Arbitration and IPR

ARBITRATION AND INTELLECTUAL PROPERTY RIGHTS: INDIAN SCENARIO
SHALIKA ANNA HERENZ1
Prior to the 1996 Act, the arbitration Act was governed by the 1940 Act which was coupled
with the slow judicial system which led to the inefficacy and unattractive cultivation of the
arbitration system.
But after the liberalization policy of the government in the 90s, to attract the confidence of
the merchandized countries India adopted the Arbitration and Conciliation Act, 1996. It was
based on UNICITRAL Model.
Among the main objects of the Act which were set in the Act, was to minimize the
Supervisory Power/role of the courts in the arbitral process and to provide that every final
arbitral award is enforced in the same manner as if it were a decree of the court.
Intellectual Property Laws have become a very important topic in the recent times. It is
gaining popularity with the passing of time and so is the legal battles relating to them. The
cases involving IPR are mainly between parties not only living distant nationally but also
internationally. They mainly concern with the disputes which are commercial in nature.
Jurisdictional issue often creates barrier in the path of obtaining justice. Thus arbitration is
becoming more populous in solving these disputes.
The various advantages of arbitration are already known. But to name a few, they make the
solving of disputes more:
Quick / fast,
Easy,
Economical,
Time efficient,
Satisfactory results.
Proceeding and awards are confidential.
Limited scope of appeal, therefore speedy trial.
1 SEMESTER X, ROLL NO. 89, NATIONAL UNIVERSITY OF STUDY AND RESEARCH IN

LAW RANCHI.
1
There are options available for the person claiming his right to avail them by filing case in the
court but the disadvantage relating to it are more.
Firstly IPR being a technical subject is very hard for a person not an expert in that subject to
understand the dispute properly. Judges may lack technical understanding of different rights
protected under the ambit of the said Act and hence may result in delivering a wrong
judgement.
Secondly, since IPR rights are time barred, therefore any late judgement will result in a no
judgement at all.
Thus arbitration will solve the above issues in a more efficient manner than that of the cases
in the courts and thus they have become the most attractive alternative which is being used in
disputes settlement procedure relating to the IPR subject.
Likewise in India, arbitral awards relating to patent infringement or validity could be denied
as being against public policy.
In the ONGC v Saw Pipes case (2003), the Court noted that the concept of public policy
connotes some matter which concerns "public good and the public interest and that what is
public good or public interest has varied from time to time..." also noting that an arbitral
award, "patently in violation of statutory provisions cannot be said to be in public interest".
Public policy was given a far wider meaning than as held previously in the Renu Sagar v.
General Electric Co. case (1993), increasing the scope thereby of judicial intervention and
undermining the scope of IP arbitration.
In yet another ruling, the Constitutional Bench of the Supreme Court on September 6, 2012 in
Bharat Aluminium Co. v Kaiser Aluminium Technical Service, Inc. (where IPRs were also
in dispute) overruling the Bhatia International ratio, decided that Part I of the Arbitration and
Conciliation Act, 1996, had no application to arbitrations which were seated outside India,
irrespective of the fact whether parties chose to apply the Act or not. This decision having farreaching implications will now impact and affect decisions on whether to have the seat of
arbitration outside India and thereby, international intellectual property transactions. The
Parties in an international commercial arbitration having the seat of arbitration outside India
cannot agree to have jurisdiction to be exercised by Indian Courts.
However, the argument against arbitrability of IP disputes, especially where international

ones are concerned, stems from the constraints of the territoriality of IP laws, especially in
subjects like patents where perhaps issues linked to patent validity and public interest come
under the scanner. In international patent arbitrations, the courts may refuse to enforce a
foreign award based on a foreign law as being contrary to public policy and Indian interests.
Patent matters in particular are considered not arbitrable as courts hold the exclusive
jurisdiction to hear them in India.
Though section 103 of the Indian Patent Act allows the Court to refer any question on patent
validity to arbitration, generally speaking, the said Act and the Arbitration and Conciliation
Act are silent on the enforceability of arbitral awards for infringement or validity.
With delays and judicial interference hampering the progress of successful arbitration in
India, the essence of dispute resolution is minimised. This could be the factor for the slow
movement of arbitration as an ADR measure in the IP sector too. The Centre has formulated
the National Litigation Policy 2010 to reduce the cases pending in various courts throughout
India (more than 30 million according to recent estimates) with the mission to reduce the
average pendency time from 15 years to 3 years. The policy also highlights that ADR should
be "encouraged at every level" as long as arbitrations would be cost effective, efficacious,
expeditious and conducted with high rectitude."
In India as the recent E&Y report suggests, arbitration is being rationalised as sector specific
expertise, with for instance, the construction industry having created the Construction
Industry Arbitration Council (CIAC) and the Bombay Stock Exchange having developed
specific arbitration cells that provide relevant technical expertise. With greater competition
and growing awareness about intellectual property rights giving rise to an increased volume
of disputes, mechanisms of Alternative Dispute Resolution such as arbitration has been
gaining ground across the globe.
What stops then, the Department of Industrial Promotion and Policy in proposing necessary
amendments in the IP/patent laws and enabling and encouraging institutional arbitration in
intellectual property disputes? The same could be modelled on the lines of that set-up by
WIPO. Enforcement of arbitral awards is as important as the finality of the awards
themselves. Looking forward, intellectual property rights are that patents, copyrights,
trademarks and other statutory forms or those like trade secrets and confidential information
that are simply determined by contracts, in any country are only as strong as the means
available to enforce them.
References:
1. Intellectual Property Disputes and Use of Arbitration, Deshaipeta Aparna, Legal Wire
Legal Media.
2. Maheshwari Anuradha, Arbitration and Intellectual Property, Legal Era News
Network, may 27th, 2013.
3. Rohit, Overview of Arbitration in Ipr, lawyersclubIndia, August 13th, 2014.

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ARBITRATION AND INTELLECTUAL PROPERTY RIGHTS: INDIAN SCENARIO

SHALIKA ANNA HERENZ1

1 SEMESTER X, ROLL NO. 89, NATIONAL UNIVERSITY OF STUDY AND RESEARCH IN

However, the argument against arbitrability of IP disputes, especially where international

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