Written By: Apoorv Agarwal, Rushil Anand
By way of this article, we will examine the shifting paradigm of arbitrability of Intellectual Property Rights (“IPR”) disputes. By analyzing the landmark judgement of the Hon’ble Supreme Court in matter titled “K. Mangayarkarasi v. N.J. Sundaresan,” (2025) 8 SCC 299 and of the Hon’ble Bombay High Court in matter titled “Anand Khosla v. Punam Kumari Singh” bearing 2025:BHC-OS:26726, this article will outline the current boundaries between IPR disputes that are arbitrable private claims and non-arbitrable, being in the sphere of public law. The article also critiques the judgement of the Hon’ble Bombay High Court in Anand Khosla (Supra) for its misapplication of the test of the Hon’ble Supreme Court in determining arbitrability of dispute concerning IPR.
The Doctrinal Foundations: Rights in Rem versus in Personam
The questions regarding arbitrability of disputes concerning IPR fundamentally hinges upon distinction between rights in rem and rights in personam. Originating from the judgement of the Hon’ble Supreme Court of India’s in matter titled “Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532, disputes concerning rights in rem are only to be adjudicated by national courts, while disputes relating to rights in personam are fully arbitrable. Booz Allen (Supra) also established that subordinate rights in personam arising from a right in rem are capable of being referred to arbitration.
The jurisprudence was further developed by the Hon’ble Supreme Court by way of its judgement titled “Vidya Drolia v. Durga Trading Corpn., (2019) 20 SCC 406”, where the Hon’ble Supreme introduced a fourfold test for determining whether a dispute is non-arbitrability. Under this test, disputes are held to be non-arbitrable if they involve actions in rem, have erga omnes effects on rights of third parties, relate to sovereign or public functions, or are barred to be referred to arbitration statutorily. Consequently, direct actions affecting rights remain non-arbitrable, however disputes arising out of commercial agreements concerning these rights are arbitrable.
The shift towards a pro-arbitration stance gained momentum by way of the judgement of Hon’ble Delhi High Court’s judgement in matter titled “ Hero Electric Vehicles Private Limited v. Lectro E-Mobility Private Limited,” 2021 SCC OnLine Del 1058. In the said case, the dispute involved certain family settlement agreements allocating the “Hero” trademark for electric vehicles to defendants and the extent to which the agreements permitted usage of the said trademark. The Hon’ble High Court referred the dispute (involving trademark infringement and passing-off claims) to arbitration, holding that the dispute between the parties did not challenge the validity of the trademark but rather contractually allocated right to use the brand between the parties. The relevant portion of the said judgement has been reproduced here below:
“45. I am unable to agree with Mr. Sudhir Chandra. As has been correctly pointed out by Mr. Sibal, the dispute, as raised by Mr. Sudhir Chandra’s clients, is almost entirely centred around the FSA and TMNA. Though the prayer clause, in the suit, superficially read, seeks remedies against alleged infringement by the defendants, the infringement is alleged, not on the ground that the defendants are using deceptively similar trademarks, but on the ground that the right to use the trademarks, on electric cycles was conferred, by the FSA and TMNA, not on the F-4 group, but on the F-1 group. The reliance, by Mr. Sibal, on paras 19 to 25 of the plaint, is also well taken. The precise case set up by the plaintiff, in the said paras, is that the right to use the trademark “Hero” and its variants, which, prior to the execution of the FSA and the TMNA, vested in Hero Cycles, was transferred, by the FSA and the TMNA, to the F-1 group, insofar as electric cycles were concerned. In using the “Hero” trademark, on electric cycles and e-cycles, therefore, it was alleged that the F-4 group was infracting the covenants of the FSA and TMNA. Even if, in the process, the plaintiffs were to rely on any of the provisions of the Trade Marks Act, the essential infraction, as alleged to have been committed by the defendants, was not of the provisions of the Trade Marks Act, but of the provisions of the FSA and TMNA. As against this, the defendants rely on Articles 17.1 and 17.2 of the FSA and Article 3.7 of the TMNA, to dispute the claim of the plaintiffs. I am in agreement with Mr. Sibal that the dispute, as thus emerged between the plaintiffs and the defendants, required a holistic appreciation of the FSA and the TMNA, their various covenants, and the interplay thereof, in order to adjudicate on the rights conferred on the various family groups. Any effective adjudication of the disputes, without reference to the FSA and the TMNA would, in my view, be impossible.
Further, in the matter titled “K. Mangayarkarasi v. N.J. Sundaresan”, (2025) 8 SCC 299, the Supreme Court of India adopted a highly permissive approach. Original plaintiffs filed a trademark infringement suit before, which the defendants sought to refer to arbitration based on assignment deeds and were successfully able to do so. The Hon’ble Madras High Court dismissed the appeal preferred by original plaintiffs against reference to arbitration by the commercial court. Before the Hon’ble Supreme Court, the plaintiffs argued that the assignment deeds were forged hence fraud ousted arbitral jurisdiction. The Supreme Court rejected this contention, holding that contractual assignment disputes concerning “in personam rights”, and mere allegations of inter partes fraud do not bar arbitration under Section 8 of the Arbitration Act.
These rulings of the Hon’ble High Court and the Hon’ble Supreme Court affirmed that when IP claims are incidental to a contract, party autonomy and arbitration agreements must be upheld.
Restrictive Jurisprudence in Anand Khosla
However, the Hon’ble Bombay High Court in Anand Khosla (Supra) adopted a restrictive approach. The dispute arose under an LLP agreement over the ownership of the software “Test Magic”. The arbitral tribunal declined to decide which of the parties owned the IP of the software, stating that determining software ownership would imply deciding the copyright itself, which would be deciding on a right in rem. The arbitral award was challenged before the Hon’ble Bombay High Court, which upheld the decision of the arbitral tribunal, stating that the disputes regarding the software code i.e. statutory ownership disputes concerning the copyright of the software operate in rem and are non-arbitrable. Relevant portion of the judgement of the Hon’ble Bombay High Court has been reproduced herein below:
“33) Adjudication of prayer clauses (h) and (i) in the counterclaim would require decision of issue of ownership of rights in the trademark of the software ‘TestMagic’ and Mr. Purohit has fairly conceded this position. There appears to be serious disputes between the parties with regard to ownership of the software ‘TestMagic’. The Respondent claims ownership in the mark of the said software. She claims that the software is developed by her and by her husband. There are disputed issues of ownership of intellectual property rights in respect of the software. The rights arising out of ownership of the mark TestMagic would be rights in rem incapable of being resolved through private arbitration.”
The Anand Khosla (Supra) has drawn criticism for its narrow and formalistic approach and being against the Supreme Court’s pro-arbitration approach. By upholding the arbitral tribunal’s refusal to decide ownership of a partnership asset, the Hon’ble High Court misapplied the in rem vs. in personam distinction. The Hon’ble Supreme in Vidya Drolia (Supra) itself draws a careful distinction between a right in rem and a subordinate right in personam, which in the present case ought to have been drawn by the Hon’ble Bombay High Court since question of who owns that copyright between two partners is a subordinate right in personam. This restrictive approach also forces the bifurcation of causes of action.
Conclusion
While K. Mangayarkarasi (Supra) provides certainty that contractual transfers and inter party disputes concerning infringement are arbitrable dispute, Anand Khosla (Supra) highlights the risk of courts re-characterizing ownership disputes as non-arbitrable rights in rem.
