The Scope of Arbitrability of IPR Disputes in India

Kavya Arora and Aryaman Kaushik*

Introduction

Gradually over the years, the Arbitration Act, 1996 has developed substantially, which has resulted in less interference by the courts. It has provided for a friendlier and independent body, which lays down its effective rules and regulations. Because of this, the methods of alternative dispute resolution have gained much popularity in the commercial and the business sectors. Most of the parties associated in these transactions prefer arbitration over the other types of dispute resolution systems as it gives freedom from the lengthy procedure of litigation. Arbitration has picked up pace and especially Institutional Arbitration is now becoming very important for all the sectors that are currently in the growing phase in India when we look in the context of globalization and liberalization. Even though, there have been numerous amendments over time, the act still has a long way to go so as to gain a foothold in India. 

Arbitrability of IPR Disputes

Intellectual Property Disputes are commercial in nature and also have an international ambit attached to it because these rights are often protected over multiple jurisdictions. These rights are given to people for their creations. They can be owned, sold, brought or even bequeathed. These are not exhaustible and tangible. IP owners tend to be inclined towards traditional courts, because the true capabilities of other dispute mechanisms like arbitration and mediation has not been fully utilized. But, the mechanism of arbitration and mediation can be a new way to resolve such disputes. Since, this protection is available for only a period of time, speedy mechanism is the key.

Many legal systems haven’t allowed arbitration for IPR disputes, because of the rights been granted by the sovereign power. The authority which issued these rights, have the power, to adjudicate upon these matters. However, it has been broadly accepted that such disputes can be referred to arbitration and like IPR disputes, other commercial arrangements can also be resolved through arbitration. Alternative mechanisms have been referred to IPR matters by the WIPO as well, by setting up of WIPO Arbitration and Mediation Centre which is  an international non-profit dispute resolution system. It is advantageous because it is neutral, cost efficient, saves time and also enables private parties to settle their IP disputes out of courts, be it domestic or cross-border.

India’s stand on IP disputes is logical but a little complicated, as the confusion arises because of the policy dispute regarding rights in rem and personam. IPR are considered right in rem as the owner has exclusive rights over his property. A right in rem can be exercised against the whole world which is opposed to a right in personam which is exercised against an individual. Different courts over time has disputed upon the fact that whether right in rem are arbitrable or not. But, it has been resolved for the time being that IPR disputes can be resolved through alternative mechanisms and has also rejected the blanket ban of arbitration over the same.

The important factor that enables a party to choose arbitration in IPR disputes is the criticality of time. Factors such as patent terms that are limited and the technology which could become out of date fast should be considered. Because of the time taken by the courts to pass a judgement, the scope of appeal goes against the interest of the parties as it will only prolong the case. Hence, this is where arbitration comes in the picture where it provides these sectors advantages that are particularly valuable for them in the long run. The only main obstacle that arises when you use arbitration to resolve the intellectual property right matters is the subject matter arbitrability.

It’s a known fact that IP Arbitrations are rare because IP disputes in frequent cases do not involve a pre-existing contractual relationship. But, on the other hand, arbitration has a requirement of a contractual agreement to arbitrate. There are some countries that do not allow the arbitral tribunals to adjudicate on the matters of patent invalidity. Thus, the grounds of arbitrability of disputes pertaining to intellectual property are very narrow and should not restrict the parties in any manner for basically planning and conceptualizing in advance for how and intellectual property could be structured successfully and what are the factors that should be taken into consideration for this framework.

Existing Jurisprudence

The Supreme Court in the case of Shreevardhman Rice & Gen Mills v. Amar Singh Chawalwala, held that IPR disputes are mostly fought between the parties over the issue of temporary injunction. It takes a huge amount of time to grant the same, so the court suggested that the provision under Order XVII Rule 1(2) CPC should be strictly adhered to and the decision over temporary injunction must be granted within 4 months.

Expert officers and an understanding in technology are required to preside over the disputes of copyright and patent law. In Bajaj Auto Ltd. v. TVS Motor Company Ltd., it was further held that in the disposal of such cases, the parties have to go through unwarranted delay and a costly litigation which defuses the main purpose of the case. Opting for ADR mechanisms in commercial cases would benefit the parties. ADR might also help in narrowing down the issues for contestability in a litigation process. 

All disputes regarding right to personam could be referred to arbitration while disputes pertaining to right in rem are to be referred to courts and tribunals because in such cases the dispute arise out of special statue or the courts have exclusive jurisdiction. The same was upheld in the case of Booz-Allen & Hamilton Inc. v. SBI Home Finance Ltd. & Ors. However, in A. Ayyasamy v. A. Paramasivam & Ors, the Supreme Court laid down that the mechanism of Arbitration cannot be used in the matters pertaining to IPR. The same was only obiter dictum and no reasoning was put down for the same.

This decision cannot be read as a bar of ADR on IP disputes as right in rem can be distinguished in IPR with the help of legislative clarifications. It enables a case to be referred to arbitration when the IPR dispute involves right in personam. In the case of O.N.G.C v. Saw Pipes, the consideration of public policy was set down while adjudicating over a dispute of IPR as the protection of IP is territorial in nature. The issue faced was that the award would only be binding on the parties and not on any third party.

The Bombay High Court in Eros International Media Limited v. Telemax Links India Pvt Limited, held that where it is specified in the contract between parties that the disputes arising out of such contracts would be referred to ADR, even if, such disputes are regarding IPR, it would be considered right in personam and could be referred to ADR mechanisms because in such cases one party is seeking a relief from the other party and not from the world at large. To conclude the same, the quasi-judicial bodies were made to share the burden and to provide for an expert testimony and the same can be used in the determination of validity of an intellectual property.     

The High Courts of Delhi, and Madras, have held repetitively that as far as rights in personam are concerned the disputes are arbitrable in the matters concerning intellectual properties. The Supreme Court in Vikas Sales Corporation v. Commissioner of Commercial Tax, has held that patents and copyrights are rights in rem. The same was upheld by the SC in Common Cause v. Union of India, that infringement of these are an infringement of rights in rem.

There are certain types of disputes under IPR that are arbitrable like the dispute regarding the rights under a patent licence. However, disputes which involves the question of validity of a patent is not arbitrable and the same has been explained by Mustill and Boyd, while differentiating between rights in personam arising out of rights in rem like the first type of dispute which is arbitrable and rights in rem per se which are not arbitrable like the second type of disputes. There are certain scholars like Marc Blessing, who argue that all the disputes regarding IPR are arbitrable and the limits are imposed as per the public policies in the international affairs, which means that the limits are not expressly providing under law, rather, they are self-imposed.

Challenges

The idea pertaining to arbitrability of IPR disputes is a fairly developing concept which has been changing over time due to the difference in opinion of various High courts as well as the Supreme Court. But, this mode has proved to be effective and advantageous over the years, however, there are some hurdles have been present in the complete interpretation and adaptation of arbitration in the different fields of law.

Some cases may affect the rights of the third party because of oppression and mismanagement and therefore, such disputes are rendered to be non-arbitral by the courts. Another problem is regarding the applicability of foreign laws over the arbitration agreement between two Indian parties. It was held by the Bombay HC, that choosing foreign law to govern the arbitration agreement is against the public policy of the country.

However, the Madhya Pradesh HC held that the same is not against the public policy and can be allowed. The biggest challenge that this field is facing is that, it becomes extremely difficult to get injunctive relief and punitive damages. It is the most challenging part to overcome, as an IP holder requires his case to be resolved speedily.

Also, parties do not generally agree to refer their IP disputes to arbitration because of the issues relating to territorial jurisdictions and rights in rem. Therefore, in order to promote this filed of dispute resolution in commercial cases, there has to be a clearer view of judiciary regarding the subject matter.         

Recommendations

Although, there has been a lot of progress over time in this particular field, the authors believe that the following recommendations can speed up the dispute resolution process in India:

Alterations in essential enactments ought to be made, so that the doubts which are corrupting the minds of the people who wish to settle their disputes through assertion can proceed with the same. What we need is to thoroughly consider the restrictions on arbitrability and to really survey the adequacy of discretion in IP matters. The expanding IP questions, on both public and global level, represent a test to the current lawful structure to adapt to them, and with all its promising outcomes up until this point, intervention can be our response to these difficulties presented to the IP system, are likewise critical. Quick activity here is fundamental to set apparitions of the past to rest.

IPR structures a vital constituent of business exchanges and are contained in the heap of rights in that. To ipso facto announce them non-arbitrable would dilute the motivation behind the Arbitration Act, 1996. Moreover, it would impede the viability of business mediation and negligence party self-governance. In fact, it is critical to keep ‘rights in rem’ past the scope of assertion. Considering the reformist changes of the 1996 Act as of late, this could be accomplished through administrative explanations. For instance, both the United States of America and Switzerland grant the mediation of patent encroachment claims, given that the resulting grant is enrolled with the important patent position or board.

This at the same time shields the corresponding interests of powerful intervention of IPR debates and public interest in ‘rights in rem’. A comparable authoritative arrangement could be copied in India. Further, the ‘arbitrable’ parts of protected innovation could be explained by means of enactment, similar to the case in Hong Kong. The arbitrability of IP disputes has been tested and will keep on being tested until all the nations receive a solid favourable mediation position.

Conclusion

At the point when parties look for components for dispute settlements, they consider their business advantages as essential concern and they wish for the contest settlement to be close to home. They want it to be profoundly adaptable and effective, so that their questions can be settled without discolouring their business relationship.

The Arbitration of Intellectual Property Disputes will fill in as a convenient reference and guide for exploring through the unpredictable labyrinth of protected innovation and discretion.. Considering the speedy disposal of cases due to overburdening of Courts and promise of India to maintain the sacredness of IPR, a solid and more clear favourable to intervention position of India in instances of IP questions may oblige the necessities and desires of the nation. The judgment in Eros case is a welcome advance and has demonstrated a few beams of expectations in a somewhat bleak air. The way towards turning into a worldwide intervention centre point is a long one, yet every long excursion begins with one little advance.


*Kavya Arora and Aryaman Kaushik are students at School of Law, UPES Dehradun.


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