In Q.D. Seatoman Designs Pvt. Ltd v Lifestyle Equities CV (A. No. 6729 of 2017 in CS No. 678 of 2017), a Single Judge of the Madras High Court (Court) by his decision dated 1 March 2019 (Decision) referred a dispute concerning copyright infringement to arbitration.

In the present case, Lifestyle Equities CV (Lifestyle), being in the business of apparels and accessories for men, women and children under ‘Beverly Hills Polo Club’ (Brand), had engaged Q.D. Seatoman Designs Private Limited (QD Seatoman) to provide support to the Brand. The parties were stated to be working under an oral understanding since 2008 and a formal written agreement dated 30 June 2014 (Agreement) was subsequently signed by them in February 2016. It was contended by QD Seatoman that though the Agreement did not contemplate creation of “designs” for the apparel, they were subsequently also called upon to create designs for the Brand.

Certain disputes arose between the parties pursuant to which Lifestyle filed an application under section 9 of the Arbitration & Conciliation Act, 1996 (Arbitration Act) and sought interlocutory reliefs against QD Seatoman which were granted and upheld in appeal. An arbitral tribunal also came to be appointed. QD Seatoman later instituted the present suit for permanent injunction against Lifestyle and others, seeking an injunction restraining them from infringing its copyrights in the designs created by it. Lifestyle made an application in the suit under section 8 of the Arbitration Act on the ground that the dispute had arisen out of the Agreement, which contained an arbitration clause and sought that the dispute be referred to arbitration (Application).

QD Seatoman opposed the Application, contending, inter alia, that the suit had been filed under the Indian Copyright Act, 1957 (Copyright Act) and since an adjudication in respect of a right in rem i.e. an injunction in relation to infringement of copyrights over the designs created by it was sought, the issue could not be referred to arbitration.

Lifestyle contended that no declaration as to the ownership of copyrights in the design was sought and therefore no adjudication in respect of a right in rem was involved. It was argued that the principal relief sought was only a permanent injunction, which is a cause in personam. Lifestyle also relied upon the order passed in the petition under Section 9 of the Arbitration Act filed by Lifestyle where the dispute was held to be arbitrable by a Single Judge of the Court (as confirmed by division bench as well as the Supreme Court of India, which had kept the issue of arbitrability open to be decided by the arbitral tribunal). The arbitral tribunal had also dismissed a preliminary objection as to the arbitrability of the dispute.

The Court in its Decision allowed Lifestyle’s Application and referred the dispute to arbitration. The Court inter alia observed as under:

  1. QD Seatoman did not seek a declaratory relief of ownership of copyright in its design, the ownership of which was disputed by Lifestyle, rather it only sought a decree of permanent injunction which is a relief in personam against Lifestyle from using the designs. Therefore, no adjudication as to the title, i.e. a right in rem was sought and hence the dispute was arbitrable;
  2. Unless a right in rem in the nature of a declaration of title or ownership to the copyright is sought and established and granted by the Court, merely because the nomenclature of the suit states that it had also been filed under the provisions of the Copyright Act, it would not convert the suit to one seeking an adjudication in respect of a right in rem.

Under the scheme of Copyright Act, copyright in inter alia an artistic work subsists the moment a work is created. In an ordinary suit for copyright infringement, usually a plaintiff asserts its copyright in the work and on that basis seeks injunctive reliefs and other consequential reliefs against the infringer. It is not common to seek a separate declaratory relief for ownership of copyright in the work though pleadings and material to demonstrate ownership is a sine qua non. In case the defendant disputes the ownership of copyright of the plaintiff, the issue regarding the ownership of the copyrights is decided after a trial and has normally been considered as an adjudication in respect of a right in rem, which is not arbitrable. However, in a dispute that arises between parties to a contract with regard to creation of works in which copyright subsists, the adjudication is likely to be on the basis of the terms of such contract between the parties as to the ownership of the copyrights in the works created and courts seem to be increasingly leaning towards a view that such disputes should be treated as actions in personam and hence arbitrable. However, in view of the specific observations in the order in the present case, it is not clear if the Court would have come to a different conclusion if QD Seatoman had also sought a declaration of ownership of the copyrights in addition to the injunctive reliefs.

This article was first published in Mondaq dated 28 May 2019.