Introduction

Intellectual Property Rights (IPR) are the lifeblood of innovation and creativity, providing legal protection for inventors and creators. However, disputes are an inevitable part of the commercial exploitation of IPR. Traditionally, such disputes have been the domain of national courts, but with the rise of global commerce, arbitration has emerged as a preferred alternative. The arbitrability of IPR disputes, however, is a nuanced subject, influenced heavily by the doctrine of public policy. Public policy can restrict the scope of arbitration. This is because certain aspects of IPR, such as patent validity or trademark registration, involve public interest and state authority, which are typically beyond the reach of private arbitration.

In Law, 'public policy' has been likened to an 'unruly horse,' a term coined by Justice Burrough in Richardson v Mellish (1825)1. “It was noted that in some common law jurisdictions that term might be interpreted as not covering notions of procedural justice while in legal systems of civil law traditions, inspired by the French concept of ‘ordre public’, principles of procedural justice were regarded as being included.”2

Arbitration offers a beacon of hope for those entangled in disputes, providing a less formal and more flexible path than traditional and adversarial court battles. It tailors the dispute resolution process to their needs while keeping court interference to a bare minimum. Yet, this freedom isn't absolute. It is affected by the exception of 'public policy' under Section 34, making certain matters non arbitrable on the basis that they are against the public policy. It prevents the autonomy granted by arbitration to stray from the law's boundaries.

Statutory Changes and Recommendations Affecting the Arbitrability of IP Disputes

Amendments in 2015 and 2019 aimed to address practical issues, reduce court involvement, expedite arbitration, and encourage institutional arbitration. However, these changes raise questions about which disputes can be arbitrated. Intellectual property rights (IPR) disputes are particularly complex. While some aspects, such as contractual disputes with clear arbitration clauses, can be arbitrated, others, like the validity and ownership of IP, typically cannot because they have significant public policy implications. Enforcing IP rights often requires the involvement of national IP offices or courts, which are government authorities.

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The 246th Law Commission Report3 and the 2015 Amendment4 aimed to refine the arbitration process. It does not particularly provide for IPR disputes, however it can be referred to for understanding the important aspects that concern the arbitrability of IPR dispute.. The Commission criticised the expansive interpretation of 'public policy' in prior rulings, which could potentially overwhelm the courts with cases. It recommended adopting the Supreme Court's definition from the Renusagar case5 to prevent courts from delving into substantive issues, as Sections 346 and 487 of the Act should address procedural aspects only.

Developments of Various Tests of Arbitrability

Arbitrability essentially addresses whether a particular subject matter can be decided by an arbitral tribunal. Despite not being explicitly defined in the 1996 Act, the term has evolved through case law over time. Booz Allen and Hamilton v. SBI Home Finance Ltd. (2011)8 marked the inception of the discussion on arbitrability. In this case, the Supreme Court highlighted three facets of arbitrability. However, it overlooked the principle of ‘kompetenz- kompetenz’ provided under section 169 of the Act. Secondly, it encouraged the interference of courts in arbitration, expanding the court's power under section 810. Instead of assessing the validity of the agreement, courts began determining the arbitrability of the subject matter. Lastly, the court failed to showcase the extent of rights in personam and rem in the context of arbitration.

The Supreme Court's ruling in the Vidya Drolia v. Durga Trading Corporation, 202111 case established the whole issue of 'arbitrability' by putting forward the four-fold test.

This test checks if:

(i) the cause of action and subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.

(ii) the cause of action and subject matter of the dispute affects third party rights; have erga omnes effect; require centralised adjudication.

(iii) the cause of action and subject matter of the dispute relates to inalienable sovereign and public interest functions of the State.

(iv) the subject-matter of the dispute is expressly or by necessary implication non- arbitrable as per mandatory statute(s).

“It was further explained that these tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically, will help and assist in determining and ascertaining, with a great degree of certainty, when a dispute or subject matter is non- arbitrable.”12

“Uncertainty about the arbitrability of IP disputes persisted due to the Supreme Court's statement that patent and trademark grants confer monopoly rights, implying they are non- arbitrable.”13 Although later clarified in Vidya Drolia14 that arbitrability should be assessed

case by case, this could be seen as a blanket ban on IP arbitration. The Delhi High Court resolved this ambiguity in Hero Electric Vehicles Pvt. Ltd. v. Lectro E-Mobility Pvt. Ltd.15,

determining that IP disputes involving rights assigned in agreements are rights in personam and thus arbitrable. This principle was upheld in Golden Tobacco Limited v. Golden Tobie Private Limited16 and Vijay Kumar Munjal v. Pawan Kumar Munjal17.

Court intervention is limited to determining whether the subject matter is arbitrable, with the Supreme Court's general observations on non-arbitrability of IP disputes being non-binding. High Courts often view trademark infringement as a right in rem, non-arbitrable, but in Eros International Media Limited v. Telemax Links India Pvt. Ltd.18 recognised IP disputes arising from contract breaches as arbitrable rights in personam. This reflects the overlap between commercial transactions and IP. The Bombay High Court's approach was seen in Indian Performing Rights Society v. Entertainment Networks19, ruling that arbitral tribunals cannot decide the legal existence of copyright, as it is an action in rem.

Judicial percents on Arbitrability of IP Disputes

In the Mundipharma Case20, the Delhi High Court decided that a claim of copyright infringement couldn't be resolved through arbitration. The court reasoned that copyright infringement is a statutory issue with specific legal remedies that only civil courts can provide. This decision aligns with the principle that disputes arising from special statutes are reserved exclusively for civil courts.

Similarly, in the SAIL Case21 the Bombay High Court ruled & explained that trademark rights and related remedies are matters in rem, meaning they affect the public and cannot be handled by a private arbitration forum. This ruling follows the principle that actions in rem are inarbitrable.

The Euro Kids International (P) Ltd. v Bhaskar Vidhyapeeth Shikshan Sanstha22 marked a pivotal moment in the shift towards allowing arbitration for IP disputes. The Bombay High Court ruled that declaring all IP disputes non-arbitrable would be impractical. It clarified that IP disputes stemming from contracts are arbitrable because they involve specific relief sought against specific parties, falling under the first test of arbitrability. Additionally, the court

affirmed that copyright infringement, being an action in personam, can be determined through arbitration.

While disputes in personam can be non-arbitrable if arising from special statutes, the Eros Case challenged this notion. It argued that the relevant statute doesn't mandate court adjudication exclusively, thus permitting arbitration. This decision was appropriate since the second test typically applies to address power imbalances, which aren't always relevant in IP disputes.

Since the Eros and Euro Kids cases, other IP disputes stemming from negative covenants in contracts have also been deemed arbitrable. In Indian Performing Right Society Ltd. v Entertainment Network (India) Ltd.,23 the Bombay High Court ruled that copyright infringement disputes under a license agreement were not arbitrable. IPRS licensed ENIL to broadcast songs for a royalty, but disputes arose and went to arbitration. IPRS challenged the arbitration award, arguing it addressed non-arbitrable issues.

The court held that Section 62(1)24 of the Copyright Act 1957 mandated infringement suits be brought before the District Court, making them non-arbitrable. It also stated that copyright rights are rights in rem, unsuitable for private arbitration. The court distinguished this case from Eros International, noting that it involved IPRS’s entitlement to royalties and injunctions against wrongful demands, which are non-arbitrable under Booz Allen and Steel Authority of India Ltd rulings.

Conclusion

The trend towards institutional arbitration in India reflects increasing acceptance of resolving IPR disputes outside courts, provided it aligns with public policy. As India's arbitration framework evolves, balancing public policy with IPR arbitrability remains crucial for legal reform. “Currently, there is no blanket ban on the arbitrability of IP disputes in India. Arbitrability depends on the nature of the claims.”25 It depends on the nature of the claims. Contractual disputes, such as royalties and licensing terms, are arbitrable. However, disputes over IP validity or ownership should be decided by courts or public authorities due to their public rights implications.

Infringement claims depend on the case. pure statutory claims are not arbitrable, while contract-based claims are. If a counterclaim about IP validity arises, it must be resolved by the court, potentially staying the arbitration. This approach balances inventors'/authors' rights to arbitrate contractual issues with the need for courts to handle public rights claims, promoting an effective IP regime that encourages dispute resolution and safeguards public interests.

1 130 E.R. 294

2 UNCITRAL Model Law on International Commercial Arbitration, 1985, A. 34

3 LAW COMMISSION OF INDIA, REPORT NO. 246 Amendments to the Arbitration and Conciliation Act 1996

4 The Arbitration and Conciliation (Amendment) Act, 2015, No. 3, Acts of Parliament, 2016 (India)

5 Renusagar Power Co. Ltd vs General Electric Co on 7 October, 1994 AIR 860

6 THE ARBITRATION AND CONCILIATION ACT, 1996 § 34, No. 26, Acts of Parliament, 1996(India)

7 Id. §48

8 2011 (5) SCC 532

9 Supra note 6 § 16

10 Supra note 6 § 8

11 AIR 2019 SC 3498

12 Pallavi Rao & Robin Grover, Cyril Amarchand mangaldas, August 28, 2023, https://disputeresolution.cyrilamarchandblogs.com/2023/08/arbitrability-of-ip-disputes-a-step-forward/

13 Id.

14 Vidya Drolia vs Durga Trading Corporation 2011 (5) SCC 532

15 AIRONLINE 2021 DEL 893

16 O.M.P.(I) (COMM.) 182/2021

17 ARB.P. 975/2021

18 SUIT NO. 331 OF 2013

19 AIRONLINE 2021 DEL 16

20 Mundipharma Ag vs Wockhardt Ltd., ILR1991DELHI606

21 Steel Authority Of India Ltd vs Sks Ispat And Power Ltd And 2 Ors, COMMERCIAL IP SUIT NO.117 OF 2014

22 Arbitration Petition No. 1061 of 2014

23 AIRONLINE 2021 DEL 16

24 THE COPYRIGHT ACT, 1957, No. 14, § 62(1), Acts of Parliament, 1957 (India)

25Saniya Mirani and Mihika Poddar, Arbitrability Of IP Disputes in India- A Blanket Bar?, Wolters Kulver, March 9, 2019, https://arbitrationblog.kluwerarbitration.com/2019/03/09/arbitrability-of-ip-disputes-in-india-a- blanket-bar/