This article is written by Mayank Srivastava, pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.com.
I can imagine no society which does not embody some method of arbitration. ~ Herbert Read
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Is there any formal manner in which an arbitration clause can be stipulated? Will the manner of stipulating be the same for copyright agreement as well? The arbitration clause though has its terms and conditions but its stipulation varies as per the needs of the agreement and the comfort of the parties. For example, in the franchise agreement, the parties stipulate the arbitration clause as per the governing law where the dispute arose, the jurisdiction of the court which is near to both the parties and as per the common language spoken by both parties. Similarly, the arbitration clause in the copyright agreement needs to be drafted differently with care and analysis of the situation of the parties and their contractual obligations. Under copyright, the author (in relation to literary, musical, film, etc.) grants a ‘licence’ to people or companies (ex- publishing house) to exploit the work such as publishing books, movies based on an adaptation of books, publishing music or adaptation of music, etc. Since the accessibility of copyright material is really fast these days, copyright agreement has become the most crucial element for parties in various industries. Having understood the significance of arbitration, still, arbitration clauses under copyright agreements happen to be found rarely. This article explores the significance of the arbitration clause in the copyright agreement and suggests points to consider for effective drafting of this clause.
What is a copyright agreement?
A copyright agreement is used in literature, films, media, software, advertising services, and music industries, quite prominently. Under this agreement, there is representation and warranties of the author, transfer of rights, and the limit up to which these rights can be exploited. The author transferring these rights gets reimbursed accordingly. Such rights are:
a) Right to copy,
b) Adaption of work,
c) Distribution of work.
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Signifying a copyright agreement’s essentiality
The copyright agreement is the legitimate document for the transferring of rights by the author and up to which extent the work can be exploited for fair use. For example- Company ‘A’ builds a track for the advertising of its product. It received huge support from the public. Company ‘B’ used the music of the track that A made and this led to a copyright infringement case against B by A. The case was settled in the court and B ended up paying a large sum of money. Therefore, had there been a copyright agreement between the parties or company B had requested for exploiting the work, B wouldn’t have to pay this large sum of money.
An excerpt from the copyright agreement clause reads,
The author agrees that all right, title, and interest in the Work, including subsidiary rights and the right to maintain copyright in the name of ______________, is, or shall be by assignment through this Agreement.
Significance of arbitration in the copyright agreement
A piece of art builds its worth when it enters into the public domain, where people recognise it, understand its relevance, and use it for entertainment, learning, and other purposes. The copyright protects the author against the unfair use of his/her original work. This is the age of content, where the copies of movies are reproduced just after release, where the copies of books are easily accessible at the local vendor with no knowledge or consent from the author, all of which enhances the scope for the infringement of copyright which eventually has led to more copyright disputes. But why should copyright disputes be resolved through arbitration and not through the courts? The parties to the copyright disputes are generally the author, the publisher, or the third party who is exploiting the work without any consent from authenticated parties. Due to huge demand and easy accessibility of content nowadays, the copyright disputes shall be resolved through arbitration because of the following reasons:
1. Speedy resolution
Due to the speedy resolution process, companies, businesses prefer to resolve the dispute through arbitration.
2. Less hindrance in reproduction
Example: Movie, music, or books reproduction companies under copyright dispute would face less hindrance in their reproduction due to lesser time and a friendly system of arbitration.
3. No harm to the copyright-protected work
Arbitration provides confidentiality to the parties, so the parties and especially in this situation the publishers and the author, the nobility of the work, would be unaffected.
4. Reputation of the parties
Due to the confidential nature of the arbitration, the party’s reputation and notability of copyright-protected work would face no harm.
The relevance of arbitration in copyright agreement
This can be understood through the prominent 3 Idiots controversy case:
- “Aal izz well …Aal izz well” is one of the most famous dialogues from the 3 idiots movie. But was all well behind the curtains too? Movie production house (Vinod Chopra Pvt. Ltd.) entered into a contract with Mr. Chetan Bhagat. As per the terms and conditions of the contract, Mr. Bhagat assigned all rights in any audio-visual format of the book (Five points someone) or its adaptation to the production house.
- As the movie got released, the author claimed that the movie was nearly 70% adaptation of his book and not 2-5% as he was told by the production house. Though there was no infringement as per the contract conditions, the morality of the author’s right to copyright-protected work was at stake. All of this led to huge controversy and the situation became worse with the parties being on the verge of initiating legal action but everything was hushed up through an evident out-of-control settlement.
- Had there been an arbitration clause in the agreement, both parties wouldn’t have to suffer and the movie would have been released with more ease with the satisfaction of all parties.
Drafting an effective arbitration clause
1. Multi-tier dispute resolution
Parties not willing to proceed with arbitration at the initial stage must stipulate this term in the arbitration clause. Multi-tier dispute resolution provides a forum for dispute resolution. It attempts to provide time to the parties for resolving the disputes through the forums such as:
- negotiation, and
The parties shall be aware while inserting this clause in the agreement as this clause can delay and extend the dispute resolution process and which could be a disadvantage for any party.
2. Mandatory reference
Once the time limit under multi-tier dispute resolution gets over, it is mandatory to mention the reference to arbitration.
3. Scope of arbitration
It is pertinent to mention the circumstances under which the arbitration shall be applied. It is ideal to choose one dispute resolution mechanism that applies to and covers all disputes that can stem from a contract otherwise not stipulating such circumstances will lead to more confusion between the parties.
4. Ad-hoc or institutional arbitration
Under a copyright agreement, parties should consider whether they want their arbitration to be administered and supervised by a recognised arbitral institution or whether they want an ad hoc procedure. Under ad-hoc, the parties are required to make their arrangement on their own, for instance, the selection for arbitrators, designation of rules, applicable law and procedures, and administrative support. Under institutional arbitration parties don’t need to worry about such an arrangement as the institution (ex- London Court of International Arbitration, Dubai International Arbitration Centre, etc.) has their own rules and regulations which provide the framework for the arbitration.
5. Appointment of arbitrator
The appointment of an arbitrator shall always be odd (one or three). It can vary in numbers but what the parties need to consider while stipulating is whether the number of arbitrators justifies the subject matter of the dispute. And, it is pertinent to mention how many arbitrators shall be appointed as it will help avoid confusion in resolving disputes. Ex- The Arbitration Tribunal shall consist of three arbitrators, one to be appointed by the author, one to be appointed by the publisher and the third to be appointed by the two appointed arbitrators. Including this, parties shall also consider the basic eligibility for the appointment of the arbitrator. Ex- The arbitrator shall be persons (including those who have retired) with not less than ten years experience of art (music, writing, etc.) within the industry or as lawyers or other professional advisors serving the industry.
6. Arbitration rules
The choice of institution carries with it a choice of institutional rules to provide a basic procedural framework for the arbitration (subject in any case to the parties’ agreement on different rules). The institution will typically play a role in arbitrator selection or confirmation, administration of the arbitration, and (in some cases) scrutiny of arbitral awards. Some common arbitration rules used by parties include the SIAC Rules, the ICC Rules, and the UNCITRAL Rules.
7. Language of arbitration
It is pertinent for the parties to specify the language of arbitration, specifically if the parties and their respective witnesses speak different languages, or if the law of the country governing the arbitration specifies that in the absence of any agreement between the parties, the arbitration should be conducted in the national language of that country. Failure to specify the language of the arbitration may ultimately result in parties having to incur expensive and unnecessary costs for translating documents and witness evidence.
8. Place of arbitration
The place or “seat” of the arbitration determines the arbitration law governing the arbitration procedure. Parties should select a neutral place and also one where the local courts will enforce the arbitration agreement and support the arbitral process.
9. Governing law
Considering the worldwide accessibility of copyright material where it is easily accessible to any country, where one copyright work authored in another country gets exploited by users of other countries, the laws governing the arbitration in copyright disputes must be stipulated in the agreement.
The Supreme Court in NTPC v. Singer, held that substantive law is normally the governing law as well. In exceptional circumstances and if there is no substantive law defined, the law of seat will be deemed to be governing law as the law bearing the “closest connection” to the dispute. Three laws are potentially applicable to an arbitration agreement:
(1) The law of the arbitration agreement (governing law),
(2) The proper law of the contract (substantive law), and
(3) The law of the seat of arbitration.
Therefore, it is pertinent for parties to stipulate the substantive law under which the dispute shall be resolved otherwise not mentioning the governing law the parties will have to prefer court proceedings for resolving this matter, and stipulated arbitration clause in an agreement will make no gain to the parties.
The arbitration clause in a copyright agreement is uncommon but considering the number of copyright disputes that occur, it is advisable and preferable to stipulate arbitration clauses. The parties to the copyright disputes would willingly protect the nobility of the work in any situation and therefore arbitration clause is pertinent in the agreement as it will protect the copyrighted work from any harm. Further, an arbitration clause shall be stipulated in considering the comfort of the parties as the parties to the copyright could be from distinct parts of the world or could be as close to the same city.
The parties must specify all circumstances that would lead to infringement of the contract to avoid any further confusion and delay in resolving disputes. All suggested terms in the ‘how to draft effective arbitration clause’ shall vary and stipulated as per the type of copyright agreement and as per the parties’ willingness. Disputes in relation to copyright agreement have been kept away from the purview of the arbitration because such disputes were considered to be a right in rem and not a right in personam. Fortunately, this perspective of the judiciary has changed under the case of Eros International Media Limited v. Telemax Links India Pvt. Ltd. and Ors and the judgment made it clear that claimants to the copyright disputes can only be right in personam, i.e. one party seeking a specific relief against a particular defined party, and not against the world at large. The court further held that an arbitrator can allow most remedies that a civil court is entitled to grant. This judgment has attempted to liberalise and widen the scope of arbitration in Intellectual Property and this will be beneficial for copyright industries such as literature, films, media, software, advertising services, and music.
Sample : arbitration clause in the copyright agreement
- This Agreement shall be governed by, and construed in accordance with, the laws of the State of India.
- If any dispute arises in relation to this agreement, the parties shall attempt to settle it by negotiation within 20 days. Failing to resolve the dispute by negotiation within the specified time limit, either party shall deliver a notice to the other party that a dispute shall be resolved by mediation in accordance with the ___________ (Mediation Rules) within 15 days.
- If the dispute cannot be resolved by mediation between the parties within the specified time limit, either party shall deliver a notice to the other party that a dispute shall be resolved by arbitration under the Arbitration & Conciliation Act, 1996. The ABC Arbitration Centre will appoint the sole arbitrator and will conduct the arbitration in accordance with its rules for the conduct of arbitration proceedings then in force and applicable to the proceedings. The arbitration award shall be final and binding on the parties.
- The seat and venue of arbitration shall be New Delhi.
- The proceedings shall be in the English language.
[Some of the Arbitration centres- Delhi International Arbitration Centre (DIAC), Indian Council of Arbitration (ICA), International Centre for Alternative Dispute Resolution (ICADR), LCIA India, etc.]
- Eros International Media Ltd. v. Telemax Links India Pvt. Ltd. and Ors. and 2016 (6) ARBLR 121 (BOM), 2016 (6) BomCR 321
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