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Indian Advent in Any Types of Arbitration of IP Dispute - The Need to Clear the Judicial Enigma

03

MAR

2022

The Indian advent in any types of arbitration of IP dispute judiciary has been active and diligent in delivering justice ever since its establishment in the pre-independence era. But, with surmounting cases, the institution is being overburdened, since as many as 3.59 crore cases are pending and awaiting a final verdict from the Courts. As justice delayed is justice denied, even the current and 48th Chief Justice of the Hon’ble Apex Court, Justice NV Ramana has stated that one should knock the doors of the Court only as a last resort. Thus, several other forms of dispute resolution such as any types of arbitration, mediation and negotiation have gained prominence. Although disputes which can be adjudicated by a Civil Court such as cases involving contract law or specific civil laws are arbitrable, yet the stand of the Indian judiciary is as clear as mud in arbitrability of issues revolving around the laws of Intellectual Property Rights.

Arbitration can cater issues specifically related to the rights in personam, i.e., issues involving only the parties involved in the suit and not the public at large. On the other hand, issues related to right in rem, such as life and liberty of an individual, choice of religious practice, etc., cannot be any types of arbitrable since the adjudication of the issue has a major impact upon the public. Similarly, issues related to intellectual property rights generally fall within the category of rights in personam, which makes it crystal clear to be arbitrable. Yet the Indian judiciary has been topsy-turvy while adjudicating the issue related to it.

The Indian judiciary first addressed the present issue in the case of MundipharmaAG v.Wockhart Ltd.[i], wherein the Delhi High Court stated that as mentioned under Chapter XII of the Copyright Act, 1957, suits arising out of infringement of copyright are to be adjudicated only by the district court having jurisdiction and cannot be the subject matter of arbitration.But the judiciary delivered a pro-arbitration judgment in the case of Ministry of Sounds v. Indus Renaissance Partners Pvt. Ltd.[ii], where the Court allowed the matter arising out of trademark infringement, to be transferred to arbitration. It should be noted, however, that the issue in the aforesaid case mainly revolved around the interpretation of the contract, due to which the Court did not delve into the arbitrability of IP disputes. Thus, no constructive resolution regarding arbitration of IP disputes could be chalked out, until the case of Booz Allen v SBI Home Finance Ltd.[iii] Though the case related to maintainability of insurance claim, yet the court moved a step ahead and stated that rights which affect the public or are valid against the world cannot be subjected to arbitration, but subordinate rights in personam, arising out of the real rights, can be put to arbitration. For instance, trademark infringement related only to two parties could be arbitrable, but the validity of a trademark may not be.

Similar views were reverberated by the Delhi High Court while adjudicating the matter of Vimi Verma v. Sanjay Verma,[iv] where the court stated that there is no blanket ban upon arbitration of disputes related to infringement of trademark. But when the clouds seemed to be clearing up, the Bombay High Court in Steel Authority of India v. SKS Ispat& Power Ltd.,[v] put forward that relief for infringement and passing off are matters in rem and should not be subjected to arbitration. The matter got unraveled during the case of Eros International Media Ltd. v Telemax India Pvt. Ltd.[vi]wherein the Bombay High Court delved into the issue of arbitration of IP disputes and stated that issues related to infringement of copyright or passing off of a trademark can be subjected to arbitration since the following issues bind only the parties involved in the suit; but issues such as validity or registration of a trademark cannot be subject to arbitration, since the matter concerns the public and affects the world at large.

Interestingly, as the picture got clearer, the Bombay High Court in the case of Indian Performing Right Society vs Entertainment Network (India)[vii], delivered a judgment contrary to the finding of Eros International v Telemax. The court while dealing with the issue of royalty claims, relied upon the case of Mundipharma AG v Wockhart, and Booz Allen & Hamilton v SBI, and put forward firmly that intellectual property rights are special rights, which are rights in rem and cannot be subjected to arbitration. Further, the Court strictly followed Section 62 of the copyright act 1957 where it directed that every civil proceeding in respect of infringement of copyright should be instituted in the district Court having jurisdiction.

Analysis
Given that much of the world has adapted and embraced the process of arbitration of IP disputes, the Indian judiciary should not be in a tussle over the present topic. Though a lack of precedent by the Hon’ble Supreme Court and no express provision in the Arbitration Act has further made the situation confusing, the judiciary should look towards the issue with a broader perspective. As mentioned in the Eros Judgment (supra), Section 62 of the copyright act 1957 and Section 135 of the Trade Marks Act only state that infringement cases should only be referred to District

Courts, and further lay out the hierarchy of the Courts, and do not strictly instruct that such cases should be referred/filed only in the aforesaid courts, and that they cannot be referred to arbitration. Further, issues such as passing off of a product and infringement of copyright can be subjected to arbitration since the following issues bind only the parties involved and are thus right in personam, which can be subjected to arbitration. For instance, if A alleges infringement or passing off by B, and further succeeds against B, that does not necessarily infer that A may succeed in another suit of infringement or passing off against C. Contrastingly, registration of a patent is granted according to the statutory principles, which upon rejection cannot be subjected to arbitration as the present issue involves analysing the product based upon the statutory provision, and a result of the judgment would affect the patentability of any product in future. For instance, if A tries to patent its product, and the Patent Registrar rejects the application, then the matter can only be referred to court as the debate would also be around the rejection of the product due to not being in compliance with the provisions of the Patents Act, and not only that it was similar or a replica of a previous product. Thus, making the issue a right in rem, and outside the scope of arbitration.

Hence, issues arising from infringement of IP rights which concern only the parties involved such as infringement of copyright and passing off of a product can be referred to arbitration, which in turn would save the time and lessen the burden of the judiciary. On the other hand, issues which involve analysis and interpretation of statutory rights and affect the public at large, such as rejection of the patent or a trademark application by the registrar, shall not be subjected to arbitration. Thus, the judiciary should deal with the present topic with a broader perspective where issues of the nature of right in personam shall be referred to arbitration, while those of the nature of right in rem should be strictly dealt by the court.

Author: Sarthak Sharma – a student of National Law University (Odisha), in case of any queries please contact/write back to us via email vidushi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

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