Many times a question arises before the Courts, as to whether cases of Intellectual Property viz. those involving passing off of trademarks and 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 [193 ( 2012 ) DLT 203], observed that ‘all disputes relating to “right in personam” are arbitrable and choice is given to the parties to choose this alternate forum. On the other hand, those relating to “right in rem” having inherent public interest are not arbitrable and the parties choice to choose forum of arbitration is ousted’.
In a recent landmark judgment of Eros International Media Limited vs. Telemax Links India Pvt Ltd (MANU/MH/0536/2016), 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 right in personam as opposed to a right in 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 is in personam as 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.