Bombay High Court, while adjudicating an application filed under section 8 of the Arbitration and Conciliation Act, 1996, in Eros International Media Limited v Telemax Links India Pvt Ltd, has held that intellectual property (IP) disputes arising out of an agreement are arbitrable if the agreement contains an arbitration clause.
Eros, an owner of films and audio-visual works, had entered into a term sheet (containing an arbitration clause) for granting content marketing and distribution rights to Telemax. Eros filed a civil suit against Telemax, claiming infringement of its copyrights. Telemax filed an application under section 8 stating that in view of the arbitration clause in the term sheet, the court should not entertain the dispute.
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Eros contended that IP rights such as copyrights confer statutory rights in rem and hence any action for infringement is inherently non-arbitrable. Further, special rights and remedies are conferred by IP statutes which provide for obtaining such remedies through the courts and hence an arbitration clause for such determination is unenforceable.
Rejecting this submission and referring the matter to arbitration, Bombay High Court held that in an arbitration agreement, the parties do not exclude the statutory remedy; they merely choose a particular forum (the arbitral tribunal) to seek that remedy. Further, the court held that the parties’ dispute was contractual as it arose out of the term sheet. The court observed that while some actions in IP law can be in rem, an action for copyright infringement was in personam.
The court further observed that accepting that IP disputes are non-arbitrable would lead to widespread chaos as no commercial transactions involving IP could ever be subjected to arbitration. This is because the Supreme Court has held that the cause of action in a suit cannot be bifurcated.
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