Trademark Arbitrability Revisited: The Supreme Court's Mangayarkarasi Verdict

Manav Chakraborty* Manya Singh^

INTRODUCTION

The Supreme Court, in K. Mangayarkarasi v. N.J. Sundaresan (“K. Mangayarkarasi”), recently delivered a judgment in the context of intellectual property ("IP") disputes that marks a significant, albeit nuanced, development in Indian arbitration jurisprudence. The decision provides greater clarity to a previously uncertain and contentious legal landscape, which has been characterised by inconsistent judicial decisions and extensive scholarly debate since the landmark ruling in Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. ("Booz Allen").

In particular, the Court’s position on the arbitrability of trademark disputes arising from contractual obligations, as well as the authority of arbitral tribunals to consider allegations of fraud, represents an important step in strengthening India’s pro-arbitration framework. The judgment also incrementally aligns India’s approach with emerging global trends in the arbitration of IP disputes.

THE SHIFTING SANDS OF ARBITRABILITY: FROM IN REM TO IN PERSONAM NUANCES

The progress of arbitrability law in India has been characterized by a deliberate and consistent judicial strategy to expand the frontiers of what issues and matters can be resolved through arbitration. This evolution has not been a wholescale overhaul but a methodical application of established principles, signifying a maturing of Indian arbitration jurisprudence. K. Mangayarkarasi represents a vital but much needed step in this trajectory by pushing a new frontier for IP and trademark disputes and by providing definitive guidance and clarity on how to interpret such matters.

The foundational premise for arbitrability in India was laid down by the Supreme Court in Booz Allen which established that while most civil or commercial disputes are arbitrable in nature, certain categories of disputes due to public policy concerns or being in rem in nature must be reserved for adjudication by public fora. A right in rem is essentially a right exercisable against the world at large, whereas a right in personam is protected solely against specific individuals. Therefore, traditionally, in rem actions were deemed as being unsuitable for private arbitration, while in personam actions were generally amenable.

Crucially, Booz Allen introduced the vital nuance that "subordinate rights in personam arising from rights in rem have always been considered to be arbitrable". This paved the way for a more expansive view of arbitrability in IP. Vidya Drolia v. Durga Trading Corporation  further elaborated, acknowledging that while the grant and registration of trademarks involve sovereign functions with erga omnes (in rem) effect, disputes stemming from subordinate rights such as licences granted by the proprietor of a registered trademark are indeed arbitrable, as they pertain to rights and obligations inter se the parties to a license agreement. This progression demonstrates a consistent judicial effort to broaden arbitrability by meticulously applying the in rem/personam distinction and the concept of "subordinate rights" to new factual matrices.

Indian High Courts have on the other hand grappled with this distinction by generally adopting a much more narrow and restrictive view. For instance, the Delhi High Court in Mundipharma AG vs. Wockhardt Ltd. held that civil remedies for copyright infringement, such as injunctions and damages, could not be subjected to arbitration as they arose under the Copyright Act and fell within the District Court's jurisdiction. Similarly, the Bombay High Court in Steel Authority of India Ltd. vs. SKS Ispat and Power Ltd. & Ors. dismissed an application for arbitration in a trademark infringement and passing off suit, reasoning that trademark rights and remedies are in rem matters and thus not amenable to a private forum. In The Indian Performing Right Society Ltd. vs. Entertainment Network (India) Ltd., the Bombay High Court rejected an arbitral award that made a finding on the legal character and validity of copyright ownership, deeming it an adjudication on an action in rem. These decisions therefore reflected a cautious approach by the High Courts, primarily focusing on the public nature of IP rights.  

MANGAYARKARASI: CHARACTERIZING A NEW DEVELOPMENT IN IP ARBITRABILITY

The judgement delivered by the Court in Mangayarkarasi significantly contributes to this developing landscape  by providing explicit clarity on the arbitrability of trademark disputes, particularly those arising from contractual relationships. It laid down the foundation for the principle that the contractual nexus is the gateway to arbitrability for IP disputes in India. The Court ruled that intellectual property disputes can be arbitrable in India, if their primary cause of action arises from a contractual relationship, such as an assignment or license agreement, This creates a clear and predictable pathway for parties to utilize arbitration for IP-related disputes, within the already existing jurisprudence and does not challenge the aspect of in rem validity as expounded by this Court in a catena of judgements.

This approach has also been increasingly reflected in recent High Court decisions, foreshadowing the Supreme Court's stance. The Delhi High Court in Hero Electric Vehicles Pvt. Ltd. & Anr. vs. Lectro E-Mobility Pvt. Ltd & Anr.  allowed a trademark dispute to be referred to arbitration on the grounds that the asserted right originated from a Family Settlement Agreement and a Trade Mark & Name Agreement, and not directly from the Trade Marks Act, and hence the right was asserted against a specific family group (in personam), not the whole world, thus making it arbitrable. Similarly, in M/S. Golden Tobie Private Limited vs. M/S. Golden Tobacco Limited, the Delhi High Court referred the matter to arbitration, holding that the asserted right stemmed from a Master Long Term Supply Agreement and a trademark license agreement, and did not involve sovereign functions of the State, making the disputes arbitrable. These High Court judgments therefore demonstrated a growing judicial willingness to distinguish between the in rem aspects of IP registration and the in personam rights arising from contractual dealings, paving the way for the Supreme Court's definitive pronouncement in Mangayarkaras.

REINFORCING LIMITED JUDICIAL INTERVENTION AND ARBITRABILITY OF FRAUD

The Supreme Court's ruling in Mangayarkarasi also robustly reinforces India's pro-arbitration policy by emphasizing the restricted scope of judicial intervention at the initial referral stage. Under Sections 8 and 11(6A) of the Arbitration and Conciliation Act, 1996 ("Act"), the court's role is confined to verifying the mere existence of a valid arbitration agreement, leaving all substantive issues, including the validity of the claim, to the arbitral tribunal.

Furthermore, K. Mangayarkarasialso addressed the persistent challenge of allegations of fraud which have been used to derail and stymie arbitration proceedings. Drawing upon this issue in A. Ayyasamy v. A. Paramasivam & Ors.  the Supreme Court clarified that a "mere plea of fraud is insufficient to avoid an arbitration proceedings". In K. Mangayarkarasi, the fraud alleged was deemed to be inter partes and not of a serious enough nature to warrant ousting the jurisdiction of the arbitral tribunal. This pragmatic approach, which was reaffirmed by this Court in SBI General Insurance Co. Ltd. v. Krish Spinning (2024),prevents parties from using unsubstantiated claims of fraud as a dilatory tactic and promotes judicial efficiency by allowing arbitral tribunals to deal inter partes disputes and claims themselves.

INTERNATIONAL POSITITIONS AND GLOBAL TRENDS

The Mangayarkarasi judgment, by clarifying the framework in regards to arbitrability of trademark disputes arising from contractual relationships, closely aligns India's position with ongoing global trends in intellectual property arbitration. There is a clear international trend towards increasing the arbitrability of IP and trademark disputes, especially those stemming from licenses, assignments, and joint ventures.

Jurisdictions around the world are increasingly recognizing the viability and suitability of arbitration for IP disputes, especially when the dispute concerns inter partes rights. For instance, the  United States explicitly authorizes arbitration for patent disputes, including validity and infringement, with awards having inter partes effect, and generally considers all civil/commercial IP disputes arbitrable. Singapore has legislatively clarified that all IPR disputes, including those concerning validity and ownership, are arbitrable, with awards binding only the parties involved (in personam). Even in the United Kingdom, where there's no statutory definition for arbitrability, courts allow arbitral tribunals to consider IP issues like patent validity, though the awards only have inter partes effect.

A consistent theme across all these jurisdictions, mirroring the SC’s stance in Mangayarkarasi, is the acceptance of IP arbitrability primarily for inter partes disputes, where the arbitral award's effect is limited to the parties involved and does not alter the in rem status of the IP right itself. This shared approach represents a practical and mutually beneficial compromise, allowing for the benefits of arbitration while preserving the sovereign's exclusive role in granting and maintaining in rem IP rights.

CONCLUSION

The Supreme Court’s decision in K. Mangayarkarasi marks a pivotal step in India’s arbitration jurisprudence, addressing an ambiguity which has long plagued both litigants and the judiciary. The judgment reaffirms the distinction propounded by this Court between rights in rem and rights in personam, reinforcing that disputes concerning the former remain outside the domain of arbitral tribunals while the latter which has become vital in commercial transactions remain squarely within its ambit. In sum, the judgement delivers much-needed certainty and sensibility to the treatment of trademark disputes and provides a robust foundation upon which future reforms can be built upon.

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* Manav Chakraborty is a penultimate-year law student at Jindal Global Law School. His interests lie in dispute resolution, constitutional, and competition law, and can be contacted at 22jgls-mchakraborty@jgu.edu.in

^ Manya Singh is a penultimate-year law student at Jindal Global Law School. Her interests lie in mergers and acquisitions, capital markets, and insolvency law, and can be contacted at 22jgls-msingh@jgu.edu.in.

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