Apocalyptic Arbitration of IP Disputes?

And Justice Patel holds sway yet again with his robust reasoning and formidable flair! 

Ruling (in effect) that: 

Legal claims arising from IP licensing (and other commercial) transactions are essentially “in personam” disputes. There is nothing in Indian law which ousts such disputes from arbitration. Put another way, these are perfectly “arbitrable” disputes. And if the parties had mutually agreed to arbitrate such disputes, they must necessarily follow through on this contractual commitment. And cannot rush to court at the first instance! 

Here is the link for the full text of this decision that arose thanks to a dispute between Eros International Media Ltd and Telemax Links India Pvt Ltd [and other parties]). A decision that clarifies (quite significantly) the law around the arbitrability of IP disputes. 

As with his other decisions, this one too is full of literary nuggets. Sample this stunning striking down of a submission by Eros’ counsel that the arbitrability of such IP disputes would cause legal havoc!

“I do not think the world of domestic and international commerce is prepared for the apocalyptic legal thermonuclear devastation that will follow an acceptance of Mr. Dhond’s submission.”

The full para (a must read) is below:

“I find Mr. Dhond’s protests, to the effect that the view I am inclined to take would turn the entire edifice of intellectual property law on its head, needlessly alarmist. It will do nothing of the kind. On the contrary, I believe an acceptance of Mr. Dhond’s view must result in widespread confusion and mayhem in commercial transactions. We often have complex commercial documents and transactions that routinely deal with intellectual property rights of various descriptions as part of the overall transaction. This can be said of mergers, acquisitions, joint ventures, the setting up of special purpose vehicles, technology transfer and sharing agreements, technical tie-ups, licensing and so on. The range of fields of human activity that could possibly be covered by any one or more of these is limited by nothing but our own imagination: steel manufacturing, setting up of power plants, software, motor carmanufacture, computer hardware, music, films, books and literature, performances and even services. If Mr. Dhond is correct, then in any of these cases, where intellectual property rights are transferred or, for that matter, in any way dealt with, no dispute arising from any such agreement or transactional document could ever be referred to arbitration, and every single arbitration clause in any such document would actually, in his formulation of it, be void and non-est ab initio. It would have to be so — Sukanya Holdings will not allow a dispute relating to intellectual property rights to be segregated from other disputes. I do not think the world of domestic and international commerce is prepared for the apocalyptic legal thermonuclear devastation that will follow an acceptance of Mr. Dhond’s submission.”

Here are more bits that (I think) constitute the crux of the courts’ ruling:

“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 particularized relief against a particular defined party, not against the world at large.”

 And….

 “I do not think it is possible to lose sight of the fact that in trade mark and copyright disputes, we very often are confronted with written agreements. In copyright matters, agreements are in fact a statutory requirement for an assignment. There must be a written document. The law does not say that the written document of assignment should have an arbitration clause. But many do. What Mr. Dhond suggests, in effect, is that in every one of these cases, all these arbitration clauses must be treated as entirely null, void and otiose. No law that I am aware of even remotely suggests anything of the kind. I think it would do a very great violence not only to the language but to the purpose and ambit of the Arbitration Act as also the Copyright Act, if I would have to read it in the manner Mr. Dhond suggests.”

 And…

“The Arbitration Act is not one that we should constantly try to short-circuit in matter after matter. Unless specifically barred, what a Civil Court can do, an arbitrator can do. Dr. Tulzapurkar points out that this dispute is one that is purely contractual. It arises out of the Term Sheet. I think that is correct. The relief that the Plaintiff seeks today, a decree in damages and injunction, are both reliefs that an arbitrator can well grant. These are reliefs that are routinely granted in arbitrations. Mr. Dhond says that the arbitrator can never arrive at a finding of copyright infringement. I do not see why not. That is surely a finding of fact. It is not a question of making an order in rem at all.”

This last bit is the only one that made me uneasy. For how can a determination of copyright infringement qualify as just a finding of “fact”? Is it not a mixed question of law and fact? Anyway this particular issue and its ultimate determination does nothing to change the overall conclusion of the judge that in this case, the dispute was perfectly arbitrable and ought to have been referred to arbitration, as the parties had contractually agreed upon.

We’ll hopefully bring you a detailed post on this soon. So watch this space for more! 

Image from here