Intellectual Property Rights (‘IPR’) in today’s world are omnipresent in commercial transactions and deliver certain trade rights. There are legislations in India that govern intellectual property rights of organisations and individuals. Intellectual property is coupled with commercial prospects which is undergoing fierce competition since the last couple of decades. The increasing importance of intellectual property rights in India has led to a debate over an efficacious adjudicating authority. The intellectual property disputes generally involve infringement of ownership rights in the form of violation of a trademark, copyright, patent or design.
Arbitrability Of IPR Matters As Per Statutes:
In India, the resolution mechanism provided under the IPR statutes is governed by the jurisdiction of courts. However, in recent times there have been arguments favouring arbitration as a dispute resolution mechanism for intellectual property disputes. There is a widespread practice of executing IP contracts which contain arbitration clauses. Some major changes ushered in the IPR regime were by way of TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreements and by the Civil Procedure Code, 1908. As per Section 89 of the Civil Procedure Code, if the court deems fit, it can allow arbitration, mediation or conciliation for settlement of disputes between parties outside the court.
It must be noted that Section 62 of the Copyright Act, 1957 and Section 134 of the Trade Marks Act, 1999 do not prohibit or oust arbitration as dispute resolution of IPR matters. However, arbitrability of IPR matters is subject to controversy, in the sense of ‘rights in rem’ and ‘rights in personam’.
Arbitrability Of IPR Matters As Per Judicial Decisions:
In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. and Ors. [1], the Supreme Court of India held that, generally and traditionally all disputes relating to ‘rights in personam’ are
considered to be amenable to arbitration; and all disputes relating to ‘rights in rem’ are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not, however, a rigid or inflexible rule. Disputes relating to subordinate ‘rights in personam’ arising from ‘rights in rem’ have always been considered to be arbitrable.
In Eros International Media Limited v. Telemax Links India Pvt. Ltd. [2], the Bombay High Court held that all disputes arising in intellectual property are not considerably ‘right in rem’ and non-arbitral. Justice Patel held that “As between two claimants to a copyright or a trade mark in either infringement or passing off action, that action and that remedy can only ever be an action in personam. It is never an action in rem....
In trademark law, it is true that the registration of a mark gives the registrant a right against the world at large. It is possible that an opposition to such an application (before the Registrar) would be an action in rem, for it would result in the grant or non-grant of the registration, good against the world at large. But an infringement or passing off action binds only the parties to it…”. Therefore, the remedy was declared to be a ‘right in personam’ and the dispute was held to be arbitrable.
Subsequently, in the case of Indian Performing Rights Society (IPRS) Limited v. Entertainment Network [3], the Bombay High Court observed the distinction between ‘in rem’ and ‘in personam’ rights.
For background, the dispute was in regard to the breach of license agreement by Entertainment Network which broadcasted the musical works from IPRS on FM Radio. As per the contract, any dispute was required to be settled by arbitration. The Arbitrator held that no right of IPRS was violated and Entertainment Network need not obtain license from IPRS for broadcasting. This award of the Arbitrator was challenged by IPRS before the Bombay High Court on the ground of jurisdiction of the Arbitrator and arbitrability of the dispute. The matter required interpretation of Section 62 of the Copyright Act mandating jurisdiction of district courts for adjudication of copyright disputes.
The Court relied on the judgment of Booz Allen, and considered the right of a licensor as a ‘right in rem’, which is in public interest and thus held that “the issue was beyond the jurisdiction of the learned arbitrator for being adjudicated upon being an action in rem”.
The Court also relied on a judgment passed by Delhi High Court in the case of Mundipharama AG v. Wockhardt Limited [4] wherein it was held that in case where copyright in any work is infringed, the remedies by way of injunction, damages, rendition of accounts and otherwise as are or may be conferred by law for the infringement of such a right, cannot be subject-matter of arbitration.
The Bombay High Court interpreting the breach as a ‘right in rem’ and not only against Entertainment Network, held that rights of IPRS as a licensor were destructed in the impugned award not only against the claimant, but also against the world at large and therefore, set aside the impugned award.
Current Legal Position In India:
After considering the above discussed judgments, it will be appropriate to conclude that the position regarding arbitrability of IPR matters is ambiguous. The judgments of the Supreme Court have broadly categorized IPR issues into being ‘rights in rem’ and ‘rights in personam’ and have concluded that ‘rights in rem’ are not arbitrable.
Arbitrability Of IPR Matters In Other Jurisdictions:
In a recent trend, it is seen that parties are in favor of arbitration in relation to IPR matters worldwide. The number of IPR related arbitrations have been on the rise under the watch of the World Intellectual Property Organization (‘WIPO’). The accepted position by WIPO is similar to the legal position in India. It is now broadly accepted by WIPO that disputes relating to IP rights are arbitrable, like disputes relating to any other type of privately held rights. Any right of which a party can dispose by way of settlement should, in principle, also be capable of being the subject of arbitration since, like a settlement, arbitration is based on party agreement [5].
Conclusion:
The evolving dispute resolution mechanism leans towards a shift from a conservative ‘one formula fit all’ approach to a more pragmatic and comprehensive approach for IPR disputes. In such situation, the way forward is to adopt arbitration in larger number of domestic and cross-border IPR disputes which will lead to expeditious resolution. An award rendered by such arbitral tribunals is required to confine its adjudication to infringement of rights of the parties to the contract (‘rights in personam’) and not affect rights of third parties (‘rights in rem’).
About the Authors: Mayank Grover is a Founding Partner and Gurleen Kaur is a law intern at Seraphic Advisors, Advocates & Solicitors.