In a recent judgment of October 2017, a Division Bench of
the Madras High Court in Lifestyle Equities CV v QDSeatoman
Designs Pvt. Ltd & Ors has held that IP issues could
be subject to arbitration. The fundamental point at dispute was
whether and to what extent are IP related rights arbitrable
given that they tend to have effect in rem.
The case concerned a commercial agreement between the
parties, whereby QDSeatoman Designs Pvt Ltd, and Quintessential
Designs India Pvt Ltd (collectively referred to as "QDS") were
engaged by Lifestyle Equities for certain creative services,
relating to apparel and garments. This obviously covered IP.
This agreement contained an arbitration clause. Certain
disputes arose between the parties, though the judgment is not
entirely clear on the exact details and circumstances.
Lifestyle Equities invoked the arbitration clause in the
matter whereas QDS opposed the same on the ground that the
disputes involve IP issues and thus, non-arbitrable. Instead,
QDS wanted the Court to permit the filing of a civil suit.
In its judgment dated October 13 2017, the Court held that
the issue boiled down to whether the issues being raised would
result in a judgment / award in rem or in
personam; the former is not arbitrable, but the latter is.
According to the Court, the distinction between a right in
rem and a right in personam is very old and
well-defined one – a judgment in personam
refers to a judgment against a person, whereas a
judgment in rem refers to a judgment against a
thing, right or status or condition of property. In the
context of IP, the Court held that a patent licence issue
may be arbitrable, but validity of the underlying patent may
not be arbitrable.
On facts, the Division Bench agreed with the opinion of the
Learned Single Judge, which was under appeal, that the
fundamental dispute between the parties related to who had the
better right of usage vis-a-vis the other and that this was
clearly an issue in personam.
Even though the Hon'ble Court concluded that the dispute
between the parties was arbitrable, the Arbitral Tribunal so
constituted nevertheless had the jurisdiction to decide its own
competence and thus, the final decision on the issue would have
to be that of the Arbitral Tribunal.
Lakshmi Kumaran & Sridharan
B6/10 Safdarjung Enclave
New Delhi 110029, India
Tel: +91 11 41299800
Fax:91 11 41299899