Decoding IPR

Introduction
Arbitration in India has been an essential part of life since time immemorial. Even before the term could be coined, it was well prevalent in India. People resolved their disputes amongst themselves or a person of a repute, or a wise man would settle the dispute amicably. In other words, it was the Panchayat system which has now evolved into a structured / codified law which is the Arbitration and Conciliation Act, 1996. 

The Arbitration and Conciliation Act caters to the disputes involving local as well as parties who are situated abroad. It not only eases the process of doing business but also makes it easy for the parties to navigate their issue. Arbitration has been the most preferred resort to solve disputes as it is flexible, gives party autonomy and most importantly it saves a lot of time. 

One of the major problems is that of the “Arbitrability of IPR in India”. There has always much debate as to whether IPR disputes could be resorted to Arbitration or not. However, the Courts have also failed to give a demarcation and has given divergent views. 

Arbitrability of IPR in India:
Arbitrability means the capability of a dispute being resolved through arbitration as per the laws of the state and the capability of resolving a dispute through arbitration according to the agreement between the parties and lastly, it is the capability of a dispute being resolved through arbitration in view of the reference by the parties to arbitration. 

The persisting problem in India is that there is no straight forward answer to the issue of arbitrability of IPR disputes. The main problem that the interface is facing is that of, IP being traditionally considered as a right in rem through their legislations. A right in rem is a right that can be exercised against the world at large. Likewise, the Arbitration and Conciliation Act also does not provide with a list of matters that are arbitrable. However, Section 2(3) provides that certain disputes may not be arbitrated or in other words cannot be submitted to arbitration. 

The Courts have also given decisions which are of opposite poles. One view taken by the Court is that of the “pro-arbitration” approach and the other is “rejection”. It is safe to say that the diverging opinions have only caused a disorientation in this subject matter. The Courts have laid down a few tests in order to check whether the IPR disputes is capable of resorting to arbitration or not.  

In the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., the Court did not expressly include IPR in the list of disputes which are non-arbitrable and was also of the decision that there is no exact answer to non-arbitrability, and that it is a flexible rule. However, there are copious judgments where the Court has held that a “right in rem cannot be arbitrated”. In the cases of A. Ayyasamy v. A. Paramasivam and Ors.,; Suresh Dhanuka v. Sunita Mohapatra, and LRs. V. Jasjit Singh the court was of the opinion that IPR disputes cannot be arbitrated and also stated that a right in rem shall be incapable of being arbitrated and it is the courts that would have exclusive jurisdiction. It also stated that an action in rem could not be referred to arbitration even with the consent of the parties. 

In the case of Eros International Media Limited v. Telemax Links India Pvt. Limited where the court opined that when a right in personam is derived from a right in rem, the dispute may be referred to arbitration and such a decision must be taken after analyzing the facts and circumstances of the case. In the case of Golden Tobacco Limited v. Golden Tobie Private Limited the Court dealt with a Section 11 application under the Arbitration Act and held that the assumption that all matters relating to trademarks are outside the scope of arbitration is plainly erroneous. 

It was in the case of Vidya Drolia v. Durga Trading Corporation , where the court expanded the scope of arbitrability by asserting that even disputes involving rights in rem can be arbitrable if they arise from the rights of parties under a contract unless the statute creating those rights expressly bars arbitration. The Supreme Court provided a four-fold test to remove the difficulty of arbitrability of IPR disputes. “(i) when the subject matter pertains to actions in rem and do not pertain to subordinate rights in personam that arise from rights in rem; (ii) when the cause of action affects third-party rights or has ‘erga omnes effect’; (iii) when the subject matter relates to inalienable sovereign or public interest functions of the State; and (iv) when the subject matter is expressly or by necessary implication non-arbitrable under a specific statute.”

Thus, it is evident that there have been judgments for and against arbitration for IPR disputes. However, the Vidya Drolia case tries to remove the ambiguity while determining the arbitrability of IPR disputes. The Vidya Drolia case can be used as a testament by the legislature while incorporating IPR disputes within the ambit of Arbitration. The case amplifies the scope of Arbitration for IPR disputes. 

After the positive judgments given by the Supreme Court of India, the Rajya Sabha in 2021 recommended that the Patent Act, 1970 be amended in order to promote arbitration. However, the Patent Act, 1970 hasn’t been amended till date and similarly the Copyright Act, 1957 and the Trade Marks Act, 1999 also remain unamended. Thus, there have been steps to encourage arbitration for IPR disputes yet there have been no amendments that allow or disallow arbitrations in India. 

Conclusion: 
The conflicting decisions given by the Courts sparks debate as to whether IPR disputes should be arbitrated or not. However, it is important to note that there cannot be a complete restriction or a ban on the arbitrability of the disputes relating to IPR arising out of agreements. The disputes arising from a contract maybe treated like a contractual dispute irrespective of whether or not such a contract pertains to IP licensing or other commercial arrangements between the parties. Thus, when it is a contractual dispute, arbitration should be considered since it is cost-effective and time saving. 

The first step would be to recognize that, even disputes pertaining to infringement of, or assignment of IP rights are arbitrable. Another plausible effect would be to enhance arbitrability of IPR disputes by the Courts. With the increasing number of cross-border IP licensing agreements or technology transfer entered by Indian entities, arbitration would be a preferable dispute resolution mechanism. Lastly, measures should be taken by the legislature to make IPR disputes arbitrable and only if the Court’s interference is minimal, arbitration would be a preferred medium of settling disputes.