This article is written by Gokul Krishnan R, pursuing a Certificate Course in Trademark Licensing, Prosecution and Litigation from lawsikho.com.
Table of Contents
Introduction
The COVID 19 pandemic and subsequent disruption in the functioning of courts have put a spotlight on the need to resort to arbitration methods to settle disputes. In India, with the growing digital streaming market, a lot of disputes are coming up in the area of Copyright. Arbitration can be one of the effective methods to tackle the copyright issues as it is cost-effective, confidential and faster. This article examines the legal landscape on the arbitrability of copyright disputes in India.
Arbitration in India
In India, Arbitration is governed by the Arbitration and Conciliation Act of 1996. The Act is based on the UNCITRAL model law and was enacted to amalgamate, define and amend the law in relation to domestic arbitration, international commercial arbitration and the enforcement of foreign arbitral awards [see here]. The Act provides that Arbitration can be adopted as a dispute resolution mechanism if an agreement to that effect is signed between the disputing parties. Section 34(2)(b)(i) of the Act provides that awards contemplating a non-arbitrable subject may be set aside. But the Act does not define the arbitrable issues [see here]. The Supreme Court first determined the scope of arbitrable disputes in the case of Booz-Allen Hamilton v. SBI Finance [see here]. In this case, the Court held that a private forum could decide disputes involving adjudication of rights in rem while a public court can only decide disputes involving adjudication of rights in personam. However, the Court observed that this rule is not a rigid principle and personam rights flowing from rights in rem were arbitrable The Court expanded this idea in the case of A. Ayyasamy vs A. Paramasivam & Ors [see here], in this case, the Court held that disputes arising out of a special statute, which are reserved for the exclusive jurisdiction of special courts are not arbitrable. In the same case, the Court had included trademark, copyright and patent in the list of issues that are not arbitrable. However, this can be considered as obiter dicta as the case dealt with the issue of arbitrability of fraud, and the categories which are not arbitrable were merely incorporated from the book “O.P. Malhotra on The Law & Practice of Arbitration and Conciliation“, by Indu Malhotra.
Arbitration under the Indian Copyright Act
The Indian Copyright Act has not explicitly allowed or disallowed Arbitration. However, the Copyright Act provides that issues like determining the reasonableness of rates or royalties, issues related to assignment and issues related to Compulsory licensing are to be dealt with by a quasi-judicial Copyright Board. If we follow the principle evolved in the Ayyasamy Case, the issues vested to be dealt with by the Copyright board may not be arbitrable as it is a special court for dealing with disputes arising out of a special statute.
Indian courts on copyright arbitration
The Supreme Court of India has not provided a clear answer to the issue of arbitrability of copyright disputes. If we follow the principle evolved in the Booz-Allen case, the issues involving right in rem are not arbitrable. A right in rem is a right available against the world at large while right in personam is available against particular persons. Property rights are considered generally as right in rem and Copyright being a species of property right can also be considered as a right in rem. The Supreme Court also espoused the view that Copyright can be considered as right in rem in the case of Common Cause v. Union of India [see here]. However, the High Court’s in its judgments have not put a blanket ban on the issue of arbitrability of copyright disputes.
In the case of Mundipharma AG v. Wockhardt Ltd, the Delhi High court [see here] looked into the issue of whether civil remedies available under Chapter XII of the Copyright Act essentially exclude arbitration in Copyright disputes. It held that every suit or other civil proceedings arising under Chapter XII in respect of infringement of Copyright in any work or the infringement of any other right conferred by the Act have to be instituted in the district court having jurisdiction and remedies conferred under Chapter XII cannot be the subject matter of Arbitration.
The first Indian case which allowed for Arbitration in a copyright dispute was Eros International Media Limited vs Telemax Links India Pvt Limited. In this case [see here], Eros executed a term sheet, containing an arbitration clause, with Telemax for marketing and distribution rights in certain films. Subsequently, Eros filed a suit in the Bombay High Court against alleging copyright infringement by Telemax under Section 62 of the Copyright Act. The plaintiff argued that the dispute of the kind is inherently non-arbitrable. While the defendants argued that a blanket ban on Arbitration on any issue under Copyright or Trademark act is a broad proposition. In this case, the Court adopted a pro-arbitration stand and held that:
- Section 62 of the Copyright Act cannot be read in a way as to oust the jurisdiction of an arbitration panel. The Section does not confer exclusivity or define arbitrability.
- The plaintiff’s action is in personam as the dispute is purely contractual, and it is seeking relief against a particular party.
- An arbitrator would be able to grant the relief (damages and permanent injunction against the use of copyrighted material in future) sought by the plaintiff.
- A blanket ban on Arbitration on Intellectual Property-related matters would create widespread confusion in the world of international and national commerce as any commercial document that involves the transfer of intellectual property would then be held to be non-arbitrable.
The issue of arbitrability of Copyright dispute again came before the Bombay High Court in the case of The Indian Performing Right Society v. Entertainment Network [see here]. In this case, the Bombay High Court distinguished the judgment in Eros v. Telemax and held that the dispute referred to Arbitration affects right in rem and not right in personam. The conflict in the case arose from Entertainment Network’s alleged breach of the license agreements between the parties, which gave Entertainment Network the right to broadcast works from IPRS’ repertoire through their FM Radio Channels. IPRS terminated the agreement and invoked the arbitration clause in their license agreement. The arbitrator held that Entertainment Network was not required to obtain a license from IPS as it had a valid license from the original owners of the sound recordings to broadcast those sound recordings in public. IPS challenged this award in the Bombay High Court. One of the prominent grounds for the challenge was that the dispute at hand was not arbitrable.
The Court held that the arbitral award was in conflict with the public policy of India, and hence liable to be set aside under Section 34(2)(b)(i) of the Arbitration and Conciliation Act, 1996. On the question of arbitrability, the judgment relied on the principles laid down in the Booz-Allen case and the Vikas Sales Corporation and. v. Commissioner of Commercial Taxes judgment [see here], wherein it was held that IP rights in rem were to be included within the definition of movable property. The Court also interpreted Section 62(1) of Copyright Act and held that the provision makes it mandatory (emphasis supplied) that every suit relating to copyright infringement be instituted in a civil court. The Court also distinguished the case from the Telemax case based on the relief claimed. The Court reasoned that the present case centred on IPRS’ right to claim royalties concerning the broadcasting of a sound recording, whereas the Telemax case dealt with the issue of infringement of Copyright. The relief claimed in the present case had the effect of declaring that IPRS had no entitlement to copyright vis-a-vis the works it had licensed. Thus the arbitrator not just decided on a right under the license agreements between the two parties but also on IPRS’ right to communicate their works to the public. The arbitrators’ decision was on the right in rem and not right in personam.
The Madras High Court again dealt with the issue of arbitrability of copyright dispute in the case of Lifestyle Equities Cv vs Qdseatoman Designs Pvt. Ltd [see here]. In this case, Lifestyle Equities was engaged in the business of selling apparel, and it had engaged Q.D. Seatoman Designs Private Limited under an agreement to provide support to their brand. Certain disputes arose between the parties, and QD Seatoman filed a suit seeking a permanent injunction against Lifestyle Equities from using their designs. Lifestyle filed an application under Section 8 of the Arbitration and Conciliation Act stating that the issue had arisen out of the Agreement, which contained an arbitration clause and sought that the dispute be referred to Arbitration. QD Seatoman opposed this by stating that the suit had been filed under Copyright Act and since adjudication in respect of a right in rem, i.e. an injunction in relation to infringement of copyrights over the designs created by it was sought, the issue could not be referred to Arbitration.
The Court, in this case, examined the Booz-Allen and Ayyasamy judgments and held that the issue is arbitrable as both parties are in reality claiming ‘better usage‘(emphasis supplied) vis-à-vis the other party and thus the dispute is in nature of the right in personam and not in the right in rem. The Court illustrated this point by stating that “a patent right may be arbitrable, but the very validity of the underlying patent is not arbitrable“. Thus the Court reasoned that validity or ownership in Intellectual Property are questions that affect the right in rem whereas subordinate right in a persona that arises from such rights in rem can be arbitrable.
Copyright arbitration in foreign jurisdictions
- USA – There is no federal law regarding Copyright Arbitration in the USA. Courts have held that arbitration on the issues of validity or infringement of copyright can be allowed if it arose out of a contract.
- France – Parties can initiate ADR, mediation or arbitration to resolve non-contractual and contractual copyright disputes.
- Switzerland – Disputes regarding Copyright infringement and Copyright invalidity are considered arbitrable in Switzerland.
- Hong Kong – Copyright disputes of any nature can be submitted to arbitration including disputes over the enforceability, infringement, subsistence, validity, ownership, scope, duration or any other aspect of copyright.
Conclusion
From a perusal of the statutes and case laws discussion above, it could be inferred that there is no specific law or principal regarding copyright arbitration in India. The Legislature and the Supreme Court has not provided a definite answer to the question of Arbitrability of Copyright Disputes. The mention of Copyright in the list of non-arbitrable disputes in the Ayyasamy judgment, cannot be considered as a definite ban on Arbitration of copyright disputes unless clarified so by the Supreme Court. The High Courts have adjudged the issue of arbitrability on the basis of the nature of disputes. It has tried to determine if the issue at hand is one which affects a right in rem or right in personam. The High Court’s have allowed Arbitration for disputes which are mostly contractual in nature.
A large number of commercial disputes now involve disputes regarding intellectual property rights. Thus it is important that the Legislature steps in to provide clarity regarding the scope of arbitration in Copyright disputes and IPR disputes in general. The Legislature can either amend the Arbitration and Conciliation Act to make a provision regarding Arbitration of IPR related disputes or come up with a new law for that purpose. The Legislature could make a dispute involving a contract or arising out of a contract arbitrable while keeping the dispute relating to validity or registration of Copyright non-arbitrable. Thus Arbitration could handle cases involving licensing or royalty arising out of contract while the issues concerning the validity of Copyright itself could be left to the courts to decide. However, if contractual issues are allowed to be arbitrated, the Legislature will have to amend the Copyright Act to comply with the principle evolved in the Ayyasamy case. The Legislature would have to provide clarity on whether Section 62 of the Copyright Act excludes arbitration and whether the issues under which the Copyright Board has direct jurisdiction are excluded from Arbitration. The Legislature would also have to decide whether raising a claim questioning the validity of a copyright in an arbitration proceeding, would in itself make the whole issue non-arbitrable. The Legislature could take the cue from the laws regarding Arbitration of intellectual property from Hong Kong and Switzerland to evolve the Indian position regarding arbitration of copyright disputes. Indian could evolve a law that balances the rights between inventor/author and the general public, with inventor/author retaining the right to arbitrate contractual rights and courts retaining jurisdiction over claims that affect the general public.
References
- Resolution of Disputes involving IPR through Arbitration in India – An Analysis of the Legal Position: https://www.barandbench.com/columns/resolution-of-disputes-involving-ipr-through-arbitration-in-india
- Arbitrability of IP Disputes in India – A Blanket Bar?: http://arbitrationblog.kluwerarbitration.com/2019/03/09/arbitrability-of-ip-disputes-in-india-a-blanket bar/?doing_wp_cron=1596554420.4258129596710205078125#:~:text=Parties%20in%20India%20can%20and,to%20use%20the%20respective%20asset.
- India: Are IP Disputes Arbitrable In India? And To What Extent?: https://www.mondaq.com/india/arbitration-dispute-resolution/691550/are-ip-disputes-arbitrable-in-india-and-to-what-extent
- Arbitrability of IPR Disputes in India: 34(2)(B) or not to be: http://arbitrationblog.kluwerarbitration.com/2019/08/15/arbitrability of-ipr-disputes-in-india-342b-or-not-to-be/?doing_wp_cron=1595477037.4627149105072021484375
- On the ‘Apocalyptic’ Arbitrability of Copyright Disputes: IPRS v. Entertainment Network: https://spicyip.com/2016/09/on-the-apocalyptic-arbitrability-of-copyright-disputes-iprs-v-entertainment-network.html
- GNLU SRDC-ADR MAGAZINE Vol-I: https://gnlusrdc.files.wordpress.com/2020/05/srdc-adr-magazine-vol-i-issue-i.pdf
- Worldwide Forum on the Arbitration of Intellectual Property Disputes: https://www.wipo.int/amc/en/events/conferences/1994/plant.html
- Copyright litigation in Switzerland: overview: https://uk.practicallaw.thomsonreuters.com/w-012-2484?transitionType=Default&contextData=(sc.Default)
- Frequently asked questions on IP arbitration in Hong Kong Kong: https://www.doj.gov.hk/eng/public/pdf/arbitration_faq.pdf
- Copyright litigation in France: overview: https://uk.practicallaw.thomsonreuters.com/w-011-3781?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1
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