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An Overview of Arbitrability of Intellectual Property Disputes

Khurana and Khurana, Advocates and IP Attorneys India


INTRODUCTION

The number of patents, trademarks and domain name registrations has increased exponentially as a result of the quick development of new technologies and processes in industries like pharmaceuticals, biotechnology, aerospace, telecommunications, and information technology. The frequency of disputes in the IP domain also rises as a result of these actions. It frequently occurs when other companies violate your intellectual property or take legal action against you for violating their IP rights. The use of international arbitration to settle disputes involving intellectual property ("IP") is on the rise. Traditionally, national courts presided over the majority of IP litigation. However, the reality is that, with some exclusions and restrictions, most jurisdictions currently accept IP issues as arbitrable. Due to the sensitivity of the data involved, arbitration is a confidential process, which is useful for IP cases in particular. Additionally, it is necessary to have specialised knowledge to resolve technical conflicts effectively which can be solved by selecting arbitrators who meet the necessary qualifications.

ARBITRABILITY OF INTELLECTUAL PROPERTY DISPUTES

The phrase "arbitrability" relates to a dispute's capacity to be submitted to arbitration, that is whether it can be settled between the parties through the arbitration process of the judicial court system. Arbitration proceedings concerning intellectual property rights may be necessary in cases of intellectual property infringement, conflicts over the legality of a contract, ownership of intellectual property rights, etc. Anyone who violates someone else's intellectual property rights can be held accountable.

There will typically be an arbitration clause in the contract that allows the parties to settle their issue through arbitration in circumstances, where intellectual property disputes have been submitted to arbitration. However, in a few instances, this technique has not been used since it was believed that conflicts involving intellectual property rights that arise out of "right in rem", that is entitlement over a right against the public, were not subject to arbitration. Only disputes against private parties that resulted from "rights in personam" were regarded as arbitrable matters. Many nations have recently passed legislation to make sure that disputes involving intellectual property are arbitrable just like any other type of dispute.

  • Intellectual Property rights as rights in rem

A right that can be used against the entire globe is one that is "in rem." A judgement in rem establishes the status of a person independent of the specific interest that a party to the action has in it. Such a judgement serves as conclusive evidence for and against all parties, privies, and non-parties to the actual dispute.

Even though the issue was explored in the landmark judgement of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd.,[1] it is interesting that the Court did not specifically include IPR in the list of conflicts that are not subject to arbitration.

However, the Indian courts have tended to rule against arbitration of IPR disputes in a string of rulings. In Suresh Dhanuka v. Sunita Mohapatra,[2] it was decided that a dispute involving a right in rem should not be subject to arbitration and should instead be under the sole jurisdiction of the national courts. The right in rem is understood by the Supreme Court to include copyright and patent rights. It has also been decided[3] that even with the parties' permission, the action in rem could not be brought to arbitration.

The Bombay High Court had to determine whether an arbitral tribunal might pronounce on the legality of the copyright itself in IPRS Ltd. v. Entertainment Network (India) Ltd.[4] Allowing the tribunal to determine on merely legal matters, such as the existence of copyright, would amount to the tribunal making a judgement on an actual action, over which it is well established that the arbitral tribunal lacks jurisdiction.

  • Subordinate rights in personam

The personal rights and interests of the persons named in the lawsuit are decided "in personam" proceeding. Despite what was previously stated, the courts separated the inferior rights in personam from the rights in rem. According to the usual opinion, however, the validity of the underlying patent cannot be arbitrated, even though rights under a patent licence may.

In V.H. Patel & Co. v. Hirubhai Himabhai Patel,[5] the Supreme Court decided that eliminating arbitrability in the presence of an arbitration clause is not something to be taken for granted. It must be done in a few situations that are obviously not subject to arbitration.

In the much-welcomed decision of Eros International v. Telemax,[6] the Court stated that there is no issue of such conflicts being non-arbitrable when there are commercial disputes and parties have intentionally chosen to send these disputes originating from that contract to a private forum. Therefore, a claim of infringement against a specific person as is a subordinate right in personam, is arbitrable.

In the matter of Ministry of Sound International v. M/S Indus Renaissance Partners, the Apex Court expressed its opinion that IPR-related disputes can be arbitrated on the basis that there is no outright prohibition against it. The use and infringement of intellectual property problems only include rights in personam and are, thus, arbitrable.

INTERNATIONAL SCENARIO

Arbitration is a recognised method for resolving patent disputes internationally. International conflicts can be resolved through arbitration under the New York Convention of 1958 and the Model Law on International Commercial Arbitration of 1985. By establishing the WIPO Arbitration and Mediation Centre, WIPO went so far as to institutionalise arbitration of IPR disputes.

Arbitration of patent infringement and, in rare cases, even of patent validity has been approved by nations that follow UNCITRAL law, including Australia, Germany, Japan, and Canada. Arbitration is the preferred way for resolving disputes resulting from intellectual property transfers, according to the ICC Commission. There are no substantial distinctions between arbitrations originating from intellectual property issues and those arising from disputes in other areas, according to the ICC Final Report on Intellectual Property Disputes and Arbitration.[7]

CONCLUSION

As we saw, there is currently no general prohibition against the arbitrability of IP issues in India. Instead, the nature of the made allegations is used to assess arbitrability. Arbitration would be available for disputes relating to royalties, geographic scope, marketing, and other purely contractual provisions of licence agreements. However, a court or designated public administration should resolve a dispute over the legality or ownership of an IP right because the outcome of the dispute could have an impact on the public's ability to use the relevant asset. With the inventor/author preserving the right to arbitrate contractual rights and courts maintaining jurisdiction over claims that harm the general public, this position on arbitrability will secure a balance of rights between the inventor/author and the general public. Inventors would be inspired by the prospect of simple dispute resolution. A strong public domain and the protection of the public interest would also be ensured by maintaining the courts' jurisdiction over situations where the public's ability to use copyrighted works and patented inventions is impaired.

 

Author Details: Sanjana Shikhar, 3rd year B.A.LL.B (Hons.) student at Faculty of Law, Banaras Hindu University, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

 

[1] (2011) 5 SCC 532.

[2] (2012) 1 SCC 578.

[3] Chiranjilal Shrilal Goenka (deceased) through LRs. v. Jasjit Singh, (1993) 2 SCC 507.

[4] 2016 SCC OnLine Bom 5893.

[5] (2000) 4 SCC 368.

[6] 2016 SCC OnLine Bom 2179.

[7] 2009 SCC OnLine Del 11.

Khurana and Khurana, Advocates and IP Attorneys



About the Firm

Khurana and Khurana, Advocates and IP Attorneys

AddressE-13, UPSIDC, Site-IV, Behind-Grand Venice, Kasna Road, Greater Noida - 201310, UP, National Capital Region, India.
Tel91-120-4296878, 91-120-4909201, 91-120-4516201
Fax91-120-4516201
Contact PersonTarun Khurana
Emailinfo@khuranaandkhurana.com
Linkwww.khuranaandkhurana.com


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