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 personamâ€
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 in
Booz 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 of
Addhar 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.
Conclusion
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.
References
· (1998) Arbitration. Commonwealth Law Bulletin 24(1), 1-86.
· Andreas Rahmatian, “Contracts infringing intellectual property rightsâ€,
Intellectual Property Quarterly, 2003, 4, 411-444.
·Arpad Bogsch, Opening Address, WORLDWIDE FORUM ON THE ARBITRATION OF
INTELLECTUAL PROPERTY DISPUTES, WIPO PUBLICATIONS NO. 728 (E), 14 (1994),
availablehttp://www.wipo.int/amc/en/events/conferences/1994/opening.html
·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 fromhttp://www.jstor.org/stable/25762817
·Intellectual Property: Arbitration v. Litigation, AMERICAN ARBITRATION
ASSOCIATION 2, available athttp://www.adr.org/si.aso?id=5004(lat 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
http://www.lawyersclubindia.com/articles/Overview-of-Arbitration-in-IPR-4980.asp
 ·The ABCs of ADR: A dispute Resolution Glossary, CPR INSTITUTE FOR DISPUTE
RESOLUTION (2000),
http://www.ilr.cornell.edu/allaince/resources/basics/ABCs.html
End-Notes
[1]193 ( 2012 ) DLT 203
[2]MANU/MH/0536/2016
[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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