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Arbitration And Intellectual Property Rights

In the most basic language, arbitration means a non judicial process for settlement of disputes where there is an independent party i.e. the third party known as an arbitrator who makes decisions on the respected matter and his decisions are binding on the parties. The role of an arbitrator is similar to that of the judge but it is less formal and an arbitrator is an expert in their own right.Arbitration is the private, judicial determination of a dispute, by an independent third party. An arbitration hearing may involve the use of an individual arbitrator or a tribunal. A tribunal may consist of any number of arbitrators though some legal systems insist on an odd number for obvious reasons of wishing to avoid a tie. One and three are the most common numbers of arbitrators. The disputing parties hand over their power to decide the dispute to the arbitrator(s). Arbitration is an alternative to court action (litigation), and generally, just as final and binding (unlike mediation, negotiation and conciliation which are non-binding).

The general principles of arbitration are as follows-
· The main object for setting up of arbitration is that a fair resolution is obtained through a third party without any unnecessary expense or delay
· Through arbitration, the parties are given the chance to choose how their disputes should be resolved.
· Lastly, in the process of arbitration, the courts need not to interfere.

Arbitration has many positive points over the judicial process, because of which people tend to go to arbitrate over their disputes rather than resolve their problems through judicial proceeding in the court. The first, positive aspect about arbitration is that the parties are the decision makers. The parties can choose any person who has technical knowledge if the dispute is related to a technical field. Through this the evidence will be more readily understood. Secondly, where it takes a long time in court proceedings, arbitration can be heard sooner. The arbitration hearing is shorter in length and the preparation work is less demanding. Thirdly, when an arbitration proceeding is happening, it is always confidential i.e. it is a private meeting in which in which the media members and the members of the public are not able to attend. Moreover, the final decision is also not published as well as they are not directly accessible. This is in favour of a person or an employer who does not want his dirty laundry to be aired. Fourthly, arbitration is very convient for the people of low income as the hearings of the proceedings are arranged at times and places that suits the parties, arbitrators and the witnesses. Further, the procedures of arbitration can be segmented, streamlined or simplified according to the circumstances of the case.

With advantages, arbitration also has many disadvantages. Firstly, there is a lack of formal evidence process. It means that in spite of depending on the judge’s judgment, the parties do rely on the skills of the arbitrator to sort out the evidence. There is no interrogation or disposition and no discovery process is included in arbitration. Secondly, in arbitration one or both the parties have to pay for the arbitrator’s service, while the court system provides an adjudicator who does not charge a fee. Thirdly, because of the relaxation of the rules of evidence in arbitration, the power of the arbitrator to do equity, the arbitrator may rendered award that, rather than granting complete relief to one side, splits the decision by giving each side part of what they requested. Thus both the parties leave the table feeling that justice was not served. Fourthly, unless there is evidence of outright corruption or fraud, the award is binding and usually not appealable. Thus if the arbitrator makes a mistake, or is simply an idiot, the losing party usually has no remedy. Apart from this, Arbitrators are generally unable to enforce interlocutory measures against a party, making it easier for a party to take steps to avoid enforcement of member or a small group of members in arbitration due to increasing legal fees, without explaining to the members the adverse consequences of an unfavourable ruling.

The arbitrators which determine the outcome of the dispute are called the arbitral tribunal. The composition of the arbitral tribunal can vary enormously, with either a sole arbitrator sitting, two or more arbitrators, with or without a chairman or umpire, and various other combinations. In most jurisdictions, an arbitrator enjoys immunity from liability for anything done or omitted whilst acting as arbitrator unless the arbitrator acts inbad faith. Arbitrations are usually divided into two types: ad hoc arbitrations and administered arbitrations.

In ad hoc arbitrations, the arbitral tribunals are appointed by the parties or by an appointing authority chosen by the parties. After the tribunal has been formed, the appointing authority will normally have no other role and the arbitration will be managed by the tribunal.

In administered arbitration, the arbitration will be administered by a professional arbitration institution providing arbitration services, such as theLCIAinLondon, or theICCinParis, or theAmerican Arbitration Associationin the United States. Normally the arbitration institution also will be the appointing authority. Arbitration institutions tend to have their own rules and procedures, and may be more formal. They also tend to be more expensive, and, for procedural reasons, slower.

On the other hand Intellectual property rights are like any other property right. They allow creators, or owners, of patents, trademarks or copyrighted works to benefit from their own work or investment in a creation. These rights are outlined in Article 27 of the Universal Declaration of Human Rights, which provides for the right to benefit from the protection of moral and material interests resulting from authorship of scientific, literary or artistic productions. The importance of intellectual property was first recognized in the Paris Convention for the Protection of Industrial Property (1883) and the Berne Convention for the Protection of Literary and Artistic Works (1886). Both treaties are administered by the World Intellectual Property Organization (WIPO).

Relation Between Arbitration And IPR

Resolving Intellectual Property Rights issue through alternative dispute resolution proceeding was a technique long developing. It is the arbitration of disputes especially; institutional arbitration is becoming important for the sectors that are growing in India in the context of liberalisation and globalization. Intellectual Property rights are as strong as the means that exist to enforce them. In this context, arbitration, as a private and confidential procedure, is increasingly being used to resolve disputes involving intellectual property rights, especially when involving parties are from different jurisdictions. Institutional arbitration is a process that is not “ad hoc” or decided by arbitrators chosen case by case by the parties to a dispute by mutual agreement or named by the courts but by arbitrators by the panel of institution who have been chosen by their in depth knowledge of different fields, and have to follow norms, including in relation to fees, set by institution. All these sectors are increasingly characterized by international transactions, where the laws applicable vary from country to country and involve a high level of specialization in the domain concerned. Another common factor is the criticality of time, considering that patent terms are limited, and technology could become obsolete fast, and hence the long duration taken by courts to settle dispute beyond, the scope for appeal goes against the interest of disputants. Hence arbitration offers these sectors advantages particularly valuable for them. The main obstacle to using arbitration to resolve Intellectual Property Rights disputes is the issue of its subject matter arbitrability.

Intellectual Property rights are territorial and are primarily derived from the legal protection granted by the local sovereign power, which affords the grantee certain exclusive rights to use and exploit the rights.It is argued that disputes in relation to its agent, validity and the extent of rights granted should be determined only by the authority which granted the right or in certain situations by the courts of that country. This had an effect that the rights and entitlements to IP and the legal issues which flowed from those rights could not usefully be referred to or considered by an arbitration tribunal.Where however, the parties enter into arrangements relating to the development, use, marketing or transfer of IP rights granted, disputes arising from such commercial arrangements could be arbitrated without any controversy arising from the issue of its arbitrability. Such matters are generally regarded as inner parties’ commercial matter and are tribunal.

Now lets answer the question as to why arbitration is used as a mechanism to solve the dispute in Intellectual Property Rights Conflicts?
In the U.S, the United States Supreme Court has reviewed this question several times, with an answer dependent on certain circumstances. InAT&T Technologies, Inc v. Communication Workers of America, the court held that the question of whether parties contractually agreed to arbitrate is to be decided by the court, not the arbitrator, unless the parties clearly and unmistakably provided otherwise.Granite Rock Co. International Brotherhood of Teamstersreached the same result. A court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate the dispute and formed an agreement to arbitrate. But inRent A Centre West v. Jackson, the court held that the arbitrators decides the question of whether an issue is subject to arbitration so long as parties clearly and unmistakably provided for such a determination and the validity of agreement to arbitrate such threshold issues is not specifically challenged.

IP arbitrations are rare because among other things, IP disputes frequently do not involve a pre-existing contractual relationship. Arbitration however requires a contractual agreement to arbitrate. Further some countries do not allow arbitral tribunals to rule on issue of patent invalidity is frequently asserted as a defence to an action brought under a license agreement, these disputes tend to be litigated in court.Accordingly, the use of arbitration as a mechanism to resolve such disputes is generally consistent with public policy in most jurisdictions even if certain public policy based restrictions may limit the arbitrability of intellectual property disputes in certain countries. As a result, the grounds of in arbitrability of intellectual property disputes are quite narrow and should not restrict the parties for conceptualizing and planning in advance how an intellectual property arbitration could successfully be structured and what factors should be taken into consideration in this framework.

Arbitration In Copyright Disputes

Many times a question arises before the Courts, as to whether cases of Intellectual Property viz. those involving passing off of copyrights, are amenable to the jurisdiction of an arbitrator or the same lies exclusively in the ambit of courts. The judicial doctrine that has evolved with regard to the limit of arbitrability is that all disputes relating to rights in personam are considered to be amenable to arbitration and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals.

In this regard, the Delhi High Court in the matter of HDFC Bank v. Satpal Singh Bakshi[1], observed that ‘all disputes relating to “right in personam” are arbitrable and choice is given to the parties to choose this alternate forum. On the other hand, those relating to “right inrem” having inherent public interest are not arbitrable and the parties choice to choose forum of arbitration is ousted’.

Ina recent landmark judgment ofEros International Media Limited vs. Telemax Links India Pvt Ltd[2]an application was moved by the defendant (Telemax) under Section 8 of the Arbitration and Conciliation Act, 1996, and the question arose whether under law there is a specific bar to arbitration or the arbitrability of such Intellectual Property disputes and whether such disputes are only amendable to jurisdiction of courts.

In brief, the background of the case was that Eros (plaintiff) had copyright in several feature films. It executed a term sheet contract with Telemax (defendant) for granting content marketing and distribution rights in respect of films. The said term sheet had an arbitration clause. Also, while the term sheet contemplated the execution of an agreement within a limited time, however, no such agreement was executed.

Disputes arose between the parties and Eros (plaintiff) filed a suit for infringement of copyright against Telemax and the subsequent licensees. Eros argued that Telemax was not entitled to exploit and deal with such content before execution of the agreement. On the other hand, to counter the suit, Telemax filed an application under Section 8 of the Arbitration Act stating that all disputes (including under the present suit) between Eros and Telemax be referred to arbitration in view of the arbitration clause in the term sheet, which aspect came to be decided as part of the decision.

Eros contended that term sheet was not binding and that Telemax had infringed its copyright and had also sub-licensed this copyright-protected material to the other defendants to the suit. Eros argued that the action against Telemax was not for breach of a contract (since the term sheet had also expired), but was a statutory action under the Copyright Act, which is inherently non-arbitrable. Eros also contended that the other defendants were not a party to the term sheet. Telemax argued that the dispute arising out of the term sheet was purely contractual and not simply an action for copyright infringement. Telemax further argued that by the suit, Eros sought to enforce a rightin personamas opposed to a rightin rem.
Further, the other defendants, who were not parties to the term sheet, were in the nature of persons claiming through or under Telemax (under the amended Section 8) and had also filed affidavits agreeing to submit the entire dispute to arbitration. Telemax also argued that there was no specific bar on the arbitrability of such disputes and relied on the decision of the Supreme Court of India inBooz Allen & Hamilton Inc v. SBI Home Finance Limited & Ors.

The Court while deciding in favour of the defendant (Telemax), observed that provisions of the Copyright Act and the (Indian) Trade Marks Act, 1999 (Trademarks Act) do not oust the jurisdiction of an arbitral panel, they only seek to ensure that such actions are not to be brought before the Registrar or the board. Further, where there are matters of commercial disputes and parties have consciously decided to refer these disputes arising from that contract to a private forum, no question arises of those disputes being non-arbitrable. Such actions are always actions in personam, one party seeking a specific relief against a particular defined party, not against the world at large. Eros’ action isin personamas it is seeking a particular relief against a particular defined party.

This decision makes it abundantly clear that although under trademark and copyright law, registration grants the registrant a right against the world at large and it is possible that an opposition to such an application (before the Registrar) would be an action in rem, however, an infringement or passing off action binds only the parties to it.

Challenges In Arbitration With Respect To IPR Disputes

Arbitration, as a means of dispute resolution, has emerged to be a very successful attempt. This trend has not only been witnessed in India, but all over the world. Most of the cases that come upare, if possible sent for arbitration. But for our country, this is a relatively new concept. In the recent past, the laws of arbitration have evolved and garnered a lot of attention, especially in India. It is clear from the above mentioned information that Arbitration, no doubt plays an important and effective role in the problem solving and decision making. Also, it is not restricted to just a single field of law, but to many. But, there are some hurdles and problems that has been causing a bit trouble in the complete implementation of Arbitration.

1.Applicability of the Amended Act
It 2015, India took a huge leap and decided to amend Arbitration and Conciliation Act, 1996. After the required amendments and changes, the Law Commission of India, in 2015, changed the arbitration law b an ordinance issued in October 2015. At the end of 2015, the Indian Parliament approved a bill which made the changes permanent, and on 31 December 2015 the Arbitration and Conciliation (Amendment) Act, 2015 (the "Amendment Act") became law. One of the major hindrances that arbitration as a field is witnessing, is the fact whether the amended Act, Arbitration and Conciliation (Amendment) Act, 2015 (the "Amendment Act"). There have been High Court judgments which are conflicting in nature. In one case, it was held that the amendment act won’t be applicable to the stage post arbitral proceeding. This was held by the Madras High Court, in relation toSection 26[3]of the Amendment Act. However, Delhi High Court held that court proceedings which are initiated post amendment would not come under the Amended Act unless they were merely procedural in nature. This example clarifies that the applicability of the Amended Act is still not clear and this leads to different interpretations by the court, which could prove to be a problem.

2.Arbitrability of cases of oppression or mismanagement
Another problem that is faced is that in cases of oppression or mismanagement, not each and every consequential act which is a result of such cases, is restricted to the case only. Some disputes might lead to causing effect to a third party, who is not even a part of the arbitration agreement. Therefore, such disputes are rendered non-arbitral.

3.Arbitration under Foreign Law
Another one of the problems is whether Indian parties getting into an arbitration agreement, can choose a foreign law to govern such agreement. There have been many cases discussing this aspect, however, there is still no clarity. Bombay High Court, in the case ofAddhar Mercantile Private Limited V. Shree Jagdamba Agrico Exports Pvt. Ltd[4],stated that Indian parties, choosing foreign law to govern their arbitration agreement, could be considered to be opposing public policy of the country. However, in the case ofSason Power Ltd. V North America Coal Corporation India Pvt. Ltd[5].,the Madhya Pradesh High Court held that two Indian parties may conduct arbitration under foreign law.

4.Not keen on taking dispute to arbitration
One of the major problems when it comes to Arbitration in IPR disputes is that it is extremely difficult to get injunctive relief and punitive damages speedily. An IP holder may want his case to be resolved speedily and such relief is more likely to be obtained from public court rather than from an arbitration tribunal. Also, IPR disputes are usually among parties who do not know each other from before and have no pre-existing relationship and therefore they are not inclined to agree to submit their dispute to ADR. In other circumstances, even in the context of an existing relationship or prospective transaction, there still may be reasons why one party or another might not want to agree to the resolution of any IP disputes by arbitration of some other form of ADR.

With the advent of globalization, Intellectual Property Rights have also become more internationalized and commercialized. This is evident from the increasing number of cross-border arrangements and agreements. Because of these agreements and arrangements the demand of IPR rights holders to deal with IPR disputes at an international level is also increasing. When parties seek mechanisms for dispute settlements, they consider their commercial interests as primary concern and they wish for the dispute settlement to be personal, highly flexible and efficient, so that their cross – border disputes can be resolved without tarnishing their commercial relationship in the industry. Arbitration, inspite of the challenges it causes, is still preferred over litigation when it comes to cross-border IPR disputes. It avoids parallel litigations and has its inherent advantages in dealing with commercial disputes in respect of flexibility, confidentiality, finality.

On one hand, in the process of international economic globalization, most countries are inclined to acknowledge the IPR as private property rights. On the other hand, courts are overburdened by a large amount of commercial disputes. This has resulted in increasing debates and researches, both academically and practically, on alternative dispute resolution methods, and many countries are inclined to adopt a policy favoring and allowing arbitration and further enlarge the scope of arbitrability. With the world more and more dependent upon technology of all types, the continued and growing importance of intellectual property cannot be understated. There has been, and will continue to be, an accompanying explosion in the number and complexity of transactions in which intellectual property is a critical, if not THE critical, element. Many of these transactions cross national boundaries; as do the disputes which inevitably arise from them. But international intellectual property disputes present complexities not encountered in either intellectual property disputes which are confined to one country or other international commercial disputes.

The Arbitration of International Intellectual Property Disputes will serve as a handy reference and guide for navigating through the complex maze of intellectual property and arbitration. As confirmed by the growth of IP arbitration proceedings and by recent trends, the use of arbitration for solving international intellectual property disputes is expanding. This trend can be confirmed by the choice made by policy makers to authorize and promote the use of arbitration for solving intellectual property disputes, which constitutes a clear sign that arbitration is an adequate method for solving intellectual property disputes that does not threaten in any manner, the powers of the state authorities over intellectual property as such.

In view of these developments, it is important that all the stakeholders, and particularly the parties and their counsel, shall become aware of the adequacy of arbitration for solving international intellectual property disputes and shall take time to assess in advance the implications of using arbitration effectively for solving such disputes. This requires moving beyond the threshold issue of arbitrability of intellectual property disputes in order to address the issues which can significantly affect the success of arbitration in terms of cost, speed and efficiency, particularly the scope of the arbitration clause and the definition of the governing law.

· (1998) Arbitration. Commonwealth Law Bulletin 24(1), 1-86.
· Andreas Rahmatian, “Contracts infringing intellectual property rights”, Intellectual Property Quarterly, 2003, 4, 411-444.
·Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10 1985, art. I(1), 21 U.S.T. 2517, 330 U.N.T.S. 38
·Hoellering, M. (1985). REMEDIES IN ARBITRATION.The Forum (Section of Insurance, Negligence and Compensation Law, American Bar Association),20(3), 516-530. Retrieved from
·Intellectual Property: Arbitration v. Litigation, AMERICAN ARBITRATION ASSOCIATION 2, available at visited January 10, 2017)
·Khindria, T. (1995). Enforcement of arbitration awards in india.International Business Law Journal1995(2), 256-271.
·Overview of Arbitration in IPR. (n.d.). Retrieved January 20, 2018, from
 ·The ABCs of ADR: A dispute Resolution Glossary, CPR INSTITUTE FOR DISPUTE RESOLUTION (2000),


[1]193 ( 2012 ) DLT 203
[3]Section 26 Act not to apply to pending arbitral proceedings: -Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced or on after the date of commencement of this Act
[4]Arbitration Petition No. 910/2013 dated June 12, 2015.
[5]First Appeal No. 310/2015 dated September 11, 2015

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