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June 23, 2020

Arbitrability Of Intellectual Property Disputes In India

Author: Sri lekha

In India, arbitration proceedings are regulated under the Arbitration and Conciliation Act, 1996 (“the Act”). While the Act does not exclude any category of disputes treating them as non-arbitrable, it is well-established that only those disputes are arbitrable which involve rights exercisable against specific individuals, viz. “rights in personam” and which do not arise out of special statutes conferring jurisdiction on specific courts [Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. and Ors., AIR 2011 SC 2507]. In case of disputes involving rights exercisable against the world at large, viz. “rights in rem”, the parties are ousted from choosing a private forum and must submit to the courts. However, in Booz Allen, the Supreme Court did clarify that this is not a rigid rule and that disputes relating to sub-ordinate rights in personam arising from rights in rem have always been considered to be arbitrable.

Judicial precedents on arbitrability of IP disputes

In A. Ayyasamy v. A. Paramasivam & Ors. [(2016) 10 SCC 386], the Supreme Court listed intellectual property disputes (“IP disputes”) in the list of non-arbitrable subject matter.

While the Supreme Court’s observation in Ayyasamy with respect to non-arbitrability of IP disputes was only obiter dictum, the Bombay High Court solidified this position in Steel Authority of India Ltd. v. SKS Ispat & Power Ltd. & Ors. [Notice of Motion (L) No. 2097 of 2014 in Suit No. 673 of 2014], holding that “…the rights to a trademark and remedies in connection therewith are matters in rem and by their very nature not amenable to the jurisdiction of a private forum chosen by the parties…”.

However, in Eros International Media Limited v. Telemax Links India Pvt. Limited [2016 (6) BomCR 321], the Bombay High Court, while discussing disputes pertaining to infringement and passing off actions, took a different view and observed that “As between two claimants to a copyright or a trade mark in either infringement or passing off action, that action and that remedy can only ever be an action in personam…In trade mark law it is true that the registration of a mark gives the registrant a right against the world at large. It is possible that an opposition to such an application (before the Registrar) would be an action in rem, for it would result in either the grant or non grant of the registration, good against the world at large. But an infringement or passing off action binds only the parties to it… this applies equally to copyright actions…”. Particularly, referring to the cases wherein IP disputes arise out of contracts, the Court held “Where there are matters of commercial disputes and parties have consciously decided to refer these disputes arising from that contract to a private forum, no question arises of those disputes being non-arbitrable. Such actions are always actions in personam, one party seeking a specific particularized relief against a particular defined party, not against the world at large”.

Thereafter, the Bombay High Court in Deepak Thorat S/o Dinkar Thorat v. Vidli Restaurant Ltd. [2017 SCC online Bom 7704] reiterated its observation in the Eros case and held that “…questions of deceptive similarity, etc. which are usually part of an infringement or passing of action…are pure findings of fact. There is no reason why an arbitrator cannot go into or consider those questions. After all, such consideration is for determining whether there is any breach of a negative covenant agreed to between the parties. Neither is an order that is passed on such consideration an order in rem nor is the right to claim such order sourced in a right in rem such as the one which a registered proprietor of a trade mark or an owner of a mark…has vis-a-vis the mark…”.

In the most recent judgment on this aspect, viz. M/S Sagar Ratna Restaurants Pvt. Ltd. v. M/S D S Foods and Ors. [C.S. Comm No. 40 of 2020], the Saket District Court held that all trademark and copyright disputes cannot be non-arbitrable, and that the dispute at hand was arbitrable as the relief sought was not an ‘action in rem’ but is an ‘action in personam’ solely against the Defendants.

Conclusion

As per the judicial precedents, it is evident that there is no absolute bar on arbitrability of IP disputes in India. While IP disputes pertaining to validity and ownership of the IP are considered to be non-arbitrable, IP disputes in the nature of infringement and passing off actions have been held to be arbitrable, especially when arising out of a contract between the parties which includes a clear arbitration clause. The position can be further clarified with legislative provisions and continued evolution of Indian jurisprudence on this aspect.

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

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