AN EMERGING TREND - ADR MECHANISM IN IPR CONFLICTS to be submitted to

MEWAR UNIVERSITY, NH-76, GANGRAR, CHITTORGARH, RAJASTHAN) INDIA in partial fulfillment of the requirements for the degree of LL.M. (Master of Laws)

Compiled by:

Sanjeev Kumar Chaswal LL.M 2nd year, Roll No. Enrollement No

Declaration
I, Sanjeev Kumar Chaswal a student of LL.M final year of Mewar University of with roll no .. and enrollment no. do hereby declare that this dissertation paper is an original work of mine and is result of my own intellectual efforts. I have quoted titles of all original sources i.e. original documents as this is a LLM resrach research and name of the authors whose work has helped me in writing this research paper have been placed at appropriate places and I have not infringed copy rights of any other author.

Date ------------Place -

( )

CERTIFICATE

This is to certify that the dissertation entitled ADR MECHANISM IN IPR CONFLICTS - AN EMERGING TREND which is being submitted by Mr. Sanjeev Kumar Chaswal for the award of the degree of Master of Laws is independent and original research work carried out by him.

The dissertation is worthy of consideration for the award of LL.M. Degree of MEWAR UNIVERSITY, NH-76, GANGRAR, CHITTORGARH, RAJASTHAN INDIA.

Mr. Sanjeev Kumar Chaswal has worked under my guidance and supervision to fulfill all requirements for the submission of this dissertation.

The conduct of research scholar remained excellent during the period of research.

Signature

ACKNOWLEDGEMENT

I feel proud to acknowledge the able guidance of our esteemed.. I acknowledge with pleasure unparallel infrastructural support that I have received from Law Department, Mewar University. In fact this work is the outcome of outstanding support that I have received from the faculty members of the

college, in particular Vice Principle Mr. Karun kaushik who has guided me to finish my research.

I find this opportunity to thank the library staff of the Law Department, Mewar University. This research work bears testimony to the active encouragement and guidance of a host of friends and well- wishers. In particular mention must be made of Honble Mr. Bharat Bhushan

It would never have been possible to complete this study without an untiring support from my family.

I am greatly indebted to the various writers, jurists and all others from whose writings and work I have taken help to complete this dissertation ADR

MECHANISM IN IPR CONFLICTS - AN EMERGING TREND

Date. Place:

. (Sanjeev Kumar Chaswal)

PREFACE
Thus, like any other emerging field of law, IP conflict resolution also has a plenty of debatable issues before it. In this research paper, It will be my endeavor to delve deep into these issues like ADR: arbitration and mediation can be real alternative to IP disputes litigation, and further IP right disputes like any other commercial disputes can be brought under ADR procedure and alternative dispute resolution procedures can play effective role in resolving IP conflicts.

The subject research work has been divided in six major chapters and further divided into various sub topics and sub to sub topics. The first topic which is

named as Introduction and this dissertation further consists of eight chapters.

The first and second chapter of this work attempts to defined Alternative Dispute Resolution and history of ADR- in Indian perspective. The third chapter and

Four Chapter deals with overview of ADR mechanisms and after independence The fifths and Sixth chapter of this research work is an endeavour to put more stress on Intellectual Property Enforcement and scope of ADR in IPR disputes Chapter seventh and eighth Chapter deals in respect to IP disputes for ADR mechanisms attempts to international disputes. The Ninth chapter of this

dissertation gives final view on The WIPO Arbitration and Mediation Center and lastly conclusion of the research work and certain valuable suggestions to manage disputes under ADR mechanism.

Date. Place:

. (Sanjeev Kumar Chaswal)

ABBREVIATIONS
AIR AGICOA All India Reports Association of International Collective Management of Audiovisual Works ADR Cr LJ C.P.C CILAS GATT ICA ICADR ICANN IPR LL.M. NALSA PWC SCC TRIPS UNCITRAL UDRP Vs. WLR WIPO WIPO alternative dispute Resolution Criminal Law Journal Civil Procedure Code Committee for Implementing Legal Aid Schemes General Agreement on T ariff s and T rade International Centre for Arbitration International Centre for Alternative Dispute Resolution.

Internet Corporation for Assigned Names And Numbers

Intellectual Property Rights Master of Laws National Legal Services Authority Price Water house Coopers Supreme Court Cases Trade Rel ated Aspects of I ntellectual Propert y Ri ght s

The United Nation Commission on International trade laws

Uniform Domain Name Dispute Resolution Policy and Rules Versus Weekly Law Reports The World Intellectual Propoerty Organistion Arbitration and Mediation Center:

TABLE OF CONTENTS
Chapter Declaration Certificate Acknowledgement Preface Abbreviations THE ABSTRACT CHAPTER 1. INTRODUCTION 1.1. What is Alternative Dispute Resolution Page no. i ii iii iv v 1-3 4-8 4

CHAPTER 2 HISTORY OF ADR- IN INDIAN PERSPECTIVE

2.1 2.2 Prevalance of justice in ancient india The system of ADR under Briti sh Company Raj

9 - 15
9 - 13 13-15 16 - 36

CHAPTER 3 OVERVIEW OF ADR MECHANISMS

3.1.
3.2. 3.2.1. 3.2.2. 3.2.3. 3.2.4. 3.2.5. 3.3. 3.3.1. 3.3.2. 3.3.3.

What is ADR Mechanism

ADR Mechanisms and IP Disputes. Arbitration Mediation Conciliation Negotiation Mini-trial Early Neutral Evaluation (ENE) What an ENE Covers The Timing and Scope of an ENE The Distinctive Benefits of an ENE

16-17
17-20 20-21 21-22 22 23 23- 24 24- 27 27- 28 28 -29 29- 30 30- 32 32- 33 33- 36 37 - 71

3.4.
3.5. 3.6.

Lok Adalat
How to make ADR system more viable How to make Arbitration Mechanism truly effective:

CHAPTER 4 ADR SYSTEM AFTER INDEPENDENCE

4.1. 4.2. 4.3.

The Emergence of ADR system in independent India Court approach towards ADR mechanism Legislative efforts in India

42- 46 46- 55
55- 57

4.4. 4.5. 4.6.

Court approach towards legal reform Need and the purpose of ADR in india Implementation of ADR in India

57- 60 60 -63 63 -71 72 90 72- 74 75 -76 77 -110

CHAPTER 5 OVERVIEW OF IPR AND LITIGATION IN INDIA

5.0. 5.1.

Introduction Intellectual Property Enforcement

CHAPTER 6 SCOPE OF ADR IN IPR DISPUTES

6.1. 6.1.1. 6.1.2. 6.1.3. 6.1.4. 6.1.5. 6.1.6. 6.1.7. 6.1.8. 6.1.9.
6.1.10.

6.1.11. 6.1.12. 6.1.13.

6.1.14.

Mechanism in the intellectual Property regime 77 Commercial Copyright and Software Disputes 77-78 Commercial Patent Disputes 79 -80 Commercial Trade mark and Trade Dress Disputes. 80- 82 Commercial Trade Secret and Unfair Competition Disputes 82-83 Commercial Intellectual Property Licensing Disputes 83-85 A copyright infringement 85 Economic rights 85-86 Moral rights 86 Copyright dispute resolution 87 Copyright litigation 87-88 The current approach: patent litigation 88-90 Domain Name 90-94 International Intellectual Property Disputes 94 Fundamental Problems of International IP Disputes 94-95
96 - 118 96-101

CHAPTER 7 IP DISPUTES FOR ADR MECHANISMS 7.0. The IPR disputes and ADR:

7.1. 7. 7.3. 7.4.

7.5.

Reasons to Consider ADR for IPR Disputes 101-102 Certainty as to Forum. 102 The Relative Speed of ADR. 103 Arbitration and mediation of IP disputes as alternatives to litigation. 103 -104
Initial considerations in selecting Litigation Alternatives:

7.6. 7.7. 7.8. 7.9. 7.10. 7.10.1. 7.10.2 7.10.5.

What form of ADR should be pursued The advantages of ADR have been recognized Mediation and Arbitration are different forms of ADR Other approaches to ADR The value of IPR disputes in ADR mechanisms Professional Low cost Flexibility

104-106 106-107 107-108 108 108-109 109-110 110-111 111-112 112-113

7.11. 7.12.

Confidentiality 113-114 To maintain beneficial relationships 114-115 7.13. The adequacy of the results 115-116 7.10.6 The specific modalities of intellectual property disputes ADR 117 7.10.7. The specific modalities of IPR comparison of ADR 117 7.10.8. That size and importance of the dispute 117-118
CHAPTER 8 INTERNATIONAL DISPUTES 119-125 121 121-122 122 122-123 123 124 124 124- 125 126-134

8.1. 8.2. 8.3. 8.4. 8.5. 8.6. 8.7. 8.8.

Dispute Scenarios Research collaboration: ownership dispute Patenting of research outputs from genetic material Claims based on traditional rights Agricultural products and patents Rat v. elephant The Arbitration Option Arbitration procedure

CHAPTER 9 THE WIPO ARBITRATION AND MEDIATION CENTER

9.1. 9.2. 9.3. 9.4. 9.5. 9.6. 9.7. 9.8. 10. 11. 12. 13.

History of WIPO 126 Strategic Direction and Activities 126-127 WIPO Arbitration and Mediation Center (WIPO Center). 127-128 Tailored ADR services 128-129 Services of the wipo arbitration and mediation center 129-130 Trends in WIPO mediation and arbitration 130-131 A wipo expedited arbitration relating to a banking 131-132 software dispute Settlement trends 132-134 CONCLUSION Table of Cases Bibliography Appendixes
135-136

137 138 139

TABLE OF CASES
Sitanna Vs Viranna, the Pri vy Council Raj asthan State Road Transport Corporat ion v. Krishna Kant , 54 The Privy Council Sitanna v. Viranna, AIR 1934 SC 105, 58 Sundaram Fi nance Ltd. v. NEPC India Ltd. (reported in AIR 1999 SC 565) Salem Advocate Bar Association v. U.O.I AIR 2003 SC 189, 2002 E.Venkatakrishna Vs Indian Oil Corporation Ltd AIR 1989 Kant 35 In PT Thomas vs. Thomas Job 2005 AIR 3575, 2005(2) In Oil and Natural Gas Commission vs. CCE 104 CTR (SC) Bhasheer vs. Kerala State Housing Board AIR 2005 Ker 64, 2005 In Deco Mica Ltd Vs UOI 2000 (68) ECC 554 Atari Games Corp. v. Nintendo of Am., Inc., 975 F.2d 832, 837 (Fed. Cir. 1992); see also Jessica Litman, Copyright As Myth, 53 U. Pitt. L. Rev. 235 (1991). Atari Games, 975 F.2d at 837-38; See, e.g., Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167, 1169 (7th Cir. 1997); Repp and K & R Music, Inc. v. Webber, 132 F.3d 882, 891 (2d Cir. 1997); Grubb v. KMS Patriots, L.P., 88 F.3d 1, 6 (1st Cir. 1996). Atari Games, 975 F.2d at 844. Shaw v. Lindheim, 919 F.2d 1353, 1361 (9th Cir. 1990). Hupp v. Siroflex of Am., Inc., 122 F.3d 1456, 1464 (Fed. Cir. 1997). Jay E. Grenig, Alternative Dispute Resolution 1.2 (2d ed. 1997 & Supp. 1998).

10

BIBLIOGRAPHY 125-140
Books
John R. Kahn, Negotiation, Mediation and Arbitration in the Computer Program Industry: Why play hardball with software, pt. III.B (1989).128 Resolving Intellectual Property Disputes Outside of Court: Using ADR to Take Control of Your Case By Alan W. Kowalchyk 128

Reports
The Indian Judicial System A Historical Survey By Mr. Justice S. S. Dhavan High Court, Allahabad 98 News Week, Dec. 19. 1959, Challenge of Communism 55 Articles, Papers and Transcripts The justi ce dispensati on system in India 1 ICADR88 58 Mr. H. D. Shourie, Founder Director of COMMON CAUSE, continued his exertions to this end till his last breath. In his letter to Mr. Justice S. M. Raza, Lokayukta, Uttaranchal, dated June 22, 2005, 58

News papers
Supreme Court chides itself, govt for judicial backlog Dhananjay Mahapatra, TNN Jan 12, 2012, 05.57AM

11

APPENDIXES
The regulation of 1781 Regulation of Act 1787 Regulation of Act 1793 22 22 23

The Madras Presidency Regulation VII of 1816 23 Bombay Presidency Regulation VII of 1827 Under the Charter Act of 1833 Act IX of 1840. The Act VIII of 1857 The Act XIV of 1882 23 23 24 24 23

The Indian Arbitration Act IX of 1899: 25, 53, Information Technology Act, 2000 27 15,16,46

Arbitration and Conciliation Act, 1996 The Arbitration Act of 1940 61, 63 Industrial Disputes Act, 1947 53,

Section 23(2) of the Hindu Marriage Act, 1955 53 The Family Court Act, 1984 54 The Legal Services Authority Act,1987 The Code of Civil Procedure, 1908 47 75

The Geneva Protocol on Arbitration Clauses, 1923,

The Geneva Convention on the Execution of Foreign Award, 1927 75 Legal Services Authorities (Amendment) Act, 2002

12

ABSTRACT
India is country habitants having many religion and cultures, since centuries habitants of India has evolved with several forms of dispute resolution mechanisms and over period of time, the y have customized, varied according to needs. Even though Britishers rulers had left Indian shores almost half a century ago, still several of these laws exist till date without any major changes.

W ide

Internet

usage The

has

rendered across the

boundaries globe

of

the

states its

meaningless.

people

have

realized

potentiality as an effective tool for communicati on, dissemination of information and e- commerce and enjoying to unrestricted access to multifarious interactions, transactions inevitably thereby raising

many new issues in the nature of e-disputes to virtual sale / purchase of products through e-auctions or otherwi se, domain disputes, trademark infringement, patents, software infringement, copyri ght, defam atory writings, fraud, privacy, etc

In this scenari o the Intellectual Propert y Rights are becoming fundam entally exigent to get in to research collaborations and thereby making Intellectual propert y rights tool as valuable business assets for technological entities. The people across world over frequentl y involve in cross-border transactions having different backgrounds and different national laws or within different states of India. Som e time disputable transactions create multi-jurisdictional disputes between the nationalities of different countries having different social backgrounds, mindsets. Usually those business

13

entities having familiarity with alternative dispute resolution (ADR) are able to resolve such conflicts efficiently.

As the determination of commercial or non commercial disputes before different national courts can result in to high l egal and other costs as well as conflicting a wards. Therefore, the ADR has a potential to provide business entities belonging to distinct

nationalities a single unified forum of arbitration thereby havi ng a final and enforceable award binding across m ultiple jurisdictions. Hence, increasingly, IP owners and users are approaching to many of known alternative dispute resoluti on (ADR) procedures like

arbitration and mediation to resolve their IP disputes

In this scenario the W orld Intellectual Propert y Organization (W IPO) has been playing pivotal role since its inception in strengthening ADR procedures for IP conflicts and forefront in resolvi ng IP conflicts through their speci alized ADR procedures. The Intellectual Propert y conflicts are not that conflicts which cannot be adjudicated or resolved through ADR. As Intellectual Propert y conflicts being a specialised in its nature and it require speci alised services of ADR experts in resolvi ng IP conflicts, mainly due to non availability of IP experts in India is the main obstacle in resolving IP conflict through arbitration or through ADR.

Thus, like any other em erging field of law, IP conflict resolution also has a pl enty of debatable issues before it. In this research paper, It will be m y endeavor to delve deep into t hese issues like amongst mainly i) W hether ADR: arbitrati on and mediati on can be real alternative to IP disputes litigation, ii) whether IP right disputes like

14

any other commercial disputes can be brought under ADR procedure or not If so, to what extent?. Iii) W hen is ADR to be preferred, when is it to be avoided; and, if ADR is preferred, what form of ADR should be pursued? iv) W hether, an alternative dispute resolution procedure can play effective role i n resolving IP conflicts if so to what extent? v) W hether the parties to IP conflicts can reap overall benefits by i nvoking ADR procedures in comparison to traditional litigation, if so, to what extent? vi) W hether the use of a private consensual mechanism like arbitration or m ediation procedures

pose any threat to the resolution of such specialised disputes, if so, to what extent?

15

CHAPTER 1 INTRODUCTION

A large part of my time during the twenty years of my practice as a lawyer was occupied in bringing about private

compromises of hundreds of cases. I lost nothing thereby not even money, certainly not my soul - MAHATMA GANDHI

It is an attorneys responsibility to persuade his neighbors to compromise whenever he can. Point out to them how the nominal winner is often, a real loser -- in fees, expenses and waste of ti me. - ABRAHAM LINCOLN

1.1

What is Alternative Dispute Resolution:

Every society, every community, every culture has some or the other form/s of resolving the disputes faced by their

constituents. Of ten, the longer and more prosperous the lineage, the m ore refined and varied the mechanisms. India is a country of many cultures and hence several dispute

resolution mechanisms had evolved and been customized over time.

One of the several benefits of the British rule over India was that we got some very robust laws. Several of these exist till date (after over 60 years of Independence) without any major am endments. However, the flip side was that at the altar of Uniformity were sacrificed all the then existing dispute

resolution m echanisms, which were by and large enabling satisfactory outcomes. W hat was worse was that the system

16

that replaced them soon started showing its col ors - the formal procedures of the Courts of Law not only took their own time but also provided umpteen loop-holes to the ingenious lawyers to stretch that time even further if that suited their clients interests. This had a telling effect on the backlogs in court registries across the nati on. To give an extreme example, the Bom bay High Court is currently taking up Final Hearing of Plaints filed in the 80s and 90s. An Appeal from an

Order/Judgment in these cases will take roughly another 5 to 7 years from date of filing and a further Appeal to the Supreme Court could take an additional 2 years.

Arbitration too has seen its nam e sullied thanks to the Ad Hoc version adopted by the lawyers drafting their clients contracts. W ith no institution to keep a check on their schedule, the Arbitrators become masters unto themselves. Arbitral

hearings, when held, are often as prolix as the court hearings and one cant blame the Arbitrators for that, as they are usually retired judges and thats the only way the y know how to conduct hearings.

By and large, in the i nitial period, the scheduled hearings are held only to give fresh dates of hearings on some or the other ground ranging from non-com pletion of records to the ill-healt h of someone connected to the proceedings or related to that someone and this continues till the parties patience is found to be wearing thin. Thereafter, subst antive work is done at the arbitral hearings, but they go on for only half a day i.e. 2 t o 3 hours, with considerable time going in recaps and agenda

17

settings for f uture hearings. There are of course exceptions to this trend; especi ally amongst arbitrators who are either newl y retired judges, practicing lawyers or those coming from a nonlegal back-ground.

The parties and their lawyers, due to fear of antagonizing their Arbitrators, refrain from attempti ng to rein them in. Som e lawyers see this as a win-win situation between themselves and the Arbitrators as they get to charge for the whole day (plus for the earlier days preparati on) for the hour or so of arbitral hearing on a given da y. And if the hearing is at an outof-town location, its a paid holiday.

Going further down the line, when an Award is published, one must expect it to be challenged in Court and it could take years for it to pass through that channel. Introduction of the new Arbitration and Conciliation Act, 1996 has not helped much as the Supreme Court has rolled back the benefit of limited grounds of Appeal by suggesting a broader

interpretation of the term Public Policy, which is one of the few grounds on which an Award can be sought to be

challenged under this new Act.

Alternative dispute resolution has greatly expanded over the last several years to include m any areas in addition to the traditional commercial dispute in the form of arbitration;

mediation has become an important first step in the dispute resolution process. Arbitrators and mediators have an

important role in resolving disputes. Mediators act as neutrals

18

to reconcile the parties differences before proceeding to arbitration or litigation. Arbitrators act as neutral third parties to hear the evidence and decide the case. Arbitration can be binding or non-binding.

W hat

is

ADR?

In

simple

terms

it

is

Alternate

Di spute

Resoluti on the conventi onal Courts use formal system of redressal applying various rules of law, as we have erstwhile mentioned that our system is adversial. The concept of Conflict Management through Alternative Dispute Resolution (ADR) has introduced a new m echanism of dispute resolution that is non adversarial. A dispute is basicall y lis inter parties and the justice dispensation system in India has found an alternative to Adversarial litigation in the form of ADR

Mechanism in which two parties contest their case and one party wins and the other party looses, but in case of alternate dispute resoluti on (Section 89 Code of Civil Procedure), which can be categorized in four broad heads which are1. 2. 3. 4. Arbitration; Mediation; Conciliation; Lok Adalat.

It is wi n win situation and no party wins no party looses, today the need of time is that we resort to non conventional systems as well, we should not forget that its not som ething new to us, we had for ages, like panchayats etc, it was self sufficient, every village has panchaya t and it was a powerf ul authority for redressing the disputes. The best part of ADR i s that since both parties come face to face and they work out

19

the m odalities and reach to an amicable solution, there is no likelihood of winning or losing the case, i.e. its a win wi n situation and thereafter no appeal, and thus it reduces the burden of appellant courts as well, the arbitration an d

conciliation Act, 1996 provides for Arbitration and the award given by the arbitrator is deem ed to be a decree. It wa s step towards the ADR.

The purpose of this special provision seems to hel p the litigant to settle his dispute outsi de the Court instead of going through elaborate process in the court trial. This is a special procedure for settling the dispute outside the courts by a simpl er an d quicker m ethod. The litigants on the institution of the suit or proceedings may request the Court to ref er the disputes and if the court feels that there exist any element of settlement which may be acceptable to the parties; it may refer them to any of the f orum s abovementioned at any stage of the proceedings. In fact new rules in Order X were inserted in consequence to the insertion of the sub secti on (1) of section 89. These new rules nam ely 1A, 1B and 1C have been inserted by the Amending Act.

The settlem ent can be m ade by adopting any of the modes specified in the section 89 of the CPC i nserted by the Amendment Act. As per the Rule 1A the parties to the suit are given an opti on for settlement of the dispute outside court. W hen the parties have exercised their option it shall fix the date of appearance before such person as may be opted by the parties. As per the Rule 1-B the parties are required to

20

appear before such forum opted by them. Rule 1c provides for the Presiding Officer of the Forum to refer the m atter again to the Court in case he feels that in the interest of justice he should not proceed with the matter.

21

CHAPTER 2

HISTORY OF ADR - IN INDIAN PERSPECTIVE

2.1

Prevalence of justice in ancient India: Though the term of ADR Alternate Dispute Resolution system is basically originated and derived from developed countries and is a recent phenomena but has gained impetus in its workability, solely in the recent years that to specifically said to be the resultant of globalisation and liberalisation, though oldest form of the ADR was very much present and well organized in the Ancient Indian Legal System more particularl y the Hindu society. The conflict / disputes as well as its settlem ent have been going around for m any thousands of years rather since the evolution of humans bei ng on earth adding its new workability solution in accordance to

development of the societ y.

The techniques of negotiation best option in resolving the conflict / disputes and the negotiation have been a basic techni que being around for m any centuries. It is a fact of life whether the dispute / conflict between individuals or in entities is right or wrong but it is most important and relevant how we are able to manage or handle it with in parameters of aspirations of both litigant parties.

India is known for having one of the oldest legal systems in the world and the present modern legal s ystem prevalent in India can be traced back to the centuries, the roots of the present day human institutions lie deeply buried in its past as Indus civilization flourished around 2500 BC known as

22

Harappan culture in the Indus river valley in Indi an sub continent and rem ained in existence for 1000 years. Another thousands of years, Indias social and religious society

structures withstood and countered many invasions, famines, religious persecutions and many other political upheavals, despite of tyranny of many invasions of other countries our ancient society have able to m aintained respective regional identities with such a long, vibrant history.

The definition of law in ancient India was meant in broader term Dharma. The ancient society regarded vedas as source of divine light and was the ultimate source of authority for all codes, whi ch contained dharm a as law, the law and Justice was admi nistered according to the rules provi ded in the Manusmriti. Its law and jurisprudence stretches back to many centuries, forming a living tradition, which has grown and evolved with the lives of its diverse people, in the lat er years, the Justice was use to be administered by Kings courts and also through grass root system called Panchayats and which is still conti nuing, prevalent even today in our villages, where village el ders of the village or community sit together and resolve disputes involvi ng of villagers and issue diktats on many social issues to their comm unity. However, as far as the legal s ystem in ancient India is concerned, a liberal outlook is evident in the Indian Puranas and Manu Smiriti.

23

According to Brihaspati Smiriti, there was a hierarchy of

courts in Ancient India beginning with the family Courts and ending with the King. The lowest was the famil y arbitrator. The next higher court was that of the judge; the next of the Chi ef Justice who was called Praadivivaka, or adhyaksha; and at the top was the Kings court. The jurisdiction of each was

determined by the importance of the dispute, the minor disputes being decided by the lowest court and the most important by the king. The decision of each higher Court superseded that of the court below.

Accordi ng to Vachaspati Misra, "The binding effect of the decisions of these tribunals, ending with that of the king, is in the ascending order, and each following decision shall prevail against the preceding one because of the higher degree of learning and knowledge". It is noteworthy that the Indian judici ary today also consists of a hierarchy of courts organized on a similar principle-the village courts, the Munsif, the Civil Judge, the District Judge, the High Court, and finally the Supreme Court which takes the pl ace of the Kings Court. W e are followi ng an ancient tradition without being conscious of it. The institution of family j udges is noteworthy. The unit of societ y was the joint family which might consist of four generations. Consequentl y, the number of the member of a joint family at any given time could be very l arge and it was necessary to settle their disputes with firmness combined wit h sympathy and tact. It was also desirable that disputes should
1

The Indian Judicial System A Historical Survey By Mr. Justice S. S. Dhavan High Court, Allahabad 98 News Week, Dec. 19. 1959, Challenge of Communism

24

be decided in the first instance by an arbitrator within the family. Modern Japan has a somewhat similar system of family Courts. The significance of the family courts is that the judicial system had its roots in the social s ystem which explains its success.

The

ancient

concept

of

settlem ent

of

dispute

through

mediation, negotiation or through arbitral process known as "Peoples' philosoph y Court is verdict" or decision and of "Nyaya-Panch" in the

concept ualized

institutionalized

present form of Lok Adalat. Some people equate Lok Adalat to conciliation or m ediation; some treat it with negotiations and arbitration. Those who find it different from all these, call it "Peoples' Court". It involves people who are directly or indirectly affected by dispute resolution.

In ancient times the village elders, other influential individuals used to sit together and use to hold panchayat calling interested or disputing parties of that particular village to come in to conclusion of settling their disputes or with the help of village elders, other influential individuals, hence it is ADR in its early form was very much prevalent, well-known tool to settle disputes to ancient Indian societies. In Ancient India the disputes were peacefully decided by the intervention of Kulas (family assemblies), Parishad, Srenis etc., (guild the so men of similar of ADR

occupation),

primary

obj ect

movement is avoidance of vexation, expense and delay and promoti on of the ideal of access of justice for all.

25

That particularly during the British rule, actual formation of certain rules for arbitration were incorporated and brought in the form of the Regulation of Act 1787, empowering the court to refer suits to arbitration with the consent of parties and further more the Regulation Act of 1793 authorised the court to promote references of cases not exceeding Rs. 200 in value to arbitration and disputes relati ng to partnership account, debts, disputed bargain and breach of contract. The procedure for conducting the arbitration proceedings was also stipulated. So the law and jurisprudence represents the cumulative effect of generations. It cannot be said that Arbitration as a concept or Alternate Dispute Resolution is a foreign import on the Indian legal s ystem.

2.2

The system of ADR under British Company Raj The system of Alternate dispute redressal was found not onl y as a convenient procedure but was also seen as a politically safe and significant in the days of British Company Raj. Hence, there were several regulations and legislations that were brought by British Com pany in resulting considerable changes from 1772. Few am ong them are:

The regulation of 1781 :

the yea r 1781 regulation had

contai ned a provision that the judge do recommend, and so far as he can without compulsion, prevail upon the parties to submit to the arbitration of one person to be mutually agreed upon by the parties. And that no award of any arbitrator of arbitrators, can be set aside, except upon full proof made b y oath of the credible witness that arbitrators have been guilty of

26

gross corruption or partiality t o the cause in which they had made their awards.

The Regulation of 1787: It empowered the court to refer suits to arbitration with the consent of parties. The Regulation of 1793 : It authorised the court to promote references of cases not exceeding Rs. 200 in value to arbitration and disputes relati ng to partnership account, debts, disputed bargain and breach of contract. The procedure for conducting the arbitration proceedings was also stipulated. In the year 1795 : the regulation of 1793 was extended to Benaras and the regul ation of 1802, 1814, 1822 and 1883 extended the limits and jurisdiction of arbitration proceedings in various m anner. The Madras Presidency Districts Regulation Munsiffs to VII of 1816 : It

authorised

the

convene

districts

panchayats for the determination of Civil Suits relating to real and personal property. The Regulati on was repealed by Act VII of 1870. Bombay Presidency Regulation VII of 1827: It provided f or arbitration of civil disputes. The arbitration had to be in writing to a named arbitrator, wherein the time for making the award had to be mentioned. Under the Charter Act of 1833: The Legislative Council for India was established in 1834. Act IX of 1840 . But the aforesaid Regulations of Bengal, Madras and Bombay continued to operate till 1859. The Act VIII of 1857: It codified the procedure of Civil Courts except those established by the Royal Charter. The sections

27

312 to 325 dealt with arbitration in sui ts. The sections 326 and 327 provided for arbitration without the intervention of the court. The Act VIII of 1857 was replaced by Act X of 1877. The Act XIV of 1882: the Code of Civil Procedure was

revised in the year 1882 by the Act XIV of 1882 the provisions relating to arbitration were reproduced verbatim in sections 506 to 526. No change in the law of arbitration was effected by the sai d acts of 1877 and 1882. The Indian Arbitration Act IX of 1899: It was based on the English Arbitration Act of 1889. Act IX of 1899. It was the first substantive law on the subject of arbitration but its application was limited to the Presidency towns of Calcutta, Bombay and Madras. Act, however suffered from many def ects and was subjected to severe judicial criticisms.

28

CHAPTER 3 OVERVIEW OF ADR MECHANISMS 3.1. What is ADR Mechanism A dispute is basically lis inter parties and the justice

dispensation s yst em in India has found an alternative to Adversarial litigation in the form of ADR Mechanism in which two parties contest their case and one party wins and the other party looses, but in case of alternate dispute resolution (Section 89 Code of Civil Procedure), which can be

categorized in f our broad heads which are 1. 2. 3. 4. 5. 6. Arbitration; Mediation; Conciliation; Negotiation Lok Adalat. Early Neutral Evaluation (ENE)

That through ADR means the entering part y is win win situation and no party wins no party looses, today the need of time is that we resort to non conventional syst ems as well, we should not forget that its not som ething new to us, we had for ages, like panchayats etc, it was self sufficient, every village has panchayat and it was a powerf ul authority for redressing the disputes. The best part of ADR is that since both parties come face to f ace and they work out the m odalities and reach to an amicable solution, there is no likelihood of winning or losing the case, i.e. its a win win situati on and thereafter no appeal, and thus it reduces the burden of appellant courts as well, the arbitration and conciliation Act, 1996 provides for

29

Arbitration and the award given b y the arbitrator is deemed to be a decree. It was step towards the ADR. The labor

legisl ation has already incorporated conciliation and mediation system in their enactm ents, to have an amicable solution in case of tussle between the labor and the m anagem ent.

3.2.

ADR Mechanisms and IP Disputes.

As part of the process of specialization, since it is difficult to get judges experienced in Intellectual Propert y (IP) rights or matters relating thereto, arbitration has to be a preferred course for dispute resolution because the parties can choose an arbitrator knowledgeable and experienced in the field. However, development in this direction is at an earl y stage, which does not of provide arbitration adequate in data for any realistic related

assessm ent

intellectual

property

matters. It must be borne in mind that several intellectual propert y related matters arise between parties who do not have an agreement inter se. In all such matters, only Courts can push the matters to Arbitration.

Managem ent of integrated securitization of IP assets on ADR /ODR W hile on the subject of use of information & technology in arbitration and other ADR methods, it woul d be worthwhile to note that arbitration and ADR can play a meaningful role in several new avenues, including i ntegrated securitization of all types of assets (including but not restricted to intellectual propert y assets) and the management of such integrated securitization. However, this bei ng a specialized subject , it

30

could

be

well

dealt

with

independently.ADR

i n the

new

millennium Indian Context The most effective initiatives for implementing ADR have probably been found to be in the State of California, USA. There, several m odes of ADR have been implemented, some of which are nonbinding and som e being of binding nature, judici al arbitration, private arbitration, settlement conference (before the Judge assigned to the case), early neutral

evaluation, m ediation and conciliati on. Though some of these concepts are today alien in the Indian context, one will very soon find several of them being implemented in varying forms and degrees in the courts i n India. Those who have i mplem ented them in several other countries have already realized the benef its of these available

alternatives and India too shall realize their potentials and benefit from making these available to the litigating m asses. Along with popularization of ADR, which has gained statutory recognition by the introduction of the new Section 89 of the CPC and the introduction of the new Information Technolog y Act, 2000,the passage for impl ementati on of ODR too has been smoothened. The latter statute extends recognition to generation and storage of electronic data as also gives recogniti on to

electronic comm unication. This is a real shot in the arm for implementation of ODR. In the days of time being money, even in games like cricket, we have drifted towards one day, limited overs m atches instead of the five days, two i nning matches. Indi as business comm unity is becoming more and

31

more conscious of minimizing use of time, mone y and energ y in dispute resolution processes and therefore, while arbitration is being preferred to court litigati on, there is also a growing realization that in the long run it is advisable to perhaps suffer an adverse award rather than render the entire system of arbitration and ADR un rem unerative. Law Colleges and several other Instituti ons have, recognizing the importance of arbitration and other ADR methods, introduced courses an d training programm es and one can clearly see the writing on the wall that in the near f uture in Indi a ADR methods will bring about amicable settl ement between the disputants thereb y saving a lot of time, mone y and energy for the business comm unity as also for the professi onals from legal, accounting and other disciplines so that they can concentrate more on constructive work. In this background, conciliation an d

mediation has a very bright prospect in India and it will be advisable for all professionals, including members of

professions like law and accountancy, to get formal training as conciliators/m ediators. firstly, necessary to re-position the provisions contained in Order X, Rules 1A, 1B and 1C in a manner that the courts are em powered to refer the matters to mediation as soon as the same are filed; Another aspect that requires attention is that although the ADR provisions have been introduced in Section 89 of CPC, one finds practical difficulty in implementing these provisions. One should understanding to keep i n mind the dynamics of potent modes of ADR like mediation and

conciliation. Although there is subtle difference between the

32

two, there is no difference in the process undertaken/deployed for implementation. There is a growi ng awareness among the masses as well regarding ADR and people are increasingly using the same for getting their disputes settled outside the court. This will also reduce the backlog problem that India is facing. It is now universally accredi ted that Justice dela yed is Justice denied. The existing justice system is not able to cope up wi th the ever-increasing burden of civil and criminal litigation. There is growing awareness that in the majority of cases court action is not an appropriate remedy for seeking justice. W e have to formulate ef fective ADR Mechanisms to ease the burden of judici al functioning. The backlog of cases is incre8asing da y by day but criticizing judiciary for the same is a wrong practice. It must be noted that the backlog is a product of inadequate judge population ratio and the lack of basic infrastructure. The government has to play a pro-active role in this direction. 3.2.1. Arbitration: This is a procedure in which the dispute is submitted to an arbitral tribunal which makes a decision (an award) on the dispute that is bi nding upon the parties. Arbitration generall y grows when the parties through the contract agrees to resort to arbitration process, in case of disputes that may arise in future regarding contract terms and conditions. The process of arbitration can start only if there exist a valid Arbitration Agreement betwee n the parties pri or to the em ergence of the dispute. As per Section 7, such an agreement m ust be in

33

writing. The contract, regarding which the dispute exists, must either contain an arbitration cl ause or must refer to a separate docum ent signed by the parties containing the arbitration agreem ent. The existence of an arbitration agreement can also be inferred by written correspondence such as letters, telex, or telegrams which provide a record of the agreement. Any party to the dispute can start the process of appointing arbitrator and if the other party does not cooperate, the part y can approach the office of Chi ef Justice for appointment of an arbitrator. A sole arbitrator or panels of arbitrators so appointed constitute the Arbitration Tribunal. The arbitration tribunal has jurisdiction over its own jurisdiction. Thus, if a party wants t o challenge the jurisdiction of the arbitration tribunal, it can do so onl y before t he tri bunal itself. If the tribunal rejects the request, there is little the party can do accept to approach a court after the tribunal makes an award. Section 34 provi des certain grounds upon which a party can appeal to the principal civil court of original jurisdiction for setting aside the award. Onc e the period for filing an appeal for setting aside an award is over, or if such an appeal is rejected, the award is binding on the parties and is considered as a decree of the court. 3.2.2. Mediation: Mediation, aims to assist t wo (or more) disputants in reaching an agreem ent. The parties themselves determine the

conditions of any settl ements reached rather than accepting something imposed by a third part y. The disputes may involve (as parties) states, organizations, communities, individuals or

34

other representatives with a vested interest in the outcom e. Mediators use appropriate techniques and/or skills to open and / or improve dialogue between disputants, aiming to help the parties reach an agreement (with concrete effects) on the disputed matter. Normally, all parties must view the m ediator as im partial. Disputants may use m ediation in a variety of disputes, such as commercial, legal, diplom atic, workplace, comm unity and family matters. A third-part y representative may contract and mediate between (say) unions and

corporations. W hen a workers union goes on strike, a disput e takes place, and the corporation hires a third party to

intervene in attem pt to settle a contract or agreement between the union and the corporation. 3.2.3. Conciliation: A non-binding procedure, in whi ch an impartial third party i.e. the conciliator or the mediator, assists the parties to a dispute in reaching a m utually satisfactory and agreed settlement of disputes. Conciliation is a less formal form of arbitration. This process does not require an existence of any pri or agreement. Any part y can request the other party to appoint a conciliator. One conciliator is preferred but two or three are also allowed. Parties may submit statements to the conciliator describing the general nature of the dispute and the points at issue. Each party sends a copy of the statement to the other. The conciliator m ay request further details, may ask to meet the parties, or communicate with the parties orall y or in writing. Parties m ay even submit suggestions for the settlement of the dispute to the conciliator.

35

W hen it appears to the conciliator that el ements of settlement exist, he m ay draw up the terms of settlement and send it to the parties for their acceptance. If both the parties sign the settlem ent document, it shall be final and bindi ng on both. 3.2.4. Negotiation: Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for indivi dual or collective advantage, or to craft outcomes to satisf y various interests. It is the primary method of alternative dispute resolution. Negotiation occurs in business, non-profit organizations, and governm ent branches, l egal proceedings, am ong nations and in personal situati ons such as m arriage, divorce, parenting, and everyday life. Those who work in negotiation professionally are called negotiators. Professional negotiators are often specialized, such as union negotiators, leverage bu yout negotiators, peace negotiators, hostage

negotiators, or may work under other titles, such as diplomats, legisl ators or brokers. 3.2.5. Mini-trial The mini-trial, a development in ADR, is finding its greatest use in resolvi ng large-scal e disputes involving complex

questi ons of mixed law and fact, such as Product Liability, massive construction, and antitrust cases. In a mini-trial, each party presents its case as in a regular tri al, but with the notable difference that the case is "tried" by the parties themselves, abbreviated. In a mini-trial, lawyers and experts present a condensed and the presentations are dram atically

36

version of the case to top m anagement of both parties. Often, a neutral adviser sometimes an expert in the subject area sits with management and conducts the hearing. After these presentations, top management representatives by now more aware of the strengths and weaknesses of each side, try t o negotiate a resolution of the problem. If they are unable to do so, they often ask for the neutral adviser's best guess as to the probable out com e of the case. They then resum e

negotiations. The key to the success of this approach is the presence of both sides' top officials and the exchange of inform ation that takes place during the mini-trial. Too often, pre-litigation work has insulated top management from the true strengths and weaknesses of their cases. Mini-trial presentations allow them to see the dispute as it would appear to an outsider and set the stage for a cooperative settlement. 3.3. EARLY NEUTRAL EVALUATION: An early neutral eval uation (ENE) is used when one or both parties to a dispute seek the advice of an experienced indivi dual, usually an attorne y, concerning the strength of their cases. An objective evaluation by a knowl edgeabl e outsi der can sometimes move parties away from unrealistic positions, or at least provide them with more insight into their cases' strengths and weaknesses. Of course, the success of this techni que depends upon the parties' faith in the fairness and objectivity of the neutral third-party, and their willingness to compromise .

37

Early neutral evaluation is a process, both in court and out of court, in which an experienced lawye r gives an indication, as strong and as detailed as the disclosure and representation at that stage allows, of what woul d be the outcome if the matter were to be finally adjudicated in court.

Early neutral evaluation in court incl udes the FDR hearing at which the j udge is required by the rules to predict what would happen if the matter were to go to a final hearing. It has its

limitations for example because of time. Nevertheless there is a very high success rate. It is acknowledged as one of the To a

primary achievements of the ancillary relief procedure.

lesser extent, the process at the First Appoi ntment is an earl y neutral evaluation as the judge is required to consi der the points in dispute with a view to narrowing the issues.

Early neutral evaluation out of court is much l ess frequent and prevalent. Indeed, there is almost only apocryphal knowledge of what is going on. In this regard, it is also, perhaps

confusingly, described sometimes as private judging.

The working party felt that it was now time to encourage earl y neutral evaluation yet to have better definition, boundaries and safeguards including within the prof essional context.

Moreover the working party f ound a delightful coincidence of the collaborative law group of the ADR committee

independently considering the sam e issue at the same time. Our recomm endations do not conflict with any

recommendations they m ake but it is hoped that the use of

38

earl y neutral evaluation can build together, solicitors both as client representatives and as collaborative lawyers. The anecdotal evidence is that over the past 15 years or more, from time to time opposi ng solicitors in a case have j ointly consulted senior members of the profession, often senior barristers but also senior solicitors in other firms, on a complex issue causing a stumbling block towards a settlement. Som etimes this has been the whole of the case, for instance on quantum. interlocutory, Sometimes it has been issues or one single discreet, perhaps separating the

issue

parties. It is believed that often the opinion has been given in conference but sometimes in writi ng. It is beli eved that on

occasions it has been given on a privileged basis so that issues do not arise about the status of t he evaluation, the weight to be given in the court process and similar. It is not believed that any of these early neutral evaluations or private judgings have com e before the courts for consideration of their status. Specifically it is believed that when there was an incredibl e backlog of work due to the wardships being terminated under the Children Act by a specific date and many financial cases were taken out of the list and relisted for at least six months later, m any cases in fact settled incl uding a num ber through the assistance of early neutral evaluation.Private judging is sometimes used as an informal expression of early neutral evaluation. In some instances, it is identical. However earl y

neutral evaluation is technically evaluati on at an early stage in the case. Private judging has often occurred on a joint

39

instruction to a senior prof essional towards the l ater stages of the case and as an alternative to a court adjudication. In this docum ent we are referring to early neutral evaluation although private judging could also be incorporated in our

recommendations. 3.3.2. What an ENE Covers Favorable and unfavorable facts Favorable and unfavorabl e law, as well as important but unsettled legal issues Strengths and weaknesses of each part ys case Likely successful or meritless claims and defenses Considerations of the cl ients business needs, and the impact of an outcome on that Possible litigation strategies (such as the feasibility of

dispositive m otions) Possible end-game strategies, including mediation, settlement, and attendant dem ands or offers

Possible legal costs and expenses, including which costs or initiatives are most worthwhile. It is quite possible that an ENE will show that the dispute is best resolved through full litigation or arbitration. The ENE may then be used as a road map for case strategy. The client can em phasize the most effective claims or defenses, thereb y avoiding expenditures of valuable resources on less justified positions. The ENE thus leads to a more sharply focused case one that will have maximum impact on the judge, jury, or arbitrator. To perform the ENE, the neutral could revi ew relevant

contracts; review internal and party communicati ons; interview the clients personnel involved in the transaction; discuss with

40

managem ent the transactions place in the clients overall business operations and strategies (both long-term and shortterm); review applicable legal authority; talk with in-house or outside legal counsel about the dispute; and research or investigate the opponents business. The quality of the ENE will be proportional to the val ue and volum e of the information received and analyzed by the neutral. An ENE can be done for virtually any type of case, and especiall y for commercial disputes. For most contractual and business disputes, a neutral with general but broad decisionmaking experience is fine. After all, the actual judge will likely be a generalist too. W here the subject matter of the dispute is technical such as patents the neutral should have

experience in that area. 3.3.2. The Timing and Scope of an ENE An ENE is, by definition, done early in the case, before all of the facts are known. But, even then, it is widely believed (by this author too) that the parties already know or can readily access 80 percent of all of the i nformation t hat exists for the case or will be offered at the hearing. Because the cost to obtain increm ents of evidence sometimes outweighs the value of those increments, there is good reason to perform an ENE at the outset, even if the information is incomplete. Indeed, judges frequently make very important i nterim decisi ons such as injunctive relief at the cases beginning based on less than full information.

41

Early can be even before the complaint or arbitration is filed. Once a party knows of a potential dispute, such as by recei pt of a demand letter from the opponent, ENE is fairly t ri ggered. Indeed, it is often best to assess a dispute before the parties are entrenched in pleadings. Also, as a private process, ENE can be done even while the client, with the aid of counsel, engages in pre-litigation or early-litigation posturing with the other side. Nonethel ess, if the client prefers, the neutral evaluation can instead be done l ater, and it can also be done more than once during the case. A neutral reassessment can also be used to prepare submissions for mediation and even pre-trial briefs. ENE therefore can be, but need not be, one and done. The scope and breadth of the ENE can be determined together by the client and neutral. Obviously, a small-budget ENE may be l ess helpful than a more expansive one. The chosen scope can be based upon the com plexit y of the dispute, the volume of evidence, and the timing for the project. Given the purpose of ENE an important guide for making critical risk analyses earl y in a dispute clients should be willing to give the neutral wide latitude in order to m ake the best evaluation. A more truncated ENE can, however, contain a list of unexplored or undeveloped issues or points that the client can later

authorize for analysis. 3.2.3 The Distinctive Benefits of an ENE For very important reasons, this neutral assessment is qualitatively different from the analysis of the dispute by the

42

clients

lawyer.

First,

the

neutral

has

no

ongoing

representation i n that dispute (e.g., continuing f ees). Rather, the neutral com pletes the discrete task quickly without any prospects for long-term work. That absence of any economic conflict ensures complete candor in the anal ysis. Second, the neutral also will not likel y have any ongoing rel ationship with the client generally, and therefore the neutral is not concerned about rendering bad news about the case and possible outcom es. In this way also, candor is ensured. Thus, the neutral is able to provide a totally i ndependent and unbiased evaluation exactly the approach that should be taken by the actual judge. An ENE can also complement or supplem ent an independent experts financial anal ysis. Thus, the client can learn even more when the ENE is coupl ed with a financial consultants damage anal ysis that separately gauges risk. This com bined evaluation provides case projections with even more rigor. The ENE adds t he factual and legal assessments, too, thereby making the overall analysis m uch more com plete. An ENE can be treated as an attorney/client comm unication or attorney work product. Thus, the ENE can remain confidential, even though the neutral may not be the clients counsel in the dispute 3.3.4. Lok-Adalat The : system contributed under National Legal

Lok-Adalat

Service Authority Act, 1987 is a uniquely Indi an approach. The Constitutional dut y of the State to provide legal aid, prompted

43

by the decisions of the apex court, led to the formation of a Committee for Implem enting Legal Aid Schem es (CILAS). The legal legitimacy of Lok Adalat flows from the Legal Services Authorities Act, 1987. It roughly m eans Peoples court. Thi s is a non-adversari al system, where by mock courts (called Lok Adalats) are held by the St ate Authority, District Authority, Supreme Court Legal Services Com mittee, High Court Legal Services Committee, or Taluk Legal Services Committee, periodically for exercising such jurisdiction as they thinks fit. These are usually presided by retired judge, social activists, or members of legal profession. It does not have jurisdiction on matters related to non-compoundable offences. There is no court fee and no rigid procedural requirem ent (i.e. no need to follow process given by Civil Procedure Code or Evi22dence Act), which makes the process very fast. Parties can directly interact with the judge, which is not possible in regular courts. A case can be transferred to a Lok Adalat if one party applies to the court and the court sees some chance of settlement after giving an opportunity of being heard to the other part y. The focus in Lok Adalats is on compromise. W hen no

compromise is reached, the matter goes back to the court. However, if a compromise is reached, an award is m ade and i s binding on the parties. It is enf orced as a decree of a civil court. An important aspect is that the award is final and cannot be appealed, not even under Article 226 because it is a judgm ent by consent. All proceedings of a Lok Adalat are deemed to be judicial proceedings and every Lok Adalat is deemed to be a Civil Court . Mai n condition of the Lok Adalat is that both parties in dispute should agree for settlem ent. The

44

decision of the Lok Adalat is binding on the parties to the dispute and its order is capable of execution through legal process. Lok Adalat is very effective in settlement of money claims. Disputes like partition suits, damages and matrimonial cases can also be easily settled before Lok Adalat. Lok Adalat is a boon to the litigant public, where they can get their disputes settled fast and free of cost. 3.4. How to make ADR system more viable W e cannot stop the inflow of cases because the doors of justice cannot be closed, but we can increase the outflow of cases either by strengthening (both qualitatively and

quantitatively) the capacity of the existing system or by way of finding som e additional outlets. In this situation ADR mechanism im plem entation can be such a drastic step for which three things are required most: Mandatory ref erence to ADRs Case management by Judges Committed teams of Judges and Lawyers Equal justice for all is a cardinal principle on which entire system of administrati on of justice is based. W e cannot conceive justice which is not fair and equal. W e should aim to achieve earlier and more proportionate resolution of legal problems and disputes by increasi ng advice and assistance t o help people resolve their disputes earlier and more effectively; increasing the opportunities for people involved in court cases to settle their disputes out of court; and reducing delays in resolving those disputes that need to be decided by the courts.

45

To im plem ent the noble ideas and to ensure the benefits of ADR to common people, the four essential players

(governm ent, bench, bar litigants) are required to coordinate and work as a whole s ystem. Case managem ent includes identif ying the issues in the case; summ arily disposing of some issues and deciding in which order other issues to be resolved; fixing time tables for the parties to take particular steps in the case; and limiting disclosure and expert evidence. 3.5. How to make Arbitration Mechanism truly effective: W ith a very laudable objective of speedy disposal of cases, Alternative Dispute Resolution Mechanism (ADR) is m ooted. Among the modes of Alternative Dispute Resolution

Mechanism, Arbitration is most discussed issue always as many agreem ents or contracts contain an Arbitrati on Clause now-a-days. The difference between Arbitration Mechanism

and the adjudication through Civil Court etc. issues can be summ ed up as follows: There is no need of payi ng court fee when a dispute is adjudicated b y an Arbitrator. Arbitrator is less burdened compared to Civil Court and the parties have the liberty of choosing their own judge. Arbitrator need not follow the procedure prescribed under Civil Procedure Code, 1908

though he will follow the pri nciples of natural justice. The procedure, the fees, the place of Arbitration etc. can b e mutually agreed by the Parties and in the absence of any consensus, the Court or the Arbitrator will take a decision on the issues. Despite so m uch relaxation in the established civil procedure, the adjudication before the Arbitrator or the issue

46

of getting an Arbitrator appointed is delayed very often. The general issues or challenges to the adj udication through Arbitrator are as follows: Even when there is no real lis between the parties, one party to an agreement containing Arbitration cl ause, m ay initiate Arbitration proceedings with untenable claim. The issue is settled to som e extent now in view of the recent development that the Court entertaini ng an application under section 11 of Arbitration and Conciliation Act, 1996 discharges judicial function and can l ook into the issues as to whether there is any existing agreement prim a facie, whether there is any lis between the parties and whether the subj ect matter is capable of being arbitrated. W hen there exist a special mechanism dealing with certain issues, the adjudicati on before the Arbitrator m ay not appear to be effective. For example, Rent Control Laws provide many reliefs to the tenants and also the landlords. There is a provision for deposit of rent by the tenant when the landlord refuses to receive the rent under the Rent Control Laws. W hen it comes to depositing rent, the Arbitrator may not be

effectively deal with the issue. W hen there is no specific provisi on under the Arbitration and Conciliation Act, 1996, litigants who wants to drag the case may file many interim applications. W hen an interim

application is filed, the sam e can be rejected by the Arbi trator when it is found that the i nterim applicati on is unnecessary and motivated to drag the case. But, in many cases, the Arbitrator entertains the interim applications and disposes the

47

same in accordance with law and it consum es tim e as is the case before the Civil Court. Against the order in the Interim Application, an aggrieved party tends to approach the High Court under section 34 as we see practically. W hen hearing fees is fixed or agreed to the Arbitrator, then, at times, the Arbitrator ma y feel it convenient to grant so m any adjournments and it is happening as we wee. Even, when a fixed fee is ordered to pay to the Arbitrator or agreed upon, the parties usually not pay the entire fee in the beginning. Till the fee is paid the Arbitrati on proceedings will go on at times, though the Arbitrator can exercise his right of lien over the award until his agreed rem uneration or fee is paid. Looking at the pendency of cases before vari ous courts in India, if we think about the time to be taken for disposing all the pending cases, it is recentl y reported that it will take som e 320 years to dispose of the pending cases or to clear th e backlog. Arbitration mechanism is always Alternative, but, still we depend on the Civil Courts and the procedure lay down under the Code of Civil Procedure, 1908 for getting the civil disputes adjudicated. W e need many reforms in our judicial system in India to ensure speedy disposal of cases and it will certainl y take years to bring the proper reforms. Simultaneous to bringing the proper reforms or initiating measures to bring the reforms in our Indian Judiciary aiming at speedy and effective disposal of cases, we also need to

48

concentrate as to how make the Arbitration Mechanism trul y effective. The m easures to make the Arbitration Mechanism truly

effective, as I think, are as follows: Rather practicing to appoint retired judges as Arbitrators, it is better to have panel of Arbitrators who are talented and with very good legal knowledge. There is nothing wrong if a practicing legal

advocate is appointed as an Arbitrator when he is willing to act as such. W hen it comes to the f ee or the remuneration to be paid to the Arbitrator, it is better to fix lum p sum remuneration for deciding an issue and having mechanism that the entire fee is paid to the Arbitrator at once. It is better to avoid the practice of paying sitting fees to the Arbitrators if one needs to make the adjudication through arbitration really speed y. Applications under section 34 of Arbitration and Conciliation Act, 1996 to be carefully gone into and the im plicati ons of entertaining an application under section 34 on the main Arbitrati on claim before the Arbitrator to be carefully considered. Present legal position with regard to appointment of

Arbitrators to be continued and the process of appointment of arbitrators to be judicial always. I am of the strong opinion that with few reforms, Arbitrati on Mechanism can be m ade truly effective and I dont think that the mechanism is truly effective as of now for the few among many reasons referred to above.

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CHAPTER 4 ADR- AN INDIAN PERSPECTIVE Alternative Dispute Resolution was conceived of as a dispute resolution mechanism outsi de the courts of law established by the Sovereign or the State. In this sense, it included

arbitration, as also conciliation, mediation and all other forms of dispute resoluti on outside the courts of law, which would all fall within the ambit of ADR. However, with passage of time, the phrase Arbitration and ADR came in vogue, which implied that arbitration was distinct from other ADR forms. In

arbitration, there is a final and binding award, whether the parties consent to it or not, but in other forms of ADR (which came to be m ore commonly associated with phrase ADR) there would be no finality except with the consent of the parties. The protagonists of ADR in this sense claimed that, whereas in arbitration one party ma y win and the other(s) may lose m ay be both may lose-as in a court case, in ADR it is a win-win situation because the parties woul d agree to a disposal of the matter on terms comfortable to each of them; In ADR, in this sense, it is not the dispute or difference between the parties that is addressed, but the mindset of the parties, so that with gradual change in the mindset eventuall y both sides come to a meeting point. The most practiced forms of ADR, in this sense, are conciliation and mediation. In western countries, neutral evaluation is also frequentl y

resorted to but in India this or other forms of ADR have not yet come in vogue. Conciliation and mediation are often used as interchangeable terms although there is a subtle difference between the two. In

50

both the forms, the conciliator or m ediator (often known as neutral) endeavors to bring both sides closer to each other, but in one he plays a more proactive role whereas in the ot her his role is only to enable the parties to com e closer to each other and for that purpose, at times, the word facilitator is

used instead of the word neutral; In India, ADR has an important place because of historical reasons. If one bears in mind our heritage, tradition and culture, one fails to understand as to why arbitration and other ADR methods should not succeed admirably i n India. To think of

challenging the Panchas decision was considered a sacrilege and t o suspect or to even think of the Panchas being partial was like blasphemy. W ith this background, it should not be difficult to identif y the areas, which are obstacles in our goal to once again reach the ideals of ADR. ADR in global perspective The international busi ness

comm unity reali zed that court cases were not only time consuming but also very expensive businessmen always want to make best use of their time, money and energy, with the result that arbitration was pref erred to court litigation. Besides, in arbitration, the parties to the dispute usually got a person of their choice to decide the m atter and thereby the parties avoided decision-m aking at the hands of a judge, who m ay not be conversant with the subject matter of the dispute. However, in course of time, the even arbitration that other the proceedings m an of of becam e

protracted,

with

result to

commerce ADR, viz.

internationally

resorted

forms

conciliation, mediation or neutral evaluation. Throughout the

51

world, efforts are being made to bring about disput e resolution in as informal a m anner as possible speedily and with least expense. In certain areas even such ADR was avoided. For exam ple, in insurance, a good part of the risk is passed on to the reinsurer. In som e cases, whether the insurer of one insured had to bear the loss or the insurer of the other insured made little difference because both risks were largely covered the sam e reinsurer. This brought about the concept of knockfor-knock, which one finds in vogue even in India at least in car i nsurance where it is not the insurer of the insured whose driver is negligent who bears the loss but the loss is borne where it falls. Emerging trends in preventing court litigation at the beginning of the British regime, when the courts were established, there were few cases and the concepts like courts dela ys were unknown but by the time the British left us there were arrears in courts which resulted in elongati on of the lifespan of any matter in court. Further, with our achi evi ng independence, our legisl ators kept on passing laws, at times, in a language that was neither simple nor clear, which brought about a spate of litigation contributing to congestion of courts. In 2-3 decades, a stage was reached when everyone started apprehending that our judicial s ystem would collapse because of the arrears and unduly l ong time taken for disposal of any matter. W ith high rates of interest, the non-claimant always had a vested interest in delayi ng the disposal of court cases because the rate of interest to be awarded by the courts in normal circumstances was only 6% simple interest per annum

52

whereas trade and industry had to borrow at two to three times that rate of interest and that too on quarterly com pounded basis. Recent amendments in the Code of Civil Procedure, 1908 (CPC for short) and provisions for pushing commercial matters to arbitration or other forms of ADR coupled with formation of tribunals for handling specific types of cases has resulted i n arresting further elongation of time for disposal of court cases but it will take a few years before the full impact of these changes is known. As of date, trends in online, ADR/ODR there have been several Internet service providers who have provided platforms for Online resoluti on of disputes by parties, which they can pursue irrespective of their geographical locations. Quite a few of these have closed down, m ay be due to theirs being a bad business m odel or probabl y due to their system/platform not living up to the expectations of the end user. But this certainly does not reflect on the popularity or utility of the concept of ODR (On line Dispute Resolution), in some places also referred to as e ADR(electronic Alternative Di spute

Resoluti on). This is evident from the fact that the num ber of service providers has increased this year to over a hundred. The benefits of ODR are manifold. Being accessible online, the dispute resolution platform can be availed of sitting in ones own of fice or residence or even while being on the move. In addition, the process, being conducted online, affords the parties an opportunity to appoint neutrals from anywhere in the world. This widens their CHOICE rather than restricts it;

53

Though not wi dely heard today, even in most m etropolitan cities in India, ODR is an idea whose time has com e. But we must understand that it cannot be implemented unless we first popularize the different modes of ADR, as also remove the stigmas that arbitration (especially ad hoc arbitration) is gathering. But the night is not too long. Already the Bom bay High Court has taken i nitiatives in that direction. It has not only i nitiated training programmes for lawyers and judges It is too early to assess Courts behavioral pattern on this count because am endments in the CPC are recent. in several parts of Maharashtra and has even started an ADR course j ointly with the Mumbai University(the first batch of which is nearing completion but it is also chalking out plans for implem enting m ediation, conciliation and arbitration at several courts in Maharashtra. The Bombay High Court itself has separate Panels of Arbitrators and Mediators whose fees are stipulated at very nominal rates; W ith India having its own uni que place in informati on & technology and the younger generation being computer-savvy, ODR has already started. Several Arbitration Institutions have framed Rules in this behalf and vi deo-conferencing has been accepted as a workable solution for minimizing the cost. Here again, it is som ewhat prem ature to make any realistic

assessm ent. One can only say with confidence that the use of technology i n arbitration and ADR has already m ade a good start and the trend is that in the near future, it would be utilized to expedite arbitration and other ADR m ethods as also to minimize the cost.

54

4.1

The emergence of ADR system in independent India: That are bound to happen in group of peopl e and human are adaptable to such situations in finding out and devising novel ways and means for amicable resolution of conflicts. The human have been em bodied with rationality to solve adverse situations constantly with ease and in the human nature of a has been

evolving

establishment

congenial

atm osphere as such the dispute resolution is one of the major tool, which is being always used by a stable societ y. In India, intricacies of the form al legal system has

continuously emanated dissatisfaction for citizens of Indi a, wherein the disputes were got involved in the legal wrangling resulting to dissatisfaction and criticism of the Courts firstly, due to the unsavory conduct of legal professionals , secondly, sometimes due to i nordinate delay of delivery of justice by the courts has lead to a sense of alienation of litigants from the whol e judicial system, thus a need was felt for initiation of ADR system to resolve many trivial pending disputes, some of trivial disputes or on the pending cases, which can be resolved through intervention of ADR techniques, thereby lessening the crumbling j udicial system as well as over burdened Courts with cases. That the Arbitration Act of 1940 was enacted repl acing the Indian Arbitration Act of 1899 and section 89 and clauses (a) to (f) of section 104(1) and the Second Schedule of the Code of Civil procedure 1908. It amended and consolidated the law relating to arbitration in British India and remained a

55

comprehensive law on Arbitrati on even in the Republican India until 1996. Though, i n early years the industrial Disputes Act, 1947 provided the provision both for conciliation and arbitration for the purpose of settlement of disputes. That in Rajasthan State Road Transport Corporation v. Krishna Kant, the Supreme Court had observed: The policy of law emerging from

Industrial Disputes Act and its sister enactments is to provide an alternative dispute-resolution mechanism to the workmen, a mechanism which is speedy, inexpensive, informal and

unencumbered by the plethora of procedural l aws and appeals upon appeals and revisions applicable to civil courts. Indeed, the powers of the courts and tribunals under the Industri al Disputes Act are far more extensive in the sense that they can grant such relief as they think appropriate in the

circumstances for putting an end to an i ndustrial dispute . The section 23(2) of the Hindu Marriage Act, 1955 also mandated or casted the duty on the courts that the Court shall in the first instance must make an endeavor to bring about reconciliation between the parties of the case, where it is possible according to nature and circumstances before

granting relief under this Act. For the purpose of reconciliation the Court may adj ourn the proceeding for a reasonabl e period and refer the matter to person nominated by court or parties with the direction to report to the court as to the result of the reconciliation, section 23(3) of t he Act. The Family Court Act, 1984 was also enacted to provid e avenues for the establishment of family Courts with a view to

56

promote conciliation and secure speedy settlement of disputes relating to marri age, family affairs and for matter connected therewith by adopting an approach radically different from the ordinary civil proceedings. The section 9 of the Family Courts Act, 1984 has further lays down the duty of the family Court to assist and persuade the parties, at first instance, in arriving at a settlement in respect of a dispute. The family Court has also been conferred with the power to adjourn the proceedings for any reasonable period to enable attem pts to be made to effect settlem ent if there is any reasonable possibility of settlement. Shri M.C.Setalvad, former Attorney General of India has observed: .equality is the basis of all modern systems of jurisprudence and administration of justice in so far as a person is unable to obtain access to a court of law for having his wrongs redressed or for def ending himself against a criminal charge, justice becomes unequal Unl ess som e provision is made for assisting the poor men for the payment of Court fees and lawyers fees and other incidental costs of litigation, he is denied equality i n the opportunity to seek justice. To check and to cope up with its enormous l oad of growing cases, the Constitutional duty of the State to provide legal aid, prompted by the decisions of the apex court, led to the formation of a Committee for Implem enting Legal Aid Schemes (CILAS) and the National Legal Service Authority Act, 1987 was adopted as a uniquely Indian approach for creation of Lok-Adalat s ystem. The legal legitimacy of Lok Adalat flows from the Legal Services Authorities Act, 1987. It roughl y

57

means Peoples court. This is a non-adversarial system, where by m ock courts (called Lok Adalats) are held by the State Authority, District Authority, Supreme Court Legal8 8 Services Committee, High Court Legal Services Committee, or Tal uk Legal Services Committee, periodically for exercising such jurisdiction as they thinks fit. These are usually presided by retired judge, social activists, or members of legal profession. It does not have jurisdiction on matters related to non-compoundable offences. There is no court fee and no rigid procedural requirem ent (i.e. no need to follow process given by Civil Procedure Code or Evidence Act), which makes the process very fast. Parties can directly interact with the judge, which is not possible in regular courts. A case can be transferred to a Lok Adalat if one party applies to the court and the court sees some chance of settlement after giving an opportunity of being heard to the other part y. The f ocus in Lok Adalats is on compromise. Usually when no compromise is reached, the matter goes back to the court. However, if a compromise is reached, an award is made and is binding on the parties. It is enforced as a decree of a civil court. An important aspect is that the award is final and cannot be appealed, not even under Article 226 because it is a judgment by consent. All proceedings of a Lok Adalat are deemed to be judicial proceedings and every Lok Adalat is deemed to be a Civil Court . Mai n condition of the Lok Adalat is that both parties in dispute should agree for settlem ent. The decision of the Lok Adalat is binding on the parties to the dispute and its order is capable of execution through legal

58

process. Lok Adalat is very effective in settlement of money claims. Disputes like partition suits, damages and matrimonial cases can also be easily settled before Lok Adalat. Lok Adalat is a boon to the litigant public, where they can get their disputes settled fast and free of cost. 4.2. The court approach towards ADR mechanism: That for last two decades not only in India but remote in ot her corner of the world rather everywhere rapid development in the societies as whole is creating an multiplying human urges as well as expectations, as a result this, the conflict of interests bound to increase day by day all over the world over, no exception to India, in India due to slackness of judicial disci pline in courts and litigating parties having litigation in Indian courts has over burdened the judicial mechanism and the said judicial mechanism finding extremely difficult to manage to cope up with its enormous load of pending cases, which has furt her compounded and eroded judici al

creditability. In current scenario the Alternative Dispute Resolution (ADR) refers to a variety of streamlined resolution techniques

designed specifically to resolve issues in controversy more efficiently and in better m anner, wherein the normal bilateral negotiation process fails. In view of the fact, presently, the third party alternative dispute resolution (ADR) is being touted and being thought as effective alternative for the contesting parties to the litigation, who are hotl y involved to the formal legal intricacies.

59

W ith wide spread implementation of ADR techniques in the developed and developing world. The usage and penetration of ADR systems techniques are proving to m uch viable option in reducing cost factor in Litigation and delays. The success of ADR systems in bringi ng resolution of their conflicts in

amicable m anner, thus due to success of it, The ADR system has entered in to many untouched subjects or issues of laws, as of now, ADR penetration is being increases in legal battle and many new cases are added day b y da y under ADR system for its resolution. Hence due to successful resolution of legal conflicts / disputes through ADR systems, due to successful resolution of l egal conflicts / disputes through ADR systems has improved the lives of as such individuals and their business entities thus ADR s ystems have been able to achieve broad social / societal goals to the large extent. That the Privy Council 2 affirmed the decision of the Panchayat and Sir John W allis observed that the reference to a village panchayat is the time-honoured method of deciding disputes. It avoids protracted litigation and is based on the ground realities verified in person by the adj udicators and the award is fair and honest settlement of doubtful claims based on legal and moral grounds.
3

The justice dispensation system in India has come under

great stress for several reasons; chief reason of them being the huge pendency of cases i n Courts. The denial of justice through delay is the bi ggest mockery of law, but i n India it is
2 3

The Privy Council Sitanna v. Viranna, AIR 1934 SC 105,

ICADR88

60

not limited to mere mockery; t he delay in fact kills the entire justice dispensation system of the country. In India, the number of cases filed in Courts has shown tremendous increase in recent years for a variety of reasons resulting in pendency and delays underlining the need for alternative dispute resolution methods. The justice dispensation s ystem in India has hit rock bottom. The system crawls in its rotten rut of ineptitude and corruption. This has led to people settling scores on their own, resulting in a growing number of criminal syndicates in the country and reflect ing the loss of people's confidence in the rule of law. That Late H.D Shourie wrote in Letter Mr. Justice S. M. Raza 4, he wrote, "W e believe that there is need of bringing about the judici al ref orms which would deal with huge pendency of cases in the courts of the country. The figures presently bein g mentioned are that there are 2.27 crore ca2ses in the District and Subordinate Courts; 35 lakhs in High Cou5rts and 25000 in the Supreme Court. There are about 2 crores cases pending in the courts of India. If there are 4/5 members of the family on one side and 4/5 members on the other side, almost about 12 to 15 crores persons are involved in pending cases. At the last count the backlog of cases in the courts of Indi a had gone up t88o nearl y 3 crore cases, including more than 37 lakh cases pending i n the High Courts and over 46,000 cases awaiting disposal by the Supreme Court.

Mr. H. D. Shourie, Founder Director of COMMON CAUSE, continued his exertions to this end till his last breath. In his letter to Mr. Justice S. M. Raza, Lokayukta, Uttaranchal, dated June 22, 2005,

61

Drawbacks and suggested amendm ents in Arbitration and Conciliation Act, 1996 (i) Arbitration, as practiced in India, instead of shortening the lifespan of the dispute resolution, becam e one more inning in the gam e. Not only that, the arbitrator and the parties lawyers treat ed arbitration as extra time or overtime work to be done after attending to court matters. The result was that the norm al session of an

arbitration hearing was always for a short duration and a part of the time, at the beginning, was taken for recapitulating what had happened till that point of time and at the end for fixing the next date of hearing. Absence of a full-fledged Arbitration Bar effectively prevented arbitrations being heard continuousl y on day-to-day basis over the norm al working hours, mviz. 4-5 hours every da y. This resulted in elongation of the period for disposal. Besi des, most of the arbitrations were ad hoc as there were no Arbitration Institutions. W ith the establishment of such Institutions (for example the Indian Council of Arbitration which was established in 1965), institutional arbitrations made a beginning but it was difficult to bri ng about an y effective change in the culture and mi ndset of the arbitrators or the lawyers appeari ng before them. Besides, with long delays in court matters, and consequent vested interest in the non-claimant to delay matters for as long as possible, pending the arbitration, the m atter was often taken to the court for taking arbitration off the track on technical grounds. In m any cases, the court gave an interim injunction restraining the arbitrators from continuing with the arbitration and took a

62

long

time

to

dispose

of

the

matter

finally.

Even

when

applications objecting to the continuation of arbitration on the ground of there being no jurisdiction were dismissed, appeals from such orders of dismissal resulted in further delay. Several technical objections were being taken by the lawyers, which eventually led the Suprem e Court of India to observe in Guru Nanaks case on 29th Septem ber, 1981, as under (ii) W ith the apprehension of courts collapsing under pressure of work, and Indias decision to liberalise, it became absolutely necessary to amend or replace its Arbitrati on Law so as to qualify India to sit in the global village. This led to a m eeting of the Prime Mi nister of India and the Chief Ministers of all the States, on 8th Decem ber, 1993, where a W orking Group was constituted to suggest a new Arbitration Law for Indi a. The result of that W orking Groups efforts was the Bill which eventually became The Arbitration and Conciliation Act, 1996, which was on the UNCITRAL (United Nations Commission on International Trade Law) Model and was wi dely acclaimed the world over as being an ideal piece of legislation. However, due to absence of Arbitral Institutions and the bulk of arbitrations being ad hoc, even the provisions of the new Act did not show any immediate results because the mindset of the arbitrators and lawyers continued as before; (iii) In the Indian Arbitration Act, 1940, there was a provision for time period, viz. f our months, for giving the award. Experience showed that this period of four months was illusory because in almost every case extension was given and the very act of getti ng such extension became time-consuming and expensive. The

W orking Group therefore suggested the deletion of time-fram e

63

for giving award but considered it to be a matter of culture and suggested effective steps to be taken in that direction.

However, since m ost of the arbitration matters were ad hoc there was little possibility of any substantial the change in

handling

arbitrations,

particularly because

arbitrators,

many of whom were retired judges, continued to oblige the parties and their lawyers by giving adjournments under an erroneous apprehension that if they did not do so they would not get new arbitration cases. For this purpose, it is suggested that i nstitutional arbitrations should be encouraged and a fullfledged Arbitrati on Bar should come into existence so that arbitration proceedings can be heard on day-to-day basis with at l east 4-5 hours working on every day. (iv) Apart from this, the judiciarys approach to the 1996 Act

is not consistent. To illustrate, in Sundaram Finance Ltd. v. NEPC India Ltd. (reported in AIR 1999 SC 565) the Supreme Court said: The 1996 Act is very different from the Arbitratio n Act, 1940. The provisions of this Act have, therefore, to be

interpreted and construed independently and in fact reference to 1940 Act may actually l ead to misconstruction. In ot her words the provisions of 1996 Act have to be interpreted being uninfluenced by the principles underl ying the 1940 Act. In

order to get help in construing these provisions it is more relevant to refer to the UNCITRAL Model Law rather than the 1940 Act. Unfortunately, later on, even the Apex Court forgot this replacement of statute and its avowed objects, with the result that the judicial mindset continued to remain as it was under

64

the Arbitration Act, 1940; (v) It is trite to say that once the parties have removed the lis (dispute) from the courts of law and agreed that the same would be decided by arbitration and that such decision would be final and binding, it was for the

courts to compel the parties to adhere to their agreement and to interf ere with the award not to do justice between the parties but only for the purpose of ensuring that such private administration of justice did not contravene t he basic ethos of the societ y, viz. public policy so that transactions like money laundering, drug trafficking, flesh trading and the like are not able to get the support of such private disposal of justice. Instead, the courts (or at least som e of them in some cases) forgot this aspect of the matter and, obsessed by the mindset which was prevalent under the Arbitration Act, 1940, looked at the matter as if it was the courts bounden duty to ensure that justice is done according to the courts assessm ent and inclination. This is an entirely erroneous approach. The matter woul d be clear if one looks at it as a game of cricket. Earlier, we were playing five days cricket m atch with two innings but then we evolved a single day, limited (normally 50) over match. Supposing in such a match, on a given occasion, a batsm an is wrongly given out by the umpire, then neither the batsm an nor, for that matter, the entire cricket community can bring about a reversal of the decision on the ground that injustice was done to the batsman and that he will not get another chance to bat because it is only a singl e day, single inning match.

65

Consider what would be the chaotic effect if reversal on such a ground were permitted. The onl y course is that while even a wrong decision is acquiesced into, such umpire is not again appointed as an um pire. Applying the same analogy, an arbitrators (apparently) wrong decision should be accepted and the injustice between the parties should be tolerated and acquiesced into but such person m ay not be appointed as an arbitrator thereafter and since this is the function of the parties, the parties would obviously, in their own i nterest, follow the course of avoi ding such an arbitrator. This approach is not only logicall y concomitant with accepti ng arbitration as an effective justice delivery system as an alternative to the judici al process by the courts but is the very essence of arbitration and if this essential principle is overlooked,

arbitration, as also the other ADR methods, can never be successful.

Even

modern

international

commercial

trend

not

onl y

recogni zes this but also practices it in the l ong-term interest of the international busi ness community. The choice is between having protracted delays and heavy expenses for resolving each and every dispute and difference on the one hand or some members of the commercial com munity having (perhaps) to suffer wrong decisions on the other. It is in the long term interest of the business community as a whole that in such indivi dual cases the decisions appearing to be wrong are suffered i nstead of making the entire system of effective alternative dispute resolution m ethod lose its very purpose and reaching a level requiring its rejection. Prudence demands that

66

one should not throw away the baby with the bath water; (vi) It is in the interest of the society, com munity and business that counter-productive dispute resolution process, or for that matter, an y process, which does not ensure value for money in terms of time, money and energy, i s to be avoided, even at the possible cost of suffering some wrong decisions in

indivi dual cases. Once this aspect is clearly perceived and understood, it will not be difficult to put arbitration and other ADR methods on the ideal pedestal to which they bel ong; (vii) The Supreme Court, despite having recognized this sea

change in the law, in ONGC v. Saw Pipes (reported in (2003) 5 SCC 705) read the phrase public policy of India in a m anner which upset the apple cart. There has been serious criticism of this judgment as it is putting the clock back. However, the Supreme Court itself is reconsidering t his view and in the meantime an am endment has been proposed whereby the rigorous impact of this judgm ent would stand largely undone. Commercial arbitration in India Before the advent of the British, while at the village level Panchas would dispose of a matter as soon as any difference or dispute arose, at the level of towns and cities, the trade bodies effectively dealt with the disputes and differences arising between men of comm erce. However, with the growth of trade and commerce, and there being many occasions when all the parties were not from the same locality, informal way disposal of differences and disputes in an becam e impossible and form al commercial

arbitration cam e into vogue in India. Even today, in Commodity

67

Exchanges, disputes are resolved almost within hours an22d in some Exchanges, like for example the Cotton Exchange of Mumbai, even appeals are disposed of in 2-3 days. This is so because the m atters are decided by men of comm erce having rich experience in the trade and its different aspects and enjoying a reputation for their long standing in the business. It is often sai d that arbitration is as successf ul as the arbitrator. Since the arbitrators in Commodity Exchanges are men having a quick grip on the subject, the disposal of arbitrations in such exchanges is quick and i nexpensive - with almost no likelihood of challenge in court. In m atters not so simple as disputes and differences between the mem bers of a Commodity Exchange, well-experi enced arbitrators, even

today, bring about a quick result in an inexpensive manner but it is the need of the day to have trained arbitrators because with the court matters being pushed to arbitrati on there is bound to be a greater demand for good arbitrators available at reasonable fees. 4.3 Legislative efforts in India Article 21 5 of the Constitution of India declares in a mandatory tone that no person shall be deprived of his life or his personal liberty except according to procedure established by law. The words life and liberty are not to be read narrowly in the sense drearily dictated b y dictionaries; they are organic terms to be construed meaningfully. Further, the procedure mentioned in the Article is not some sem blance of a procedure but it should be reasonable, fair and just. Thus, the Right to
5

Constitution of India88

68

Speedy Trial has been rightly held to be a part of Right to Life or Personal Liberty by the Supreme Court of India. The Supreme Court has allowed Article 21 to stretch its arms as wide as it legitimately can. The reason is very simple. This liberal interpretation of Article 21 is to redress that mental agony, expense and strain which a person proceeded against in criminal law has to undergo and which, coupled with delay, may result in impairing the capability or ability of the accused to defend himself effectively. Thus, the Supreme Court has held the Right to Speedy Trial a m anifestation of fair, just a8nd reasonable procedure enshrined in Article 21. This is obviously a m atter which needs a very serious

consideration f or determining as to what judicial reform s can be made effective for meeting the requirem ents of reducing pendency of cases in the court of India. 6 Anguished over the state of affairs of the justice delivery system, the Supreme Court has said people's faith in judiciary was dwindling at an alarming rate, posing a grave threat to constitutional and democratic governance of the country. The Constitutional philosoph y propounded as Right to Speedy Trial has though grown in age by almost two and a half decades; the goal sought to be achieved is yet a far-off peak. The failures of prosecuting agencies and executive to act and to secure expeditious and speedy trial have persuaded th e Supreme Court in devising solutions which go to the extent of almost enacting by judicial verdict bars of limitation beyond which the trial shall not proceed and the arm of law shall lose
6

Supreme Court chides itself, govt for judicial backlog Dhananjay Mahapatra, TNN Jan 12, 2012, 05.57AM IST

69

its hold. The validity or justness of those decisions is not the matter to be decided88 but the seriousness of delay in the conclusi on of criminal and civil matters must be appreciated at the earliest. This seriousness was appreciated and accepted by m any , including the Constitutional Courts , l ong before. The sam e has got recognition from the legislature as well in the form of introduction of Alternative Dispute Resolution (ADR) Mechanism (ADRM) through various statutes. There is a growi ng awareness among the masses as well regarding ADR and people are increasingly using the same for getting their disputes settled outside the court. This will also reduce the backlog problem that India is facing. It is now universally accredi ted that Justice dela yed is Justice denied. The existing justice system is not able to cope up wi th the ever-increasing8 burden of civil and criminal litigation. There is growing awareness that in the m ajority of cases court action is not an appropriate remedy for seeki ng justice. W e have to formulate ef fective ADR Mechanisms to ease the burden of judici al functioning. The backlog of cases is increasing day by day but criticizing judiciary for the same is a wrong practice. It must be noted that the backlog is a product of inadequat e judge population ratio and the l ack of basic infrastructure. The governm ent has to play a pro-active role in this direction. 4.4. Court approach towards legal reform through ADR mechanism Further, the recent am endments of the CPC will give a boost to ADR. The section 89 (1) of CPC deals with the s88ettlement of disputes outside the court. It provides that where it appears to the court that there exist elements, which may be

70

acceptable to the parties, the court may f orm ulate the terms of a possible settlement and refer the same for arbitration, conciliation, mediation or judicial settlement. W hile upholding the validity of the CPC am endments in Salem Advocate Bar Association v. U.O.I 7 , the Supreme Court had direct ed the constitution of an expert committee to formulate the manner in which section 89 and other provisi ons introduced in CPC have to be brought into operation. The Court also directed to devise a model case m anagement form ula as well as rules and regulations, which should be followed while t aking recourse to alternative dispute redress referred to in Section 89 of CPC. All these efforts are aimed at securi ng the valuable right to speedy trial to the litigants. The Suprem e Court of Indi a has also suggested making ADR as a part of a package system designed to meet the needs of the consum ers of justice. The pressure on the judiciary due to large num ber of pending cases has always been a matter of concern as that being an obvious cause of delay. The culture of establishment of special courts and tribunals has bee n pointed out b y the SC of India in number of cases. The rationale for such an establishm ent ostensibly was speedy and efficacious disposal of certain types of offences. In E.Venkatakrishna Vs Indian Oil Corporation Ltd 8 It was hel d that, when ever there is an arbitration clause in a contract, aggrieved parties must have recourse to the provisions of the

7 8

Salem Advocate Bar Association v. U.O.I AIR 2003 SC 189, 2002

E.Venkatakrishna Vs Indian Oil Corporation Ltd AIR 1989 Kant 35

71

arbitration act and that being a com plete code in itself, parties cannot approach High Court, with a petition under Art-226. The Stage for ADR was set up in the early 1930s, the Priv y Council decision in Sitana vs. Viranna, highlights the

beginning of the germination of the idea of ADR; In Sitanna Vs Viranna, the Privy Council affirmed the decision of panchayat, and Sir John W allis observed that the reference to a village panchayat is the time honored method of deciding disputes. It avoids protracted litigation and is based on the ground

realities verified in person by the adj udicators and the award is fair and honest settlement of doubtful claims based on legal and moral grounds. In PT Thomas vs. Thomas Job
9

It

was

held,

that

the

experiment of Lok-Adalat as an alternate mode of dispute settlem ent has come to be accepted in Indi a as a viabl e, economic, efficient and inf orm al one. In Oil and Natural Gas Commission vs. CCE 10 In one of the orders passed in this judgment it was recorded that the cabinet secretary has issued instructions to all departm ents of Government of India as well as PSUs that all disputes regardless of type, should be resolved amicably b y mutual consultation or through good offices of empowered agencies of the governm ent or through arbitration and recourse to

litigation should be eliminated.

10

In PT Thomas vs. Thomas Job 2005 AIR 3575, 2005(2) In Oil and Natural Gas Commission vs. CCE 104 CTR (SC)

72

In Bhasheer vs. Kerala State Housing Board 11 The Honble Justice K.Padmanabhan Nair.J opined that, it m ust be ensured that in developing countries most of the cases are resolved by ADR mechanism of Arbitration, Conciliation and Mediation. In Salem Advocate Bar Association Tamil Nadu vs. UOI 12 It was held that, keeping in mind the law delays and the limited number of judges ,which are available ,it has now becom e imperative that resort should be had to ADR, with a view to bring an end to litigation at an early date .In this very case it was highlighted 85 of ,that CPC ADR is m echanism contemplated by

Section

arbitration

,conciliation lok

,judicial and

settlem ent mediation.

incl uding

settlement

through

adalat

In Deco Mica Ltd Vs UOI 13 it was held that ADR is inevitable in one form or the another , in view of global unquestionable phenomenon because court of law som e times becomes suit for life ,litigation in the present set up and mechanism has becom e expensive and time consum ing and dispensation of justice has become slow. It is reported that out of 192 Countries, which are mem bers of UN, 133 Countries have successfully implemented ADR in one f orm or the other, with encouraging and rewarding success. 4.5. Need and the purpose of ADR in India The growth of A.D.R in the l ast few decades on the one hand reflects disenchantm ent with the formal justice system

characterized by delays and on the other an effort to promote

11

Bhasheer vs. Kerala State Housing Board AIR 2005 Ker 64, 2005

12

ibid
13

4.5.

In Deco Mica Ltd Vs UOI 2000 (68) ECC 554,

73

a less formal dispute resolution m echanism. This development is not the outcome of any juristic philosoph y. Rather it was necessitated by the growth of commercial litigation needing speedy resolution, by the ever increasing volume of court work, by court dockets becoming heavier and by the

judge/case ratio becoming imbalanced on account of limited resources. In a developing country like India with major economic reforms under way within the fram ework of the rule of law, strategies for swifter resolution of disputes for lessening the burden on the courts and to provide m eans for expeditious resolution of disputes, there is no better option but to strive to develop alternative modes of dispute resolution (ADR) by est ablishing facilities for providing settl ement of disputes through

arbitration, conciliation, mediation and negotiation. In this context the legendaries of various fields i.e., commercial, administrative and legal unanimously constituted an institution to be called International Centre for Alternative Dispute Resoluti on-ICADR. This institution was established in Delhi on 31st Ma y, 1995 and registered under the Society Registration Act, 1960. It is an autonom ous non-beneficial institution. The chief obj ect of this institution is to inculcate and expand the culture of alternative dispute resolution. In essence the system of ADR em phasizes upon: Mediation rather than winner take all. Increasing Accessibility to j ustice. Improvi ng ef ficiency and reducing court delays.

74

The

Constitution

of

India

through

Article

14

guarantees

equality before the law and the equal protection of the laws. Article 39A of the Constitution mandates the State to secure that the operation of the legal system promotes justice on a basis of equal opportunity, and ensure that the same is not denied to any citizen by reason of economic or other

disabilities. Equal opport unity m ust be afforded for access to justice. Law should not only t reat all persons equally, but also the law must function in such a way that all the people have access to justice in spite of economic disparities. The

expression access to j ustice focuses on the foll owing two basic purposes of the legal s ystem. The system must be equally accessible to all. It must l ead to results that are individually and socially just. It is one of the most im port ant duties of a welfare state to provide judicial and non-judicial dispute-resolution

mechanisms to which all citizens have equal access for resolution of their legal disputes and enforcement of their fundam ental and legal rights. Poverty, ignorance or social inequalities should not become barriers to it. The workload of Indian Judiciary increased by leaps and bounds and has now reached a stage of unwieldy m agnitude, which has i n fact led to a large backlog of cases. Due to this ADR has become the need of the hour for Indian Judiciary. Considering the delay in resolving the disput e Abraham Lincon has once sai d:

Discourage litigati on. Persuade your neighbors to com promise whenever you can point out to them how the nominal wi nner is often a real loser, in fees, expenses, and waste of time. In

75

the same vein Judge Learned Hand comm ented, I must say that as a litigant, I should dread a law suit beyond almost anythi ng else short of sickness and of death.

4.6.

Implementation of ADR in India The concept of Conciliati on was introduced in the statute of Industrial Disputes Act, 1947. The Conciliation is generally conducted b y an officer appoint ed by Governm ent under Industrial Disputes Act, 1947. Industrial Disputes Act, 1947 provides provisions for the parties to settle disputes through Negotiation, Mediation and Conciliation, for example Section 12 Section 18 etc. Alternate Dispute Resolution pl ays a major role in the f amily disputes settlement. Section 5 of the Family Court Act, 1984 provides provisions for the association of social welfare organizations to hold Family Courts under control of government. Section 6 of the Act provide for appointment of permanent counselors to enforce settlement decisions i n the family matters. Further Section 9 of the Act imposes an obligation on the court to make effort for the settlem ent before taking evidence in the case. In addition to all provisions referred above, Indian Contract Act, 1872 most importantly gives a mention about Arbitration Agreement as an exception to Section 28 that renders an agreement void if it restrains a legal proceeding. Alternate Dispute Resolution whether sort ed for or not can be easily inferred from presence or absence of the Arbitrati on clause. Alternate Dispute Resolution in India gained importance under Arbitration Act, 1940, while sometime later Arbitration and

76

Conciliation

Act,

1996

was

passed

in

consonance

with

UNCITRAL Model Law of Arbitration, which brought the nation, on an international platform. The need arose as there was no provision in the Indian Arbitration Act, 1940 to resolve a dispute between an Indi an and a non Indian; it caused difficulties to refer such matter for arbitration For the sake of convenience and uniformity, most of the countries have based their legislation on UNCITRAL Model Law, as this law gives the binding force to arbitral award and lays down various rights and duties for commercial parties handling disputes. Som e important International Conventions on Arbitration are: The Geneva Protocol on Arbitration Clauses, 1923, the

Geneva Convention on the Execution of Foreign Award, 1927, the New York Convention of 1958 on the recognition and Enforcem ent of Foreign Arbitral Award. Alternate Dispute Resolution procedures are mostly divide d into two segm ents: Adjudicatory and Non Adjudicatory. In case of adjudicatory process case reaches a stage where decision gets a binding effect, for example in case of arbitration. And the other is non-adjudicatory; it contributes to resolution without adjudication, such as process of Negotiation,

Mediation etc. As in case of Salem court Bar Associati on v. UOI, The

Supreme Court had directed the setting up of committee that woul d look into the implem entation of various provisions, including Section 89. Section 89 (1) of Civil Procedure Code in relation to provision of ADR, which will provide avenue for settlem ent of disputes outside court. In view of the Judgment

77

pronounced by the apex court and subsequent law commission report on bringing changes, the Government brought and introduced adequate changes in section 89 of Civil Procedure Code 1908 Settlement of disputes outside the Court giving am ple jurisdiction to the court to see under section 89 (1)

where it appears to the court that there exist elements of a settlem ent which may be acceptable to the parties, the court shall form ulate the terms of settlement and give them to the parties for their observations and after receiving the

observation of the parties, the court may reformul ate the terms of a possible settlement and refer the sam e for- there by formulating and incorporating any of four methods to settle

disputes outside the court nam ely, Arbitrati on, Conciliation, Mediation and Lok Adalats. .. Though there are certain deficiencies in reference to status of settlem ent of disputes outside the court and in regard to procedural implementation of the ADR, in m y view the section 89 was not made as elaborative as it should have been, still non-insertion of many of relevant sections by enlarge has gone unnoticed that the discreti on of referring to ADR has been left to the court to decide is discretionary in nature, secondly, few details are incorporated in relation to status of opinion of expert rendered as mediators, still conciliators Di spute

incentives,

compensation,

though

Alternate

Resoluti on received recognition from experts as a milestone in the matter of settl ement of dispute outside of the court and in view of enactment of Civil Procedure Code, 1859 it provides section 312-325 for layi ng down the procedure of Arbitration

78

and Section 326-327 provides for Arbitration without courts intervention . It can be mentioned that various methods and processes have been incorporated in Indian legal system to achieve speedy disposal of cases, the concept of Alternative Dispute Resolution is a western approach where as Lok Adalat one of its specie is purel y a national concept. Alternate Disput e Resolution is more of corporate friendly, comm ercial parties enter into contract with Arbitration Clause. Most of the com panies resort to Alternate Dispute Resolution, as it is less complicated, least expensive and most importantly confidential. Litigation takes years long tim e with bundled up procedures which affects the working processes of the

companies, causing uncertainti es in financial sphere of their comm ercial sectors. Due to developm ent of trade at an International level it has become difficult for the corporate sector to maintai n pace with traditional ways of litigation. Companies are desperate to get the dispute resolved outside court, as it is beneficial to them in all ways. Resoluti on can be of great advantage to common man yet the idea doesnt acclimatize in all the developing countries of the world, as it contradicts with the domestic laws of that country, special care must be taken that the resolution reached, must depend upon honest y, trust, so as not to loosen ties of subsisting relationship and moreover, courts lack command to submit disputes to Alternate Dispute Resolution Methods. Various steps have been taken to make the process of Alternate Justice warren Burger, the former CJI of American Supreme Court had observed:

79

The harsh truth is that we ma y be on our way to a society overrun by hordes of lawyers, hungry as locusts, and bridges of Judges in numbers never before contem plated. The notionthat ordinary people want black robed judges well-dresse d lawyers, fine paneled court rooms as the setting to resolve their disputes, is not correct. People with legal problem s like people with pain, want relief and they want it as quickly and inexpensivel y as possible. The directive Principals enumerated under Art-39(A), of Indian Constitution promise to secure socio, economic, political

justice and equality of status and opportunity to all citizens., the Indian judicial system ,has not on once but several occasions fallen short of fulfilling such promises. The Malimath Committee also known as the arrears com mittee undertook a comprehensive review of the working of the court system ,particularl y all aspects of arrear and laws delay in addressing such concerns. In its recommendations the Malimath committee underlined the need for adopting an alternate dispute resolution mechanism, for encouraging Arbitration, Mediation, Conciliation and Lok Adalats, as a viable alternative for reduci ng backl og of cases pending i n various courts, In its view such alt ernate dispute resolution mechanism were capable of going a long way in restoring confidence of people and establishing rule of law , which is in fact a key objective of our constitution. That in a developing country like India with major economic reforms under way wi thin the frame-work of rule of law, strategies for swifter resolution of disputes for lessening the

80

burden on the Courts and to provide m eans f or expeditious resolution of disputes, there is no better option but to strive to develop alternative modes of dispute resoluti on by

establishing facilities for providing settl ement of disputes through arbitration, conciliation, m ediation, negotiation, etc. That the Government faced with these realities, coupled with the usual issue of inadequate towards India is infrastructure providing mainly a but due to and two

legisl ative efficacious

sensitivity justice in

speedy in

reflected

enactm ents. The first one is the Arbitration and Conciliation Act, 1996 and the second one is the incorporation of section 89 in the traditional Civil Procedure Code (CPC). That the Parliament drastically amended the Code of Civil Procedure 1908 (CPC) in the year 1999. One of the

am endments was by way of introduction of a new provision, Section 89, which gave the Courts the power to refer matters to one of the ADR tracks listed therein: Arbitration,

Conciliation, Judicial Settlement, Lok Adalat and Mediati on. A Lok Adalat (literally meaning Peoples Court) usually

comprises of 3 eminent personalities, like retired judges, and senior m embers of the Bar, Administration or societ y

generally, who are appoi nted for a particular term and they attempt conciliation and Judicial Settlement for dealing with disputes referred to them. As the first major step taken in this direction was the enactm ent of Arbitration and Conciliation Act, 1996 and was brought into force with effect from August 22, 1996. This Act, based on the UNCITRAL Model Law on International

81

Commercial Arbitration and the UNCITRAL Conciliation Rules, provides the basis for the growth of the ALTERNATIVE DISPUTE RESOLUTION (ADR) movement in India on scientific lines. The term Alternative Dispute Resolution or ADR is often used to descri be a wide variety of dispute resolution

mechanisms the term can refer to everything from facilitated settlem ent negotiations in which disputants are encouraged to negotiate directly with each other prior to som e other legal process, to arbitration systems. It included arbitration, as also conciliation, m ediation and all other forms of dispute

resolution outside the courts of law, which would all fall within the ambit of ADR. ADR facilitate parties to deal with t he underl ying issues in dispute in a more cost-eff ective manner and with increased efficacy. In addition, ADRs provide the parties with the opportunity to reduce hostility, regai n a sense of control, gain acceptance of the outcom e, resolve conflict in a peacef ul manner, and achieve a greater sense of justice in each indivi dual case. The resolution of disputes takes place usuall y in private and is more viable, econom ic, and ef ficient. ADR was at one point of time considered to be a voluntary act on the apart of the parties which has obtained statutory recognition i n terms of CPC Amendment Act, 1999, Arbitratio n and Conciliation Act, 1996, Legal Services Authoriti es Act, 1997 and Legal Services Authorities (Amendment) Act, 2002. The access to justice is a human right and fair trial is also a human right. In India, it is a Constitutional obligation in terms

82

of Art.14 and 21. Recourse to ADR as a m eans to have access to justice m ay, therefore, have to be considered as a human right problem. Considered in that context the judiciary will have an important role to pla y. The special provision Section 89, coupled with Order X Rules 1A, 1B, 1C of the CPC and allied laws, affords the judiciary the opportunity to offer the parties an arra y of avenues to resolve their issues in a timely and amicable manner and, in the process, reduce its backlog. The purpose of this special provision seems to help the litigant to settle his disput e outside the Court instead of going through elaborate process in the court trial. This is a special procedure for settling the dispute outside the courts by a simpler and quicker method. The litigants on the instituti on of the suit or proceedings may request the Court to refer the disputes and if the court feels that there exist any elem ent of settlement which m ay be acceptable to the parties; it may refer them to any of the forums abovem entioned at any stage of the proceedi ngs. In fact new rules in Order X were inserted in consequence to the insertion of the sub section (1) of section 89. These new rules namel y 1A, 1B and 1C have been inserted by the am ending Act. The settlement can be made by adopting any of the m odes specified in the section 89 of the CPC inserted by the Amendment Act. As per the Rule 1A the parti es to the suit are given an option for settlem ent of the dispute outside court. W hen the parties have exercised their option it shall fix the date of appearance before such person as may be opted by the parties. As per the Rule 1-B the parties are required to

83

appear before such forum opted by them. Rule 1C provides for the Presiding Officer of the Forum to refer the m atter again to the Court in case he feels that in the interest of justice he should not proceed with the matter.

84

CHAP TER 5 OVERVIEW OF IPR AND LI TIGATION IN INDI A 5.1. Introduction For nearly last many centuries economics had recognized onl y factor related to labour and capital, as of now in this is new changing world scenario, where in the technology is now pla ying a important role in shaping scenario of the world. In

the worl d over the information and knowledge has replace th e factor related to g capital and energy as t he initial wealthcreating assets in the world scenario, just as the m any years later, the two had replaced land and labour 200 years ago. The technology development driven majority of society of 20th century has transformed its physical wealth-creati ng work to "knowledge-based work. In current scenario the technolog y

and knowledge are now the key factors of production and overall generation of wealth with increased m obility of

information world around as well as increased the mobility to the global work force, now the knowledge and expertise can be transferred instantantly anywhere in the world, and through exchange of information any advantage gained by one

company can be eliminated b y com petitive improvem ents overnight. That due to wide spread access to information, the innovative company enjoys a sole com parative edge on its process of innovation--combining market and technol ogy know-how with the creative tal ents of knowledge workers to solve a constant stream of competitive problems and further its ability to derive timely value from extracted information.

85

In view of wider reach of the information and technology access to every one, the major challenge before companies, organizations will be in the coming years is to create a system for IPRs regime, so that innovative work and creative

innovations gets duly protected from pra ying eyes, to save precarious cost already spent on creating innovation can be stored thus m ore and m ore com panies may have to take or utilize the services of IP Managem ent Consulting Firm for drafting / prosecuti on of the intellectual Property (IP)

application(s) and also provide adequate funds for making paym ents for accessing the relevant IP databases for this purpose. Thus, to make Economics of Knowledge as the greatest strength of Indian economy, there would also required for creati ng an ecosystem for prom otion of particularl y

knowledge driven entrepreneurship with m ajor emphasis on creating an environment and a system to provide due

protection to the intellectual properties. This can be achieved by creating a stringent IPR regime. The Intellectual Property Rights (IPR) are ri ghts granted to creators and owners of innovative works which are results of a human intellectual creativity. These intellectual creativity

works can be related to nay of industrial, scientific, literary and artistic domains, which can be in the form of any invention or in the shape of a manuscript, a suite of software, or a business nam e. For last few years the importance of intellectual property has attained tremendously in India is well established at all levels whether it is a statutory or administrative and or judicial. That

86

India has also ratified its statutory laws in accordance to the agreem ent establishing the W orld Trade Organisation (W TO). This Agreement, inter-alia, contains an Agreem ent on Trade Related Aspects of Intellectual Property Rights (TRIPS) which came into force from 1st January 1995. It lays down minimum standards for protecti on and enforcement of intellectual

propert y rights in member countries, which are required to promote eff ective and adequate protection of intellectual

propert y rights wi th a view to reducing distortions of and impediments to international trade. The obligations under the TRIPS Agreem ent relate to provisi on of minimum standard of protection within the m ember countries legal s ystem s and practices. copyri ght, The IPR is a general term covering patents,

trademark,

industrial

designs,

geographical

indications, protection of layout design of integrated circuits and protection of undisclosed information (trade secrets). The Agreem ent provides for norms and standards in respect of following areas of intellectual propert y: Trade Marks Patents, Copyrights and related rights Geographical Indications Industrial Designs Layout Designs of Integrated Circuits Protection Secrets) Plant varieties of Undisclosed Information (Trade

87

5.2.

Intellectual Property Enforcement The general laws in relation to Intellectual Property

Enforcem ent in India are mainly the following: The Code of Civil Procedure The Indi an Penal Code The Civil and Criminal Rules of Practice.

W hile Civil Procedure Code provides for the civil rem edies and enforcement through civil courts, the Indian Penal Code

provides for penal remedies. The rules of practice of the trial courts, High Courts and the Supreme Court of India set the finalities of the enforcement procedure. India follows common law tradition and judicial precedents do have binding force. Hence the decisions of the Supreme Court bind the lower Propert y Laws judiciary of do provide the country. The Intellectual for statutory enforcement

mechanisms. The most important of the Indian Intellectual Propert y Laws are:The Patents Act, 1970 The Trade Marks Act, 1999 The Copyright Act, 1957 & The Desi gns Act, 2001 The above legislations are supported by the relevant Rules there under and these rules are:The Patents Rules, 1972 as amended by the Patents

(Amendm ent) Act of 1999 The Trade Rules, 2002 The Copyright Rules, 1958 & The Desi gns Rules, 2000

88

The main post W TO Intellectual Property legislations are: The The Geographical Indications Act, 1999 The Semi Conductors Integrated Circuits Layout Design Act, 2000 Geographical Indications Rules provide for the

administrative mechanisms for registration and enforcement of Geographical Indications. The Semi Conductor Integrated

Circuits Layout Design Act is yet to have its rules to support the administrative mechanism there under. The Inform ation Technol ogy Act, 2000 also pl ays an important role in relation to areas of inter-phase between Information Technology and Intellectual Property Rights. All the abovementioned legislations provide for in-built enf orcement

mechanisms and detailed procedures there of.

89

6.

SCOPE OF ADR IN IPR DISPUTES

6.1. MECHANISM IN THE INTELLECTUAL PROPERTY REGIME The following is a study as to how ADR mechanisms can be used to resolve various copyright, patents, trade mark and licensing disputes. The following is an in-depth study on how ADR can be imbibed into resolving IP-related disputes. 6.1.1. Commercial Copyr ight and Software Disputes A copyright dispute typically involves t he issue of whether or not an infringing party has infringed a copyright. 14 A key issue in such a dispute is usually the questi on of whether the infringer has unlawfull y "copied" or derived his own work from a work protected by copyri ght 15 The dispute typically i nvolves weighing the evidence of the infringing party's access to the original work and the degree of substantial similarity between the particular expressi ons of the original work and the infringing party's work 16 Usually, the case arises in a less-than-exact setting, for exam ple, consider the situation where the author of a book sues a m ovi e company alleging that a movie infringed his copyri ght in the book, or a writer of an old song sues the writer of a new song alleging that the other writer copied his song. Norm ally, of course, the nam e of the infringer's work and any

14

. Atari Games Corp. v. Nintendo of Am., Inc., 975 F.2d 832, 837 (Fed. Cir. 1992); see also Jessica Litman, Copyright As Myth, 53 U.

Pitt. L. Rev. 235 (1991).

15

Atari Games, 975 F.2d at 837-38; See, e.g., Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167, 1169 (7th Cir. 1997); Repp and K & R

Music, Inc. v. Webber, 132 F.3d 882, 891 (2d Cir. 1997); Grubb v. KMS Patriots, L.P., 88 F.3d 1, 6 (1st Cir. 1996).
16

Atari Games, 975 F.2d at 844.

90

characters, as well as the setting, plot and words, are not identical to their purported counterparts in the earlier work. If such were the case, the dispute would in all likelihood be settled quickly. Accordingly, the arbiter of the dispute must decide whether the accused party copied the expression fixed in the earlier work. This is accomplished by examining (1) the accused author's access to the earlier work; and (2) the degree of similarity between his work and the earlier work. A strong determination on the first element will mitigate the need to find a strong showing on the second. 17 Copyright cases are not technical and are usually fairly constrained in scope and complexity. Rarely do these cases require extensive discovery or documentation. Because

similarity is viewed from the perspective of the "ordinary observer", no particular expertise is required or appropriate for deciding these type s of cases. 18 Accordi ngly, these cases often are amenable to resolution through ADR, but no more or less so than m ost of the relatively straightforward commercial disputes. Although

involving m ore complicated subject matt er, disputes i nvolving duplication or derivati on of computer software and other highly technical issues can also be appropriate candidates for ADR. 19 As parties recogni ze the benefit of utilizing an arbiter with a particular technical background and ability to

understand the subject m atter at hand, ADR becomes a more

17

Shaw v. Lindheim, 919 F.2d 1353, 1361 (9th Cir. 1990). Hupp v. Siroflex of Am., Inc., 122 F.3d 1456, 1464 (Fed. Cir. 1997). John R. Kahn, Negotiation, Mediation and Arbitration in the Computer Program Industry: Why play hardball with software?, pt. III.B (1989).

18 19

91

attractive means of resolution. ADR also provides the parties with the opportunity f or f ar greater protection of trade secrets and other proprietary or sensitive inform ation during the proceeding itself. Unlike a trial, ADR allows the parties to determine for them selves the degree to which such information will or will not be made publicly available. 2 3 20 This would likely be considered a substantial advantage i n disputes regarding computer software, for exam ple, where continue d

confidentiality is often a primary concern. 6.1.2. Commercial Patent Disputes Patent disputes, especiall y those involving complex

technological issues, are often particularl y well suited f or resolution through ADR. For instance, an arbitrator selected b y the parti es may be better situated to address the technical aspects of an invention. Resolving a patent dispute involves addressing the patent's validity and subsequent

infringement. To address these issues, the decision maker must examine the technical aspects of the patent, including the claims and specification from the perspective of a person "skilled in the art" of the patent's subject matter. 2 6 Because many of the patents issued and involved in litigation today deal with biotechnology, pharmaceuticals, computer hardware and software (often referred to as "high technol ogy") the ability to select a neutral arbitrator, with training sufficient t o understand the subject matter at issue, can prove a

considerable advantage.

20

Jay E. Grenig, Alternative Dispute Resolution 1.2 (2d ed. 1997 & Supp. 1998).

92

In cases presenti ng a m ore "level pl ayi ng field" between disputants, m an y of the t ypical advantages of ADR over litigation sim ply becom e more prominent. Both sides may appreciate the ability to control substantially the amount of time, effort, intrusion and expense of the litigation. For exam ple, average patent dispute arbitration rarely exceeds 12 to 15 months, and often concludes withi n six months. Also, since m any such patent cases do not require that only one party may be deemed the victor, both parties may appreciate the opportunity to use ADR instead of litigation as a wa y to find the appropriate middle ground. For example, a mutuall y agreeable license arrangement benef its both parties and may be preferable to an all or nothing outcom e. Lastly, patent litigation has a well-deserved reputation for being costly. In patent cases, attorney f ees easily can 'go through the roof'. ADR allows parties to resolve their disputes in a more efficient manner, without si gnificantly depleting their budgets. One expert said that arbitration, conducted with skill and experience, should cost less than 50 per cent of a patent infringement suit. As ADR is becoming m ore popular in patent disputes, specific materials are now available to assi st the practitioner, ensuring a more successful process.. 6.1.3. Commercial Trade mark and Trade Dress Disputes. Trade mark and trade dress disputes typically involve a questi on of "likelihood of confusi on." Trade mark Plaintiffs are often involved in claims that allege that the Defendant's mark is confusingly similar to the Plaintiff's mark. The trade dress complainant often argues that the Defendant's packaging

93

presents his product in a m anner that misleads the public to believe it is the Plaintiff's product. In both instances, a key issue is the likelihood that consum ers will be confused about the source of the involved products. Issues often requiring resolution in both types of cases can include: the degree of distinctiveness obtained by the Plaintiff's mark or trade dress; actual or likely confusion b y consumers; similarity of the opponents' products or product categories; similarity of the marks or trade dress; sophistication of the relevant potential buyers and of the marketing channels used by the parties and the Defendant's intent in choosing his mark or trade dress.

Many such cases, however, arise where the parties have an ongoing business relationship. The parties in the dispute may, for example, have a license or franchise relationship existing prior to or unrel ated to the dispute. Often, a reasonable resolution may involve modification of the existing license from one party to the other, or the creation of an additional agreem ent. In such situations, there is a substantial benefit to avoid outright litigation not only in terms of time and expense saved, but also in being able to f ormulate the solution that best m eets the needs of the parties and the situation. This also helps prevent the parties from escalating the dispute into a purely aggressive "seek and destroy" approach, which easily could destroy any potential for future collaboration.

Although trade mark and trade dress disputes do not present complicated scientific or technical issues to a Court of law, they do require an understanding of equally com plicated legal

94

rules, consumer perception and surveys, and market data. Thus, disputing parties may pref er to resort instead to ADR for handling their conflict. ADR presents clear advantages that warrant consideration before most such disputes are pursued in Court. 6.1.4. Commercial Trade Secret and Unfair Competition Disputes: Misappropriation of a trade secret involves the acquisition of trade-secret information through a breach of an obligation of confidentiality or through illegal or otherwise improper means. 3 6 The accused party must have actual or constructive notice that the i nformation qualifies as a trade secret. Trade secret protection covers business information that provides a competitive advantage and that is kept secret and protected to a degree reasonable under the circumstances. Often, a former em ployee currentl y working for a competitor may be involved in such a dispute between the old and new em ployers. Claims of unfair competition m ay include unlawf ul, unfair or fraudulent business activity and unfair, deceptive, f alse or misleading advertising. Such claims are often intertwined with related trade secret, breach of contract or trade m ark issues. By the very nature of the issues i nvolved, usually at least one party in a trade secret dispute is very concerned about maintaining confidential the or secrecy proprietary of the trade secret Unfair or other

information.

competition

disputes may also present such concerns, depending on the exact nature of the claim. To the extent that confidentiality and the secrecy of the procedure are important, ADR may be a particularly appropriate alternative to litigation.

95

Trade secret and unfair com petition issues also tend t o involve parties that prefer a rapid resolution of their dispute, which often involves time-critical issues. For exam ple, a trade

secret, once disclosed without a requirement of conf identiality, loses its trade secret protection; an advertisem ent, by its nature, usuall y has a limited life span. In either situation, the parties often pref er a resolution as soon as possible. Again, ADR presents alternatives that can address this concern, as ADR methods generally proceed faster than litigation. Trade secret and unfair com petition cases often involve

technical subject-matter issues t hat may be difficult for a lay Judge or jury to underst and fully. For example, an unfair competition comparative claim could be based is be on a competitor's false and

advertisement

that

allegedly

misleading. A key issue could competitor's complete, product is

whether, in fact, the better, any faster, other more

reasonably or in

safer,

long-lasting

manner,

significantly superior to the Plaintiff's product. Just as with the patent cases discussed above, parties to these cases may also prefer to select a neutral arbitrator with the background and trai ning best able to understand the underlying subject matter, facts, and claims. Use of such an expert relieves the parties of the need to educate the fact finder, and helps to streamline the dispute resolution process by affording th e parties greater control over expenditures of time, effort and money. 6.1.5. Commercial Intellectual Property Licensi ng Disputes

96

Companies increasingly try to capitalize and m aximize the value of their intellectual property by entering into licensing agreem ents. 4 1 Often, such licenses include a provision for resort to ADR for resolution of any disputes that may develop regarding the intellectual propert y and the licensing matter. 4 3 For relationship. 4 2 Such licenses, however, may also give rise to issues implicating the underl ying subject

exam ple, one issue could be whether and to what extent a license covers the source code and/or object code of a particular com puter program and, therefore, subj ects the

software product to royalties, if, in fact, the product is permitted at all. Because the licensing agreem ent typically focuses in part on adequatel y describing the scope and substance of what is being licensed, such issues ma y also benefit from an arbiter's understanding of the technical subject m atter, as discussed above with regard to the underlyi ng and complex m atters often involved in patent disputes. Accordi ngly, intellectual when entering into an

property licensing agreement, both parties must

carefull y consider the identity and potential com plexity of issues that could arise when deciding whether or not to include an ADR clause in the contract. If the parties decide to include an ADR clause, it m ay be advantageous to consider issues such as the t ype of ADR available or the scope of discovery permitted at the time the contract is entered into, rather than belatedly when a dispute arises. One advantage of agreeing on the use and f ormat of ADR at this early stage is that attorneys and busi ness executives can establish fair rules

97

of conduct, which will prove advantageous if a dispute does arise. Parties must take extra care, however, when

determining the procedure used to resolve future conflicts at a time when the nature and exact subject m atter of a possible dispute is not yet known. Thus, if the drafters of the ADR clause appropriately consider possible ADR situations, and draft their agreem ent accordingl y, the parties to

an intellectual property licensing agreement may be able to set the stage for economical, efficient and reasonable resolution of any conflict that may arise later. Additionally, agreeing i n advance to ADR can relieve the parties from later concern that the other side will perceive the suggestion of ADR as sign of a weak case. 6.1.6. A copyright infringement A copyright infringem ent, breach or violation can arise in two ways: a person (or even an employee), without your authority, reproduces or takes a substantial portion of a work that is the subject of your copyri ght, an author considers that you have reproduced or taken a substanti al portion of their work. W hile there are many ri ghts that com prise the Copyri ght Act 1968, these are essentially divided into economic rights and moral rights. 6.1.7. Economic rights Economic ri ghts can be bought, sold and licensed by th e original owners of the cop yright. This means that, under the Copyright Act, copyright owners have the exclusive right to do, or authorise the reproduction, adaptation, translation,

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performance, broadcast, publication or public communicating, or importation of the protected work.

Most copyright infringem ents concern these economic rights. For example, cop ying a substanti al part of the source or object code from one computer software program into another is a breach of the copyright owners exclusive right to sell and reproduce features of their computer program that derive from that code. An ex-employee reproducing and publishing a substantial part of their ex-employers training m anual without permission is a breach of copyright on their literary work. 6.1.8. Moral rights Authors and creators of copyright work also have moral rights; these belong to the ori ginal creator and cannot be transferred to others. Moral rights include the right to: attribution as the works author whenever the work is

published or reproduced, preventing any other person from falsely claiming that they are the author of the copyright work; and preventing their work from being subjected to derogatory treatment. These right s can be infringed where authorship is not

recognised on a work or the work has been modified or displa yed in such a way so as to be considered derogatory. Most moral rights last for the duration of the copyright, although the author's right of integrity (i.e. the ri ght to prevent derogatory treatm ent of a copyri ght work) lasts only f or the author's lifetime.

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There are two options for resolving an infringement of your copyri ght, or a claim of infringement against you b y anot her party. 6.1.9. Copyright dispute resolution W hile an aggressive copyright litigation strategy might be the best approach in some circumstances, often the preferable comm ercial outcome (particularly when defending a copyright infringement claim) is to use alternative dispute resolution (ADR) methods such as negotiation, mediation or conciliation to facilitate communication between the parties so a

settlem ent to the dispute can be reached. ADR can be courtordered or privately organised. In all copyright infringem ent disputes, we consider whether ADR is a viable option, as dispute resolution will minimise costs and legal Copyright liability by avoiding a potential and litigation can sometimes lawsuit. be an

disputes

unwanted distraction from your day-to-day business.

6.1.10. Copyright litigation W hile we will always facilitate settlement where appropriate, sometimes the adoption of an aggressive copyright litigation strategy is either unavoidable or a necessary business

strategy. At the start of any litigation we provide you with a clear roadmap showing how a matter might unfol d, with timefram es and costs associated with each of those stages. W e keep you informed through regular updates as to the progress and costs of litigation.

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Our copyright lawyers have litigated in various jurisdictions including the Federal Court. Our team of copyright lawyers has a wealth of intellectual propert y experience and will devise a strategy, tailored to your needs and the needs of your business. 6.1.12. The current approach: patent litigation A patent can be generally defined as a proprietary right over the invention of a product or process that provides an inventor with a m onopol y right for a certain period of time, t ypically 20 years during which the product or process cannot be exploited by others. The Patent disputes t ypically arise where a third party allegedly infringes the monopoly right of a patent holder, although other disputes such as those involving licensing agreem ents can also eventuate. In m ost federal states intellectual propert y is a matter of national jurisdiction and so proceedings are initiated in the federal level court. Most patent disputes involve courts having to decide on technical questions of fact and law with respect to claims of alleged patent infringement. This requires

consideration of an appropriate m eans to interpret the claims of a patent, which can be defined as the precise technical descri ptions of the invention on which is based an eval uati on of the protection sought. Its interpretation is a question of law and on appeal the court may discard the claims interpretation, forcing the parties in dispute to re-argue their case on correct interpretations. This is a complex procedure that ultimately contributes to the process. often lengthy and expensive litigation

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The cases become further com plicated when a part y alleged to have infringed a patent responds with a counterclaim of patent invalidity. This is the most typical defence to infringement. Cross claiming requires the court to reconsider the validity of the original patent of and whether it meets the statutory non-

requirements

novelty,

inventiveness

and

obviousness.9During re-examination the court m ust consider newl y uncovered references or evidence potentially material to the patentability of the invention that had not been considered by the relevant patent office.10 If a defendant successfully pleads the defence of a patent the patent owner will lose not only the case but also the patent itself. Conversely, infringement injunction ordered. a patent owner be who successfully dam ages, will wi ns and an an be

claim

may further

awarded

against

infringement litigation

typically

Evidently,

patent

involves

many

complexities. That growth in international transactions has multiplied the potential for cross-border intellect ual property (IP) disputes. Global challenges such as the digital environm ent, cl imate change issues, access to health care, the protection of traditional knowledge and traditional cultural expressions and the preservation of biodiversity may create new t ypes of IP disputes. Meanwhile, the economic downturn is providing an incentive for stakeholders to seek m ore efficient and

affordable means of resolving such disputes than through court litigation making alternative dispute resolution (ADR) an increasingly attractive option.

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ADR refers to neutral mechanisms allowing parties to solve their disputes outside of court i n a private forum, with the assistance of a qualified neutral intermediary of their choice. ADR can only be applied if all parties agree to submit their dispute to the procedure or if it is mandated by a competent court. The benefits include time and cost efficiency, flexi bility, party control, neutrality, a single procedure, confidentiality and expertise. 6.1.15. Domain Name There is a distinction between a trademark and a domain name, which is not relevant to the nature of the right of an owner in connection with the dom ain name, but is material to the scope of the protection available to the right. The distinction lies in the m anner in which the two operate. A trademark is protected by the laws of a country where such trademark ma y be registered. Consequentl y, a trademark ma y have multiple registrations in many countries throughout the world. On the other hand, since the internet allows for access without an y geographical limitation, a domain name is

potentially accessible irrespective of the geographical location of the consumers. The outcome of this potenti al for universal connectivity is not only that a domain name would require world wide exclusivity but also that national laws might b e inadequate to effectively protect a domain nam e. The lacuna necessitated international regulation of the domai n nam e system (DNS).

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This international regulati on was effected through W IPO 21 and ICANN 22 . The outcome of consultation between ICANN an d W IPO has resulted in the setting up not only of a system of registrati on of domain nam es with accredited Registrars but also the evolution of the Uniform Domain Name Disputes Resoluti on Policy (UDNDR Policy) 23 by ICANN on 24th October 1999. As far as registration is concerned, it is provided on a first com e first serve basis. Besides the UDNDR Policy is instructive as to the kind of rights which a domain name owner may have upon registration with ICANN accredited Registrars. The Dispute resolution under the Uniform Dom ain Name Disputes Resolution Policy (UDNDR Policy) b y ICANN A person may complain bef ore administration-dispute-

resolution service providers listed by ICANN under Rule 4(a) that: i) A domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; and ii) The dom ain nam e owner/registrant has no right or

legitimate i nterest in respect of the domain name; and iii) A dom ain name has been registered and is being used in bad faith.

21 22

23

World intellecetula property organistion Internet Corporation for assigned names and numbers Uniform Domain Name Disputes Resolution Policy

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Rule 4(b) has listed by wa y of illustration the following f our circumstances as evidence of registration and use of a domain name in bad faith: (i) Circumstances indicating that the domain name owner / registrant has registered or the domain name owner /

registrant has acquired the domain nam e primaril y for the purpose of selling, renting or otherwise transferring the

domain nam e registration to the complainant who is the owner of the trademark or service mark or to a competitor of that complainant, for valuable consideration in excess of its

docum ented out-of-pocket costs directly related to the domain name; or (ii) The dom ain nam e owner / registrant has registered the domain name i n order to prevent t he owner of the trademark or service mark from reflecting the m ark in a corresponding domain name, provided that it has engaged in a pattern of such conduct; or (iii) The domain nam e owner / registrant has registered the domain name primarily f or the purpose of disrupting the business of a com petitor; or (iv) B y using the domain nam e, the domain nam e owner/ registrant has intentionally attempted to attract, for

comm ercial gain internet users, to its web site or other on-line location, by creating a likelihood of confusion with the

complainants m ark as to the source, sponsorship, affiliation, or endorsement of the dom ain name owner/registrant web site

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or locati on or of a product or service on its web site or location. The defences available to such a complaint have been

particularised " but without limitation", in Rul e 4 (c) as follows: (i) Before any notice to the domain name owner/registrant, the use of, or demonstrable preparations to use, the dom ain nam e or a name corresponding to the dom ain name in connection with bona fide offering of goods or services; or

(ii)

(ii) The domain nam e owner/registrant (as an individual, business, or other organization) has been commonly known by the dom ain name, even if it has acquired no tradem ark or service m ark rights; or

(iii)

(iii) The dom ain name owner/registrant is making a legitimate non-commercial or fair use of the domain nam e, without intent for commercial gain to misleadingly divert consumers or to tarnish the trademark or service m ark at issue. These rules indicate that the disputes may be broadl y

categorised as: (a) disputes between trademark owners and domain name owners and (b) between dom ain nam e owners inter se. A prior registrant can protect its dom ain name against subsequent

registrants. Confusing similarity in domain nam es ma y be a ground for complaint and similarity is to be decided on the possibility of deception am ongst potential

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customers.

The defences available to a com plaint are

also substantially similar to those available to an action for passing off under trademark law. As far as India is concerned, there is no legislation, which explicitly refers to dispute resolution in connecti on with

domain nam es. But although the operation of the Trade Marks Act, 1999 itself is not extra territorial and m ay not allow f or adequate protection of domain names, this does not mean that domain names are not to be legall y protected to the extent possible under the laws relating to passing off. 6.1.16. International Intellectual Property Disputes The nature of international disputes l ends itself to conflicts as a result of diverse legal s ystems and tribunal procedures. Also, international intellectual property disputes often involve nations that may have very different ideas regarding

intellectual property and the level of protection that it should be afforded; so therefore, the dispute mechanisms provided by General Agreement on Tariffs and Trade (GATT) and W IPO stand as the benchmark for the method and procedures to b e followed when resolving international disputes. 6.1.17. Fundamental Problems of International IP Disputes One of the fundamental problems in i nternational

intellectual property law disputes is the myriad conceptual differences in the wa y in which different nations

view intellectual property rights. For instance, until the recent ratification of the GATT, which resulted in dramatic changes i n domestic patent law in the United States, the domestic law

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required that patent applications be m aintained in secret, and discl osure not be made until the granting of the patent. The secrecy of pending applications distinguished domestic law from foreign patent registration procedures, where disclosure occurs at the time of filing. Mechanisms employed under international agreements, that include ADR provisions, may provide better means for protecting intellectual propert y in less developed nations, and industrialized nations may then decide to enter the markets in these nations. Complex issues, such as choice of law or jurisdiction, will no longer be problematic when dispute settl ement procedures are outlined in multilateral agreem ents. For instance, when mediation is used in

international intellectual propert y disputes, it is more problem solvi ng than bei ng right determinative. The fact that mediation focuses on solving the problem and not on the rights of the indivi duals is the key to its effectiveness in dispute settlem ent. One of the fundamental is the problems existence of with different

intellectual property disputes

views that developed and under-developed countri es have with respect to intellectual property rights. By focusing on problem solvi ng and not exclusively on the rights of each party,

settlem ent may be reached through compromise.

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CHAPTER 7 IP DISPUTES FOR ADR MECHANISMS 7.2. The IPR disputes and ADR: The people across world over frequently involve in crossborder commercial transactions having different backgrounds and different national laws or sometimes within different states of India. Som e time due to inherent flaws these disputable transactions create multi-jurisdictional disputes between the nationalities of different countries having different social

backgrounds, mindsets. Usually those business entities having familiarity with alternative dispute resolution (ADR) are able to resolve such conflicts efficiently. In other words, a court can

enforce a decision reached in an ADR proceeding solely against the parties in that proceeding.

Though use of alternative dispute resol ution ADR to resolve bilateral conflicts has been recognized and being carried out successfully but use of ADR in Intellectual property right conflicts is a not yet utilised to its full potential rather the intervention of ADR in Intellectual property rights conflicts is being carri ed out in slowl y as being seen as a novel

intervention. The ADR has not been fully used much in India in respect of IPR m atters.

Though Intellectual property comprises of exclusive rights acquired over property created with intellectual / innovational effort of an individual principally over novel ideas, s ymbols, names, images, creative works: inventi ons, literary, artistic, scientific works and designs including performances of

performing artists, phonograms, and broadcasts, inventions in

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all fields of human endeavor, scientific discoveries, industrial designs, tradem arks, service marks, and commercial names and designations basically deriving the results or out come from simulative and cognitive efforts put by such an individual to protect its intellectual / innovational against unfair

competition.

Intellectual property right acquired over property created with intellectual / innovational effort of an individual pri ncipally over creative works give the creator the right to prevent others from making un-authorised use of their property f or a certain period but wide Internet usage has rendered boundaries of the states m eaningless. In this scenari o the Intellectual Propert y Rights are becoming fundamentally exigent to get research propert y collaborations rights tool as and thereby m aking in to

Intellectual assets for

valuable

business

technological entities.

As

the

determination

of

commercial

or

non

commercial

disputes before different nati onal courts can result in to high legal and other costs as well as conflicting awards. Therefore, the ADR has a potential to provi de business entities belonging to distinct nationalities a single unified forum of arbitratio n thereby having a f inal and enforceable award binding across multiple jurisdictions. Hence, increasingly, IP owners and users are approaching to many of known alternative dispute resolution (ADR) procedures like arbitration and mediation to resolve their IP disputes

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Though

in

today's

consumer

oriented

world,

intellectual

propert y is emerging as one of the most valuable legal rights in the global economy, invariably technology has becom e increasingly dependent Intellectual Property laws for its

protection, hence, we can not ignore the the importance of Intellectual Property laws for provi ding protecti on to

intellectual / innovational efforts of an individual. Resultantly, various nati ons around the globe have entered into multilateral agreem ents having unified rules to increase the protection of intellectual property rights i n their respective constituents.

The vast majority of intellectual property litigati on, especially cases involving copyright, patent and trademark i nfringement claims takes place in the our courts. Like most cases that set out upon the litigati on path, intellectual property cases are most often settled before trial; the number of cases actually tried in court is sm all.

Regardless of when intellectual property lawsuits are settled, the cost of litigating is extremely high and is incurred up to the completion of trial. The Trademark, Copyright and Patent cases but even these cases can run into the hi gh six figures or more when potential damages are large (i.e., exceeding 20 lacs), there are complex legal issues and/or a lengthy trial is anticipated.

Not only is litigation expensive, it is a liability on the balance sheet f or as long as the lawsuit exists, which can be a decad e or more in patent cases that are appealed and then retried A

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more practical problem is that litigation continually drains a companys cash flow. And litigation is so very public. So, when your client is faced with enforcingor acquiescing toan intellectual property right, the question Should one advi se the company to step into the ring? should be asked because there are alternative, less public and less costly ways of resolving many intellectual propert y disputes. The m ost common are arbitration and mediati on, whi ch are distinctly different

alternative dispute resolution (ADR) processes.

How do parties enter into arbitration? It is prudent to use a pre-dispute ADR clause providing for arbitration in th e

transaction documents, such as a patent royalt y license. The ADR clause usually states that the parties agree to arbitrat e any and all disputes arising out of or related to this

agreem ent. Having this clause can lower the temperature of the parti es potentially heated reactions, which can distract them from objective decision making after a dispute arises.

If there is no ADR clause in the relevant documents, the parties can agree to arbitrate post dispute. However, by that time the parties usually are so at odds with each other that they are less likely to agree on anythi ng. The cost of not having a pre-dispute clause is that if litigation is commenced, the court might require the case to be arbitrated or mediated before a court-appointed neutral under a court-referred ADR program. This obviously takes the decision making about the process of resolving their intellectual propert y dispute out of the parties hands.

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Private commercial arbitration allows the parties to have that control. Significantly, it allows them to decide on the rules and procedures that will appl y to their arbitration.

In

most

cases,

parties

agree by

to an

have

their

arbitration neutral

proceedings

administered

established,

arbitration provider, such as the Indian Council of Arbitration (ICA), which has well-tested arbitration rulesbut does not includes specialized rules for patent disputes and acts as an intermediary with respect to neutral com pensation issues. The Arbitration rules tend to be flexi ble and give great discretion to the arbitrator to manage the proceedings. Even when agreeing to arbitration under ICA rules, parties can adjust the rules to meet their needs. Because the arbitration agreem ent governs the arbitral process, parti es need to pay consi derable attention to the terms of that agreement to increase the likelihood that the dispute will be resolved without the need for litigation

In this scenario the W orld Intellectual Propert y Organization (W IPO) has been pla ying pivotal role since its incepti on in strengthening ADR procedures for IP conflicts and forefront in resolving IP conflicts through their specialized ADR

procedures. The Intellectual Property conflicts are not that conflicts which cannot be adjudicated or resolved through ADR. As Intellectual Propert y conflicts being a specialised in its nature and it require specialsed services of ADR experts in resolving IP conflicts, mainl y due to non availability of IP experts in India is the m ain obstacle in resolving IP conflict through arbitration or through ADR.

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Thus under the aegis W IPO developed inherent mechanisms of resolution the Arbitration and Mediation between various

nations around the globe trough their multilateral agreements, These many of multilateral agreements entered between

various nations around the globe recognising that traditional legal litigation is no longer the most viable as mean of settlin g international intellectual propert y disputes.

It is agai nst this backdrop, till date it is not yet utilised fully in India by Indian courts as well as Individuals and or business entities in resolving the Int ellectual propert y rights conflicts. In India at Present the provisi ons of ADR solely being i nvoked in disputes of general civil nature litigation, matrimonial and other business litigations where arbitration clauses are being part of the agreem ents only in relation to ADR and conciliation Act. Hence Through this research paper I will try to discuss various remedies available in ADR in respect of IPR conflicts which can considerable reduce the IP litigation i n our courts too. 7.3. Reasons to Consider ADR for IPR Disputes As a general principle, intellectual property rights are

territorial in scope. The Patent Act, for example, provides that the grant of a patent confers a right to exclude others from making, using, offering for sale, or selling the invention throughout the India. That normall y copyright law also does

not apply beyond particular states territorial boundaries, even though the Copyright Act is not explicit on the point. The

same principle is generally true of trademarks (alt hough infringing activity in the case of trademarks sometim es is

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found to occur outside of territorial boundaries). At the sam e time, contracts and licenses concerning IP rights and

transactions frequently create and extend related legal right s and obligations beyond a single nations territorial boundaries and, because of international treaties and the harmonization of national laws concerning intellectual property, the same IP rights increasingly are recognized and protected

simultaneously in many different nations.

7.3.

Certainty as to Forum . As with any commercial transaction implicating the laws and judici al power of several different jurisdictions, one of the primary reasons in an IP transaction for including a

contractual clause mandating the ADR rather public court adjudication of any disputes is simply to provide the parties with the certainty that, i n the event of a dispute, they will be submitting their dispute to a simple forum for resolution rather than potentially to several dif ferent forums in several different jurisdictions simultaneously. W ithout such an arbitration

clause, one part y or the other might file a lawsuit in each of several different jurisdictions having power to apply its law or its judicial power to the parties or transaction. Courts of the

United States, as in m ost other nations, will ref use to hear a lawsuit that is within and the will scope of a valid the contractual parties to

arbitration arbitration.

clause,

instead

refer

Thus, such clauses generally are viewed as

indispensable by commercial parties whose transactions are subject to the laws or j udicial power of more than one nation or jurisdiction.

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7.3.

The

Relative and

Speed other

of ADR of

ADR .

The

Properly tend

managed, to provide court the court

arbitration speedier

mechanisms disputes occurs

resolutions This ADR

than either unlike

public because public

adjudications. arbitration /

t ypically

proceedings,

adjudications, are able to commence immediatel y (i.e., there is not an entire docket of cases com peting f or the attenti on of the adjudicator), or because the procedural flexibility of

arbitration / ADR results in the proceeding taking less time. The speed of dispute resolution principal multinational treaty governing international arbitration.

7.4.

Arbitration and mediation of IP disputes as alternatives to litigation. W hen the company has been accused of trademark infringement and the suit has been filed and t he com plai nt served. The court offers mediation of the dispute. The com pany operates under a licence in connection with its sale of a particular product line. A new line is introduced, and the licensor claims the new product line is subject to the licence. This licence agreement requires arbitration of all disputes arising under the licence. In m yriad situations,

companies have at least an initial option to mediate a di spute, or arbitrate, in advance or instead of litigation.

The common wi sdom is that arbitration is less expensive and more expeditious than litigation. In some circumstances, this may even be true. In som e circumstances, arbitration or som e other form of alternative dispute resolution (ADR) m ay provide an economical, efficient alternative to the race for the

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courthouse and all that transpires there. Certainly, as it has been said, all disputes are settled eventually: they are settled by the parties themselves or b y a judge or jury.

7.5.

Initial considerations in selecting Litigation Alternatives: The knowledgeable use of litigati on alternatives cannot occur unless bot h parties to the IP dispute understand their business goals. Do the y know wh y the y are fighting and what each wants to accomplish? Is the goal a public victory in court or to crush the com petition? Maybe what they reall y want is to put the litigation behind them and get back to business; maybe they want to control their litigation costs.

For example, before choosing a process to resolve a patent dispute, a plaintiff should consider the potential returns from litigation, including the available damages and how much product excl usivity will be available under the scope of claim coverage provided by the patent. A defendant shoul d consider the likelihood that it will have to pay dam ages, the am ount of such damages and whether product changes can be made to minimize or eliminate the dispute. Given the costs, time and uncertainty of IP litigati on, many issues m ay be better

addressed using ADR approaches such as arbitration or mediation.

The

competition

in

high-value

technology

areas

like

pharmaceuticals and medical devices is so f ierce that in many cases traditional civil litigation is heavily relied on to achieve business goals. It is not rare for these cases to involve 10 or

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more patents, which inevitably entangles the parties in a long and costly process with uncertain results. Attorneys shoul d questi on whether it is necessary for their clients to take this path in every IP dispute.

As recently the our Civil Procedure code has understood the potentiality f or settlements through other means in which courts to consider the potential for settlem ent in each case after filing a lawsuit, counsel should raise with the client whether mediation or arbitrationor both sequentiall y would be a more productive way to achieve the clients commercial goals. Clients should trademark and patent also be licenses asked to research earlier and litigation settl ement

agreem ents with the adversary to determine whether any of them require the use of ADR to resolve future disputes arising out of new or related technology.

Som e IP cases cl early should go the litigation route: the cases which present novel legal issues, wh ere a legal precedent is desired for future enforcement efforts and where court-

supervised discovery ma y be necessary because of the level of detail needed of to an obtai n invention. critical Full facts regarding and the court

development

discovery

involvement m ay be required in some cases when dealing with issues like multiple contributions to an invention, propriety of conduct or the timing of a competing inventors efforts.

But many of IP cases do not raise novel issues or are not potentially fit for judicial precedents. Thus, it is important to

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make a determination in almost every case as to whether mediation and/or arbitration woul d be pref erable to litigation. Making this determ ination depends on a num ber of factors. I n some cases, one factor m ay be so dominant that it determines which form of dispute resol ution is best. In other cases, several factors taken together may weigh in favor of one process over another. The factors to be considered are addressed below.

7.6.

What form of ADR should be pursued? After setting out the framework for the discussion regarding what forms of ADR are commonly used and how they differ we can look at some of those circumstances in the context of IP disputes, where the answers may be somewhat clearer than it depends. W e can also look at some of those circumstances where the determinati on to employ a particular form of ADR may depend on the jurisdiction; the basis for the parties past relationship; the desire of the parties to maintai n a

relationship going forward; and the nature of the relief sought. W e can start with a presum ption that the legislature and the judici ary favour arbitration, and other forms of ADR, as private dispute resol ution shifts the costs to the parties and relieves congestion in the courts. ADR encompasses a variety of processes used to resolve disputes in lieu of trial. ADR includes not only arbitration which is adjudicative, but also mediation and earl y neutral evaluation, which are non-

adjudicative.

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W hether one opts for arbitration or mediation, or for any other form of ADR (eg, earl y neutral evaluation), to resolve disputes over intellectual propert y depends on a number of factors. ADR has both advantages and disadvantages over litigation.

7.7.

The advantages of ADR have been recognised: Norm ally speed of resolution (the caveat is that some IP disputes m ay be resolved m ore expeditiousl y by filing a motion for interlocutory injunctive relief, whether an application for a tem porary restraini ng order or a preliminary injunction); generally less expensive (this is in part because fewer formal requirements allow for compromise in resolution rather than zero-sum flexibility in fashioning remedies); less combative and so preserves business relationships; preserves confidentiality, which m ay be a major

consideration in matters involving trade secrets, patent matters and even trademark disputes where product attribute and custom er information may be relevant to the determination; and the decision maker has accepted expertise, and

presumabl y, real interest in the subject m atter of the dispute. The disadvantages of ADR have to be weighed for IP disputes in particular: no binding precedent; may not serve as a deterrent to other infringers; Generally no appellate review; third parties cannot be compelled to participate; and Costs may not be m uch

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lower than in litigation, particularly if the parties engage in discovery and there is extensive briefing.

7.9.

Mediation and Arbitration are different forms of ADR. Mediation is a non-adjudicative, facilitated settlement

negotiation process. In som e jurisdictions, a statute or court order may impose mandatory supervised m ediation on the parties. The parties can themselves agree t o m ediate, either before a dispute arises or after. The parties may em ploy an a d hoc m ediation process or submit the dispute to mediation through a private organisation.

7.10. Other approaches to ADR Other approaches to ADR are as varied as submitting m atters in dispute to a mock jury or using a rented j udge in a summary trial for evaluation or disposition, and can be as simple as earl y neutral evaluation.

W hen considering whether to resort to ADR, and what sort of ADR, it is important to consider the nature of the relief sought: is the process employed one that can provide the desired relief; and, even if so, is there a means enforcement; and will the arbitration resolve all of the issues in the proceeding, or only some of the issues, so that there will be litigation in an y event?

In the IP area, certain types of disputes are simply not as well suited as others to ADR: f or example, counterfeiting cases and cases where the Patent Office, and not the parties or an

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arbitrator, may grant a reissue or determine who prevails in interference.

The point of all of this is the caution that boilerplate arbitration clauses need to be reviewed carefully and that consideration should be given to other forms of ADR, with the understanding that there are situati ons in which arbitration, and other forms of ADR, m ay not, in the context of IP disputes, provide the best resolution or a better resol ution than either litigation or no acti on at all.

7.10.

The value of IPR disputes in ADR mechanisms That in the various mechanisms for settling disputes, litigation is a legitimate, open the most efficient process for resolving disputes, which is characterized by the public, mandatory program, etc., but these procedures to resolve disputes with natural features of the resolution of intellectual property disputes, but there are m any limitations. Although the ADR and litigation in the settlement can not be completel y

overcome the drawbacks of intellectual property disputes, but the ADR itself has many advantages that are not litigation, but tend to become parties to the dispute select ADR to settl e disputes on grounds of intellectual property, but also

highlights the existence of ADR on the value of the dispute.

As compared to other common property rights, rights of intellectual property with the object hidden features, regional, perishable, legal and others. Thus, to resolve disputes over intellectual property as a resul t, there are special

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requirements,

such

as

professionalism,

timeliness,

confidentiality, diversity and so on.

7.10.1. professional That Intellectual propert y disputes in the literature, art,

science and other fields, disputes the fact that a wider scope, and resolve the disput e to resolve professional issues and techni ques is greater. For example, the litigation in

counterfeiting. Is copyright, the judge is accused of having violated if the works are ori ginal works of the same or similar to the original artworks alleged offense is plagiarism, copy, deform and manipulate the rights on works, and if in the proceedings in counterfeiting? is patent, the questi on of the alleged infringem ent of patent specifications and requirements related to the corresponding technical characteristics, is

essentiall y the sam e way perform the sam e function, making it the same ef fects. and there is no external manifestations of intellectual property rights, the right to rely entirely on the right to define the scope and content, and intelligence to create products which these laws are often associated with a considerable degree technical content, as often as those with technical knowl edge and appropriate legal professionals to understand and grasp. in the proceedings, the arbitrator of the dispute are the professi onal judges, and judges generally consider that a legal expert in the field, they have onl y the law enforcement, the fa? development of we correctly determine the correct and the

the evidence presented at trial

expertise and capacity, and theref ore generally not a good deal of intellectual propert y rights in cases of professional

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issues related to technology. and different action, ADR is able to better m eet the IP needs to resolve disputes.

As part of ADR to resolve IP disputes, the parties ma y agree to select the relevant field of technology experts, legal experts and has extensive experience as an ADR neutral secti on three people involved in the regulation dispute, vocational training and experi ence to play the role? the conflict resoluti on are more reasonable behavi or, and standardized as a third party experts to provide professional or technical problems related to cognition and evaluation to assist the parties to form on the facts, evidence of technical and legal issues related to a clearer understanding, which is conducive to m aximizing the protection of clients to the right decision based on judgments of a settlement of disputes rationally.

7.10.2 Low cost Litigation is a national law bindi ng dispute settl ement process applies, with a strict system of technical standards, complete each step of the procedure or measures related to spend som e time, usually a long period to resolve the dispute. Cycle and intellectual property liti gation is generally higher than ordinary civil cases, even more. First, because the legal issues of intellectual property litigation and technol ogy intersect the complexity consuming, disputes, of on the the more issues other m entioned, hand, in the the finish is time

intellectual general

propert y

and

supplement

procedures

necessary civil engineering, often related to situations such action is interrupted, which has exacerbated the c ycle delay of

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litigation. intellectual property litigation in the worl d have long trial periods and characteristics of high cost, and the

widespread problem of the backlog of cases following the procedure for settling the dispute has led to high cost in litigation, because the parties have f ull control in ADR and at the right speed and efficiency of dispute resolution depends on the intention of the parties, the parties to the di spute

resolution sought cost of time and money invested in the control it from a certain range, if the ADR has the advantage of saving time and money no doubt.

In addition, ADR is not only savings cost for the parties, including parties to the dispute settlement process to pay th e cost directly, incl uding disputes arising in the process of cost indirectly, such as business interruption, destruction of the relationship between the parties and the l oss of future

business opportunities, etc.. 'Facts have proved that more use of dispute resolution in intellectual property litigation in

resolving disputes outside of litigation, the parties can save the cost of dispute settlement m ore and has thus more viability.

7.10.5. Flexibility The dispute is a national exercise of judicial power and the right to obtain from large, so that the operation of process and technology is very accurate, reasonable, and specialized, with a separate set of procedures and standards. But the com plex relationship of intellectual property rights disputes,

heterogeneous interests of the parties, the demand for variet y,

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it is difficult to solve with standard types of disputes. and? ADR is a consensual basis, and for different parts of the program center, which makes the resolution of disputes in order to avoid the stark choice of anything, so that the ADR with a high degree of flexibility and ph ysical variability, and the parts (a) total compensation. '... in ADR, the parties concerned the right to choose and decide the dispute

settlem ent of personal interest, the parties may com bine the understanding of the nature of intellectual propert y disputes and address the concerns of the design process in form parties under the principles of aut onom y and self-selection laws applicable intellectual property rights and regulations, industry standards, busi ness practices, etc., or sim ply based on som e principl es or rul es of law agreement negotiated settlem ent of disputes.

7.10.5. Confidentiality Intellectual property ri ghts, in addition to public intellectual achievem ents, but there are many undocum ented trade secrets and other confidential internal information such as product formulation, customers, production business processes, technologies and co? data ts,

plans,

operational

methods,

profits, etc. This informati on m ay be parties to the competition between com panies to win a key f actor, the parties do not want to open and aware of com petitors in the process settlem ent of disputes to the extent possible, protect the confidentiality of proprietary information. The natural action of the public with the evidence, procedure and results are open to the parties and the public, so that the privacy and trade

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secrets is a large risk exposure and this difference is, ADR is often the procedure is confidential. In m any countries

legisl ation ADR (mainly arbitration and conciliation law) and a variety of ADR in rules of the organization of the procedure are clear to the confidentiality provisions. For those who want to protect privacy, trade secrets, com mercial information not to discl ose the terms of the parties, the ADR conf identiality of the process benefits the party more than the parties or by the exchange discovery. of evidence dispute benefits obtained through

7.10.5. To maintain beneficial relationships In many intellectual property disputes, parties often have a long business relationship, service providers and custom er relationship, business relationship between the joint ventures, the establishm ent of these relations is not the success of overnight, and in the fierce market competition, possibilities of cooperation is not often achieved, and therefore the parties are generally the value of these relationships and attention. in case of dispute, the parties shall consider the interests of resolving disputes are often not only sta y in one time gains and losses level, maintain long-term interests of the

comm ercial relationship is becoming more of a compromise decisive factor, litigation is adversarial mechanisms for

resolving disputes, the judge's task is to clarif y and protect th e authority of those who are enrolled in the legal text of th e value and protect the legal rights of the parties and to achieve social justice, result of the decision is? Either all-or-nothing (all or nothing) ',' black and white, 'if the parties after the trial

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there may be in a state of perpetual conflict and confrontation. and m echanism of action is different, ADR can provide a n effective, but not resolve the conflict, given the rel ationship between trade between the parties over a long period to avoid the rights and obligations established under the law simply to make a relation of determination, the result is not a simple mechanism for resolution of the result, relatively little harm to the feelings between the parties.

7.10.5. The adequacy of the results For the administration of justice in the proceedings before the dispute took place, the parties to the dispute settlement procedure is the subject of rights and obligations between the parties am ount an of absolute litigation disti ncti on. and However, a considerable ri ghts and

intellect ual

property

obligations can not be sim ply attributed to relationship m ay be of interest for m ore balance. ADR to resolve the dispute does not dwell on the past, in the settl ement of disputes more concerned about future earnings.

Accordi ng to t he principle that the interests of compromise and concessions, as opposed to the struggle for human benefit without more appropriate, For example, in disputes

counterfeiting? Is patent counterfeiting? One patent once the composition, m ost have now an established fact that

counterfeit goods have a certain market, some companies have even violated certai n scale. with respect to litigation to obtain damages for the termination of the infringement, or the results of such a measure, if both parties through licensing,

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joint ventures or other forms of mutually beneficial cooperation in the exchange for ending the controversy, not onl y conducive to achieving a win-win, and can create a more substantial benefits socially and economically.

7.10.6 The specific modalities of intellectual property disputes ADR ADR, including all intellectual property disputes in a court outside the mechanism of formal dispute resolution process to resolve intellectual property rights, at present, the m ain mode of IP ADR administrative processing, arbitration, mediation, negotiation.

Administrative intellectual disputes

processing rights

is

regulated

by

the

law of

of civil

property

administrative

organs

between

equal

entities,

including

administrative

decisions and administrative of the two forms of mediation, arbitration is that parties to the conf lict took place before or after the dispute agree to submit the dispute to the Joi nt recognized third-party proceedi ngs, and subject to widely advertise the results of the model dispute resolution, similar to the privatization of the tri al, civil mediation refers primarily to the interventi on of a neutral third party, to the parties in reaching activities of the agreement dispute resolution,

including social groups, organizations, autonomous mediation associations and i ndustry, lawyers, mediation, negotiation is Referring to the dispute or the parties through their own private forces of compromise and compromise to resolve the dispute. In addition, there are still overseas, may be used f or

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various

forms

of

ADR

to

resolve

IP

disputes,

including

orientation assessment, mini -tri als, mediation - arbitration and arbitration - mediation and various forms of repetition of the ADR base, multi-application, or local changes in the resolution of disputes.

7.11.7. The specific modalities of IPR comparison of ADR Different t ypes of model intellectual propert y ADR has its own characteristics, advantages and disadvantages, Table 1 of voluntary, m andatory, third, a formal, procedural in nature, results, and open to reveal several aspects of the main similarities and differences.

7.10.8. That size and importance of the dispute: Many litigators believe that IP disputes

involving

large

am ounts of damages, compl ex legal issues and extensive expert testimony are not suited for mediation or arbitration. This is too simplistic. There is no reason to allow the amount of money at stake to rule out arbitration or mediation. If the financial resources of the aggrieved part y are limited, litigation is likely to quickly eat up those resources, leaving this party without a resoluti on and without funds. In these circumstances, mediation is a sensible alternative and should be considered first.

Many litigators and business executives believe that when a companys survival is at stake, the di spute should be litigated. However, both arbitration and m ediation allow for confidential treatment of the parties financial data, business-plannin g

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information and development workprotection not available in litigation, at least once the trial begins. Protective orders typically are effective only during the discovery phase of litigation, an important f actor to consider when trade secrets or highly com petitive businesses are involved in a dispute. Parties m ay not want to discuss their proprietary information in court i n f ront of com petitors who frequently m onitor IP trials precisely i n order to learn about a competitors business. Mediation and arbitration do not take place in public. Thus, ADR should not be ignored just because an IP case is monetarily large, com plex and im portant.

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CHAPTER 8 INTERNATIONAL DISPUTES: Intellectual property cases that are international in scope are particularly well suited for arbitration or m ediation. Arbitration is a well-established commercial Asian dispute resolution and (often mechanism is there for well as

international known in

disputes, countries

mediation known

m any

conciliation). Mediati on is also attracting attention in the European Union, where there is now a push to use mediation before another adversarial process.

The reasons for acceptance of ADR in the international business comm unity include, among others, a lack of

confidence in national courts; unfamiliarity with foreign laws; concern about long, costl y court proceedings; unpredictable and possibly i nconsistent outcom es; and difficulties with

enforcing judgments obtained in foreign countries. These considerations are especially applicable in international IP disputes, since IP rights are issued on a country-by-country basis. Using international arbitration makes it unnecessary to litigate in multi ple affected j urisdictions having unf amiliar procedures, different different legal protections for By IP ri ghts and a

enforcement

mechanisms.

arbitrating

multinational IP dispute in a single dispute resolution process, the parties can save m oney and time and obtain a consistent result. 24

The

institutions the IP

in

developing and

countries multipart y,

are

increasingl y IP

entering
24

market,

multi national

Resolving Intellectual Property Disputes Outside of Court: Using ADR to Take Control of Your Case By Alan W. Kowalchyk

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relationships are becoming more common, and even essential to soci o-economic these development. relationships creative, and Through scientific, traditional transactions technical, is

involving

entrepreneurial,

knowl edge

exchanged. Nonetheless, a protected right also tends to increase the likelihood of disputes related to that right. 1 W hile parties seek to reduce the frequency of disputes by rigorously managing their IP rights and obligations, disputes will

inevitably arise. W hen they do, they can negativel y affect both sides. Parties involved in IP transactions, therefore, should be aware of dispute-resolution m ethods and have a specific dispute-prevention and resolution strategy. Dispute-resolution procedures too often are unwittingly sel ected when a

relationship begi ns, often years before a dispute actually arises. The dispute-resolution clauses will therefore have been inserted into contracts by people no longer involved in the issues. Moreover, clauses frequently are inserted with a limited awareness of their specific implications in a disputeresolution scenario.

Litigation, the formal, public process for resolving disputes before national courts, is the most conventional method of dispute resolution. Particularly for transnational disputes,

litigation may be risky, frequently protracted, and ma y at times require seemingl y unlimited legal costs and management time. Moreover, a dispute taking place in multiple jurisdictions may result in different outcomes depending on which court decides the case.

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The

alternative

dispute

resolution

(ADR)

procedures

f or

resolving IP disputes, focusing on the i nterests of developing countries, the ADR encompasses a range of options for resolving disputes outside of form al court procedures. These options differ in terms of formality, party control, and finality. Each option, moreover, offers benefits uniquely appropriate to different circumstances. This chapter concentrates on two representative ADR procedures, arbitration and mediation.

8.1.

Dispute Scenarios The following dispute scenarios discuss some specific

circumstances that apply to health or agricultural IP disputes. The scenarios m ay have particular relevance for institutions in developing countries. Parties to the types of disputes in these scenarios will most likel y first consider resorting to litigation in national courts. They will, however, often find court action stymi ed because of the challenges involved: cost, length of procedure, legal uncertai nty, decision makers lack of

expertise, confidentiality/publicity, the difficulty of seeking action in foreign jurisdicti ons, and the negative impact on existi ng parties business should relationships. consider Given these are difficulties, practical

whether

there

alternatives to expensive and protracted court proceedings.

8.2.

Research collaboration: ownership dispute Researchers in a medical research center in a developing country (Center X) build a research partnership with a leading university in a developed country (University Y). They

collaborate on pursuing leads for pharmaceutically active

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compounds. The partners exchange dat a and discuss research directions. University Y has a well-est ablished policy of

patenting campus research, and an invention disclosure is filed with the technology transfer office (TTO). This becomes a patent application in the name of University Y, citing three of its researchers as inventors. There is no notice to, nor recognition of, the researchers in Center X. The researchers at Center X denounce the behavior of University Y and request that their nam es be included as inventors. W hen University Y refuses this request, the researchers contemplate legal action, but are st ymied by prohibitive legal costs.

8.3.

Patenting of research outputs from genetic material A research institute obtains patent protection for a cell line developed from genetic m aterial obtained from one of the institutes patients. The patient is from an indi genous group that lived an isolated existence until very recently. The indigenous group seeks redress, claiming ownership of

interest in the patent and breach of fiduciary obligations by the research institute. The research institute asserts that it

proceeded to commercialize the research result based on the patients prior consent to treatment. The controversy, with claims of biopi racy, rapidly escalates into a global public debate.

8.4.

Claims based on traditional rights An ethno botanist collects traditional m edical herbs and

associated knowledge about their therapeutic use from an indigenous community. The community is led to believe that

135

this is the personal research of the ethno botanist; the researcher acquires some of the knowledge after he falls ill on site and is treated by a traditional medicine man. The

customary law of the indigenous community constrains both the dissemination and use of comm unity. The researcher this knowledge within the publishes the

subsequentl y

knowledge, and details about the plants he collected, in a noncommerci al academic publication. This publication is

widely distributed and used by several private companies in their medical research. The disclosure of the information leads to patents, not directly on the traditional knowledge, but on further i nnovations, which are guided by and dependent upon the traditional knowledge. These patents acknowledge th e prior publication, but give no direct reference to the traditional comm unity itself. The traditional community attempts to seek relief but quickly finds that the legal remedies at their disposal are uncl ear and inappropri ate for dealing with the cultural and spiritual harm incurred.

8.5.

Agricultural products and patents Farm ers in a developing country have cultivat ed for centuries a certain type of grain that gains popularity in global m arkets. A biotechnological corporation obtains patents on the grain by introducing genetic modifications. Farmers in the devel oping country denounce their loss of international market share resulting from the actions of the biotechnological corporation. The farmers are concerned, however, that any inherent right they m ay claim will be overshadowed in court by t he economic, technical, and legal prowess of the corporation.

136

8.6.

Rat v. elephant? An inventor in a developing country holds patents in a number of countries on com ponents used in consumer goods. The inventor enters into a license agreem ent regarding these patents with a m ultinational manufacturer. A dispute arises regarding royal ty payments under the license agreem ent. The inventor wants to enforce his rights, but does not dare to engage in protracted and expensive multijurisdictional

litigation. Furthermore, the inventor hopes to maintain his profitable relationship with the manufacturer.

8.7.

The Arbitration Option Seeking resoluti on to the above disputes through litigation promises much pain and little certaint y for parti es in

developing countries. An alternative approach to litigation, however, could offer better results. Arbitration, for example, involves submitting a dispute, b y agreem ent of the parties, to one or more arbitrators who make a binding decision.

8.8.

Arbitration procedure To send a dispute to arbitration, the parties must sign an agreem ent to submit their existing or future disputes to arbitration. Such an agreement is the foundation of an arbitration arrangement. 3 It demonst rates the parties genuine willingness to settle the dispute through arbitration and limits the parties right to take the dispute to court. Arbitration m ay be conducted in different ways, and it is up to the parties and the arbitrator(s) to decide how the procedure should unfold, subject to any applicable rules and public policy

137

requirements. Parties may agree on the num ber of arbitrators, type of arbitration (ad hoc or institutional), place of arbitration, language of arbitral proceedings, and the applicable

substantive law.

138

CHAPTER 9 The WIPO Arbitration and Mediation Center 9.1. History of WIPO The World Intellectual Property Organization ( WIPO ) is one of the 17 specialized agencies of the United Nations. W IPO was created in 1967 "to encourage creative activity, to

promote the protection of intellectual propert y throughout the world." W IPO currently has 185 member states, administers 24 international treaties, and is headquartered in Geneva,

Switzerland. The current Director-General of W IPO is Francis Gurry, who took off ice on Oct ober 1, 2008. 184 of the UN Members as well as the Holy See are Members of W IPO. Nonmembers are the states States of Cook of Islands, Kiribati,Marshall Nauru, Niue,

Islands, Federated

Micronesia,

Palau, Solomon Islands,Timor-Leste, Tuvalu, and the states with limited recognition. Palestine has observer status. 9.2. Strategic Direction and Acti vities W IPOs vision is that IP is an im portant tool for the economic, social and cultural developm ent of al l countries. This shapes its mission to promote the effective use and protection of IP worldwi de. Strategic goals are set out in a four yearly Medium Term Plan and refined in the biennial Program and Budget docum ent. The five strategic goals defined in the 2006 2007 Program and Budget are: To promote an IP culture; To integrate IP into national development policies and programs; To develop international IP laws and standards;

139

To

deliver

quality

services

in

global

IP

protection

systems; and To increase the efficiency of W IPOs managem ent and support processes.

9.3.

WIPO Arbitration and Mediation Center (WIPO Center). The W IPO Arbitration and Mediation Center (W IPO Center) was established in 1994 on a not-for-profit basis to facilitate the time and cost-effective resolution of IP and related

disputes through ADR. It is recognized as an international and neutral forum especi ally appropriate for cross-border and cross-cultural disputes and conducts procedures under th e W IPO Mediation, Expedited Arbitration, Arbitration and Expert Determination Rules (W IPO Rules).

The

W IPO

Rules

contain

specific

provisions

that

are

particularly suitable for IP and related disputes, such as those concerning confidentiality and technical evidence. However, their scope is not limited to such disputes and they can be, and have been, successfully applied in other areas. The W IPO Center makes available, in different languages, m odel clauses and agreements that parties may use as a basis for submitting their disputes to W IPO.

As experience has shown, the effecti veness of ADR depends largely on the quality of the m ediator, arbitrator or expert. The W IPO Center maintains a database of over 1,500 qualified neutrals from 70 countries with further candidates added

140

according to case needs, and it assists in the appointment of neutrals in each case.

The W IPO Center works also as a resource center to raise awareness of the valuable role ADR can play in different sectors. It provides ADR advice to interested private and public entities as well as training in IP-related ADR through workshops and conferences. The W IPO Center recentl y

collaborated with the W IPO Academ y in introducing an online course on Arbitration and Mediation under the W IPO Rules.

9.4.

Tailored ADR ser vices The W IPO Center recognizes that certain sectors experience specific recurring types of disputes with particular features and needs that can best be addressed by specially tailore d ADR services. It works with IP owners and users as well as their representative organi zati ons to facilitate or establish specially adapted ADR schemes. One such schem e is the W IPO-initiated Uniform Domain Name Dispute Resolution Policy (UDRP), under which the W IPO Center has been providing services since 1999. More recently, in 2008, the W IPO Center responded to a request by the Association Audiovisual of International (AGICOA) Collective by Management the of

W orks

developing

W IPO

Expedited Arbitration Rules f or AGICOA, tailored to the specific needs of AGICOA right holders. One provision

includes the direct implementation of the award by AGICOA, which updates the rights and releases the royalties

141

accordingl y. For AGICOA disputes, the W IPO Center has identified a special panel of copyri ght and entertainment law arbitrators from various jurisdictions. The W IPO Center also collaborates with stakeholders i n em erging IP-rel ated areas, including biodiversity, traditional knowledge, traditional cultural expressions and access to health care, in order to develop adapted dispute resolution systems. It has, for i nstance, been involved in informal explorations of ADRs potential in the context of the

Convention on Biological Diversity and the International Treat y on Plant Genetic Resources for Food and Agriculture.

9.5.

Ser vices of the wipo arbitration and mediation center Mediation: a procedure i n which one or more independent mediators assist the parties in reaching a settlem ent of the dispute through facilitating dialogue and helping the parties to identif y their interests. The mediator does not render a decision.

Arbitration: a procedure in which a dispute is submitted to one or more independent arbitrators who m ake a binding decision on the dispute. The decision of the arbitrator is internationally enforceable under the 1958 New York

Convention for the Recognition and Enforcem ent of Foreign Arbitral Awards.

Expedited Arbitration : Arbitration procedure with shortened timelines and reduced costs, normally providing for a sol e

142

arbitrator. The award is enf orceable under the New York Convention.

Expert

Determination :

procedure

in

which

specific

questi on is submitted to one or m ore independent experts who make a determination on the referred matter. The

determination is binding, unless the parties agree otherwise.

9.6.

Trends in WIPO mediation and arbitration The W IPO Center having administered over 80 mediations and 110 arbitrations, the m ajority of which were filed in the last four years has observed various trends and

developments in IP dispute resolution: 41 percent of the administered procedures were mediation cases, 49 percent standard arbitration, and 10 percent

expedited arbitration.

The W IPO clauses and procedures are often found in a combined model. For example, the m ost frequently used W IPO clause is that providing for mediation, followed in the absence of a settlem ent by (expedited) arbitration. It has the

advantage of giving parties the opportunity to settle their case in a more informal forum before moving to arbitration.

W IPO standard arbitration tends to be used in more com plex cases such as patent disputes, which generally last from 12 to 18 months. W IPO expedited arbitration is primarily used in disputes where a lower amount is at stake, less vol uminous and technical evidence is involved and where a quick result is

143

needed, which tends to be the case for t rademark and software-related disputes. In general, the expedited arbitration procedure takes up to six months.

W IPO mediation and arbitration have been used in disputes coveri ng a variety of fields, incl uding patent infringem ent and licenses, information technology transactions, for and

telecommunications, pharmaceutical

distribution copyright

agreem ents issues, research

products,

development agreements, knowledge transfer, trademark coexistence agreements, art marketing agreements, joint venture agreem ents, engineering disputes, life sciences, sports,

entertainment, dom ain name disputes and cases arisi ng out of agreem ents in settlement of prior multi-jurisdictional IP

litigation. Parties have also used the Centers services in nonIP-related disputes, such as general contractual matters, insurance, construction and employm ent (at an IP law firm).

9.7.

WIPO

expedited

arbitration

relating

to

banking

software dispute.

Another area in which W IPO ADR has recentl y been used is banking. Banks can be i nvolved in a vari ety of IP-related disputes, for example, in connection with the use of a banks trademark or the development of software systems, as this case demonstrates.

A U.S. company providing data processing software and services and an Asian bank concluded an agreem ent regardin g

144

the provision of account processing services. The parties agreed the U.S. Company was to be the exclusive service provider for certain of the banks affiliates in North America and Europe. Any dispute arising out of or in connection with the agreement would be resolved under the W IPO Expedited Arbitration Rules.

Four years later, the U.S. Com pany alleged the bank had violated the agreement by using the processing services of third parties in the countries covered by the agreement. W hen the parties failed to settle the dispute, the U.S. service provider commenced W IPO expedited arbitration proceedings, claiming infringement of the agreement and substanti al

consequential damages.

The parties agreed upon a sole arbitrator who held a two-day hearing in New Yo rk. The parties and the arbitrat or agreed to use the W IPO Centers electronic case communicati on facility, W IPO ECAF. After three months, the arbitrator rendered a final award f or partial infringem ent of the agreement granting damages to the U.S. service provi der.

9.8.

Settlement trends The Price W ater house Coopers (PW C) study on International arbitration: Corporate attitudes and practices observed a general trend according to which parties explore settlement at different stages of the dispute resolution process. Twenty-five percent of the studys participants indicated achieving a settlem ent before the arbitral award, while 7 percent reported

145

settlem ents

that

were

impl emented

in

consent

award,

suggesting an approximate settlement rate of 32 percent in international arbitration within the perimeters of the survey.

The W IPO Center observes an even higher settlement trend in relation to IP-related disputes.1 The flexibility of W IPO ADR procedures allows parties to com bine the different procedures and to consider am icable settl ement throughout the process.In W IPO mediation, 71 percent of cases settl ed, 23 percent did not and 6 percent are pending. Most settlem ents occur during the mediation phase, consistent with the parties intent in using this mechanism and with the role of mediator. The mediator assists the parties to explore workable, interestbased solutions that help them to preserve their long-term relationship.

But a number of W IPO cases also end in settlem ent after the termination of the m ediation. By enabling the parties to identif y their interests and to better understand their dispute, mediation can provide a basis for direct negotiation between the parties after the m ediation. For example, in a recent W IPO mediation, a European patent university holding and a several European

pharmaceutical

applications

pharmaceutical company used mediation in order to conclude a license agreement. The mediator, a lawyer with years of experience in the pharmaceutical industry, helped the parties to identif y the issues and deepen their understanding of the legal circumstances. After the mediation, the parties resumed direct negotiations and reached an agreement.

146

Interestingly, a significant proportion of W IPO arbitration cases also result in settlement: 50 percent of cases settled (including consent awards), 39 percent did not settle and an award was issued (excluding consent awards) and 11 percent are pending. The W IPO Arbitration Rules provide that the arbitral tribunal can suggest that the parties explore

settlem ent whenever it deems appropriate. If the parties so wish, the arbitral tribunal can give them a preliminary view of the case in order to facilitate settl ement discussions. W here the parties concl ude a settlem ent before an award is made, the arbitral tribunal can, upon the parties joint request, record that settl ement in the form of a consent award, which is enforceable under the New York Convention.

147

CHAPTER 10 CONCLUSION

ADR procedures are flexibl e m echanisms allowing parties to explore appropriate remedies that may not always be available in court litigation.

W hile monetary relief remains the most comm on form sought in W IPO cases, parties often also request specific actions as a remedy, such as a declaration of non-performance of

contractual obligations, or of infringem ent of rights. Other forms of remedies sought are, for inst ance, further safeguards for the preservation of conf identiality of evi dence, the

provision of a security, the production of specific data, the delivery of a specific good or the conclusion of new contracts. The time has come legal fraternity to have trained panels of mediators and training also being imparted to Judges,

Magistrates & other Judicial Officers, concerned court staff and, more importantly, the litigation lawyers, along with the necessary sets of Rules f or their respective conduct - in tandem with a robust great Case promise Management for the system, these

provisions

hold

litigants

virtually

languishing for years in the corri dors of Indian courts.

The courts may refer IPR disputes to resolve all disputes ev n to the extent of controversial nature of the disputes; wherever both parties are wish to resolve their dispute largely by determining common manageable disputes is most appropriate for ADR systems to bring parties on the tabl e.

148

W ith

certainty,

it

can

with

be

stated

that

most

intellectual Property disputes would derived benefit in som e way or otherwise from usage of wide range of ADR

mechanisms, which could be either by settlement, narrowing the issues, improved comm unication, or case-planning

assistance. That one of the key benefits of ADR is the ability of the parties to select a process suitable for their case and to tailor the process to their needs.

Thus, to obtain the m ost beneficial result from ADR in usag e of IPR cases, lawyers should help their clients make inf ormed decisions in selecting a suitable ADR process and in

customizing it for their case, and should thoroughly prepare themselves and their client to participate m eaningfully in the ADR proceeding.

An epitom e for a conclusion would be to resonate the words eloquently stated by Abraham Lincoln, that "part of the role of an attorney is to persuade your neighbours to com promise whenever you can. Point out to them how the nominal litigant winner is often a real loser-in fees, expenses and waste of time". Presently, many Intellectual Property attorneys and their clients do not regularly consider ADR as a means for resolving their disputes. ADR processes are relatively new in India to the Intellectual Property field frequentl y. and should be used more

149

BIBLIOGRAPHY 125-140

Books

Statutes

Reports

Articles, Papers and Transcripts

Websites referred

News papers

150

APPENDIXES
41 The Arbitration and Conciliation Act, 1996 42 The Legal Services Authority Act,1987 43 Code of Criminal Procedure,1973 148

151