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Arbitrability of IP Disputes: An Indian Outlook

Updated: Aug 22



[This article is authored by Kritagya Agarwal, Bharati Vidyapeeth's New Law College]


Introduction


The Mohenjo-Daro and Harappa Civilizations, which are known to have existed around 3500-2500 B.C., furnish evidence of the use of Trademarks. The artisans and craftsmen in those times used to stamp their work that was later used in trade. Clearly, Intellectual Property Rights have consciously and/or unconsciously been deep-rooted in human society. Over time, societies have evolved this concept and now it is recognized worldwide. The rights provided to people for the creations of their minds are called Intellectual Property Rights. [1]

A right provided to a person is like a stop line on a traffic signal, it ought to be crossed. The infringement of a right leads to disputes among parties. And, as history has it, litigation is considered to be the best way to resolve disputes. On the flip side, however, are some glaring questions on the viability of litigation as a means of dispute resolution. To exemplify, isn’t litigation expensive and time taking? Don’t judges issue ex-parte orders? Judgments are considered public records, aren’t they? All of the aforementioned questions make us wonder, what is the best possible alternative to litigation? After all, Abraham Lincoln rightly stated, “The nominal winner is often a real loser in fees, expense, and waste of time.”

Alternative Dispute Resolution (“ADR”) has attained widespread recognition in developed and developing countries across the globe. ADR includes Mediation, Arbitration, Negotiation, Conciliation, Lok Adalats (in India), and other ways of resolving conflicts with the help of a specially trained, neutral third party without the need for a formal trial or hearing. The fact that ADR is pocket-friendly and speedy is making it famous among the public as well as litigators. Parties are also attracted to the method due to the confidentiality of information it offers that can be sensitive to the working of their organizations. ADR is a win-win strategy as it is not focused on declaring winners and losers but to solve the problem at hand. [2]

In India, several legislations have been passed governing different aspects of IP but barely any of them consist of provisions for Alternate Dispute Resolution. ADR in India took a leap after the enactment of the Arbitration and Conciliation Act of 1996. The Act, however, lacked to shower light upon Intellectual Property Rights. The burden for the same was transferred on the shoulders of the Indian Judiciary. 

Over the past two-and-a-half decades, India has experienced a significant rise in the registration of IPs. In the year 1998-99 around 13,000 IPRs were granted in India, whereas in the year 2017-18 this figure was around 3, 44,000. [3] But this growth collaborated with infringement of IPRs in India. In 2017, India was the origin for 55 percent of the total value of global counterfeit pharmaceutical seizures, the rate of unlicensed software use stands at around 58 percent, stakeholders have identified specific incidents of camcording that originate in Indian cinemas, and Indian products bear the mark of forged accreditation certificates. [4] There was a consequential increase in the rate of IP disputes in India.


Judiciary on IP Disputes and ADR


The basic notion among people to resolve any dispute is through litigation. Specifically speaking of IP disputes, the Berne Convention 1886, the Paris Convention 1883, the Rome Convention 1961,  all these and many more statutes governing IPR state that the primary step for the enforcement of provisions of IPR is civil remedies. In this whirlpool, the emergence of ADR was tough. The Indian Courts came to the rescue of ADR across cases of overtime. Although these cases promoted ADR in commercial disputes, they created a lot of confusion about its usage in the resolution of IP disputes.

In the landmark judgment of Booz Allen [5], the Supreme Court laid down the test for determining the arbitrability of any dispute. Under this test, the court opined that if a dispute is related to a right in personam, then such dispute can be sorted through arbitration. Whereas if a dispute involves a right in rem, it can only be adjudicated by courts. Furthermore, the court recognized some examples of non-arbitrable disputes such as disputes involving criminal offenses, guardianship, insolvency, matrimonial disputes, testamentary disputes, and eviction or tenancy. 

The judgment of Ayyasamy [6], shook the very idea of whether IP disputes could be referred to arbitration because the Apex court clearly mentioned that disputes relating to ‘patents, trademarks, and copyright’ are non-arbitrable. This obiter dictum by the court gave rise to sheer confusion as it was imprudent to blindly ignore the clarifications specified in Booz Allen. In Lifestyle Equities [7], the Madras High Court clarified this confusion produced by the two judgments of the Supreme Court and said that this specification by the Apex Court was merely a scholarly opinion and was not the court’s ratio. Further, in this judgment, the court held that a patent right dispute may be arbitrable as far as it lies under the ambit of right in personam but the validity of the patent is not arbitrable because such a dispute lies under the scope of the right in rem.

In the milestone judgment of Eros International [8], Bombay HC held that a plaintiff is entitled to bring an action for infringement of IPR in right in rem but the infringement of the right is done by a certain party and the actions are in personam. Considering the ratio in Booz Allen and Eros International, IP disputes fall in the category of right in personam and thereby are arbitrable.

IP related Statutes under ADR


Legislations in India have successfully enforced several laws for the smooth running of the ADR mechanism. Similarly, laws related to IP have progressed in the effect of the same. Arbitration & Conciliation Act, 1996 is the biggest step towards the success of arbitration in India. Accordingly, the Code of Civil Procedure is amended to simplify the use of ADR in the Indian dispute resolution system. Section 89 and Rule 1A, 1B, and 1C of Order X of First Schedule were implemented by the CPC Amendment Act of 1999. These are related to ADR and talk about the different types of ADR methods. In addition, the Legal Service Authority Act of 1997 provides for ADR through Lok Adalats. 

IP statutes in India have recognized the need for ADR and accordingly, provisions are enforced. The Patent Act of 1970 under Section 103 specifically lays down the use of arbitration for the resolution of Patent disputes. Patent disputes involve a lot of technical knowledge that needs to be analyzed and understood. In India, patent disputes are stretched for long terms and become very expensive. ADR is an effective method to resolve disputes related to patents. Various judgments in this regard have made it easier for parties to engage in dispute resolution through ADR.

An extensively prominent method for infringement of Trademarks in the modern world is of Cybersquatting. Cybersquatting is the unauthorized use and registration of Internet Domain names that are identical to trademarks, service marks, company names, or personal names. Cybersquatting registrants obtain and use the domain name with the bad faith and with the intent to profit from the goodwill of the actual trademark owner. [9] To prevent this type of trademark infringement, the Uniform Domain Name Dispute Resolution Policy of 1999 was enforced; this policy pertains to the use of arbitration in such types of disputes. Indian Domain Name Dispute Resolution Policy is responsible for adjudicating these disputes for Indian domain names.


Conclusion


Is litigation the best way to resolve a dispute that can be solved through ADR? Varied opinions can exist on such a question. IP disputes can often attract lack of arbitrability when the dispute lies in the ambit of right in rem, like those disputes which are to establish validity or invalidity of IPR. Although IP dispute resolution can never be completely dependent upon ADR, or arbitration which is more prominent in India, yet it should opt-in cases where there is a choice. The plethora of advantages of ADR over litigation will always be its driving factor. ADR can be positively regarded as an amicable mechanism for IP dispute resolution.

References

[1] TRIPS Agreement, 1994.

[2] Dr. Vikas Vashishth, Law and practice of intellectual practice in India, First Edition (2002).

[3] Annual Reports 2002-03 & 2017-18, Office of the Controller General of Patents, Designs & Trademarks.

[4] 2018 Special Report 301, Office of the United States Trade Representative.

[5] Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532.

[6] A. Ayyasamy v. A. Paramasivam & Ors., AIR 2016 SC 4675

[7] Lifestyle Equities CV v. Qdseatoman Designs Pvt. Ltd.

[8] Eros International Media Limited vs Telemax Links India Pvt Limited, 2016 (6) ARBLR 121 (BOM)

[9] What is the definition of Cybersquatting?, Winston & Strawn LLP, Available here


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