Introduction

The central focus of Arbitration policy has been to segregate the concepts of public law and private law. This has been done by enabling a mechanism, and often a time-bound one; away from the shackles of court procedure, for disputes which arise out of bilateral or multilateral private relationships. The purpose of this approach is two pronged; One that focuses on relieving the burden from the public dispute resolution forum i.e., the courts, to enable their defined attention on issues which concern the utilitarian idea of in rem issues. And the second, to enable private players to efficiently and quickly resolve their inter se disputes, without having to resort to institutional procedures. Such an approach provides them with the independence to choose their own convenient forums of resolution and move on with their private endeavors. 

Intellectual Property (hereinafter, “IP”) is considered to be a statutory interference in the free market, often working to incentivize private players and sometimes even the government, to invest in innovative and creative endeavors. Thus, it is one of the core tools that helps businesses reduce their risk in knowledge-based investments. The focus of private players on IP, lately, has gained huge traction, given the guaranteed statutory monopoly that it offers, often ranging from 20 years in cases of inventions, to more than a lifetime in cases of creative efforts. In fact, the provision of assignability of rights within IP, has enabled it to be one of the core incentives to invest. Such power, however, is accompanied with conflict, where aggressive enforcement of these rights, to recoup the maximum possible benefits out of the limited monopoly period, have led to various contentious disputes. In the last decade itself, there has been a huge spike in IP disputes. It is noteworthy that in 2019, 59% of disposed of cases on the commercial side in the Delhi High Court have been IP disputes. 

This paper aims to address one of the more ambiguous issues here: whether disputes involving patents, copyrights, trademarks, trade secrets as well as geographical indicators (hereinafter, “IP Disputes”) can be considered arbitrable, given the involvement of private players. There has been a huge internal conflict qua this question due to the general belief that IP rights have an in rem effect, instead of an in personem effect. This means that IP rights allow for a wide-encompassing monopoly i.e., a monopoly which binds all market participants and their behaviors. In other words, the question of validity of an IP of a party, affects all participants in the market. 

Issue of conflicting jurisprudence

It is interesting to note that the scope of arbitrability of IP disputes remains undefined within the statutory contours, but rather has been left upon courts to define. In the case of A. Ayyasamy vs A. Paramasivam & Ors., one of the landmark decisions concerning the scope of arbitrability of IP Disputes, the Supreme Court broadly pronounced that IP disputes are in rem disputes and hence, not arbitrable. The core reasoning behind holding IP disputes, such as disputes related to fraud, not being arbitrable was that the judgments that are given in such disputes have an effect on the world at large. For instance, if a member of the public initiates proceedings against the patenting of a purported invention, an answer to the said question affects the rights of not just the two parties litigating, but rather the whole market, as the monopoly that is sought is an exclusion of the world at large. Therefore, what is sought in essence is a judgment in rem, even though the dispute remains between the applicant and the party opposing the grant of patent. 

The doors towards arbitrability of IP disputes were opened, although narrowly so, in the case of Booz Allen and Hamilton Inc. v SBI Home Finance Ltd. Here, it was recognized that subordinate statutory rights, within in rem rights, which can be considered in personem, are arbitrable. IP statutes, for instance, the Copyright Act, involve many contractual provisions relating to licensing of rights, assignment of rights, franchising agreements, employer-employee relationships, royalty agreements etc. These are in personem subordinate rights, which are voluntarily entered into between parties, on the terms and conditions defined by themselves.

This aspect of subordinate claims within the IP statutes being arbitrable was soon taken up by the Delhi High Court as well, in the case of Ministry of Sound International Ltd. v Indus Renaissance Partners Entertainment (P) Ltd. Here, the Delhi High Court held that a case concerning the licensing of IP rights, and the dispute thereof, involved a common-sensical interpretation of the licensing agreement and nothing beyond, and therefore, was a contractual dispute which is arbitrable. Further, in a copyright infringement suit titled Tandav Film Entertainment (P) Ltd. v Four Frame Picture, which involved the determination of the scope of an exclusive licensing agreement between two parties, and other proforma parties, the dispute was referred to an arbitration. This is because the licensing terms were governed by a contract, and the main dispute was pertaining to the parties to the licensing agreement, in spite of the question concerning IP rights.

The jurisprudence took an unexpected turn in SAIL v SKS Ispat and Power Ltd (hereinafter, “SAIL judgment”), a case involving an issue of trademark infringement and passing off. Here, the Bombay High Court held that an action of infringement or passing off was beyond a contract and was a matter in rem since it involved evaluating the scope of the meaning of the constitution of an act of infringement. This was followed in the copyright case of Indian Performing Right Society Ltd. v Entertainment Network (India) Ltd, wherein a statutory copyright society with stipulated membership was involved. Here, in a dispute related to the determination of entitlement to royalty, it was held that such dispute involved an in rem effect. Further, even though the decision taken by the arbitrator would have only affected the members of the copyright society, it was hailed as one which would have an in rem effect. The court misconstrued the limited membership of a copyright society, as also the agreement, and arbitration proceedings thereto, affecting merely these members and not the world at large. 

Following this, the case of Eros International Media Ltd. v Telemax Links India (P)Ltd was a turning point. Here, another single judge of the Bombay High Court, disagreed with the position in the SAIL judgment and held that actions of infringement between two claimants of copyright are not actions in rem but are only actions in personam. Further, the court opined that although registration gives the holder a right against the whole world, however, infringement or passing off actions, whether in trademark or copyright, bind only the parties to the dispute. To illustrate, A may succeed in an infringement action against B but this will not mean that A will succeed in an infringement action against C. Subsequently, the cases of Euro Kids International (P) Ltd. v Bhaskar Vidhyapeeth Shikshan Sanstha, Uday Chand Jindal v Galgotia Publications (P)Ltd and P. Shanthi Thiagarajan v KE Gnanavelraja, which were cases involving franchising agreements, assignment agreements and infringement thereto, were held to be arbitrable at the prima facie and the disposal stage of these suits. 

Missed opportunity

The essential conflict that arises regarding the arbitrability of infringement and passing off disputes, relates to the differing interpretations of the meaning of in rem by single benches. Recently, in the case of Hero Electric v. Lectro E-Mobility, the Delhi High Court missed another opportunity to clarify this ambiguity. In this case, a family settlement agreement, stipulating an arbitration clause, was entered into by the parties. This agreement contemplated the uses of the trademark “Hero” between different members of the family for different classes. Pursuant to the same, a group of family members were assigned the said trademark for use qua “electronic vehicles” including electric bikes. The dispute was as to whether this class included electronic bicycles, since the right to use “Hero” for the class “bicycles” was given to another group of family members, which had filed the infringement claim. Here, the court held the dispute to be arbitrable, albeit with a caveat that the case was a simple contractual dispute pertaining to interpretation of contractual provisions, and did not involve any dispute pertaining to trademarks.

This case was an opportunity for the Delhi High Court to clarify the scope of arbitrability of infringement cases since it involved a substantial question of whether the use of the trademark “Hero” for electronic bicycles, infringed upon the trademark rights of a proprietor having the right to use the trademark qua bicycles. However, the court took a safer approach by terming the dispute as one being purely contractual in nature.

Arbitrability of IP Disputes around the world

Therefore, the continued ambiguity about the scope of arbitrability of IP disputes in India, continues to burden the courts with large amounts of IP litigations, despite them involving arbitration agreements. With the large amounts of investments involved and the need for a time-bound efficient resolution of disputes arising out of IP claims, many jurisdictions have been quick to clarify the scope of arbitrability of IP disputes. Some have gone further and included claims of “validity”, often concerning in rem rights, to be arbitrable, with an inter se effect between the parties to the dispute. In a few countries such as Canada, Switzerland, the United States, "all contentious questions relating to IP" may be submitted to arbitration. Most other countries have followed alternate approaches. In respect of the "validity" of a patent, Australia, Germany, Great Britain regularly admit arbitration as an alternative. However, in these countries, the decision may not involve revocation and has an effect only inter partes (i.e., between the parties to the arbitration). In the Netherlands, the validity question falls within the exclusive jurisdiction of the District Court of The Hague. However, a claim for damages resulting from infringement may be submitted to arbitration. 

Conclusion

With dispute resolution in ‘domain name disputes’ (often analogous to trademark disputes) that involve a robust online dispute resolution methodology called Uniform Domain-Name Dispute Resolution Policy, it seems to be incomprehensible as to why a similar arbitration-based methodology practiced through ODR, especially with an inter se effect within parties, cannot be practiced for private disputes concerning IP rights. In the Indian context, given the ambiguity behind the scope of arbitrability of questions concerning IP rights, it would be extremely tough to aspire to become an international arbitration hub, with a constricted arbitrability of IP regime. Further, it becomes even more difficult since various jurisdictions have now created a more robust arbitrability regime, even on questions pertaining to validity, unless they are concerned with registration or issues with public IP bodies. In other words, as stated above, an approach as followed in countries like Australia, Germany, Great Britain, which permit arbitrability of validity disputes with inter se effect, deserves consideration. 

However, arbitrability of IP disputes can be reserved when such disputes are raised with a public body, like the Patents and Trademarks office or the Copyright Registration office. This is because the outcome of such disputes would specifically pertain to having an in rem effect, as against when the same is raised between two private parties, where the effect can be inter se. This issue deserves a special re-look given the institutional failure of statutory bodies within the Indian IP regime to resolve and institutionally manage IP disputes. With the Intellectual Property Appellate Board recently having been shut, and the burden of combatting commercial disputes involving private parties, going back to district commercial courts and high courts, this seems like the best time to take inspiration from other leading jurisdictions. The focus needs to be on increasing efficiency of resolution of private disputes, through a time bound mechanism as envisaged in the Arbitration Act. This will allow businesses to function without a hassled court experience and will further relieve the grueling burden on courts and allow them to efficiently address issues which affect the public at large.

All views expressed above are solely of the author.