In Eros International Media Limited v Telemax Links India Pvt Ltd (Notice of Motion No 886 of 2013 of Suit No 331 of 2013), a Single Judge of the High Court of Bombay (Court), in his decision dated 12 April 2016 (Decision) on an application under Section 8 of the (Indian) Arbitration and Conciliation Act, 1996 (Arbitration Act), has held that intellectual property (IP) disputes arising out of an agreement are arbitrable if such agreement contains an arbitration clause.
Eros, being the owner of several films, had entered into a term sheet with Telemax (consisting of an arbitration clause) for granting content marketing and distribution rights in respect of films. While the term sheet contemplated the execution of a long form agreement, no such long form agreement was executed between the parties.
Eros filed a suit for infringement of copyright of its content by Telemax under Section 62 of the (Indian) Copyright Act, 1957 (Copyright Act), claiming that Telemax was not entitled to exploit and deal with such content before execution of the long form agreement. 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 argued 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 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 arbitrablity of such disputes and relied on the decision of the Supreme Court of India in Booz Allen & Hamilton Inc vs SBI Home Finance Limited & Ors.
The Court passed the order in favour of Telemax and held that:
- Provisions of the Copyright Act and the (Indian) Trade Marks Act, 1999 (Trademarks Act) do not oust the jurisdiction of an arbitral panel;
- Although IP rights are special rights, they are still a species of property rights and share much with their more tangible cousins to whom acts such as the Sale of Goods Act, 1930 or the Transfer of Property Act, 1882 apply; and
- Eros’ action is in personam as it is seeking a particular relief against a particular defined party.
Practically, IP statutes such as Copyright Act / Trademarks Act may provide the IP licensor certain flexibilities (such as choice of jurisdiction) to initiate an infringement action in comparison to such disputes being referred to an arbitrator. When it comes to clauses such as an arbitration clause, commercial transaction documents tend to follow a standard pattern across all agreements within the transaction. However, with this Decision, parties may have to decide whether or not to include the standard arbitration clause in documentation for transactions which have a significant IP element.