THE INEVITABLE NEED FOR ARBITRATION IN INTELLECTUAL PROPERTY DISPUTES IN INDIA
This article is authored by Amith Castelino and Vrinda Bhandarkar, students of S.D.M Law College, Mangaluru.
“Discourage litigation. Persuade your neighbours to compromise whenever you can.”
- Abraham Lincoln
The phenomenal growth of globalization led to the weaving of the world into an intricate global marketplace filled with intense cut-throat competition. In 1991, when India reluctantly opened its markets to foreign business enterprises, commercial and business laws of India were compelled to keep pace with the changing tides of the world economy. Thus, the ever- evolving realm of Intellectual Property gradually began debating modes of resolving disputes relating to Intellectual Property Rights through alternate methods of dispute resolution, primarily arbitration. However, the rudimentary drawback for actively adopting arbitration in Intellectual Property (IP) disputes is the absence of arbitration clause or agreement and lack of voluntary consensual agreement between the parties to submit to arbitration.
Development of Intellectual Property boosts the economy of the country, as it results in generation of abundant revenue streams in commercial sectors and thus, there is an inevitable need for using arbitration as a tool to resolve disputes, as it eases business transactions and encourages innovation. In this pursuit, the World Intellectual Property Organization (WIPO) itself vigorously encouraged arbitration over litigation in resolving IP disputes. Therefore, the inevitability of arbitrating Intellectual Property disputes is axiomatic.
Arbitrability of Intellectual Property Disputes
In India, arbitrability of any subject matter is developed based on the public policy as well as judicial decisions. The test of arbitrability determined in Booz Allen and developed in Ayyasami’s case has been followed and its principles include:
Disputes regarding adjudication of right in rem. It is however been lay down that disputes which are of in personamnature, even when they arise in rem can be arbitrated.
Disputes arising out of a special statute, which have reserved exclusive jurisdiction of special courts.
IPR operates erga omnes and confers monopoly rights on its holders/owners. In this regard, the IP regime in India has allowed the establishment of ‘statutory monopoly’. Thus, the jurisdiction of such disputes has ordinarily been reserved within the domain of courts. As observed in Ayyasami’s case, The Supreme Court has merely laid down an obiter categorizing IP dispute without absolutely barring arbitration. However, in the absence of finality, diverse opinions have been expressed by various High Courts. In Ministry of Sound International Ltd. v. Indus Renaissance Partners, Delhi HC upheld the arbitrability of IPR disputes based on the wide pro-arbitration approach adopted by the Hon’ble Court.
Similarly, the Bombay HC held in Eros International Media Ltd. v. Telemax Links India Pvt. Ltd. & Ors, that in matters of commercial disputes where parties have consciously decided to refer the disputes arising from the contract governing them to a private forum, the disputes arising therefrom are arbitrable as such actions form action in personam where one party seeks a specific relief against another and not against the world at large.
Furthermore, in Indian Performing Right Society Limited (IPRS) v. Entertainment Network, it was noted that the decision of the learned Arbitrator in such cases, would bind the parties as well as form a declaration of their status to the world at large. In Lifestyle Equities CV v. QD Seatoman Designs Pvt. Ltd., Madras HC has held that the IPR disputes can be referred to arbitration. But, the issue of their arbitrability will be subject to the adjudication of the arbitral tribunal. This finding was further upheld and reiterated by the Apex Court.
Thus the concept of ‘one field, one law’ cannot be applied strictly to ascertain the arbitrability in IPR as every IP dispute is sui generis and its arbitrability would depend and vary significantly based on the facts and circumstances of each case. Based on the analysis of the matters at hand, all the disputes in personam are arbitrable and the choice is given to the parties to choose an alternate forum. On the other hand, rights in rem having inherent public interest are not arbitrable and the parties right to choose a forum of arbitration is ousted in such matters. For example, a dispute regarding licensing or infringement of a patent is arbitrable, whereas, a dispute challenging the validity of a patent itself is not arbitrable.
Need for Arbitration of Intellectual Property Disputes
Litigation involves an adversarial process which results in bitterness, severe financial losses and undue delay. Businesses are driven by profit and litigations prolong settlements making businesses divert their focus. Inter alia, business rivalry may result in frivolous litigations. In this light, the inevitability for resorting to arbitration is furnished as follows:
1) Inexpensive panacea
The ordinary litigation battle has proved to be quite expensive for IP disputes as it has many technical issues to be dealt with and frequently both the bench as well as the bar is not well versed with the intrinsic aspects which are involved, resulting in various auxiliary expenses in hiring experts and additional counsels. Inevitably, a lot of additional financial resources are invested in resolving the disputes through ordinary litigation. IP litigation's reputation of being highly expensive has served to be a major cause as to why intellectual property has not been able to generate much innovation. Unlike court proceedings, arbitration is not bound by procedural formalities by which a court is bound and has limited appeal against arbitral award and unlike the decree passed by a court in ordinary proceedings. For example, average patent dispute arbitration seldom exceeds twelve to fifteen months, and is generally resolved within six months which can effectively save a lot of time and expense in comparison to patent litigation which has a reputation of being highly expensive.
Arbitration unlike court proceedings is private in nature, hence there is confidentiality maintained and can protect sensitive information like trade secrets. Arbitration serves as an ideal forum for resolving cross border IP disputes as the parties themselves have the autonomy to not only choose the neutral arbitrator(s) but also the laws, place, venue and neutral language for the arbitration proceedings. Thus no party would enjoy home advantage in cross border disputes which normally one of the parties would enjoy in ordinary litigation.
3) Non- adversarial approach
Arbitration ensures flexibility in providing the relief, whereas, in litigation, parties end up combating against each other which ends up with an ‘all or nothing’ outcome as the solution. Arbitrators provide innovative solutions which facilitate a ‘win-win’ outcome for both the parties and help in amicable resolution and preserve their business relationships. For instance, a mutually agreeable license arrangement for an IP benefits both parties and is preferable to an ‘all or nothing’ outcome.
4) Expertise and confidence
Arbitration puts the parties at liberty to choose arbitrators with mutual consent. Thus, arbitrators who are impartial and esoteric can be appointed. Experts who understand the intricacies of intellectual property rights ensure consideration of prevailing circumstances in a particular field, in addition to, consideration of the diverse perspectives of the parties involved.
To overcome the roadblocks of arbitration in IPR, India being a member to the TRIPS agreement, has an obligation to provide an efficacious remedy without any unnecessary delay and costs, which can be duly accomplished through arbitration. Where arbitration clauses are absent in contracts governing the parties, there must be a greater inclination towards arbitration while analysing the facts and nuances of a case. Further, arbitrability should be extended to determining the validity of IPR, but must be made binding only the parties to the contract. On a harmonious consideration of the international position in this regard, WIPO has emphasized the need of arbitration in IPR by establishing WIPO Arbitration and Mediation Centre and also provides eADR services to its members. Consequently, WIPO has framed separate rules for arbitration of IPR disputes for efficient resolution. Further, India may emulate the practices adopted by USA and Switzerland which permits arbitration of patent infringement claims, provided that the consequent claim is registered with the appropriate patent authority or board for its operation. Furthermore, the arbitrable aspects of IP could be clarified via legislation, as is the case in Hong Kong, USA and Israel.[i]
[i] Vishakha Choudhary, Arbitrability of IPR Disputes in India: 34(2)(B) or Not to be, (Aug 15, 2019).