Introduction
The question whether or not disputes relating to intellectual property rights can be resolved by way of arbitration has been a subject matter of debate to some extent, despite there being guidance given on this subject from decisions given some courts, including the Honorable Supreme Court of India.
In the recent case of Lifestyle Equities CV vs. Q.D. Seatoman Designs Pvt. Ltd. and Ors, the Division Bench of the Madras High Court, had to decide on giving an interim relief to a party which had a better right of usage of intellectual property vis-à-vis the other party under a contract (containing an arbitration clause).
To arrive at a decision, the Court provided its views on the following important question of law, –
Question to be decided
“Whether disputes relating to intellectual property rights can be decided by way of private arbitration agreement between the parties (or can they be decided by civil courts only)?”
Court’s Judgement
Taking a cue and relying upon the landmark judgment given by the Honorable Supreme Court of India, in the case of Booz Allen and Hamilton v/s. SBI Home Finance, the Court held that if the dispute relates to a right in rem, the same is not arbitrable, but if a dispute relates to right in personam, the same is arbitrable.
A judgment in rem refers to a judgment against a thing, right or status or condition of property which operates directly on the property itself. A judgment in personam refers to a judgment against a person as distinguishable from a judgment against a thing, right or status. For example, it can be said that a patent license issue may be arbitrable, but validity of the underlying patent may not be arbitrable.
Upholding the decision given by the Single Judge of the Madras High Court, the Division Bench held that the grant of registration of a copyright or design under the relevant statutes can be achieved through/only by statutory authorities constituted under the respective statutes. In the present case, however, as both parties were claiming a better right of usage vis-à-vis the other and that this would clearly bring the facts of the present case within the realm of a right in personam rather than a right in rem, and hence arbitrable.
Analysis & Comments (in brief)
The difference between right in rem against right in personam can be understood well from the illustration given in Salmond’s text on jurisprudence (as quoted); – “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.”
In the landmark judgment given in the case of Booz Allen (supra), the Honorable Supreme Court had held that, – disputes / judgments involving rights in rem (i.e. disputes concerning rights exercisable against the world at large) are not arbitrable, while disputes concerning rights in personam (i.e. rights exercisable against specific persons) are arbitrable. However, disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable. In the judgment given in the case of Eros International Media Ltd. v. Telemax Links India Pvt. Ltd., the Bombay 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); the former is non-arbitrable, but the latter is arbitrable.
It is very important to note that even while the Madras High Court gave the aforesaid judgement, the same was only for an interim relief, as the Court allowed the parties to argue on the issue before the Arbitral Tribunal. This was given in the background that as per section 16 of the Arbitration and Conciliation Act, 1996, the arbitral tribunal has the right to rule on its own jurisdiction (i.e. to decide whether or not a particular issue could be adjudicated by way of arbitration).