Arbitrability of IPR Disputes

The arbitrability of IPR related disputes are decided by the nature and language of the
contract. Indian Courts have time and again affirmed the arbitrability of IPR disputes.

In Eros International vs Telemax Link1 Bombay High Court has held that trademark
and copyright infringements arising out of a contract containing an arbitration clause
is an arbitrable dispute, which must be referred to the decision of the arbitrator, and
civil courts will not entertain such disputes. The Bombay High Court has upheld the
arbitrability of trademark and copyright infringement claims arising out of contracts
containing an arbitration clause. The reason being that determination of infringement
or non-infringement would be an action “in personam” and would be binding only
on the concerned parties. However, very often as and by way of a counter, the
registration of the trademark or the entitlement to the copyright itself is challenged.
Such a challenge would entail a determination “in rem” which can only be
undertaken by the forums constituted by the intellectual property statutes and not by
an arbitrator. Hence, arbitrability of infringement issues can be frustrated by
challenging the registration of the trademark or entitlement to the copyrights itself
which would then make the entire dispute as a whole non-arbitrable.

In Ministry of Sound International v M/s Indus Renaissance Partners 2, the Delhi

High Court examined the arbitration clause in a trade mark/copyright license
agreement. The dispute resolution clause allowed parties to seek injunctive relief in
the case of any breach or threatened breach of any obligation of confidentiality or
infringement of the other of any intellectual property, or commencing any proceedings
where it was necessary to avoid any loss of a claim due to the rules on limitations of
actions. Subject to these, disputes were to be submitted to arbitration in London at the
London International Court of Arbitration, in accordance with the Arbitration Act,
1996, and the LICA rules. The defendants contended that the dispute should have
been referred to arbitration and not to court. The plaintiffs in reply contended that the

1 2016 (6) Arb LR 121 (Bom)

2 156 (2009) DLT 406
arbitration clause was subject to the clause related to breach of obligation of
confidentiality of infringement of intellectual property, and therefore not arbitrable.
The court, keeping in mind the ratio of Sukanya Holdings Pvt. Ltd v Jayesh H
Pandya and Anr3, held that the arbitration clause was wide-ranging, and the
intellectual property dispute was to be submitted to arbitration also. Therefore, the
parties were referred to arbitration.

In a landmark judgment in the case of Bawa Masala Co. vs. Bawa Masala Co. Pvt.
Ltd. and Anr.4, where a number of legal disputes were resolved through a process of
alternate dispute resolution, the Delhi High Court passed orders for adoption of a
process known as early neutral evaluation, in an intellectual property based litigation
suit. The Court in this case, under the umbrella of section 89 of the Civil Procedure
Code, 1908 mooted for the inclusion of such procedures for amicable settlement of
disputes. The Court further said that the early neutral evaluation procedure shares the
same features as a mediation process…the difference is that in case of mediation the
solutions normally emerge from the parties and the mediator makes an endeavor to
find the most acceptable solution whereas in case of early neutral evaluation, the
evaluator acts as a neutral person to assess the strengths and weaknesses of each of
the parties. The Court further made a distinction between early neutral evaluation and
arbitration by stating that in early neutral evaluation there is no testimony or oath, or
examination and such neutral evaluation is not recorded. The Court held that early
neutral evaluation is confidential and cannot be used by any of the parties against the
other. There is no award or result filed. This stands as a seminal case, where, Indian
Courts have tried to bring alternative dispute resolution machinery for solving
intellectual property infringement related matters. This case also highlights the
inclination, which Indian Courts have started sharing, towards involvement of
alternate dispute resolution measures in resolution of such disputes.

3AIR 2003 SC 2252

4 AIR 2007 Delhi 284
In the case of Enercon (India) Ltd and Ors vs Enercon Gmbh and Anr 5, the
Supreme Court of India had examined agreements pertaining to the business
relationship between the respondent, who held the patent for technology related to
wind turbine generators, and the appellants, who were to manufacture and sell the
wind turbine generators. One of the agreements was a Technical Know-How
Agreement, under which the appellants were the licensees and the respondents were
the licensors. There was also a Supplemental Technical Know-How agreement. Later
on, an Intellectual Property License Agreement (IPLA) was also installed. Following
disputes, respondents invoked the arbitration clause contained in the IPLA, however,
the appellants claimed that there was no concluded contract between the parties. Court
held inter alia that in the absence of a fundamental legal impediment, it would be up
to the arbitral tribunal to determine the validity of the contract itself. Further, it was
held that a common-sense approach has to be adopted to give effect to the intention of
the parties to arbitrate. In such a case, the court ought to adopt the attitude of a
reasonable business person, having business common sense as well as being equipped
with the knowledge that may be peculiar to the business venture. The arbitration
clause cannot be construed with a purely legalistic mindset, as if one is construing a
provision in a statute. Further, it was re-emphasized that the law of the seat of the
arbitration (i.e India) was to apply to the arbitration proceedings; consequently, anti-
suit injunction was granted, restraining the respondents from continuing concurrent
proceedings in England.

5 AIR 2014 SC 3152