Up until early 2006, using mediation to resolve intellectual property disputes was an unchartered territory in India. However, in 2006, there was a torrent of training of judges in Delhi and Bangalore which exposed the judges to advanced models of mediation, early neutral evaluation, (ENE) plea-bargaining, etc., which has led to the gradual shift towards a more arbitration-friendly outlook within the judicial framework of the nation.
More recently, the Bombay High Court, in its judgement in Eros International Media Ltd. v.Telemax Links India Pvt. Ltd., effectively held that a copyright dispute was a dispute ‘in personam’ and not ‘in rem’, and hence it was arbitrable. This paper seeks to argue that while the judgment is laudable in its outcome, its motivations were ill-founded. This is to say that the judgment, which is now being hailed as a landmark judgment, is grounded in improper understanding of the jurisprudence surrounding it. Furthermore, it argues that basing arbitrability on the nature of the relief claimed is, perhaps, a better way of understanding intellectual property rights as arbitrable than basing it on the nature of the right.
I. Eros International Media Ltd. v. Telemax Links India Pvt. Ltd.
The case revolved around a “Term Sheet” that was signed by the Plaintiff, who owned copyrights in several films, as well as the Defendant, who would be distributing its films. The Term Sheet contemplated an exclusive licensing contract and an execution of a “Long Form Agreement” and had a standard arbitration clause stating that any dispute arising out of or in connection with the Term Sheet shall be settled by arbitration by a sole arbitrator. The Long Form Agreement was never executed and disputes arose as regards the copyrighted content provided to the Defendant under the Term Sheet. Accordingly, the Plaintiff filed a suit in the Bombay High Court and the Defendant thereafter filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act), which pertains to the power of the judicial authority to refer parties to arbitration in the presence of an arbitration agreement. The Defendant, it is important to know, was not using the copyright material anymore and therefore, the only relief that could be provided was a claim in damages and for relief in terms of a permanent injunction for the future.
The Notice of Motions under Section 8 of the Act was allowed and it was held by the Court that this dispute was arbitrable for the following reason: Firstly, para 14 of the judgment hold that the resolution of copyright disputes by an arbitral tribunal does not take away or exclude the remedies available to a claimant. A claimant still has the same remedies available to him or her. Secondly, para 17 states that that action and that remedy can only ever be an action “in personam”. It is never an action “in rem”. Copyright actions are actions “in personam”, which is in contradistinction to several previous judgments and the predominant practise. The paper analyses these rationales in the next part through a jurisprudential lens.
II. Theoretical Understanding of Rights ‘in rem’ and Rights ‘in personam’
Sir John Salmond, who laid the theoretically foundations for the notion of rights, contended the following in his texts:
“A right in rem is available against the world at large; a right in personam is available only against particular persons. The distinction is of great prominence in the law, and we may take the following as illustrations of it. My right to the peaceful occupation of my farm is in rem, for all the world is under a duty towards me to not interfere with it. But if I grant the lease of the farm to a tenant, my right to receive rent from him is in personam. …. A right in rem, then, is an interest protected against the world at large; a right in personam is an interest protected solely against determinate individuals… the law confers upon me a greater advantage in protecting my interests against all persons than in protecting them only against one or two. The right of a patentee, who has a monopoly against the world, is much more valuable…”
The exercise of a right in rem is meaningless without a corresponding remedy. It is not plausible to suggest that a person may have a right against the world in respect of a particular property but is not able to claim the remedy against all. Rights in rem generally include torts, crimes and property rights. Rights in personam mainly include contractual rights.
III. Rights in rem – Arbitrability in India
Intellectual property rights, being a species of property rights, are rights in rem. The right conferred on an owner of intellectual property “binds the world”, and is enforceable against everyone. The right holder has the exclusive right to certain activities (depending on the intellectual property right in question) within the ambit conferred by law and is therefore entitled to fight off any encroaching act by any person not authorised by himself or by the law directly. It has also been argued that if an unauthorised interfering/infringing act can be resisted by virtue of the ownership status, then the performance of a contract which constitutes or contains such an infringing act, can presumably also be resisted on the same basis.
The non-arbitrability doctrine of rights in rem rests on the idea that some matters so pervasively involve public rights, or interests of third parties, which are the subjects of uniquely governmental authority, that agreements to resolve such disputes by ‘private’ arbitration should not be given effect. Therefore, there are some matters that impact the public at large; it would not do to address them in a private manner that disables it from being applicable to the people that it pertains to. These matters are listed in the case Booz Allen & Hamilton v. SBI Home Finance Ltd., a case that Eros International Media heavily relied on.
This is also one of the ways in which the judgment differs from other jurisprudence in the area. The Madras High Court held in the case Super Audio Madras P. Ltd. v. Entertainment Network India (P) Ltd. that the Copyright Board’s orders are orders in rem and are binding on the world at large.
IV. Implications and Conclusion
One of the foremost aspects of the Eros International Media judgment that was lauded was the fact that the Court applied the “remedies test”. For the purposes of arbitrability, the Court effectively applied the distinction between rights in rem (i.e. the entitlement to the copyright or registration of a trademark) and the subordinate rights flowing from such entitlement (i.e. the right against infringement of copyright or trademark). In addition to the “rights” test, the Court also applied the “remedies” test, unlike two earlier decisions of the Bombay and Delhi High Courts on the same matter, which had solely applied the “rights” test.
Given that disputes concerning infringement of intellectual property rights are now arbitrable, some crucial issues arise. In an infringement action, a counterclaim may be made contesting the entitlement to the copyright (or the registration of a trademark). In such a scenario, since the right as well as the relief sought is in rem, the counterclaim would not be arbitrable, and the parties would have to turn to the relevant forum for resolution of that claim. It is not clear what effect this would have on the arbitral tribunal hearing the infringement action. While some have argued that it would render the entire dispute non-arbitrable, a better solution may be for the tribunal to stay the infringement action, until the forum decides on the validity of the copyright/trademark in question. This is, however, far from ideal as it would delay the arbitration and substantially increase costs.
Therefore, it is evident that while it is extremely beneficial that intellectual property rights are treated as rights in personam with regard to their arbitrability, a way needs to be devised wherein it can also be jurisprudentially sound. Perhaps this can be done by arguing that a contract to arbitrate disables them from using their right in rem. However, a general rule of law is yet to be made regarding the arbitrability of intellectual property issues in India.
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