Intellectual Property Rights and their Nature: The Concept of Institutional Arbitration
Intellectual Property Rights (IPRs) and their nature, with a particular focus on the concept of institutional arbitration—accompanied by a detailed breakdown of key case law illustrating how and when IP disputes are suited for arbitration under Indian law.
1. Nature of Intellectual Property Rights (IPRs)
IPRs typically involve rights in rem, meaning they are enforceable against the world at large, granting exclusivity and public monopolistic privileges.
Important Supreme Court precedent in Booz Allen & Hamilton v. SBI Home Finance clarified that:
Rights in rem are generally non‑arbitrable.
However, subordinate rights in personam arising from rights in rem—i.e., contractual rights stemming from IP ownership—may be amenable to arbitration if parties have agreed so.
This distinction remains pivotal: pure IP enforcement (e.g., seeking injunctive relief against the world) is typically court-only, whereas contractual disputes over IP (e.g., breach of licensing terms) are more likely arbitrable.
2. Emergence of the “Four‑Fold Test” from Vidya Drolia
The Supreme Court in Vidya Drolia v. Durga Trading Corporation (2021) refined arbitrability with a four-pronged criteria. A dispute is non‑arbitrable if it:
Relates to actions in rem not reducible to personam rights.
Affects third-party rights or has erga omnes (all‑encompassing) effects.
Concerns inalienable sovereign or public-interest functions of the State.
Is expressly barred by statute.
3. Institutional Arbitration & IPRs: Selected Case Laws
A. Eros International Media Ltd. v. Telemax Links India Pvt. Ltd. (Bombay HC, 2016)
Held that disputes arising out of commercial contracts (here, under a term sheet) that incidentally involve IP—like copyrighted content—are actions in personam.
Thus, they are arbitrable, and statutory limitations (e.g., Section 62 of the Copyright Act) don’t exclude arbitration where the dispute arises from contract.
B. Steel Authority of India Ltd. v. SKS Ispat & Power Ltd., SAIL Case (Bombay HC)
Refused arbitration for a trademark infringement and passing off suit, because:
These rights are actions in rem, not arising from contract.
Dispute did not arise from an arbitration clause.
Involvement of parties outside any such clause.
C. Hero Electric Vehicles Pvt. Ltd. v. Lectro E-Mobility Pvt. Ltd. (Delhi HC, 2021)
Trademark dispute relating to “Hero” branding.
Though the agreement had an arbitration clause, defendants argued IP disputes can't be arbitrated.
Relying on Vidya Drolia, the court held the dispute was contractual (use of mark per agreement), hence arbitrable.
D. Golden Tobie Pvt. Ltd. v. Golden Tobacco Ltd. (Delhi HC, 2021)
Trademark license & supply agreement dispute.
Court applied the Vidya Drolia test, ruling the dispute was contractual in nature—thus arbitrable.
E. Other Supporting Cases
Deepak Thorat v. Vidli Restaurant (Bombay HC, 2017): Dispute over franchise agreement's negative covenant—not trademark ownership—was resolvable via arbitration as it involved in personam rights.
Lifestyle Equities CV v. Q.D. Seatoman Designs (Madras HC, 2017): Trademark usage argued between two parties—held arbitrable, not in rem, and thus fit for arbitration.
4. Institutional Arbitration—Why It Matters for IP Disputes
Institutional arbitration involves resolving disputes through professional bodies like ICADR, SIAC, ICC, etc. Its relevance to IP disputes includes:
Efficiency: IP matters often involve technical and trade-sensitive information—arbitration ensures confidentiality and speed.
Expertise: Arbitrators with specific industry/IP knowledge are more suited to handle nuanced issues.
Flexibility: Arbitration allows customized procedure, ideal for complex licensing terms, territorial rights, etc.
Thus, for IP disputes of a contractual nature, institutional arbitration presents a valuable, enforceable, and discreet mechanism.
5. Summary Table
| Type of IP Dispute | Arbitrability | Precedent / Principles |
|---|---|---|
| Actions in rem (e.g., public enforcement) | Non-arbitrable | Booz Allen, Vidya Drolia test—erga omnes, sovereign |
| Contractual disputes over IP (in personam) | Arbitrable | Eros, Hero v. Lectro, Golden Tobie, Vidya Drolia test |
| Franchise/license covenant enforcement | Arbitrable | Deepak Thorat, Lifestyle Equities |
Key Takeaways
IPRs are typically rights in rem, non-arbitrable by default.
Contractual IP disputes—i.e., rights in personam arising from IP—are arbitrable when an arbitration clause exists.
Vidya Drolia’s four‑fold test guides arbitrability determinations.
Institutional arbitration adds efficiency, confidentiality, and expertise, especially valuable in IP contexts.
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