Ishita Warghat
Introduction
In recent years, the intersection between Intellectual Property Rights (‘IPR’) and Arbitration has emerged as a significant legal terrain, raising complex questions about the arbitrability of IPR disputes. India, with its robust legal system, stands at the forefront of this evolving landscape. Section 34 of the Arbitration and Conciliation Act, 1996 talks about the non-arbitrable nature of the subject matter of the dispute or the grounds on which arbitral awards can be set aside. While IPR is touted to fall squarely within the four lines of this section, this article seeks to analyse the judicial stance of the Indian courts with respect to this particular aspect and suggest a more liberal approach towards encouraging arbitrability of IPR disputes while referencing laws from other jurisdictions for substantiation of this view.
Evolution of the Law and the Extant Stance
The statutory understanding of the India Copyright Act, 1957, The Patents Act, 1970, and The Trademark Act, 1999, indicates that IPR disputes fall within the realm of right in rem. This implies that such disputes should not be arbitrated as arbitration concerns disputes concerning in personam rights. However, to discern the extant stance, it is crucial to understand the evolution of the law concerning the contours of arbitrability of IPR as the subject-matter. The ruling in Booz Allen and Hamilton Inc. v. SBI Home Finance Limited (‘Booz Allen case’) that disputes involving rights in personam are arbitrable, while those involving rights in rem are not, laid the groundwork for subsequent analyses in the context of IPR disputes. The case laid down certain conditions that need to be fulfilled in order to categorize any subject-matter as arbitrable, viz., existence of an arbitration agreement and the subject-matter must be capable of being referred to and be settled by arbitration. However, this foundational ruling set a general principle but left room for interpretation, especially considering the unique characteristics of IPR, which often encompass both in rem and in personam aspects.
The landscape shifted significantly with the Vidya Drolia v. Durga Trading Corporation (‘Vidya Drolia case’) in 2019. The dictum in the case expanded the scope of arbitrability by asserting that even disputes involving rights in rem can be arbitrable if they arise from the rights of the parties under a contract unless the statute creating those rights expressly or by necessary implication bars arbitration.
This marked a departure from the strict categorization laid down in the Booz Allen case, introducing a nuanced approach that recognized the interplay between in personam and in rem rights. The Court’s acknowledgment of the contractual foundation as a determining factor paved the way for a more flexible and contextual understanding of subject-matter arbitrability. The inclination towards referring IPR disputes to arbitration was first observed in Eros International Media Limited v. Telemax Links India Pvt. Ltd where the Bombay High Court noted that when a right in personam is derived from a right in rem, the dispute may be referred to arbitration and such a decision must be taken after analyzing the facts and circumstances of each case. However, a view to the contrary was taken by the Madras High Court in Shanthi Thiagarajan v. K.E. Gnanavelraja which has led to a myriad of differing views concerning this dichotomy.
The Need for Change: Drawing Parallels
If India wants to be recognized as an arbitration-friendly jurisdiction, it would be essential to adopt some changes. The above-referenced decisions indicate the shifting paradigm towards enabling arbitration as a mode of dispute resolution for IPR disputes. However, they merely hold a precedential value considering the lack of any conclusive judgement relating specifically to the subject matter by the Supreme Court to put the issue at hand to rest. Additionally, the statutory provisions are not tailored to support this changing stance. However, these aspects should not be an impediment to adopting such an approach and can be illustrated by the following two aspects:
Certain disputes cannot be referred to arbitration due to statutory mandates to refer it to a particular Court or special tribunal. Various cases relating to immovable property inter alia Title disputes and License agreements are arbitrable. However, the same understanding is not resonated with IPR disputes with the same issue with the only difference being the intangible nature of the property in the latter case. This offers no conclusive reasoning as to why there exists a statutory bar on referring such disputes to arbitration even under similar circumstances.
Secondly, the amendment to the Commercial Courts Act, 2015 mandates civil disputes to be referred to mediation wherein no urgent relief is sought. Section 12(5) of the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 equated the status of a settlement agreement reached through mediation with that of an arbitral award to endow legal sanctity to the same. In the case of Reckitt Benckiser (India) (P) Ltd. v. Surekhaben L. Jain, the ourt recognized the settlement of an IPR dispute concerning a right in rem through the process of mediation. If validity can be given to such mediation-oriented settlements of right in rem IPR disputes, there is no reason as to why the same approach cannot be adopted for the process of arbitration.
Taking Cue From Other Jurisdictions: A Balancing Act
Every jurisdiction has a different approach towards subject-matter arbitrability. What is arbitrable under one jurisdiction, might not be arbitrable in another. With reference to IPR, there exist three categories. Firstly, jurisdictions where most of the IPR disputes are arbitrable, such as the USA and Hong Kong; secondly, where there is a partial ban on the arbitrability of such disputes, e.g., Germany and Spain; and lastly, where there is a complete ban on referring such disputes to arbitration, e.g., South Africa. It would be pertinent to take cues from the statutory practices of other jurisdictions while tailoring them to India’s legal landscape.
In the case of India, and to enable her to grow as an IPR arbitration-friendly hub, it is pertinent to take the example of Hong Kong. The Arbitration (Amendment) Ordinance, 2017 (‘amendment’) enabled arbitration of IPR disputes even if it involved contentions regarding scope, infringement, etc. of intellectual property provided they were not barred by public policy. Taking cues from the Singapore Intellectual Property (Dispute Resolution) Act, 2019, the provisions of the amendment state that even when a relevant forum as per the statutory laws exists, the mechanism of arbitration could still be availed. Following a similar approach in India shall lead to the crystallization of framework on this grey and uncertain area of law which can result in effectively recognising arbitration as a mode of dispute resolution mechanism for IPR disputes.
In countries such as the USA and Australia where there are no statutory provisions that explicitly allow arbitration of IPR disputes, judicial determination has given validity to the decisions of the arbitrators in such disputes. India can take examples of the above-referenced statutory provisions and judicial references to adopt the best IPR arbitration practices in accordance with the legal outlook of the country.
Conclusion
In conclusion, India stands at a crossroads with an opportunity to position itself as a hub for IPR arbitration. Including arbitration for resolving such disputes shall give the parties the autonomy to select arbitrators with specialized knowledge in the relevant field of intellectual property. Unlike traditional litigation, this shall ensure that decision-makers possess a deep understanding of both the technical intricacies and legal nuances associated with the dispute. Additionally, parties shall also have the freedom to choose the applicable rules and procedures, allowing for a more customized and acceptable dispute resolution framework. This shall also aid in protection of sensitive information, trade secrets, and proprietary data, a vital consideration in IPR disputes.
Suggestions for reform include aligning statutory provisions with the evolving judicial stance, explicitly recognizing the arbitrability of IPR disputes. Drawing inspiration from other jurisdictions like Hong Kong and Singapore, India could consider legislative amendments that expressly enable the arbitration of IPR disputes, even those involving contentions regarding scope and infringement, provided they do not contravene public policy. Embracing this evolution will not only align with global trends but also foster innovation and efficiency in the resolution of intellectual property conflicts.
The author is a third year student at National Law Institute University, Bhopal.
NUALS Law Journal 