This article has been written by Madhuparna Ray pursuing BBA LLB (Hons.), GITAM School of Law, GITAM Deemed to be University, Visakhapatnam and the article has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders). This article aims to explore the arbitrability of IPR disputes and the grey area surrounding the same by employing a case-by-case approach of the concept and a comparative analysis of the position in India and abroad with the help of various statutory laws and treaties encompassing this growing field of law.
Table of Contents
As per World Intellectual Property Organization, Intellectual Property Rights Law revolves around protecting and safeguarding the creations of the human mind and creativity. IP rights grant the creator of the work ‘statutory monopoly’ upon it by conferring certain exclusive rights with regard to their creation. It is basically a right in rem as the right of the creator is against the entire world.
In India, IPR dispute resolution mainly occurs through courts of law. But the massive percentage of pendency of cases in the courts poses a difficult situation for the fast-paced and ever-increasing arena of Intellectual Property Rights. Due to this, the need for the Alternative Dispute Resolution mechanism is felt.
According to Section 89 of the Code of Civil Procedure, 1908, the courts may allow disputes to be resolved by arbitration, mediation, or conciliation if it deems fit. But there is a grey area surrounding the issue of arbitrability of IP-related disputes because the disputes concerning rights in rem are generally considered non-arbitrable.
With the arrival of the phenomenon of globalization, there has been a tremendous upsurge in international trade and commerce. This resulted in aggressive competition, which eventually paved the way for a manifold increase in disputes. Owing to the rapid pace of today’s world, these disputes require speedier resolution. The age-old system of litigation, even though it is time-tested, yet fails to cope up with such an ever-increasing magnitude of caseload. This leads to the pendency of cases which is not desirable. Hence, the new-age legal tools come into the picture in the form of alternative dispute resolution methods.
Arbitration is a much-coveted mode of alternative dispute resolution when it comes to commercial and international dispute resolution. This is mainly due to the quasi-judicial structure of arbitration, which outshines the overburdened Courts of Law. Arbitration begins with a contract between the parties wherein the rights and obligations of the parties are laid down beforehand, making the process systematic and organized. The method of arbitration ensures speed, flexibility, confidentiality and gives the involved parties the power to control the process. Moreover, along with a binding decision, in most of the cases, it helps to maintain the relationship between the parties, which is a highly essential criterion surrounding the commercial world.
The arena of intellectual property law is primarily commercial in nature and has an international reach due to the creators of such intellectual property licensing in various international jurisdictions. It is now an integral part of the corporate world as copyrights, patents, trademarks, designs, etc., are omnipresent. Neither their presence nor their importance can be ignored. In fact, with time, the field of intellectual property rights law is gaining worldwide attention, and so the resolution of the disputes in this field should be taken seriously.
Intellectual Property Rights Overview
As per World Intellectual Property Organization, Intellectual Property Rights Law revolves around protecting and safeguarding the creations of the human mind and creativity. IP rights grant the creator of the work ‘statutory monopoly’ upon it by conferring certain exclusive rights with regard to their creation. It is of extreme essence to protect intellectual property rights as they are intangible. Hence, several circumstances might pose several threats of infringement from various quarters if they are not adequately protected. These rights arise from the intellectual acumen of the creator or author of the intellectual work. Hence, its protection is necessary to incentivize the author so that he is encouraged to develop more such works in the future, which would naturally cause progress in that particular field of work.
Different Facets in Intellectual Property Disputes and How Arbitration can be Advantageous
Firstly, IP Disputes revolve around highly technical areas which need to be dealt with by experts in the field. In the case of traditional modes of dispute resolution, it might pose a problem as the judges might not possess the pre-requisite technical expertise to delve into the depths of the issue at hand. Contrastingly, in the case of arbitration, the parties would have the advantage of appointing an arbitrator who possesses all the technical knowledge required for the resolution of the dispute.
Secondly, when the case with regard to Intellectual Property goes before the Court of law, any confidential information which the parties wish to keep private from the world would inevitably become public knowledge. On the other hand, with the arbitration, confidentiality would be efficiently maintained.
Thirdly, there would be power in the hands of the parties to have a tailormade procedural set if they opt for arbitration. It comes in handy as opposed to the traditional system wherein there is no concept of ‘party autonomy’. Having such power would enable the parties to have better control in monitoring the fate of the case.
Fourthly, Intellectual Property Disputes have gained rapid international reach over the past few decades. Opting for a traditional dispute resolution system could turn problematic due to the fact that laws differ from country to country, and owing to the international nature of such disputes, multiple proceedings might arise in various countries. Also, problems might arise surrounding the jurisdiction as each party would prefer a jurisdiction supporting his own convenience. These peripheral disputes would make the core dispute more time taking and laborious. Each of these issues can be solved by choosing the process of arbitration, as then a single arbitral authority will be in a position to resolve the dispute. Moreover, the place and seat of arbitration can be chosen as per the convenience of the parties involved.
Finally, the corporate world prefers to resolve disputes in a manner that is effective as well as speed efficient so that they can carry on with their business. With the traditional litigation process, this becomes tough due to the massive load of pending cases therein. Hence, with the arbitration, the parties would have a result within a stipulated time. Also, as the decision is final and binding in case of arbitration, hence in most of the cases, the matter gets a speedy closure in contrast to the cases in Courts where several rounds of appeals exist.
Disadvantages of using Arbitration for Resolution of Intellectual Property Related Disputes
In spite of the existence of the various above-mentioned advantages of using arbitration as a method of dispute resolution, there are certain limitations in this process as well. First and foremost, the inclusion of a clause for referring to arbitration in case of a dispute is necessary for a contract between the parties beforehand. Without the existence of this clause, it can prove extremely difficult for one party to make the other party agree to take the path of arbitration. Secondly, if one party is at a higher position or, in other words, is at a more advantageous position with better availability of resources, then that party would have a tactical edge over the other party. Thirdly, the decisions reached through the process of arbitration do not have the power to be considered as a public precedent. Hence, even though there exists a suitable arbitral decision, it cannot be used as a binding precedent for subsequent cases.
Arbitrability of Intellectual Property Disputes in India
In the case of Guru Krupa Mech Tech Pvt Ltd v State of Gujarat and Ors., it was opined by the Hon’ble Gujarat High Court that the law of Intellectual Property deals with negative rights in the sense that it creates a right that excludes others from using the creation of the registered creator. The same stance was taken by the Hon’ble Delhi High Court in McDonald’s India Pvt Ltd v Commissioner of Trade and Taxes, New Delhi. Thus, it can be construed from these two cases that Intellectual Property Law deals with right in rem.
According to Section 89 of the Code of Civil Procedure, 1908, the courts may allow disputes to be resolved by arbitration, mediation, or conciliation if it deems fit. But there is a grey area surrounding the issue of arbitrability of IP-related disputes because the disputes concerning ‘rights in rem’ are generally considered non-arbitrable. Over the years, the legal scape with regard to the arbitrability of Intellectual Property is undergoing lots of changes owing to the various judicial decisions in this regard.
In the case of Booz Allen and Hamilton Inc. v SBI Home Finance Ltd. and Ors., the Hon’ble Apex Court of India stated that the disputes that arise out of ‘rights in personam’ would be open to arbitration. On the other hand, cases that have come out of ‘rights in rem’ are not considered to be arbitrable. They would be resolved through Courts or Tribunals. The Court further added that it is not a rigid rule and could be subject to changes based on the situation. However, the Hon’ble Court laid down a list of disputes that it considers non-arbitrable. They are:
- Disputes with regard to criminal offenses;
- Matrimonial disputes;
- Disputes over the issue of guardianship;
- Insolvency Disputes;
- Testamentary matters like succession certificate, grant of probate, etc;
- Eviction and tenancy related matters.
Expanding the list further, the Hon’ble Supreme Court in the case of Ayyasamy v Paramasivam added the disputes from patents, copyrights, and trademarks to the above existing list of non-arbitrable matters. But, the Hon’ble Court further mentioned that there would be no absolute bar, and the arbitrability of Intellectual Property Rights matters would be decided on the merits of the case at hand.
Contrastingly, in the case of Eros International Media Ltd v Telemax Links India Pvt Ltd., the Hon’ble Bombay High Court held that each and every dispute that is related to Intellectual Property Rights Law could not be straight-jacketed as disputes arising out of ‘rights in rem.’ Hence, not every such dispute is non-arbitrable.
Therefore, after analyzing the above-mentioned judgments, it can be said that the grey area regarding the arbitrability of IP-related disputes still exist. In fact, even though The Hon’ble Supreme Court of India has opined that ‘rights in rem’ are non-arbitrable nonetheless, it can also be seen that no absolute bar was declared regarding the same. Hence, the decision would depend on the facts of a given case.
Arbitrability of Intellectual Property Disputes Abroad
United Kingdom: Initially, there was no recognition of arbitrability of disputes related to intellectual property law in the statutes of 1950, 1979, 1996. Under the UK Patents Act, 1977, permitted in certain circumstances. Now, arbitrability of Intellectual Property related disputes has received judicial recognition. In the United Kingdom, Copyright and Trademark matters are completely arbitrable.
United States: It is clearly mentioned in the Federal statutes that Patent disputes would be subject to arbitration if the parties agree to insert an arbitration clause in a contract related to patent or if the parties give their consent to resolve a continuing dispute with the help of arbitration. Even though there is no explicit provision of arbitrability of Copyright disputes, but still many copyright cases are being subjected to arbitration in the United States. In the case of trademark disputes, there is no statute that provides for its binding arbitration.
Canada: Even though there is no explicit provision for arbitrability of IP-related conflicts in Canada, yet arbitral award for a patent dispute can be enforced. Even though certain ambiguity exists, still from the trend, it can be said that Canada is pro-arbitration when it comes to IP disputes.
Australia: There is no specific statute for permitting arbitration of IP disputes, yet all the Australian Courts run on the motto that something that is fit to be determined by a court can be subjected to arbitration.
Therefore, it should be seen that the arena of Intellectual Property Disputes which is an ever-increasing field, should be dealt with effectively, speedily, and efficiently as its presence and importance is felt almost everywhere. Such advantages can be gained if the highly effective dispute resolution technique of arbitration is used. Hence, the grey area that exists in this regard should be cleared in order to facilitate quicker, easier and efficient resolution of Intellectual Property related disputes.
- Anuradha Maheshwari, ‘The need of the hour is to propose necessary amendments in the IP/Patent laws to enable and encourage institutional arbitration in intellectual property disputes’ (available at http: // www.lexmantis.com / pdf / May – 2013 – LexMantis – Arbitration – And – IP.pdf )
- Aastha Mullick, ‘Institutional Arbitration in Intellectual Property Right Disputes (available at https: // www.latestlaws.com /wp-content /uploads /2018 /08 /Institutional – Arbitration – in – Intellectual – Property – Right – Disputes – By – Aastha – Mullick.pdf )
- Rajat Jain, ‘Arbitrability of IPR Disputes -A Harmonious Approach’ (available at https: // www.mondaq.com / india / arbitration – dispute – resolution / 977762 / arbitrability – of – ipr – disputes – – a – harmonious – approach )
- Saniya Mirani, ‘Arbitrability of IP Disputes in India’ (available at http: // arbitrationblog.kluwerarbitration.com / 2019 / 03 / 09 / arbitrability – of – ip – disputes – in – india – a – blanket – bar / )
- The Arbitration and Conciliation Act, 1966
- Code of Civil procedure, 1908