ARBITRABILITY OF INTELLECTUAL PROPERTY RIGHTS
Introduction
This article deals with Arbitrability of IPR disputes in India. Besides the fact that this issue is still debatable, the Indian Judiciary has also not been able to give a clear picture regarding this. The Courts have pronounced judgements favouring both the extreme ends. On one hand, they have rejected the arbitrability of IPR disputes (Mudipharma Case, SAIL Case [Suit No. 673/2014]) and on the other embraced the same (EROS Case, Impact Metals Case). Apart from the aforementioned, the Courts have opined different and confounding tests and standards to decide the same. These tests include the relief test, the guidelines set down in Vidya Drolia, etc. Pro-arbitration approach in India is very necessary for the participation of foreign entities to do business in India. But it seems difficult as provisions like Section 62[1] of the Copyright Act, 1957, Section 134[2] of the Trademarks Act, and Section 104[3] of the Patents Act, 1970 restricts a party from filing an infringement suit in a court inferior to the District Court. However, it is pertinent to mention that Section 89 of the Civil Procedure Code, states that “If the court deems fit, it can allow arbitration, mediation and conciliation for settlement of disputes between parties outside the court.” This section gives the powers to Courts to decide which matter should be referred to Alternate Dispute Resolution and which should not.
The Booz Allen Case[4] paved the path for arbitrability of IP disputes in India. The Supreme Court stated that “disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.” The arbitrability test was established in this case to assess what constitutes arbitrable subject-matter. According to this test, the following categories of disputes are not subject to arbitration:
- Disputes involving the adjudication of actions in rem as opposed to actions in personam.
- Disputes arising out of a special statute, which is reserved for the exclusive jurisdiction of special courts.
Judicial Interpretation
In Vidya Drolia v. Durga Trading Corporation, MANU/SC/0939/2020, the Supreme Court gave a fourfold test for determining when all the subject matter of a dispute mentioned in an arbitration agreement is not arbitrable:
- When cause of action and subject-matter of the dispute relates to actions in rem
- When cause of action and subject-matter of the dispute affects third party rights; have erga omnes effect; require centralised adjudication, and mutual adjudication would not be appropriate and enforceable
- When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be enforceable
- When the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s)
The judgment has inducted Intellectual property as monopolistic rights, subsequently indicating them as non-arbitrable.
The major reason why Courts have held IP disputes to be non-arbitrable is that public policy aspects are believed to be involved in IPR disputes which makes it against the public interest if such disputes are made arbitrable.
However, in the case of Eros International Media Limited v. Telemax[5], the Bombay High Court had held that certain disputes of IP were arbitrable. The Court was approached under Section 8 of the Arbitration and the Conciliation Act, 1996. The issue at hand concerned the defendants’ actions involving the marketing and distribution rights of a feature film. Regarding the arbitrability of intellectual property rights, the court noted that such rights are a subset of property rights and cannot be regarded as a distinct body of law. The court held that IPR disputes of commercial nature where the parties required ‘specific reliefs’ against the other party i.e., actions in personam, are arbitrable.
Certain IPR issues such as issuing patents and trademark registration have been deemed by courts to be exclusive matters having an erga omnes effect that fall within the sovereign functions of the state. Monopoly rights are not subject to arbitration because they are granted. Such an obiter may cause some confusion, but it should not be interpreted as a blanket prohibition.
In the matter of Hero Electric Vehicles Private Limited[6], the Delhi High Court held that disputes involving intellectual property are subject to arbitration. The case pertained to infringement of trademark where the application to refer the dispute to arbitration was filed.
The court made it clear that the issue raised in the Vidya Drolia case does not influence the current ruling, since, first, no sovereign functions are involved, and second, it does not fit into any of the categories of non-arbitrable disputes described in Vidya Drolia. The court further ruled that courts must be cautious and distinguish between rights in rem and actions in rem. When the remedy is sought against a particular person or group as in the present case of Hero Electric case, the same would not constitute an action in rem and therefore would not have an erga omnes effect.
Conclusion
Arbitration has proven to be a very effective method of resolving disputes. Not just in India, but all throughout the world, this trend has been observed. Allowing IP issues to be arbitrated will ease the burden on courts as IP is frequently a crucial component of modern commercial contracts. When parties look for dispute resolution mechanisms, they prioritise their business interests and want the process to be private, nimble, and efficient so that their cross-border issues can be resolved without jeopardising their industrial relations. Due to a number of factors, including the avoidance of multiplicity of litigations, the use of IPR specialists to decide the case, confidentiality, speed, flexibility, and finality, arbitration may very well be the best method of resolving IP disputes.
[1] 62. Jurisdiction of court over matters arising under this Chapter.—
(1)Every suit or other civil proceeding arising under this Chapter in respect of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the district court having jurisdiction.
(2) For the purpose of sub-section (1), a “district court having jurisdiction” shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), or any other law for the time being in force, include a district court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or other proceeding or, where there are more than one such persons, any of them actually and voluntarily resides or carries on business or personally works for gain.
[2] 134. Suit for infringement, etc., to be instituted before District Court.—
- No suit—
- for the infringement of a registered trade mark; or
- relating to any right in a registered trade mark; or
- for passing off arising out of the use by the defendant of any trade mark which is identical with or deceptively similar to the plaintiff’s trade mark, whether registered or unregistered, shall be instituted in any court inferior to a District Court having jurisdiction to try the suit.
(2) For the purpose of clauses (a) and (b) of sub-section (1), a “District Court having jurisdiction” shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908) or any other law for the time being in force, include a District Court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or proceeding, or, where there are more than one such persons any of them, actually and voluntarily resides or carries on business or personally works for gain. Explanation.—For the purposes of sub-section (2), “person” includes the registered proprietor and the registered user.
[3] 104 Jurisdiction. -No suit for a declaration under section 105 or for any relief under section 106 or for infringement of a patent shall be instituted in any court inferior to a district court having jurisdiction to try the suit: Provided that where a counter-claim for revocation of the patent is made by the defendant, the suit, along with the counter-claim, shall be transferred to the High Court for decision.
[4] https://main.sci.gov.in/jonew/judis/37919.pdf
[5] Eros International Media Limited v. Telemax Links India Pvt. Ltd. and Ors, 2016 (6) ARBLR 121 (BOM)
[6] Hero Electric Vehicles Pvt. Ltd. v. Lectro E-Mobility Private Ltd, 2021 SCC 1058
-Ms. Anandita Anand, Associate Counsel at SUO Law
