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This‌ ‌article‌ ‌is‌ ‌written‌ ‌by‌ ‌Saloni Chitlangia,‌ ‌pursuing‌ ‌‌Diploma‌ ‌in‌ ‌Intellectual‌ ‌Property,‌ ‌Media‌ ‌and‌ ‌Entertainment‌ ‌Laws‌ ‌from‌LawSikho‌.‌ ‌The‌ ‌article‌ ‌has‌ ‌been‌ ‌edited‌ ‌by‌ ‌Aatima Bhatia ‌(Associate,‌ ‌LawSikho) and Ruchika Mohapatra ‌(Associate,‌ ‌LawSikho).‌

Introduction

In a developing country like India, the focus on the importance of Intellectual Property Rights (hereafter referred to as IPR) has been increasing over the years. A patent is one such IPR that has come into focus with increased scientific and technological development. Patent disputes are not limited to the same country and are seen to often involve parties based in different countries as a result of international collaborative research work. Seeking remedies for such disputes from state-run courts prove to be an arduous task as simultaneous proceedings running in different jurisdictions apply varying procedural and substantive laws to the same dispute. Cases keep piling before the courts, often taking decades to be resolved. It is here where a need arises for an alternative to the conventional court proceedings-namely, arbitration. In recent times, arbitration has been used to settle different kinds of controversies. Globally there has been a transition towards arbitration of IPR matters. It is to be seen whether arbitration can serve as a solution to the current patent law challenge of the meandering pace of the judicial mechanism in dispute resolution. This requires a study of the International perspective, Indian legislative background, judicial perspective as well as a  comparative study between arbitral procedure and litigation.

Evolution of arbitration in India

The history of arbitration in India dates back to the times of ‘Brihadaranyaka Upanishad’ which mentioned a system of dispute resolution which we now refer to as ‘arbitration’. It talked about primarily 3 bodies namely; ‘puga’, ‘srenis’, ‘kulas’ which together formed the system of Panchayats. These Panchayats resolved disputes and passed awards which were given recognition. The first formal law regarding ‘arbitration’ came into force in 1697 in England. With the enforcement of the Bengal Regulation Act of 1772, the first modern arbitration law was established in India. In 1889, British Arbitration Act came into force, based on which, 10 years later, the Indian Arbitration Act was modelled. This act however was only applicable to the Presidency towns initially and exhibited other loopholes. 

The Honourable High Court in the case of Dinkarrai Lakshmiprasad v. Yeshwantrai Hariprasad held that the 1899 Act was highly complex and needed reforms. In 1940, a more revised and specific Act was passed which was known as ‘The Arbitration Act, 1940’. This Act, although a more modified one, was not free from lacunas. This Act lacked provisions prohibiting an arbitrator from leaving any time before the proceedings are completed. It also fails to address an alternative solution if the arbitrator dies during the proceedings of dispute. Marginal Notes too were not regarded as a part of this Act, which was a matter of concern. This Act faced a lot of criticism especially with regards to the Act’s silence on shortcomings present in it and was replaced by the Arbitration and Conciliation Act of 1996. This new Act consolidated and amended laws related to arbitration, international commercial arbitration and enforcement of foreign arbitral awards.

Historical development of patent laws in India

The history of patent laws in India began in the 19th Century with the implementation of Act VI of 1856. This Act was modelled on the British Patent Law of 1852. It laid emphasis on the protection of inventors by providing exclusive privileges for a new invention for a period of 14 years. In 1872, the Patent laws were consolidated in order to extend protection to matters relating to designs. The Act was known as the Patterns and Designs Protection Act which was further amended in 1883. Later in 1911, the Indian Patents and Designs Act replaced all the previous Acts dealing with patent laws. Under this Act, the administration of patents was brought under the management of the Controller of patents for the first time. This Act too went through a number of amendments for example; in 1930, the term of a patent was extended to 16 years from 14 years, in 1945 provisions were made for filling and submission of specifications within the period of nine months. This Act had become archaic after independence and thereby needed replacement. A committee chaired by Justice Bakshi Tek Chand was constituted by the Government of India, in 1949 to review the patent law in India. A number of recommendations were submitted by this Committee. Another Committee was appointed in 1957. After the recommendations given by the second committee, the Patents Act 1970 was passed. After 1994, this Act too underwent certain amendments.

International perspective

If an overall observation is made on the international sphere, it shall be noticed that there are legislations such as Article 28 of “Ley de Marcas” and Article 48 of the “Portuguese Code of Industrial Property” which promoted the resolution of IP disputes by arbitration. However, the arbitrability of disputes concerning the validity of registered patents is not an acceptable practice in the majority of nations. In most countries, the jurisdiction over IPR disputes is reserved with the nations’ domestic courts. To understand the condition of the international platform regarding the arbitrability of patents more accurately, the paper shall indulge in a further discussion on the European as well as the American perspective on the matter at hand.

European perspective 

The patent litigation System in Europe has had a black patch on its efficiency criteria since 1999 from the time of the Sepracor’s case. The major problem dominating the European scenario is that the EU consists of 27 Member States, each having its independent and distinctive judicial system. The legal procedure of each nation differs significantly, for example, the Irish Courts regulate patent disputes by Common Law procedure while Germany in itself has a bifurcated system. No single Court in Europe has pan-European jurisdiction to adjudicate patent disputes. As a solution to this problem the Unified Patent Court had been set up in 2013 by an agreement signed by 25 European Union members. This however cannot be termed as a full-proof solution as it does lack in certain aspects. Firstly the patentees have the opportunity to “opt-out” of the UPC system under Article 83(3) of the Agreement on UPC. Secondly, there lies an uncertainty whether the procedures laid down under the UPC Rules would be competent enough to deal with high-value complex technological international patent disputes.

Arbitration in contrast to this might prove to be a better mechanism for patent dispute resolution in the EU as it shall provide uniformity in a procedure that is lacking in the present scenario. Under the 1958 New York Convention, recognition and enforcement of international arbitral awards is available in over 150 nations globally.

American perspective

The situation of the US Patent litigation System is not different from those of other countries. The process takes years and parties incur heavy litigation costs which keep recurring as the court proceeding time period keeps extending, ultimately leading to frustration among the parties. The USA thus decided to resort to Arbitration as a solution to the difficulties of patent litigation. The history of arbitration of patent disputes dates back to the 1980s in the United States. The “Patent Law Amendments Act of 1984” and the Sub-section (a) of 35 U.S.C. § 294, both promote the use of arbitration to resolve patent disputes. The “American Arbitration Association” revised the rules of privacy, binding nature and finality of Arbitration procedures and results while the “International Institute for Conflict Prevention and Resolution”, lays down rules for non-administered arbitration of patent and trade secret disputes. The American legal system has a positive outlook towards arbitration of disputes related to patents and has been proactive in making arbitration a mainstream patent dispute resolution mechanism.

Legislative background in India 

In India, the recognition and enforcement of Patent rights are governed and regulated by the “Patents Act, 1970”. Section 104 of the said Act clearly states that jurisdiction of Patent infringements rests with the district courts. However, in several cases, the High Courts of Calcutta, Bombay, Madras and Delhi have exercised original jurisdiction. However, the concept of arbitrability of patents has not been addressed clearly by this Act and also there is the absence of judicial precedent regarding this matter. Section 103(5) of the Act provides that the High Court may order whole proceedings or any question or issue of fact to be referred to an arbitrator in case of the Government’s use of a patented invention. Leaving this aside neither the “Patents Act” nor the “Arbitration and Conciliation Act” talk about arbitration of patent disputes.

Judicial perspective

It is not only that the legislature has failed to present a clear picture regarding the resolution of patent disputes by means of arbitration but the judiciary has failed to do so, as well. However, there are certain landmark cases by which the Apex Court and the High Courts have laid down certain arbitration guidelines. Such as in “Booz Allen Hamilton v. SBI Home Finance” the Supreme Court of India said that “Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of arbitral tribunals is excluded either expressly or by necessary implication”. The Court further went on to say that though it is a general rule that rights in personam are arbitrable and disputes arising from rights in rem require adjudication by the courts, are not suitable for arbitration; this is not a rigid or inflexible rule. “Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable”. 

Another important case that has to be mentioned at this juncture is “Ayyasamy v. Paramasivam”. In this case, the Supreme Court of India concluded that patent, trademarks and copyrights disputes are generally non-arbitrable in nature. However, the Apex Court was silent on the question of whether sub-ordinate rights arising from patents are arbitrable or not. This case served as a precedent in “Lifestyle Equities Cv v. Qdseatoman Designs Pvt. Ltd” where the Madras High Court held that “It can be said that a patent license issue may be arbitrable, but the validity of the underlying patent may not be arbitrable”. It can be concluded from the above-stated judgments that the basis of deciding the arbitrability of patents in India is whether the dispute is right in personam or right in rem. However, it can be inferred that disputes arising from the infringement of patents are arbitrable.

Comparison between arbitral procedure and litigation 

The legal systems under different jurisdictions differ by the substantive and procedural laws. Patent laws are territorial in nature and thus it would not be possible to merge laws of different jurisdictions during patent litigation. Patent infringement problems are often international and thus give rise to this problem. Arbitration can serve as a solution to this problem as it follows a single procedure, thereby removing the complexity and conflict between different legal proceedings under different jurisdictions.

Arbitration can take place anywhere and the arbitrator can belong to any nationality thus there would be neutrality of language, laws, procedures, customs, etc. As the proceedings would not take place in Court Halls in case of arbitration, the confidentiality of the dispute resolution can be kept private. In case of complex technical disputes there arises a need for special adjudicators for resolving the cases. These adjudicators are experts in patent laws, unlike judges who lack the expertise to deal with highly technical patent cases which often lead to unsatisfactory judgements. Litigation often results in building undesirable strained relations between the parties which is unlikely to happen in case of arbitration. Patent litigation just as any other litigation is a time consuming and expensive affair. The number of hearing dates keeps on increasing and the parties have to keep on paying their advocates thus making it a very slow and expensive method. Arbitration on the other hand is a much less expensive and speedy mechanism that resolves disputes generally within a few sittings itself. Court decisions can be appealed to higher courts whereas, in arbitration, the results are final and come into force immediately thereby causing less hassle and saving more time. In the case of arbitration, the parties are free to choose a competent decision-maker, which can never be possible in case of litigation.

Conclusion

If one glances through the present legislation in the country, it may seem that arbitration of patent disputes is prohibited. But after analysing the judgments, it can be inferred even though patent rights are rights in rem, certain subordinate rights arising from it are rights in personam and therefore can be resolved by arbitration. However, no statute in itself has clearly laid down the proposition of arbitrability of patents in India. It is required from the Legislature to bring in amendments to the current legislation and provide clarity in this matter. The legislature can take inspiration from countries such as Hong Kong in this Manner. Hong Kong Arbitration (Amendment) Ordinance, 2017, Part 11A clearly lays down the guidelines for arbitration of patent disputes in Hong Kong.

There are presently three aspects related to this matter that needs to be addressed by the legislature. Firstly, the disputes arising over the infringement of patent rights; should be allowed to be resolved by arbitration. The procedures for conventional commercial arbitration laid down in the “Arbitration and Conciliation Act, 1996” should be made applicable in such cases. The award must be binding and should protect the rights and obligations of the parties towards each other. Secondly, when a party files for the registration of a patent, it should be the arbitral tribunal that decides who should have the right over the patent. It is only upon the approval of the tribunal that the Patent Office should proceed to register a patent. This would preserve the confidentiality of patent proceedings. Therefore, such an amendment should be brought to the “Patents Act, 1970”. Thirdly, in case that the Patent Office rejects a patent registration, the dispute arising between the party and the Patent Office should also go to an arbitral tribunal.

The Amendment Act of 2019 aims to build India into an International Arbitration hub. Legislation providing for the arbitration of patent disputes would move India one step closer to this aim. This Amendment Act provides for the establishment of the “Arbitration Council of India”. When this council comes into operation it should address this issue and look into the establishment of effective rules for arbitrability of patent disputes. Guidance for the same can be taken from the Swiss and the American Legislature Protection and preservation of Patents are essential for a nation’s intellectual as well as economic growth. Therefore, it becomes a primary duty of the judicial mechanism of the country to see to it that the most effective methods are adopted while dealing with such crucial matters. It requires a joint effort by both the legislature as well as the judiciary to promote arbitrability of patent disputes by passing requisite laws and setting up efficient and competent arbitral tribunals for resolving patent disputes. It is essential for India to overcome its Patent law challenges and be at par with scientific advancements which are the stepping stones to India’s journey from a developing to a developed nation.


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