Part I: Arbitrability of IPR Disputes: A Comparative Analysis calling for Change
Apurva Singhi [i]
As a means of dispute resolution, arbitration provides several benefits over the traditional court process. However, while most disputes that courts can adjudicate upon are said to be arbitrable, there are a few limitations to the same. This may be due to the subject matter or nature of the dispute.
In and of itself, the arbitrability of intellectual property rights (‘IPR’) disputes brings along a great set of challenges, including the harmonization of several existing laws. However, what should be kept in mind is that the foundation for arbitration is consent and the intervention of the judiciary should be kept to a minimum, especially when private parties have agreed to arbitrate.
The arbitrability of IPR disputes is differentiated based on the dispute in question affecting rights in rem and rights in personam. A right in rem is available against the whole world but a right in personam is available against a particular individual only. Through case laws, it is well established that disputes between private parties may be referred to arbitration, although there are a few decisions that have restricted the arbitrability of these disputes as well. However, the problem arises with the recognition of the nature of the right violated. There has been no standard evolved to give a clear threshold to determine whether a right in rem or a right in personam has been violated. Due to this, a high level of uncertainty exists for private parties. When a court classifies the violation of a right to be in rem, this bars the parties from exercising their autonomy and referring their dispute to arbitration.
This discussion becomes important when we consider the growing foreign investments in India, accompanied by assignment of IPR. If a restrictive regime is followed, parties would not want to designate India as the seat of arbitration. Therefore, to increase the volume of international arbitration in India, firstly, there needs to be clarity regarding the arbitrability of IPR related disputes, particularly whether disputes affecting rights in rem are arbitrable; and party autonomy needs to be given more importance.
The article proceeds from here in four parts. Part II examines the existing case-law in India which relate to the arbitrability of IPR disputes and tries to ascertain the latest position of the Court. Part III delves deeper into the overlap of rights in rem relating to IPR disputes and their arbitrability. Part IV investigates the practices followed in other jurisdictions and carries out a comparative analysis with India. Part V examines whether a balance has been achieved between party autonomy and rights in rem, and discusses certain changes that are required in the Indian legal scenario, to provide for clarity in this practice and ensure party autonomy is upheld.
An Examination of Case Law
Initially, Indian courts had stated that all disputes which arose out of trademarks, copyrights and patents were not arbitrable per se. However, the position of the Court with respect to arbitrability was clarified in Booz-Allen & Hamilton Inc v. SBI Home Finance Ltd. (‘Booz-Allen’). While the Supreme Court acknowledged that every matter that might be addressed in a civil court may also be settled through arbitration, it cautioned that the legislature had expressly or implicitly reserved some types of disputes as non-arbitrable. According to the Court, such classifications included actions in rem. The Court ruled that actions in rem could not be arbitrated since they determined rights not only between the parties to the case but against the world at large. Proceedings in personam, on the other hand, were actions involving the parties' rights and interests as against each other, and the court believed that such actions may be referred to arbitration.
While Booz Allen provides the tests to decide whether a dispute is arbitrable or not, Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya deals with whether the relief being sought can be granted by an arbitral tribunal. In this case, it was held that when an application under Section 8 of the Arbitration and Conciliation Act, 1996 (‘1996 Act’) has been filed, the matter should be one which the parties have agreed to refer to arbitration. Furthermore, if disputes were partly-arbitrable, bifurcation would not be allowed, and the arbitration of these disputes would then be prohibited.
Case law such as Ministry of Sound International v. M/s Indu Renaissance Partners and Eurokids International v. Bhaskar Vidyapeethhave allowed for disputes regarding IPR and emerging out of a contractual agreement to be referred to arbitration.
Rights in Rem v. Right in Personam
The wrongs committed that lead to IPR disputes are tortious in nature, and were regarded as such for several years. The concepts of rights in rem and in personam have been applied to IPR disputes as well. In this section, the author explores the grey areas surrounding the demarcation of disputes as affecting rights in rem.
If we draw a parallel to immovable property, it is observed that even though the owner has a right in rem to immovable or moveable property, a licence or bailment is a contractual agreement between the owner and the other party. As a result, a pure action in rem cannot be one which is inclusive of contractual rights or a breach of a contractual condition.
However, there are contradictory views of courts on this issue, specifically with regards to IPR. In Eros International Media Ltd. v. Telemax Links India (P) Ltd, the court held that an action for infringement was a right in personam, but in Indian Performing Right Society Ltd. v. Entertainment Network (India) Ltd., the court disagreed and held it to be a right in rem.
The principal confusion arises due to the dual nature of the rights available. For example, in a licensing agreement of a patent for a limited period, where the licensee violates the agreement, the right of the owner is a right in rem. However, at the same time, the right of the owner as a licensor against the licensee is a right in personam. If the owner has agreed to arbitration on the occurrence of any dispute, it can be taken to mean that the owner has opted to exercise his rights as a licensor. This choice of the owner must be taken into account while determining the right in question and the implied option should be recognized.
Apurva Singhi is a third-year student at the National University of Juridical Sciences. She has a keen interest in the fields of Arbitration and Intellectual Property Rights. For any discussion related to the article she can be contacted at email@example.com.