Arbitrating intellectual property disputes in India

(This piece is a work in progress. Please do not quote or cite without permission from
the author)1

Introduction

A right without a remedy is no right at all, so goes the old adage. Therefore to protect rights
of its members, a State tends to recognise, formulate and operationalise various mechanisms
to resolve any disputes concerning protection, preservation and promotion of their rights.
These mechanisms may range from being completely state centric (for instance state courts)
to completely private and protected within a state supervised system (conciliation or
mediation), to completely private sans state supervision (negotiation) except in very limited
instances.

Intellectual property, notwithstanding lack of a comprehensive definition, is generally

conferred with extensive protections in most jurisdictions, which operate erga omnes,
meaning that they confer monopoly rights to the holder/owner. Given the skew monopoly
rights introduce, states endeavour to craft intellectual property policies to draw a balance
between levels of protection granted and benefits that members of the State can derive from
exploitation of such intellectual property. Given the overall policy and the erga omnes
character of IP protections, disputes concerning IP are ordinarily reserved within the sole
domain of state courts. The purpose of this paper is to take another look at whether State
courts, specifically in India, provide the only possible avenue for resolving IP disputes, or
whether such disputes could be resolved utilising alternate methods of dispute resolution.
Part I of the paper would analyse why it is important to explore alternatives to courts as a
mechanism of dispute resolution. Part II explores various concerns that may arise when
attempts are made to resolve IP disputes through alternate methods of dispute resolution in
particular arbitration. Part III looks at attempts to arbitrate IP disputes in various
jurisdictions. Part IV looks at the approach adopted within the Indian jurisdiction to arbitrate
IP disputes. It is also pertinent to note at the outset that this article does not delve on choice of
law issues pertaining to question of arbitrability in an international arbitration. It also limits
its focus to three types of intellectual property namely patents, trademarks, and copyright, and
to instances where civil remedies are being sought. Further, this article focuses only on the
mechanism of arbitration and not on alternate dispute resolution methods generally.

Part I

Though adjudication of disputes through courts is the staple method of resolving disputes, it
has over the years come into some disrepute. Some of the major issues that have plagued
working of the court systems have been substantial delays, high cost, and lack of expertise, to

1
Daniel Mathew, Assistant Professor (Law), National Law University Delhi. The author would like to acknowledge
and thank Ms. Tia Majumdar for the able research assistance rendered for this work.

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Electronic copy available at: https://ssrn.com/abstract=2942684

name a few.2 Add to this in the event of a transnational dispute factors such as distrust of
foreign legal practices, political and economic structures also form a justification for active
avoidance of a particular court system. Additionally the adversarial system is charged with
regularly failing to achieve its ultimate objective namely that of justice.3 Jurisdictions across
the globe have faced them to varying degrees.4

To address some of the concerns noted above various alternate methods of dispute resolution
were evolved. The methods were founded on the understanding that private methods of
dispute resolution could resolve disputes more efficiently, including reduction of time taken
and cost incurred, as compared to resolution through court based adjudication. These
alternatives ranged from completely private such as negotiation, to adjudication through
arbitrators outcome of which were enforced through state based mechanisms.5

Arbitration is a consensual means of dispute resolution, requiring all parties involved to

submit the matter to arbitration, failing which this method of dispute resolution would fail to
operationalise. The agreement to arbitrate, which embodies the consent of the parties, obtains
a binding force as a result of national and international support extended to it through
domestic and international law.6 Most jurisdictions have modified their domestic laws to
reflect the Model Laws prepared by UNCITRAL and recommended for adoption by the
United Nations General Assembly. Internationally, instruments such as the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, adhered
to by 156 States, provided for expedited enforcement of a valid arbitration agreement and
award rendered in a contracting state in the territory of another contracting. 7

2
Gregg A Paradise, Arbitration of Patent Infringement Disputes: Encouraging the Use of Arbitration through
Evidence Rules Reform, 64 Fordham L Rev. 247 (1995), pages 251-255. Harish Narasappa, The long, expensive
road to justice, available at http://indiatoday.intoday.in/story/judicial-system-judiciary-cji-law-cases-the-long-
expensive-road-to-justice/1/652784.html. Docket explosion and consequent delays have been on numerous
occasions flagged as a critical issue by the Supreme Court of India. According to the Supreme Court of India
website as on 01.02.2017, 62309 matters were pending before it. See also Utkarsh Anand, More than 2 crore cases
pending in India’s district courts: Report, http://indianexpress.com/article/india/india-news-india/indian-judiciary-
shortage-judges-ts-thakur-2-crore-cases-pending-in-indias-district-courts-report-2842023/.
3
Katherine R Kruse, Learning from Practice: What ADR needs from a theory of Justice, 5 Nevada Law Journal
389, (2004), 390-392.
4
For instance according to a 2015 study commissioned by the American Intellectual Property Law Association
(AIPLA) in its 2015 Report of the Economic Survey estimated an ever increasing average cost of litigation (through
trial) for patent, trademark and copyright infringement. The survey estimated that in patent infringement cases
where the amount in dispute was between USD $10 million to $25 million total litigation costs average in excess of
$3.5 million. In cases where the amount in dispute exceeds $25 million, average litigation costs are roughly doubled.
Summary of the Report, available at http://files.ctctcdn.com/e79ee274201/b6ced6c3-d1ee-4ee7-9873-
352dbe08d8fd.pdf, page 37-52. For most litigants one of the greatest obstacles in pursuing their rights is the high
litigation cost that is involved. WIPO Magazine, Feb 2010, No.1, available at
http://www.wipo.int/wipo_magazine/en/2010/01/. In similar vein see also the 245th Report of the Law
Commission of India on a review of the working of the Indian Court systems.
5
Blackman and Mcneill, Alternative Dispute Resolution in Commercial Intellectual Property Disputes, 47 The
American University Law Review 1709 (1998), pages 1711-1714. See generally, Robert H Mnookin, Alternative
Dispute Resolution available at http://www.law.harvard.edu/programs/olin_center/papers/pdf/232.pdf
6
Gary B Born, International Commercial Arbitration, Vol I, Wolters Kluwer, 2009, page 90.
7
Status of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1958)
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html. Other relevant
international instruments include the Geneva Convention on The Execution of Foreign Arbitral Awards 1927 and

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Electronic copy available at: https://ssrn.com/abstract=2942684

As a method of dispute resolution, arbitration involves selection of arbitrators who act as
judges in disputes submitted to them for adjudication. Thus even though there is an element
of adjudication (similar to court based system), unlike the courts the adjudicators are selected
by the parties. The advantage of the latter lies in the fact that the selection could now be
based on the expertise of the arbitrators, familiarity with the applicable laws, business
practices, industry practices, customs, preservation of commercial relationships, etc.,
allowing for a better and more efficient resolution of disputes.8 Adjudication of highly
technical and at times complex problems posed by intellectual property disputes require
adjudicators with definitive background and knowledge of intellectual property to fully grasp
and understand the nuances of the underlying intellectual property, be it plant varieties,
computer software, etc. Presence of such adjudicators tend to substantially reduce the time
and cost involved in educating a judge about the intellectual property in dispute. An evolved
understanding of the industry including its practices ensures a less protracted, costly and
more efficient resolution of disputes.9 As a process, arbitration allows for adoption of a
flexible procedural setup including rules, active case management in the instance of
institutional arbitration, favourable governing law, a high degree of confidentiality, flexibility
of remedy, limited review, finality, expedited enforceability of awards, to name a few of the
advantages it holds over state based court adjudication.10 Arbitration thus presents a better
and more preferred solution especially in instances of international disputes.11

However it would be inaccurate to suggest that arbitration scores on all aspects as compared
to a court based adjudication system. Arbitrators lack the breadth of authority ordinarily
enjoyed by courts, and consequently lack jurisdiction over a non-consenting party.
Additionally international commercial arbitration is by no means a less expensive option.12 It
further lacks a defined quality control mechanism of the nature seen in courts leading to
suspect quality of adjudication. Procedurally arbitration suffers from increased
judicialisation, limited or no discovery, limited access to information, lack of predictability of
outcome, to name a few.13

Geneva Protocol on Arbitration Clauses 1923.

8
Gregg A Paradise, Arbitration of Patent Infringement Disputes: Encouraging the Use of Arbitration through
Evidence Rules Reform, 64 Fordham L Rev. 247 (1995), pages 261-265. Robert H. Mnookin, Alternative Dispute
Resolution, page 2 http://www.law.harvard.edu/programs/olin_center/papers/pdf/232.pdf.
9
David A Allgeyer, In Search of Lower Cost Resolution: Using Arbitration to Resolve Patent Disputes, Conflict
Management Newsletter, Vol 12.No.1, 2007, pg 9-12. Blackman and Mcneill, Alternative Dispute Resolution in
Commercial Intellectual Property Disputes, 47 The American University Law Review 1709 (1998), page 1717.
10
See 2015 International Arbitration Survey, Improvements and Innovations in International Arbitration, Queen
Mary and PwC, available at http://www.arbitration.qmul.ac.uk/docs/164761.pdf. See also Peter L Michaelson,
Patent Arbitration: It still makes good sense, Landslide, Vol 7, No.6, 2015, page 3-7. Kenneth R Adamo, Overview
of Intellectual Arbitration in the Intellectual Property Context, 2 Global Bus L. Rev. 7 (2011), 13.
11
2013 International Arbitration Survey, Corporate Choices in International Arbitration: Industry Perspectives,
available at http://www.arbitration.qmul.ac.uk/docs/123282.pdf.
12
Blake, Browne and Sime, A Practical Approach to Alternative Dispute Resolution, 4th ed, OUP 2016, pages 63-
64. In fairness, practitioners understand that arbitration costs are determined by how extensive the arbitration
process is. Extent of arbitration process, and consequently the associated cost, is contingent on party autonomy.
Peter Michaelson, Demystifying Commercial Arbitration: IT’s much better than you think!, New Jersey Law Journal,
2014, page 2.
13
John W Cooley and Steven Lubet, Arbitration Advocacy, 2nd ed, NITA, 1997, 2003, pages 7-9. See also Charles

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 Part II

Though benefits of arbitration operationalise even when applied to intellectual property

disputes,14 there are some specific concerns that may arise given the nature of an intellectual
property and consequences that flow from resolution disputes concerning it. As a
consequence, the idea of arbitrating intellectual property disputes has faced stiff opposition in
mainstream intellectual property discourse. Various oppositions against private adjudication
of intellectual property disputes could be condensed into four broad ideas:15

i. IP rights are granted by the State – Intellectual property rights are granted/ recognised
by the State. Given that arbitral tribunal is a private body, it is argued that such a
private body should not have the authority to invalidate a state created/granted right. In
other words, grant of an IPR is made through an exercise of the sovereign authority of
the State and only State should be able to undo it.16

ii. Nature of IPR (exclusivity) – in pursuance of public interest, the State has the power to
extract subject matters from public domain and place them within private domain.
These grants have erga omnes effect, in other words, the holder of an intellectual
property has the ability to exclude others from exploitation of that intellectual property.
Thus a grant imposes an obligation on the third parties. Consequently, a private tribunal
does not /cannot posses the ability or authority to undo a monopoly, considering such
an action would require sovereign authority.

iii. Limited authority of an arbitral tribunal - Additionally, an arbitral tribunal is created

and derives its power through consent of the participating parties. Consequently, an
arbitral tribunal exercises no authority or, ordinarily, carry any power over non parties
to the arbitration. They can neither grant non parties any right nor impose any
obligation on them. A limitation of this nature would, in principle, inhibit the
cancellation of obligation erga omnes.

iv. Public interest animating grant of monopolies - intellectual property rights are
created/granted to achieve certain socio- economic goals. Such goals would include
boosting domestic research, transfer of technology, enhancement of skill sets, to name a

W Shifley, Goodbye Patent Arbitration?, available at goo.gl/lzNWc8. At times business considerations might affect
a decision on the question of method of dispute resolution to be adopted. Fox and Weinstein, Arbitration and
Intellectual Property Disputes, page 6, available at
http://www.micronomics.com/articles/Arbitration_and_Intellectual_Property_Disputes.pdf.
14
Arbitration of IP disputes in particular patent infringement matters are fairly regular affair. Major arbitration
institutions such as WIPO and ICC regularly conduct IP Arbitration. Two recent high profile ICC arbitrations
concerned Nokia v. Samsung (http://www.nokia.com/en_int/news/releases/2016/02/01/nokia-receives-decision-
in-patent-license-arbitration-with-samsung-positive-financial-impact-for-nokia-technologies) and
15
Trevor Cook and Alejandro I Garcia, International Intellectual Property Arbitration, Wolters Kluwer, 2010, pages
62-66. See also William Grantham,The Arbitrability of International Intellectual Property Disputes, 14 Berkeley J. Int'l Law
173 (1996), pages 180-182, 184.
16
Pierre Veron, Arbitration of Intellectual Property Disputes in France, 23 Int’l Bus. Law 132 (1995), page 134.

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 few.17 Grant of intellectual property rights thus acts as an incentive for the creator to
disclose their creation which in turn is utilised to further the overall public welfare.
Allowing a private arbitral tribunal to freely invalidate the same, would have a
detrimental effect on the whole system and goals it was formulated to achieve.18

v. Creation of bodies with exclusive and specific jurisdiction on questions of validity. In

such cases since law vest exclusive jurisdiction in a specific public fora, by necessary
implication all others bodies including a private fora are excluded.19 Various reasons
are proffered to justify conferment of exclusive jurisdiction including specialised
judges, powers, the need to ensure generation of clear and accessible record of
ownership of IPR, to name a few.

Part III

It would however be incorrect to suggest that no jurisdiction has attempted to arbitrate

intellectual property disputes. Increasingly transnational IP disputes are being arbitrated, with
arbitral institutions such as WIPO,20 ICC, etc providing adequate support for the process.
There is however no consistent state practice that has emerged in this regard. Most
jurisdictions that permit arbitration of intellectual property disputes draw a clear distinction
between contractual and non contractual disputes. Almost all jurisdictions permit pure
contractual disputes to be arbitrated. The logic behind this is that contractual disputes base
themselves on the agreement between the parties, and any resolution of that dispute operates
in personam between the parties, with no consequences being visited upon third parties. The
problem however is complicated in instances of non contractual disputes, or contractual
disputes where non contractual defences such invalidity and ownership are raised. Questions
concerning validity and ownership are usually held to be inarbitrable in various jurisdictions.

Understanding Inarbitrability

Arbitrability is a crucial concept within the New York Convention on Recognition and
Enforcement of Arbitral Awards 1958 and empowers a domestic court to refuse recognition
and enforcement of a foreign arbitral if it concerns a subject matter deemed inarbitrable under
the domestic legal system. Arbitrability also found a place within the UNCITRAL Model
Law, which permitted the courts of the seat to set aside an arbitral awards on the grounds that

17
Thomas G Field Jr., Intellectual Property: Some Practical and Legal Fundamentals, 35 IDEA 79 (1994-95), pages
86, 97
18
Resolving Intellectual Property Problems through Alternative Dispute Resolution, WIPO Advisory Committee
on Enforcement, Ninth Session, WIPO/ACE/9/9, 2013, page 6-7.
19
Booz Allen Hamilton Inc. v. SBI Home Finance Ltd & Othrs, para 35
20
To facilitate resolution of IP disputes the World Intellectual Property Organisation established the WIPO
Arbitration and Mediation Centre. http://www.wipo.int/amc/en/. For a detailed analyses of WIPO Arbitration and
Mediation Centre as an international and neutral alternate dispute resolution provider see De Castro and Chalkias,
Mediation and Arbitration of Intellectual Property and Technology Disputes: The Operation of the World
Intellectual Property Organisation Arbitration and Mediation Centre, (2012) 24 SAcLJ, 1059.

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the subject matter of the dispute is not capable of settlement by arbitration under the law of
the State.21

Over the years the scope of this ground has been consistently shrinking, but it remains
relevant because the determination of specific contours of arbitrability remains within the
domain of national courts.22 Additionally unlike a growing acceptability of the concept of
international public policy, it is unclear whether a concept such as international arbitrability
exists.23

Arbitrability involves determination of issues that can and cannot be submitted to arbitration.
Though the meaning of the term itself is unsettled, this understanding is the bare minimum in
any understanding of the term arbitrability. Broadly arbitrability could be divided into two
categories24 – a) objective arbitrability – what the law permits to be arbitrated, and b)
subjective arbitrability – which refers to what the parties have or not referred to arbitration
through their consent. In the first instance, the jurisdiction of arbitral tribunal is restricted by
the operation of law independent of the will or capacity of the parties, while in the second it
is determined by the common consent of the parties.25

Thus arbitration is considered not particularly well suited to resolve disputes containing or
relating to public policy, for the following reasons:26

a. Less intensive fact finding process and less rigorous evidential proceedings
b. Private arbitrators would under-enforce public laws.27
c. Limited review of arbitral awards (including complete exclusion of an appeal); and
d. Private and confidential proceedings.

The above reasons fuel the distrust that national jurisdictions have against arbitration as a
method of dispute resolution. Each of these arguments are not without their critics, including
a suggestion that presence of such characteristics do not compromise arbitration as a process
of dispute resolution mechanism rendering it unfit for resolving public policy disputes.28

21
Section 34.2.b.i., Model Law 1985.
22
Redfern and Hunter, 2009, pages 22, 123.
23
Loukas A Mistelis & Stavros L Brekoulakis, Arbitrability – International and Comparative Perspectives, Wolters
Kluwer, 2009, page 3.
24
Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective, CUP, 2011, pages 182-189.
William Grantham,The Arbitrability of International Intellectual Property Disputes, 14 Berkeley J. Int'l Law. 173
(1996), page 179.
25
Loukas A Mistelis & Stavros L Brekoulakis, Arbitrability – International and Comparative Perspectives, Wolters
Kluwer, 2009, page 5.
26
Stavros L Brekoulakis, On Arbitrability: Persisting Misconceptions and New Areas Of Concern, in Loukas A Mistelis &
Stavros L Brekoulakis (eds), Arbitrability – International and Comparative Perspectives, Wolters Kluwer, 2009, page
23.
27
The argument ran that arbitrators would in all probability be commercial men, who were biased in favour of
commerce and against public regulation of commercial activities.
28
Stavros L Brekoulakis, On Arbitrability: Persisting Misconceptions and New Areas Of Concern, in Loukas A Mistelis &
Stavros L Brekoulakis (eds), Arbitrability – International and Comparative Perspectives, Wolters Kluwer, 2009, page
25.

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Consequently inarbitrability, however limited in scope, remains an essential part of
arbitration law world over. That said there is a gradual movement towards, what is termed as,
universal arbitrability, which suggests that all matters with an economic facet are prima facie
arbitrable in most jurisdictions.29

In light of the above discussion, some potential responses to the dilemma of inarbitrability of
IP disputes could be put forward:

i. Fluid public policy limits30 – it is at times extremely difficult to ascertain specific

contours of public policy. It is also difficult to gather the standards utilised to
determine whether a particular matter is part of public policy or not. Therefore it is
necessary to isolate precise reasons that would include a dispute concerning a
particular intellectual property within the ambit of public policy. IPR represents a
bundle of distinct rights with each exhibiting a distinct legal nature and with each
being acquired in a different manner. Therefore there cannot be one size fits all
approach when it comes to determining whether a dispute concerning a particular
intellectual property ought to be arbitrated or not. Thus given the difficulty in
ascertaining precise contours of public policy using it as a blanket standard to deny
arbitrability would be inappropriate. Public policy cannot be a viewed as a
monolithic and rigid idea.

ii. Inter partes effect - arbitral awards only binds parties to arbitration and does not
have an erga omnes effect. Consequently it does not undo anything that a State has
done. A novel way of understanding it to view a favourable award as an irrevocable
and royalty free grant of license.

iii. Limited jurisdiction of arbitral tribunal - given that an arbitral tribunal unlike a State
court derives its powers from parties, the possibility of jurisdictional overlap
between jurisdiction of arbitral tribunal and public bodies is unlikely. An exclusive
jurisdiction clause therefore would operate within a hierarchy of state tribunals but
not on those tribunals that remain outside the hierarchy.31

iv. Drawing a distinction between whether a question of validity is the main issue or is
incidental to the main issue. If the issue is an incidental one, it is upto the arbitral
tribunal to determine whether for adjudication of the main issue, responding to the
incidental issue is necessary. In the event it is not, then such dispute would not be hit
by the bar if inarbitrability.

v. Contractually agreeing to limit or waive or alter legal rights through contract that

29
Karim Youssef, The Death of Inarbitrability, in Loukas A Mistelis & Stavros L Brekoulakis (eds), Arbitrability –
International and Comparative Perspectives, Wolters Kluwer, 2009, page 55.
30
Greenberg et al., International Commercial Arbitration: An Asia-Pacific Perspective, CUP, 2011, pages 188-189.
31
It however must be acknowledged here that this is an extremely weak argument and has been debunked in India.

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 would otherwise be available through a court system. 32 The parties are well within
their rights to restrict their ability to raise certain defences when faced with a dispute
involving an intellectual property.

As noted earlier States, to a varying degree, permit arbitration of intellectual property

disputes. Some of the approaches are noted below:

i. Liberal regimes – would comprise of States which permit the arbitral tribunal
to look into questions of validity if raised during arbitral proceedings, with the
decision having:

1. Erga omnes effect – This would be one end of the spectrum depicting
the most liberal regime which allows the arbitral award to operate in
equal measure as a decision of the court. For instance the Swiss
jurisdiction confirms erga omnes effect of an arbitral award in IP
arbitration generally.33 Similarly the Belgian law affirms the erga
omnes effect of arbitral awards from a patent arbitration.34

2. Interpartes effect – Other regime though permitting an arbitral

tribunal to look into questions of validity, limit a decision to operate
inter partes and not carry erga omnes effect. For instance US (35 USC
§ 294), Japan (Law no.121 of 1959), etc.35

ii. Midway regimes – this includes states that permit all intellectual property
disputes, except questions of validity and ownership, to be arbitrated.
Examples of these regimes would be Germany, Finland, Italy, Portugal, etc.36
Similarly in EU, patent disputes could be adjudicated so long as they do not

32
William Grantham,The Arbitrability of International Intellectual Property Disputes, 14 Berkeley J. Int'l Law. 173
(1996), 187.
33
Art 177, Swiss Federal Act on Private International Law 1987. https://www.admin.ch/opc/de/classified-
compilation/19870312/index.html#a177, http://www.andreasbucher-
law.ch/images/stories/pil_act_1987_as_amended_until_1_7_2014.pdf, and 1975 Decision of the Federal Office of
Intellectual Property, http://www.wipo.int/amc/en/events/conferences/1994/briner.html at 2.2.2 and footnote
25. See also http://uk.practicallaw.com/3-621-5856#a247883 and http://uk.practicallaw.com/5-502-
1047#a560008. See also Anna P Mantakou, Arbitrability and Intellectual Property Disputes, in Loukas A Mistelis &
Stavros L Brekoulakis, Arbitrability – International and Comparative Perspectives, Wolters Kluwer, 2009, page 267.
34
Belgian Patent Act 1997, Art 51, available at
https://www.jpo.go.jp/shiryou_e/s_sonota_e/fips_e/pdf/belgium/patents_law.pdf. See also Trevor Cook, ADR
as a tool for Intellectual Property Enforcement, WIPO/ACE/9/3, page 14, available at
http://www.wipo.int/edocs/mdocs/mdocs/en/wipo_ace_9/wipo_ace_9_3-main1.pdf
35
Kenneth R Adamo, Overview of Intellectual Arbitration in the Intellectual Property Context, 2 Global Bus L.
Rev. 7 (2011), pages 17-18.
36
Erik Schafer, The use of Arbitration and mediation for protecting intellectual property rights: A German
perspective, 94 TMR 695 (2004) 709-710. Validity of Patents remains subject to the exclusive jurisdiction of State
Courts. See also Article 35, no. 1, of the Portuguese Industrial Property Code. Nuno Ferreira Lousa and Raquel
Galvao Silva, Arbitrating Intellectual Property Disputes in Portugal: A Case Study, available at
http://kluwerarbitrationblog.com/2015/11/13/arbitrating-intellectual-property-disputes-in-portugal-a-case-study/.

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 deal with questions of validity.37

iii. Conservative regimes – On the other end of the spectrum are those regimes
that prohibit arbitration of disputes concerning specific intellectual property.
This would include states like South Africa,38 China,39 etc.

Part IV

Given the lack of a uniform trend, it is important to raise this question in relation to Indian
jurisdiction – can intellectual property disputes be arbitrated in India? There is no clear
answer either from the applicable statutory law or judicial decisions. Indian jurisdiction has
not directly addressed the issue of whether intellectual property disputes can be arbitrated in
India.

A review of the major IP laws enacted by the legislature would include the Patent Act,
Trademarks Act, and Copyright Act.40 The relevant provisions of the legislation would be - a)
The Patents Act, 1970 – section 104, b) The Trademarks Act 1999, – section 134, and c)
Indian Copyright Act 1957 – section 55 r/w section 62, does not provide a clear answer.

Another legislation which may prove to be a possible source of resolution would be the
Indian arbitration law. Arbitration in India is governed by the Arbitration and Conciliation
Act 1996, which governs both the domestic and international commercial arbitration seated in
India. The Act also incorporates provisions dealing with awards originating in foreign seated
arbitration. In particular, §2(3), (4) and (5) of the Act designate this law as lex generalis
clearly noting that it would give way for laws by virtue of which certain matters may not be
submitted to arbitration. Additionally an arbitration happening under any other law would be
governed by provisions of the 1996 Act in the absence of contrary provisions in that law.41

At this juncture, in view of the query posed in this paper, it becomes important to raise three
concerns:

1. How is the concept of arbitrability understood under Indian arbitration law?

2. How has the judiciary responded to the query of whether intellectual property disputes

37
Article 35, Agreement on a Unified Patent Court 2013. See also EC Regulation 44/2001 Art 22.4 which required
disputes regarding ownership rights on patents and trademarks may only be submitted to the exclusive jurisdiction
of specific national courts
38
Art 18(1), South African Patent Law (Act no. 58 of 1978). See also Trevor Cook, ADR as a tool for Intellectual
Property Enforcement, WIPO/ACE/9/3, page
15,.http://www.wipo.int/edocs/mdocs/mdocs/en/wipo_ace_9/wipo_ace_9_3-main1.pdf
39
Art 45 read with 60, Patent Law of the People’s Republic of China, 1984, available at
http://www.wipo.int/edocs/lexdocs/laws/en/cn/cn028en.pdf. A perusal of the law seems to suggest that
mediation of a patent dispute is permitted, at the same time it does not explicitly bar arbitration of IP disputes.
40
As noted earlier the review in this article is limited to three primary IP laws.
41
In such situations, the Arbitration and Conciliation Act 1996 performs a gap filling role. It provides necessary
provisions where the lex specialis fails to provide for a rule.

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 could be arbitrated?; and
3. A related question - on the whole what has been the attitude adopted by the Indian
judiciary towards arbitration?
1. Attitude towards arbitration

Responding to the third question first. Indian arbitration law has long recognised that an
arbitral tribunal can do what a civil court can except where special powers are endowed on a
tribunal. In other words, all civil matters can be arbitrated unless specifically made
inarbitrable. From the start the Indian judiciary has acknowledged a pro-arbitration stance
incorporated in the law noting clearly that where arbitration is statutorily permitted and
agreed to between the parties no party could be permitted to unilaterally avoid the same.
Additionally a clear stricture has been enunciated whereby any judicial authority (understood
as inclusive of any tribunal and not just the court) when faced with a valid arbitration
agreement must refer the matter to arbitration.42

The focus on seeking alternative dispute resolution mechanisms also led to other
developments in law. In particular, was the amendment made to the Indian Code of Civil
Procedure 1908, whereby §89 was introduced, with the intention to facilitate greater out of
court settlements through utilisation of ADR processes before trial commences. A civil court
while operating under §89 could refer the disputing parties to arbitration, conciliation,
judicial settlement or mediation.43 A mandatory duty has been imposed on the court to make
its best endeavour, in every matter, to refer it to one of listed methods of alternate dispute
resolution. Considering arbitration is an adjudicatory process, all parties involved have to
provide their consent for reference, before such a reference could be made.44 This however
does not mean that the consent to arbitration or an arbitration agreement had to pre-exist the
dispute or even the initiation of the matter before the parties. Indeed, if such an arbitration
agreement had pre-existed then the matter would have been referred to arbitration under §8 of
the Arbitration and Conciliation Act 1996.

2. Arbitrability in India – principles established

The spectrum of arbitrability in India is understood as part of the broad spectrum of public
policy, and following the UNCITRAL Model Law 1985 template, provided for under a
separate provision of §34.2.b.i. Grounds under this provision are referred to as ex officio,
which implies that court retains the power to scrutinise an arbitral award before it even in
instances where these grounds have not been specifically raised by the challenging party.

42
Section 5, PAG Raju v. PVG Raju. Additionally there has been a long and inconclusive debate as to whether the
question concerning the validity of an arbitration agreement should be adjudicated upon before referring the matter
to arbitration. This question has been resolved by the 2015 amendment to the Arbitration and Conciliation Act
1996, which requires affirmation of a prima facie validity prior to referring the matter to arbitration.
43
S.89 entire section.
44
Afcons Infrastructure Ltd v. Cherian Varkey Construction Co Ltd (2010) 8 SCC 24. A reference while operating
under §89 would require court to positively ascertain that all parties to the suit seek arbitration.

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§34.2.b.i provides that an award, where the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in force in India, will be a nullity.
Though the term subject matter remains undefined, it has been understood to be the right in
the property including a cause of action and relief claimed.45 Thus the relevant law in India
would be the lex specialis and the 1996 Act. To begin with, the latter does not enumerate a
list of matters it considers inarbitrable, leaving it to other enactments to exclude disputes
from under arbitration. Consequently, if the lex specialis makes a matter inarbitrable, the
1996 Act gives way and treats that matter as incapable of being arbitrated.46 If however the
lex specialis remains silent on the question of arbitrability, one has to revert to the 1996 Act
for guidance. From a perusal of the arbitration law in India one can note certain matters as
inarbitrable, for instance in instances of international commercial arbitration, a matter that is
not in respect of a defined legal relationship, would be inarbitrable. Similarly such a
relationship should also be considered as commercial under the law in force in India.47 This
distinction is not the same as a distinction drawn between contractual or non contractual
relationships. A defined legal relationship and commerciality then becomes a threshold
requirements.

Clearly therefore the applicable law provides for two instances wherein any matter becomes
inarbitrable: (a) where their reference to arbitration is expressly barred, and (b) where the
subject matter of the dispute is incapable of being settled using arbitration as a method of
dispute resolution.

Different laws for varying reasons, including creation of exclusive tribunals, withdraw
matters to exclusive public domains. In India for instance criminal offences; matters relating
to winding up, amalgamation or takeovers under the Companies Act 1956; recovery of debt
by banks under the Recovery of Debts due to Banks and Financial Institutions Act 1993;
disputes under Electricity Act 2003; matrimonial and guardianship matters; testamentary
matters; etc are few examples of exclusion.

A different problem arises when one attempts to interpret the principle of ‘incapable of
settlement by arbitration under the law’. A strict interpretation would have limited this
principle as referring to those matters wherein a specific law would have explicitly ousted
arbitration. And yet that is not how this particular principle has been understood within the
arbitration conspectus. Indian courts have developed interpreted it to include within its fold
an implicit ouster based on the principle of public right.

2.a Ouster based on right in rem

45
Indu Malhotra, OP Malhotra’s The Law and Practice of Arbitration and Conciliation, 3rd ed., Thomson Reuters,
2014, page 1317.
46
§2.3 of the Arbitration and Conciliation Act 1996.§2.3 -This Part shall not affect any other law for the time being
in force by virtue of which certain disputes may not be submitted to arbitration.
47
§2.1.f - “international commercial arbitration” means an arbitration relating to disputes arising out of legal
relationships, whether contractual or not, considered as commercial under the law in force in India…”

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In principle, all civil or commercial disputes that can be adjudicated upon by a court, in turn
are capable of adjudication by an arbitral tribunal. In a seminal case, Booz Allen Hamilton
Inc. v. SBI Home Finance Ltd & Othrs,48 (Booz Allen) the Supreme Court of India elaborated
upon the concept of arbitrability in Indian arbitration law. It observed that the meaning of the
concept of arbitrability would vary according to the contexts, and distilled three prominent
understandings:49

a. whether disputes having regard to their nature fall exclusively within the domain of
public fora (court) or whether it is a dispute that could be resolved by a private forum?

b. whether the disputes are covered by arbitration agreement or whether the parties have
excluded the disputes from under the purview of agreement?

c. whether the parties have referred the disputes to arbitration?

Elaborating further the court observed, that where the matter concerned an action in rem, it
would be a matter of public policy to have such matters adjudicated within the public fora. A
judgement which concerns a right in rem,50 would operate in rem, and therefore could not be
dealt with by an arbitral tribunal since it had no authority to bind non-parties. Therefore, for
the court, all disputes relating to rights that operated in personam could be resolved through
arbitration, while those disputes that concerned in rem rights had to be necessarily
adjudicated by public tribunals. However the court went on to clarify that the noted rule was
not a rigid one. It observed that in personam rights flowing from rights in rem were clearly
arbitrable.51 The court also in passing acknowledged the remedy or relief theory for
determining arbitrability, noting that where remedies sought would have in rem effect, such
remedies could not be granted by private fora. Such matters would be considered as
inarbitrable.52

2.b Ouster based on forum exercising special powers

48
(2011) 5 SCC 532
49
Booz Allen Hamilton Inc. v. SBI Home Finance Ltd & Othrs, Paragraph 21. The court noted the following examples
of disputes which were considered to be non arbitrable – (i) Disputes relating to rights and liabilities which give
rise to or arise out of criminal offences; (ii) Matrimonial disputes relating to divorce, judicial separation, restitution
of conjugal rights and child custody; (iii) Matters of guardianship; (iv) Insolvency and winding up; (v)
Testamentary matters, such as the grant of probate, letters of administration and succession certificates; and (vi)
Eviction or tenancy matters governed by special statutes where a tenant enjoys special protection against eviction
and specific courts are conferred with the exclusive jurisdiction to deal with the dispute. A seventh category of
dispute namely disputes relating to trusts, trustees and beneficiaries arising out of a trust deed and the Trust Act,
was added to the list by Vimal Kishore Shah v. Jayesh Dinesh Shah AIR 2016 SC 3889.
50
A right in rem is understood as a right that is exercisable against the world at large, as against a right in personam that
operated against specific individuals. So an action in rem would be one that would involve determination of rights of
an entity against the world at large ie against anyone claiming an interest in that property, while an action in
personam would refer to actions determining rights and interests of parties interse.
51
Booz Allen Hamilton Inc. v. SBI Home Finance Ltd & Othrs para 23.
52
Booz Allen Hamilton Inc. v. SBI Home Finance Ltd & Othrs, para 25 quoting from Russell on Arbitration (22nd ed,
2007) pg 28. See also Donde et al, Arbitrability of intellectual property disputes: Setting the scene,
http://www.youngicca-blog.com/arbitrability-of-intellectual-property-disputes-setting-the-scene/

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Another argument that is frequently taken is that a particular matter cannot be referred to
arbitration because it has been submitted to the exclusive jurisdiction of a particular public
tribunal to the exclusion of all other civil courts.53

Critics however have attempted to highlight a fine distinction. The counter runs thus – the
jurisdiction has been vested in a particular court/public tribunal to exclusion of all other
public tribunals. The restrictions therefore run only against other public tribunals, but does
not extend to private forum such an arbitral tribunal. In other words, so goes the argument,
that even in instances where matters have been exclusively vested within the jurisdiction of a
particular public tribunal, it could still be referred to arbitration.

This precise question was looked at by the Delhi High Court in HDFC Bank Ltd v. Satpal
Singh Bakshi,54 in connection with a matter pertaining to debt recovery, and whether the
Recovery of Debts Due to Banks and Financial Institutions Act 1993 would override
provisions of the Arbitration and Conciliation Act 1996. An argument before the bench was
that given that exclusive jurisdiction in debt recovery matters had been vested in debt
recovery tribunal, even though parties had concluded an arbitration agreement, the matter
could not be referred to arbitration.

The Delhi High Court adopted a novel line of reasoning in the matter by making a fine
distinction. The court started with questioning the nature of special tribunals, characterising
them into two – (a) ones that simply replaced civil courts as fora without anything more, and
(b) ones that were created pursuant to an enactment which vested them with special powers in
addition to ones ordinarily enjoyed by the court. For the court, it is only in the second
instance where exclusion occurs. This was so because arbitration was an alternate to ordinary
civil courts, and special tribunals in first instance were mere replacement of ordinary courts
without anything more. Therefore arbitration would be a legitimate alternative to such special
tribunals. But in instances where the special tribunals were vested with special powers, not
otherwise vested in ordinary civil courts, arbitration would not be an alternate because it
could not exercise such special powers.55 In other words, where a particular enactment
created special rights and obligations and vested a tribunal with special powers to protect
such rights or enforce such obligations, such a setup could not be avoided in favour of
arbitration. This was so because such rights could not be enforced through ordinary civil
courts instead required tribunals vested with specific and special powers to do so.

Such a distinction however may not have been entirely approved by the apex court. In a

53
This also forms one of the arguments for suggesting inarbitrability of an IP disputes.
54
193 (2012) DLT 203
55
HDFC Bank Limited v. Satpal Singh Bakshi (2013) ILR 1 Delhi 583, paras 12 and 13. Interestingly, in responding to
this question the Supreme Court, in Booz Allen Hamilton Inc. v. SBI Home Finance Ltd & Othrs, had held that the
arbitration agreement would not be enforced. In other words when faced with a matter subject to exclusive
jurisdiction of a tribunal, that matter even in the presence of an arbitration agreement between the parties could not
be referred to arbitration.

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recent decision in A Ayysamy v. A Paramasivam & Othrs,56 it observed that where the
jurisdiction of an ordinary civil court had been excluded by conferment of exclusive
jurisdiction on a specified court or tribunal, then as a matter of public policy such dispute
could not be arbitrated.57 Clearly the SC does not require an enquiry to be made on whether
special powers had been vested or the special tribunal had the ability to grant relief which an
ordinary court could not have granted.

3. Intellectual property arbitration in India

In India generally disputes with intellectual property as subject matter are considered to be
inarbitrable. This however is not an inflexible rule. A range of commercial transactions can
happen around intellectual property including sale and assignment. Such transactions mostly
would be pursuant to a contract and it is equally possible for such agreements to contain an
arbitration agreement. Disputes under or in relation to such contracts are ordinarily subject to
arbitration. Such contractual disputes would also fulfil the Booz Allen dictum of being in
personam disputes and therefore be capable of adjudication by arbitration.

In EROS International Media Limited v. Telemax Links India Private Ltd.,58 which pertained
to a copyright infringement action, responding to a request by the applicant for reference to
arbitration, the defendant resisted the application on ground of inarbitrability since the
disputes pertained to IP. It further argued that remedy against violation of right in rem could
be granted only by a civil court and not by an arbitrator.

The court began with a clear enunciation that there could not be an absolute principle to the
effect that all disputes relating to intellectual property are inarbitrable. It went on to observe
and rightly so, that the present matter arose from a contract and the dispute even though
pertaining to copyright infringement arose from the operation of a contract, and therefore
clearly concerned an in personam right. It thus drew pertinent conclusion, namely that even in
instances where rights in rem are in focus, if disputes concerning them arose under or in
relation to a contract, such disputes could be arbitrated provided the parties to the contract
had entered into a valid arbitration agreement.59 In a similar matter concerning trademark
infringement, in Suresh Dhanuka v. Sunita Mohapatra,60 the apex court raised no objection to
request for arbitration in a matter that was covered under the deed of assignment.

As noted earlier, the above cases affirm an understanding that where intellectual property
rights are covered under a contractual agreement, any dispute concerning these rights that
arise out of such contractual relation would be arbitrable. It is therefore necessary to evaluate

56
AIR 2016 SC 4675
57
Para 32. Concurring opinion of Justice DY Chandrachud.
58
Notice of Motion no. 886 of 2013 in Suit no. 331 of 2013 (MANU/MH/0536/2016). See also Shamnad Basheer,
Apocalyptic Arbitration of IP Disputes?, https://spicyip.com/2016/04/18085.html
59
This is an affirmation of Booz Allen Hamilton Inc. v. SBI Home Finance Ltd & Othrs dictum.
60
AIR 2012 SC 892

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a specific scenario, namely defences raised in an infringement suit, which has the potential to
block a possible arbitration. For instance, if in an infringement suit, the defence of ownership
or validity is raised, would the matter still remain arbitrable? This question is of particular
importance from another standpoint. If parties are allowed to avoid arbitration agreement by
the raising the defence of ownership or validity then it would make entering an arbitration
agreement a futile exercise given the ease with which it could be avoided. Yet at the same
time one cannot lose sight of the fact that the parties could not have validly agreed to submit
a matter to arbitration that was inarbitrable in the first place.

But responding to the scenario noted above, resolving questions of validity or ownership
would have in rem repercussions, which only a court or special authority vested with special
powers would be able to do. As noted above arbitral tribunals would be incapable of
adjudicating such matters rendering such disputes as inarbitrable.

Part V – Conclusion

A clear distinction is drawn in instances of intellectual property whose grant requires State
action such as registration for instance patents and trademarks, and other types of intellectual
property which are not required to be registered. Equally, a clear distinction is drawn between
purely contractual disputes where validity or ownership is not an issue in dispute, and
otherwise. Further demarcation is done on the basis of whether the dispute requires
adjudication on the question of validity or ownership of the concerned intellectual property.

At first blush, a perusal of the Indian statutory and case laws gives an impression of blanket
inarbitrability of disputes concerning intellectual property. This has partly been owing to the
adoption of the rights in rem and relief theories. However the courts have also acknowledged
that ancillary in personam disputes arising from in personam rights were arbitrable.

A perusal of existing literature also indicates that the question of privately resolving
intellectual property disputes has primarily been dealt within the arbitration law spectrum and
never really within the intellectual property rights domain. The National Intellectual Property
Rights Policy 2016, while making ‘strengthening of enforcement and adjudicatory
mechanisms for combating intellectual property rights infringements’ as one of the objectives
in its mission statement, makes an obscure remark that ADR methods may also be explored.61
There is very little discussion on the question of arbitrability of disputes concerning
intellectual property rights. Internationally, while implications of arbitrating intellectual
disputes have been extensively discussed, India lags behind in coherently addressing this
question either statutorily or through a national policy. Courts then are left with the
unenviable task of ascertaining and in instances constructing the policy.

61
National Intellectual Property Rights Policy 2016, Objective 6, page 2
http://dipp.nic.in/English/Schemes/Intellectual_Property_Rights/National_IPR_Policy_08.08.2016.pdf. Objective
6.10.3. Promoting ADRs in the resolution of IP cases by strengthening mediation and conciliation centres, and
developing ADR capabilities and skills in the field of IP.

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Though immense strides may have been made in crystallising the intellectual property
regime, a persistent gap continues when it comes to providing an effective, decentralised and
equally, if not more competent, method of dispute resolution. A right is only as good as the
remedy provided to operationalise and enforce it. Failure to make an appropriate provision
considerably weakens the effectiveness of such rights. Time is ripe to initiate discussions on
this important lacuna within the overall intellectual property rights protection regime.

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