In this blogpost, Harsha Asnani, student, NIRMA University, Ahmedabad writes about arbitration as a legal recourse in cases of Intellectual Property disputes. The author also writes about the benefits received by a party to the suit by opting for such a suit and increasing use of this method in India.

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In the past decade, there has been a parallel increase in the trade volumes and competition between various industries on one side and commercial, international and trade disputes on the other. With the increase in the number of disputes, there is a growing need for speedy disposal of such disputes. Since such disputes involve high costs and wastage of resources, it becomes essential that these disputes should be settled in a manner that they bear minimum costs to both the parties to a dispute.

The methods that best suits this need are arbitration, mediation and reconciliation. These three methods have been regarded by many scholars as the new age methods of dispute resolution. As far as the disputes in the matters of Intellectual Property are concerned, these disputes are majorly commercial in nature. Due to increasing cross-border trade and involvement of citizens of multiple jurisdictions in such trades, international dimensions have been infused to such disputes. Intellectual properties though constitute to be incorporeal in nature but because of the fact that they have become an integral part of corporate assets, they have started demanding same treatment as their corporeal counterparts. Taking into consideration the intangibleness of the intellectual properties and nuanced nature of technology, Intellectual property rights battles have become protracted and expensive.

The reason as to why these Intellectual property right battles have proved to be very expensive in their nature is because of the fact that in such suits, technical issues are to be addressed. Not only the bench but also the bar is to be informed and taught about various intricacies involved. Various additional costs such as those of hiring technical and financial experts, additional counsels have to be borne. All these factors demand a lot of financial resources be invested. With regard to this Kingston has stated that one of the major reason as to why the intellectual property has not been able to generate much innovation is because of the excessive costs involved in ordinary court litigations.

Comparison of various issues involved in IP disputes

  • International issues – Increasingly, IP disputes have become a common matter between internationally trading institutions. In the ordinary court litigation procedure, problems such as multiple proceedings under different laws coupled with the risk of conflicting results have to be faced. Each party would try to persuade the other party so that the case can be tried in his or her jurisdiction since there would exist a possibility of actual or perceived home-court advantage. All these problems can be solved if the matter is referred to an arbitrator because firstly, the question of jurisdiction is solved by a prior choosing of an arbitrator. By this, the multi-jurisdictional disputes can be resolved together in a single arbitral forum. Secondly, a single proceeding would take place under the law that is determined by the parties, thirdly, the arbitral procedure can be neutral to the nationality of the parties, their laws, language and institutional culture.
  • Technical Issues – In the ordinary court setup, the judge deciding the suit may or may not be holding an expertise that is required for such matters and hence additional time and cost would have to be assigned for this purpose. However, in the arbitration process, the parties to the dispute would beforehand select the arbitrators with relevant expertise. Hence, the problem of time and cost shall be saved.
  • Urgency issues – In the case of intellectual property disputes the offences are of continuing nature, therefore it becomes important that the court provides the suffering party with immediate relief. Such immediate reliefs are called interim injunctions. These interims reliefs are not available in all jurisdictions. Therefore, proper relief cannot be claimed by parties in whose jurisdiction this interim relief is not available. Also lengthy and drawn out procedures are yet another problem. Whereas in cases of arbitrators the parties can by mutual consent authorise the arbitrator to shorten the procedure. Under the WIPO arbitration, provisional measures can be included but such measures cannot preclude seeking court ordered injunction.
  • Appeal issues – In cases of ordinary court proceedings, there remains a possibility of appeal. Whereas in cases of matters settled by way of arbitration, unless agreed to by the parties, there is a limited appeal option.
  • Risk issues – In Open Court or Public Proceedings, there exists a constant threat to the confidential information, trade secrets and reputation. This problem of risk and threat to secrets can be solved by way of arbitration because both the proceedings and awards can be kept secret and confidential as per the requirement.
  • Party Autonomy – By using arbitration as a method of dispute resolution in IPR disputes, the parties shall be enabled with a higher control over the dispute resolution procedure. Procedural rules can be tailored; location and language of the proceedings are chosen by mutual consent so that the specific needs of both the parties can be resolved.
  • Neutrality – Arbitration is neutral to the law, language and judicial systems of both the parties involved in the dispute. This helps in avoiding the prejudice in the mindset of both the parties that the other one will be able to have home court advantage. It is essential that the arbitrator is neutral. The partiality of the arbitrator is one of the grounds on which the arbitral award can be struck down by the court.
  • Flexibility – Unlike courts, the arbitrators have a choice between various types of remedies that they can give to the suffering parties. A combination of Traditional remedies such as compensation and injunctions and Non-traditional remedies such as directing the infringer of copyright to purchase the license can be given.

Initially, it was suggested that since the IP battles involve such property which is granted by national authorities, therefore, any resultant dispute should be resolved by a public authority. Since it is now accepted that that IP rights are arbitrable, such disputes can be settled through out of court processes based on mutual understanding of both the parties.

Disadvantages of using arbitration as a method of dispute

Although arbitration can be termed as one of the most useful methods but it is not the most feasible method in every situation. Firstly, arbitration can be used as the best legal recourse if the parties to a dispute have on a prior basis included the clause of arbitration in their contracts. Unless there is a pre-existing contractual relationship, it becomes very difficult for one party to convince the other to agree to arbitration. Secondly, if the parties are unequal in terms of their resources, the party with higher resources can obtain a tactical advantage over the other. An arbitral award has no binding value. It cannot be used as a public legal precedent. While considering as to whether arbitration should be chosen as a method resolving IP disputes, it must be first decided whether such issues can be arbitrated or not and also the laws of those jurisdictions where enforcement would likely be necessary.

Alternative dispute resolution in intellectual property laws in India

Initially, prior to the year of 2002, there was no trend of using arbitration as a method of dispute resolution in the Indian regime. Majorly the cases were settled by way of court litigation in which the grant of the interim injunction would determine the final outcome. Very few cases were settled this way. Others would just vanish before the trial. The factors that brought about changes to this regime were made by way of changes made to the IPR laws on account of TRIPS and the Code of Civil Procedure. With section 89 of the CPC coming into force the courts were now given a discretion that if the elements of arbitration, conciliation or mediation or settlement could suit to the case at hand then the court can on its own motion refer the disputes to such legal recourse as per the procedure laid down in the said section. Mediation as a method of dispute resolution had been opted by very few parties until this stage. Lack of success rate may be a probable reason for less number of cases being referred to the mediation method.

With the passage of time, judges were now exposed to various new methods related to dispute resolution and also many High Courts had started to award damages in cases of intellectual property disputes. The damages, now awarded were both compensatory and punitive and exemplary in nature. With these changes, many parties were now not reluctant to opt for such method. The fact that during 2004-2007, the Supreme Court decided 349 arbitration cases and the Delhi High Court’s mediation and conciliation centre decided 668 out of 868 cases indicates a growing appreciation of the importance of arbitration as an alternate dispute resolution mechanism in India.[1]

[1] http://www.lexmantis.com/pdf/May-2013-LexMantis-Arbitration-And-IP.pdf

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