In a landmark decision which settles the law on arbitrability of copyright/trade mark infringement claims, the Single Judge of the Bombay High Court has held that as between two claimants, copyright /trade mark infringement claims are necessarily in personam in nature and are thus capable of adjudication by arbitration. In its capacity as owner/exclusive licensee of films, Eros granted content marketing and distribution rights (“Rights”) for various films to Telemax. The Term Sheet contemplated execution of a Long Form Agreement which was never executed. The Term Sheet stands expired.
Eros instituted suit proceedings against Telemax and its sub-licensees alleging they cannot exploit copyright until execution on the Long Form Agreement. Relying on the arbitration clause in the Term Sheet, Telemax filed a Sec.8 application asserting that the dispute ought to be referred to arbitration. All sub-licensees also agreed to submit their disputes to arbitration as well.
Eros contended firstly, that the suit was based on a statutory claim and not breach of contract and is thus inherently in arbitrable. Secondly, Eros claimed that Sec.62 of Copyright Act, 1957 / Sec.134 of the Trade Marks Act, 1999 confer exclusive jurisdiction on courts to decide infringement claims. This, by implication, bars the jurisdiction of an arbitral tribunal. Thirdly, Eros contended that Copyright / Trade Mark infringement is not a right arising purely out of a contract. These are rights in rem which are inherently non arbitrable. Finally, Eros submitted that sub-licensees are non-signatories to the Term Sheet.
Telemax asserted firstly, that, all civil suits are arbitrable unless specifically barred. Tus, provisions of Copyright Act, 1957 / Trade Marks Act, 1999 do not bar arbitration of infringement claims. Secondly Telemax argued that the dispute arises out of the Term Sheet and is purely contractual and not statutory in nature. Thirdly, relying on Booz Allen& Hamilton Inc vs SBI Home Finance Limited & Ors, AIR 2011 SC 2507 (“Booz Allen”), which holds that in rem claims are in arbitrable, Telemax asserted that the dispute between the parties may be referred to arbitration as it involved in personam claims as opposed to in rem. Finally, Telemax argued that lack of other defendants being party to Term Sheet is no impediment. Such defendants were claiming through or under Telemax (under the amended Section 8) and also consented to submission of the entire dispute to arbitration.
Rejecting Eros’ contention, the Hon’ble Court held that Sec.62 / Sec.134 only define the entry level of infringement actions in our judicial hierarchy. They do not confer any exclusivity to courts and cannot be read as ousting the jurisdiction of the arbitral tribunal. Such jurisdictional sections defining entry level of a civil action are common to many statutes and cannot be interpreted to infer ouster of an entire statute.
The Hon’ble Court accepted Telemax’s argument that all civil disputes are, by definition, arbitrable except those that are specifically excluded. The Court relied on Booz Allen to note that matters governed by a special statute which confers jurisdiction on designated courts are well known to be non-arbitrable.
In my opinion, Sec.62 may be contrasted with Sec.6 of the Copyright Act which confers exclusive jurisdiction on the Copyright Board to decide certain questions such as whether a work has been published or its date of publication for purposes of calculation of term of copyright. Sec.6, thus, specifically excludes the jurisdiction of a court over the questions mentioned in the said provision. Hence, the questions referred to in Sec.6 cannot be the subject matter of arbitration asa civil suit with respect to such questions is barred.
The Hon’ble Court further noted that the provisions of the Copyright Act or the Trade Marks Act do not themselves define arbitrability or non-arbitrability. However, the Court noted that the material distinction between the excepted categories of non-arbitrable claims listed in Booz Allen as contrasted with arbitrable claims is that the former are in rem claims and not in personam claims. In rem claims are based on rights which are actionable against the world at large. In personam claims are based on an interest protected solely against specific individuals.
Consequently, having regard to the nature of the claim made, the Court held that “as between two claimants to a copyright or a trade mark infringement or passing off action, that action and that remedy can only ever be an action in personam. It is never an action in rem.” An infringement or passing off action binds only the parties to it and is thus an in personam claim capable of being referred to arbitration. Moreover, the Court held that the nature of the reliefs sought, being in personam reliefs such as damages and injunction, are routinely granted by arbitral tribunals. The Court also noted that the dispute in the instant case arises out of the Term Sheet and is purely contractual in nature.
Thus, a dispute is arbitrable if it satisfies the following factors:
The claim is based on a right in personam and not in rem,
The reliefs claimed are also in personam reliefs capable of being granted by an arbitral tribunal,
The dispute is purely contractual in nature and is within the scope of arbitration clause,
While I agree with the court’s ruling that in personam infringement claims could be subject matter of arbitration, I am unsure of the practical application of this ruling. To my mind, almost always, a claim of infringement involves a decision on the ownership of the IP in question as a first step. Undoubtedly, a claim to ownership is an in rem claim incapable of arbitration. Bearing in mind the ruling of the Supreme Court in Sukanya Holdings (2000) 3 SCC 531, which prohibits splitting of claims, any infringement claim which also involves declaration of ownership would be incapable of being referred to arbitration.
Moreover, while all sub-licensees consented to arbitration in the instant case, joinder of non-signatories to arbitration is still a vexed issue. In my opinion, Sec.8 of the Arbitration & Conciliation Act is a limited right of a non-signatory to be included in arbitration when its rights are being claimed through a signatory. However, Sec.8 does not empower a signatory to demand implead meant of a non-signatory merely because the non-signatory is a sub-licensee. A non-signatory which has a principal-to-principal licensing relationship with a signatory cannot be forced to arbitrate simply because the rights in dispute form a part of its agreement with the signatory.
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