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ABSTRACT

Over time, ADR strategies have gained widespread acceptance and practical use in the business and corporate world. These days, arbitration is among the most popular choices, since most parties involved in a business transaction would rather use it to resolve any issue than go to court. Since many individuals now protect their intellectual rights or licence them across borders, intellectual property conflicts are often of a commercial character and may have far-reaching consequences on a global scale. Whether or if arbitration can be used to resolve intellectual property issues is the focus of this article. In that case, in what kinds of arguments might it work? The paper provides the reader with an understanding about the basics of Alternate Dispute Resolution and Intellectual Property Rights. Its analysis the scope of ADR with the perspective of the Indian as well as Foreign ADR methods. As and when the paper terminates, the paper will enhance the knowledge of the reader on two major law areas and how they are interlinked and go hand in hand.

INTRODUCTION

The globalisation of industry and communication technologies means that millions of people may be reached with a single mouse click. Intellectual property (hence “IP”), like any other kind of intangible asset, has both positive and negative aspects. Intellectual property (also known as “copyright,” “patent,” “trademark,” etc.) is just as valuable as tangible assets, yet it defies easy categorization. Since its founding, it has expanded significantly, making it necessary to build a legislative framework to handle complex IP issues on a national and worldwide scale.

When essentially all significant nations joined the New York Convention, it was a key step toward building a unified, powerful international arbitration procedure in line with the goals of the UNCITRAL Model Law, which is why arbitration is so popular today. With the unprecedented Covid-19 epidemic, the necessity for arbitration has grown, since no rational person would want to participate in exorbitant and time-consuming litigation, especially in a cross-border dispute.

To what extent may arbitration be used to resolve disagreements? People who are trying to get a licence for their intellectual property in more than one country are more likely to find themselves embroiled in a conflict with another country. This study seeks to answer the issue, “Is arbitration viable in IP disputes?” If it is, then in what kinds of cases may it happen? Indian law has evolved over the years to meet changing needs, but it expressly forbids some types of conflicts from being submitted to arbitration. Can an award made outside of India for a dispute that cannot be resolved via arbitration in India be recognised and enforced in India? When deciding whether or not a dispute over intellectual property may be taken to arbitration, similar issues exist.

ANALYSIS

From the 1940 Act to the 2015 Amendment Act, Indian arbitration legislation has progressed significantly, reducing judicial participation and establishing more user-friendly and efficient standards for more impartial and successful arbitration. Although “arbitration” is in its infancy, still developing, and has yet to establish itself in India.

Historically, many legal systems have barred arbitration of intellectual property disputes on the grounds that IP rights are conferred by a sovereign body. It was believed that the validity of a right could only be called into doubt by the entity that originally granted it. Nevertheless, The World Intellectual Property Organization (WIPO) has fostered alternative dispute resolution (ADR) in intellectual property matters by establishing the WIPO Arbitration and Mediation Centre, a neutral, international, and non-profit dispute resolution provider that provides private parties with efficient, cost-effective, and expedited options for resolving domestic and cross-border intellectual property and technology disputes outside of court.

THE INDIAN INTELLECTUAL PROPERTY RIGHTS SYSTEM

Certain legislation in India controls the intellectual properties system, including:

• “The Copyright Act, 1957”; 
• “The Patents Act, 1970”;
• “The Trade Marks Act, 1999”;
• “The Designs Act, 2000”.

For a certain amount of time, only the holder of certain intellectual property may exercise control over it and earn the monetary benefit, as granted by these acts, known as a “Statutory monopoly.” The owner of intellectual property protected by these statutes also has the legal right to seek redress in a court of law if he or she believes that someone else is infringing on those rights.

For instance, the Copyright Act’s Sections 55–58 of Chapter XII provide the creator various rights to protect his or her work against infringement. In the event of an infringement of patent rights, the proprietor may pursue legal action under Section 104 of Chapter XVIII of the Patent Act, and may pursue legal action under Section 134 of Chapter XIII of the Trademarks Act. Importantly, District Courts have the authority to issue injunctions and other relief designed to preserve the aforementioned rights. These rights given by the aforementioned legislation are considered rights in rem rather than rights in personam by the Indian legal system and courts.

Rights in Rem vs. Rights in Personam policy is at the heart of the debate over whether or not IP issues may be arbitrated.

A GLIMPSE AT INDIAN ARBITRATION

The Arbitration and Conciliation Act of 1996 governs the practise of arbitration inside India. The legislation related to domestic arbitration, international commercial arbitration, and the enforcement of foreign arbitral awards has been unified and defined by considerable amendments to the act over time to bring it into conformity with the UNCITRAL model law. The courts may overturn an arbitral ruling if the issue is beyond the scope of what can be arbitrated, as stated in Section 34 (2)(b) of the Arbitration and Conciliation Act, 1996. Curiously, the extent of subject matter arbitrability is not defined under the Arbitration and Conciliation Act, 1996 or any of the statutes regulating intellectual property in India. Our judicial system’s verdicts are the sole authoritative sources for its definition. 

THE INDIAN POSITION ON THE ARBITRABILITY OF INTELLECTUAL PROPERTY CONFLICTS

India’s position on the arbitrability of intellectual property issues is convoluted but ultimately reasonable. The policy discussion is prompted by the split over the relative merits of rem vs persona rights and rem versus persona judgments. Controversy exists about the extent to which parties The efficacy of the Indian judicial system is being undermined by a growing pending cases and sluggish disposal rates. Incorporating arbitration in load distribution by broadening the applicability of arbitration would go a long way toward resolving the lingering problem.

It’s important to remember that the idea of “Public Policy” is vital to the notion of arbitrability. At first glance, public policy looks too vague and open-ended, but precedents can shed light on the issue of arbitrability. The basic goal is to ensure that an arbitral tribunal only decides on issues that pertain to rights that arise “in rem,” or to rights that pertain to property.

The area of rights “in rem” has been explicitly excluded from the scope of arbitration in the seminal case Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. &Ors, (2011) 5 SCC 532, which emphasised the necessity for a competent judicial authority to judge on the same. It did, however, note that rights in rem and personam cannot be completely disentangled, and that arbitration may be necessary in cases where interests in personam based on rights in rem are predominate. The appeal was then rejected by the Hon’ble Supreme Court, which acknowledged three prerequisites for an issue to be inside the purview of arbitration, they were:

There must be an arbitration agreement in place, the parties must have submitted the disagreement to arbitration, and the dispute must be amenable to adjudication and resolution by arbitration.

The case A Ayyasamy v. A. Paramasivam and Ors[1], then came along, with “non arbitrable” topics like patents, trademarks, and copyright being front and centre; yet, O.P. Malhotra’s work was mentioned in this case. Later, landmark decisions built on these precedents to clarify the intertwined but distinct ideas of IPR, therefore reducing the ambit of arbitration.

Section 62(1) of The Copyright Act does not categorically reject the jurisdiction of an arbitral tribunal in intellectual property disputes that are of a commercial nature and are therefore classified as rights “in personam,” as was held in Eros International Media Limited v. Telemax Links India Pvt. Ltd. and Ors[2], However, in IPRS v. Entertainment Network, Dhanuka J[3], provided an opposing opinion. Using the Booz Allen, Vikas Sales Corporation, and Mundipharma AG, case as precedent, it held that Section 62(1) requires any complaint or proceeding for copyright infringement to be heard and decided only by a competent court.

A similar dissenting opinion was reached in the case Steel Authority of India Ltd. v. SKS Ispat and Power Ltd[4], which held that trademark and passing off claims aren’t arbitrable. The beginning of arbitration in IPR issues has been either rejected or accepted in certain situations, although the grounds for either decision are unclear.

A single cause of action cannot be subdivided if the central issue is partially arbitrable, as the court explained in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya[5]. Even though the recent landmark case Vidya Drolia V. Durga trading Corpn[6], primarily dealt with the arbitrability of landlord-tenant disputes, it did touch upon the fact that the validity of a patent and the rights accruing from a patent are distinct, making the former non-arbitrable and the latter possibly arbitrable based on the facts as well as particulars of the case.

By comparing the Supreme Court’s and other High Courts’ decisions on the arbitrability of IP issues, we can see that each precedent has sought to preserve the precarious equilibrium between rights in rem and rights in personam. Given arbitration’s growing importance, parties often choose to resolve disputes via it, despite the possibility that a court would ultimately reject the parties’ decision to do so. Nonetheless, the current situation differs from what was previously explained by Booz Allen; arbitration has been ordered for IP issues, and necessary interim reliefs and other assistance have been made available.

Arbitration is one option for resolving conflicts with patents, however it is not often employed. However, the Patent Office doesn’t really acknowledge arbitral rulings in cases of invalidity, therefore this option is unavailable for resolving invalidity disputes. Arbitration may only be used for disagreements that stem from agreements between parties, such as patent licencing disagreements.

The confidentiality of the dispute’s subject matter is the main selling point of arbitration in IP disputes. In a nation like India, however, it might be difficult to strike a middle ground between the parties’ need for privacy and the public’s right to know about conflicts involving rights in rem or third-party interests that have been the subject of arbitration proceedings. Especially in cases of revocation, when the public would benefit from knowing the conclusion, keeping such information secret would be harmful.

Although arbitration has gained widespread support as a fast and effective dispute resolution alternative, more work needs to be done in this area. Because of the far-reaching effects they have on society as a whole, arbitration cannot be used to settle disputes involving the formation of special tribunals or the creation of monopolies in favour of a person or entity. While legal and commercial differences help to clear up some of the confusion, having several, conflicting viewpoints may lead to harm that is difficult, if not impossible, to repair. The National Intellectual Property Rights Policy 2016’s vague reference to engaging in ADR mechanisms for redress does nothing to help. An all-encompassing set of rules or principles that can finally settle the debate is urgently required. Some recurring concerns might be resolved by researching how other nations handle the intersection of intellectual property rights and arbitration.

DISPUTE RESOLUTION METHODS IN PATENT LAW

The patent system centralises the intersection between law and technology. The main challenge that the Indian Courts have is simplifying the adjudication of the issue in a way that is both cost-effective and quick, given the technical expertise involved in patent disputes. Interim injunctions and appeals about them have been at the centre of every conflict involving patent law in India. To settle patent disputes, arbitration has been supported by several nations. Article 103 of the Patent Act of 1970 specifies arbitration as a means of resolving legal issues. The future of fair patent infringement trials may lie on the closer integration of alternative dispute resolution processes.

THE UNITED STATES’ ADR SYSTEM’S STANDING WITH REGARD TO INTELLECTUAL PROPERTY RIGHTS

Courts in the United States have exclusive jurisdiction over IP disputes because of concerns about monopolistic IP rights and the interests of society involved. The subject of whether intellectual property (IP) disputes should be addressed by courts and arbitral tribunals was recently attempted in Henry Schein, Inc., et al. v. Archer & White Sales, Inc.

But in modern times, the United States has chosen a polished, unequivocal method by writing arbitration and when it should be employed into their separate federal legislation. The decline of patent litigation in particular bolstered support for arbitration as a viable substitute. For instance, the United States Patent Act (USPA)  permits parties to submit patent validity, enforcement, interference, or infringement disputes to binding arbitration if both parties agree. The arbitration process allows for some procedural leeway and maintains confidentiality, both of which are essential to protecting intellectual property rights. The court ruled in Scan-Graphics, Inc. v. Photomatrix Corporation[7], that the arbitral tribunal should consider any challenges to the validity or enforceability of a patent. The award will only bind the parties involved and not any other parties. Copyright, Trademark, and Trade Secrets statutes in the United States do not explicitly provide arbitration of IP issues, unlike the Patent law.

However, the courts have taken a pro-arbitration posture where parties in trademark and copyright disputes have opted for arbitration. As was made clear in the Mitsubishi case, antitrust issues are not automatically subject to arbitration under valid pre-arbitration agreements. The need of arbitration in international intellectual property disputes was emphasised by the court in Honeywell, Inc. v Minolta Camera Co. for the purpose of the parties’ convenience and their own sense of fairness.

The United States Patent and Trademark Office must receive a copy of any arbitral ruling, however arbitration of questions of patent validity and infringement and arbitration of “any element” of patent interference disputes are expressly permitted under US law. Until such time as this notification is delivered, the award is not enforceable. Arbitral awards are also registered in Switzerland with the same body responsible for issuing and maintaining patents. A certificate of enforceability issued by the Swiss court at the seat of the arbitral tribunal in accordance with Article 193 para. 2 [Swiss Private International Law Act] is also accepted as the basis for entries in the register if the award was rendered in connection with the validity of intellectual property rights. These cases show that with the right laws in place, India may enhance and encourage arbitration in IP disputes while maintaining a healthy balance between privacy and public interest.

NECESSARY USE OF AN ALTERNATIVE DISPUTE RESOLUTION PROCEDURE FOR DISPUTES INVOLVING INTELLECTUAL PROPERTY

With the help of intellectual-property laws, the creator is able to exert authority over other parties who, without his permission, try to profit from his efforts. In the event that rights can’t be put into practise, the logic for their creation becomes irrelevant. The Indian judicial system has made great strides toward the development of a secure innovation system in India. However, the available resources may be put to better and more lawful use by the Indian judicial system if the other contest aim is communicated. The multidisciplinary nature of the present case necessitates the use of specially trained arbitrators familiar with patents act and regarding copyright issues, such as convergence with science and understanding of innovation.

International intellectual property issues that end up in court sometimes entail a number of different processes in a number of different countries, increasing the possibility of contradictory outcomes. To save the time, effort, and money of litigating in many jurisdictions, the parties to a dispute over a right which is protected in multiple nations might agree to settle the matter via alternative dispute resolution (ADR).

CONCLUSION

Although civil litigation and alternative dispute resolution (ADR) have deep historical roots as conflict resolution processes, their connection with the IP area is worthy of further study. Disputes involving intellectual property (IP) are only going to become more complicated as time goes on and technology improves. We will also be pioneers in the field of alternative conflict resolution. Maintaining effective, cost-conscious, and reasonable methods of resolving IP disputes will need more study at the intersection of dispute resolution and IP. The business sector will gain from the arbitrability of intellectual property dispute schemes in India, and the country as a whole will take a step toward becoming an arbitration centre for many multinational corporations if this is allowed by law. The courts may strike a fair balance between the interests of the inventor/owner and public interest by permitting arbitration in the legal dispute out of purely commercial grounds while maintaining the dispute surrounding the validity or registration of IP non-arbitrable. As such, the future of India’s arbitration-friendly framework depends on the decisions of the Hon’ble Apex Court and the other High Courts.

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Written by- Mansi Malpani

[1] A Ayyasamy v. A. Paramasivam and Ors, (2016) 10 SCC 386

[2] Eros International Media Limited v. Telemax Links India Pvt. Ltd. and Ors, 2016 (6) ARBLR 121 (BOM)

[3] IPRS v. Entertainment Network, Dhanuka J, (2016 SCC OnLine Bom 5893)

[4] Steel Authority of India Ltd. v. SKS Ispat and Power Ltd, (2003) 5 SCC 531

[5] Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531

[6] Vidya Drolia V. Durga trading Corpn, (2021) 5 SCC 531

[7] Scan-Graphics, Inc. v. Photomatrix Corporation,1992 WL 2231