India – Arbitration In Intellectual Property / Trademark Disputes And Further Remedies.

 

21 February, 2017

 

 

Arbitration is a mode of alternate dispute resolution which can more often than not be fruitfully resorted to by IP litigants in India. Although a useful tool, arbitration may, at times, turn out as an exercise in vain. In such events, if the arbitral award is patently erroneous and rendered without application of mind then it may be set aside by a court of law. In 2015 the Arbitration and Conciliation Act, 1996 (“the Act”) was amended.

 

The amendment in relation to Section 34, which lays down certain grounds for a court to set aside an arbitral award, limited the scope for doing so under one such ground i.e. if the award is in conflict with the public policy of India.

 

This ground, prior to the amendment, was of a general and inclusive kind. However, for an award to be now considered as being in conflict with the public policy of India, it has to inter alia effectually come under either of the following:

 

1. The award is induced or affected by fraud or corruption; or
2. The award is in contravention with the fundamental policy of Indian law; or
3. The award is in conflict with the most basic notions of morality or justice.

 

Further, the test for an award to be in contravention with the fundamental policy of Indian Law will not involve a review of the merits of the case.

 

A pertinent case which was decided recently by the Delhi High Court in connection with the above legal framework is discussed here under:

 

Thoughtworks Inc. v. Super Software Pvt. Ltd. & Anr.[1]

 

Events (in brief):

 

On 12th July, 2015 the sole Arbitrator of National Internet Exchange of India (“NIXI”) passed an award in favour of the respondent (Super Software Pvt. Ltd. – engaged in online business / e-commerce) and against the petitioner (Thoughtworks Inc. – an IT consulting and software development services company based out of the USA) in a complaint filed by the latter in May, 2015 that the former had infringed its registered trademark THOUGHTWORKS by misappropriating the domain name “Thoughtworks.in”. Surprisingly, the sole Arbitrator failed to consider and clarify that the trade mark “THOUGHTWORKS” was indeed validly registered in India in favour of the petitioner and rather based the arbitral award inter alia on the following:

 

There were three addresses given for the petitioner as the owner of the trademark THOUGHTWORKS and this discrepancy made it difficult to hold that the petitioner was the owner of the mark in India;

 

• For over three years the petitioner had not claimed the disputed domain name “Thoughtworks.in” and from 18th August, 2011 till 31st October, 2014 by when the domain name got registered in the respondent’s name, the same was freely available;
• The respondent was making a legitimate and fair use of the domain name although he was carrying on business ‘very much similar to the business of the Complainant’;
• No explanation was given as to why the petitioner had not taken any action against the respondent for all these years.

 

Decision and observations:

 

The Court, on the petitioner’s application under Section 34 of the Act, set aside the arbitral award with inter alia the following observations:

 

• The Arbitrator failed to notice that a copy of the trademark registration certificate of the petitioner was enclosed in the complaint. It ought to have sought a clarification from the petitioner as to the validity of its registration(s) for the mark THOUGHTWORKS in case of any doubt but he failed to do so. If a party is not permitted to clarify a factual aspect then that may lead to a grave error which would be fatal to the Award in terms of what could be seen as a procedural lapse.
• No finding was returned as to whether the use of the domain name “Thoughtworks.in” by the respondent would lead to confusion, deception or false association, which would indeed be the logical conclusion as it takes up the entire name of the petitioner;
• A mere delay in lodging the complaint would not disentitle the aggrieved party from proceeding against the 'squatter'[2]. Further, the petitioner was able to show that as soon as it came to know of the domain name in dispute, it took prompt action by filing a complaint with NIXI;
• In view of the above, the award is opposed to the fundamental policy of India as it has numerous glaring errors.

 

Comments:

 

This decision instils faith in the Indian Judiciary especially for foreign stake holders when their IP are also recorded with the Indian authorities such as a trademark registration.

 

Although domain name disputes often get subjected to arbitration[3] the outcome of which may at times be erroneous; however, despite their binding nature and deemed finality, the courts in India with their comprehensive interpretations are always ready to provide remedies to undo the wrong.

 

[1] Decided by the Hon’ble Delhi High Court on January 12, 2017;

[2] In Stephen Koenig v. Arbitrator, National Internet Exchange of India & Anr. 186 (2012) DLT 43, it was observed: “The root problem stems from the system of assigning domain names on a first-come-first-served basis. This permits well known and established trade names, brand names, company names, names of famous personalities, politicians to be 'captured' by a 'registrant' with little connection with such name and get it registered as a domain name. The problem is compounded with web browsers and search engines making it easy for a surfer to locate a website by simply typing the name of the company or product. However, where the 'registrant' of a domain name has 'captured' the trademark associated with that company or product and made it part of the domain name, the surfer is taken to a different location. Among the serious problems of the domain name system ('DNS') is "cyber-squatting" resulting from deliberate and fraudulent registration of domain names using well-known trademarks with the intention of selling them to the owners of those trademarks at a huge price. Cyber-squatters could also sell these domain names to any other person for a price, thus 'diluting' a well-known trademark or trade name.”

[3] Such arbitration proceedings are carried out under the ‘.IN Domain Name Dispute Resolution Policy (INDRP)’ & the rules framed thereunder.

 

 

For further information, please contact: 

 

Dheeraj Kapoor, LexOrbis

mail@lexorbis.com