Part II: Arbitrability of IPR Disputes: A Comparative Analysis calling for a Change

Apurva Singhi [i]


 

Arbitrability of IPR Disputes in other Jurisdictions: A Comparative Analysis


There are four generally recognised practices relating to arbitration of IPR disputes which have been adopted by states. These range from liberal to restrictive approaches. First, some countries restrict the arbitration of all IPR disputes. While this is not a widespread practice, South Africa is one such nation that follows it, and makes all disputes relating to patents non-arbitrable.


Second, some jurisdictions follow a practice of selective arbitration of IPR disputes. In this method, issues involving private law, such as a breach of the assignment or license are made arbitrable. However, public law disputes such as the scope or validity of the IPR granted by the state are considered non-arbitrable.


Third, is the characteristic USA approach, wherein all IPR related disputes are made arbitrable. In this approach, with respect to public law issues of the scope and validity of the IPR, the decision of the tribunal binds only those parties who are party to the dispute and not third parties.


Fourth, is the approach characterized by Swiss Law, which permits the arbitration of all disputes with an ensuing effect in rem. If an award passed is accompanied by a certificate of enforceability issued by a competent Swiss Court, it is entered in the Federal IP Register.


While other jurisdictions have allowed arbitrability of IPR disputes for a long time, this has been a recent development in India. Due to this, there is still confusion with regards to the exact practice to be followed and legislations have not provided a lot of clarity. The lack of clarity provided by legislations has led the courts to delve into policymaking to decide the debate on the arbitrability of such disputes. However, as discussed, the decisions of the courts are differing in this regard causing uncertainty which has a negative effect on the rights of parties.


Rights in rem and Party Autonomy: Discussion and the Way Forward


For a long time, parties in India and across the world have agreed that transactions involving intellectual property would be arbitrated. A large number of international and local transactions include the licencing or transfer of intellectual property and include arbitration provisions to adjudicate any disputes that may arise. If all of these conflicts involving IPR are settled in court, it would not only jeopardise the parties’ voluntarily agreed upon arbitration agreement, but it will also cause significant delays in the resolution of those disputes, flooding the already overburdened court docket.


Given the tremendous amount of investment and the need for speedy resolution of disputes stemming from it, India would be wise to explore liberalising the arbitrability of IPR issues in the near future. With the current constrained regime of arbitrability of IPR disputes, India would find it difficult to aspire to become such a hub due to the limited spectrum of non-arbitrable IP cases in international arbitration centres.


However, at the same time, arbitration should not be utilised to trample on the rights of stakeholders who are not necessarily party to the arbitration agreement. The necessity to strike this balance is a pressing matter that the courts should address.


While the practice in Switzerland is novel and gives complete autonomy to the parties, it might not be the correct solution for a jurisdiction like India, where the arbitration of IPR disputes is still relatively new and the legal environment is based on the recognition of public rights. However, there is still a need to move away from the current regime and move towards a more liberal one.


While we are currently debating upon whether or not IPR conflicts under licencing agreements may be arbitrated, many jurisdictions have discovered ways to strike a balance between the sanctity of arbitration agreements and the public policy considerations that are at the heart of the issue. As discussed above, some countries, such as the United States, have made all IPR disputes, including their validity, arbitrable. In doing so, they have limited the application of the latter rulings to judgments in personam, that is, judgements that only affect the parties to the disputes and not the rest of the world. This means that while matters related to rights in rem, such as licensing are arbitrable, however, the award is valid only against the parties to the dispute and not other third parties who have similar rights or who might be affected similarly. For example, if there is a dispute regarding the licensing of a patent between X & Y which is taken to arbitration, while the right of the licensor, X, is a right in rem, it will only be enforceable against Y and not any other licensees if the award is favourable to X. Some countries have added an extra layer of protection by allowing validity-related concerns to be arbitrated if they arise in the course of resolving the dispute and treating decisions on such matters as judgments in personam.


A similar model can be adopted in India to allow autonomy to the parties to decide whether they want to refer their dispute to arbitration or not, while also preserving the rights of third parties and protecting public rights. The judiciary has recognised that disputes relating to rights in personam arising out of broad rights in rem are arbitrable. Under this umbrella, disputes relating to scope and validity of IPR which are generally taken to be rights in rem, can also be arbitrated and the decision of the tribunal should be binding only on the parties to the disputes and not third parties. This will allow for greater party autonomy while also ensuring that the rights of the world at large and those parties not associated with the dispute are not abrogated.


Conclusion


Due to the dual nature of the rights available to owners of patents and copyrights, as licensors, etc. and as owners a confusion is created as to which rights should be applied or taken up on a case-to-case basis. Due to a lack of clarity in the provisions of the legislature and differing opinions of the court on this issue, a situation of great uncertainty has been created and the position of India as a seat of arbitration is not favourable to parties. Therefore, there is a need for change. At the same time, while taking into account the rights of the parties and their autonomy, we also have to consider the rights of third parties. Thus, a model which is similar to the US model with slight modifications as required in the Indian context is appropriate to resolve this conundrum.


 

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 apurva220011@nujs.edu.


Part II - Arbitrability of IPR Disputes - A Comparative Analysis calling for a Change
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