upheld as being arbitrable.[7]
ANALYSIS AND CONCLUSION
In previous
cases such as Munidpharma and SAIL, the issue of arbitrability of intellectual property
(IP) disputes was examined.
In these cases,
the petitioners raised
statutory claims of copyright or trademark
infringement, seeking statutory or public law-based remedies. Initially, the scope
of IP disputes tested for arbitrability was limited to those arising
solely from IP statutes. However,
it is essential to recognize that IP disputes can also have a
contractual dimension.
Recent cases like EROS and Eurokids
have addressed the arbitrability of purely contractual IP disputes, marking a
shift in the understanding of arbitrability. These cases correctly
distinguished from SAIL's ruling on the inarbitrability of purely statutory IP
claims, indicating that contractual IP claims are arbitrable.
In India,
there is no absolute prohibition on the arbitrability of IP disputes. The
arbitrability of such disputes is determined based on the nature of the claims
involved. Disputes over
royalty, geographical area, marketing, and other terms of
license agreements, which
are contractual in nature, are considered
arbitrable. Parties in India are
encouraged to arbitrate
such disputes freely.
However, disputes over the validity or ownership of an IP right should be adjudicated by the court
or assigned public administration, as they can impact the
general public's right to use the asset.
The arbitrability of infringement claims depends on the specific circumstances of each case. Statutory infringement claims alone are generally not
arbitrable, as per the Mundipharma and SAIL cases. However, infringement claims
arising from a contract are arbitrable, following the decisions in the EROS and Eurokids
cases. In cases where a counterclaim is raised regarding the validity of an IP right
alongside an infringement claim, the court
should resolve the counterclaim,
as it involves an action in rem. Pending such resolution,
arbitration may be stayed.
This approach to arbitrability strikes a balance between the rights
of inventors/authors and the general
public. It allows inventors/authors to arbitrate contractual rights while
ensuring that courts retain jurisdiction over matters
that affect the public's right to use copyrighted works and patented
inventions. This balance is
crucial for the effective functioning of the IP regime and encourages inventors. It also
safeguards the public domain and public interest by retaining the courts'
jurisdiction over certain IP matters.
[1] O.P. Malothra, The law and
practice of Arbitration & Conciliation (2nd edn, LexisNexis Butterworths , New
Delhi 2016).
[2]
Ahuja S. Arbitration Involving
India: Recent Developments, 18(3) Asian Dispute Review (2016).
[3]
AIR 2007 Delhi 284, (2008)
149 PLR 38
[4] ILR 1991 Delhi 606
[5] Original Side Appeal No.307 of 2012
[6] O.S.A.Nos.216 and 249 of 2017
[7]
Deepak Thorat v. Vidli
Restaurant Limited, 2017 SCC OnLine Bom 7704
Article Information
ARBITRATING INTANGIBLES: INTELLECTUAL PROPERTY RIGHTS AS CATALYSTS FOR LEGAL INGENUITY BY: DHVANI KAMRA & DR. BHAVNA BATRA
Authors: DHVANI KAMRA, DR. BHAVNA BATRA
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/05/21
- Issue 7
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International Journal for Legal Research and Analysis
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