Arbitration has progressively become the default commercial dispute mechanism across the globe and the courts have also been enlarging the scope of alternative dispute mechanisms to reduce the burden on courts. Contrarily, in Indian Jurisprudence time and again courts have held that the disputes concerning Intellectual Property Rights are non-arbitrable. The prime reason for this is that often the courts believe enforcement of IPR involves the public policy aspect, meaning it would be against the interests of the public to make these disputes arbitrable. Also, our domestic statutes such as the Arbitration and Conciliation Act, 1996 and the other IP legislations do not provide a concrete expression about the availability of Arbitration in IP Disputes.
Section 89 of the code of Civil Procedure, 1908 states that "if the court deems fit, it can allow arbitration, mediation or conciliation for settlement of disputes between parties outside the court" which expressly means that the court has the power to refer the IP matters to ADR too. Courts have thus been trying to settle the ADR practices and have come up with various tests to determine arbitrability of various types of disputes.
In the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. the Hon'ble Supreme Court held that all the disputes which pertain to "right in personam" are arbitrable in nature and all disputes relating to "right in rem" are unsuitable for arbitration. In Eros International Media Limited v. Telemax Links India Pvt. Ltd., the Bombay High Court observed that all Intellectual Property cases are not essentially "right in rem" and so cannot be said to be non- arbitrable. The Delhi High Court in Hero Electric Vehicles Private Limited and Anr. v. Lectro E- Mobility Private Limited and Anr. held a trademark dispute to be arbitrable where the plaintiffs were seeking to enforce their trademark rights against a particular group and not against the world.
So, the crucial aspect determinative of arbitrability is the nature of judgment sought by the aggrieved and if it is sought against the public at large it is not arbitrable.
Current position in Law:
In 2016, the Trade Mark Registry (Delhi) decided to undertake a pilot project wherein 500 pending oppositions were referred to mediation/ conciliation based on the consent of the parties which were a party to the dispute.
The latest case on point is the Delhi High Court Judgment pronounced by Hon'ble Justice Jayant Nath in the case of Golden Tobie (P) Ltd. v. Golden Tobacco Ltd. wherein the Defendant had filed an application under Section-8 of the Arbitration and Conciliation Act, 1996. The facts of the case were that the parties entered into a master long-term supply agreement by which the defendant on an exclusive basis had supplied to the Plaintiff the exclusive brands of the Defendant "Golden's Gold Flake, Golden Classic, Taj Chhap, Panama and Chancellor". Subsequently, the Plaintiff entered into a trademark license agreement stating that he had been granted an exclusive non-assignable, non-transferable license to manufacture the Defendant's product which will be solely manufactured at his factory in Noida. Plaintiff submitted that despite huge capital and operational expenditure made by the Plaintiff to increase the availability of the Defendant's products he was issued a termination notice. Since the commercial production had not yet started the agreement was terminated with immediate effect. Subsequently, by another termination notice, the Defendant stated that the timely payment had not been made and the plaintiff had no right to manufacture and sell exclusive brands of the defendant in the market. Hence the present suit was filed and it was prayed before the hon'ble court that the dispute be referred to sole arbitrator.
The Hon'ble bench referring to Supreme Court's decision in Vidya Drolia v. Durga Trading Corporation observed that actions in rem including grant and issue of patents and registration of trademarks are exclusive matters falling within the sovereign and government functions and are non-arbitrable. Court held that the present dispute did not pertain to infringement of a trademark but was on the right to use the trademark conferred by a particular agreement on a particular group. Thus, the dispute between the parties was held to be arbitrable. Further, it was held that "the assignment of a trademark is by a contract and is not a statutory fiat."
It is clear from the study of aforesaid cases that the possibility of arbitration in IPR matters only arises out of the nature of the dispute and if the procedures are well in place, it can bring a positive impact.
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