How to Draft an Arbitration Clause in a Copyright Agreement?

“Arbitration is justice blended with charity”

Introduction

With globalization and the growth in the marketing industry, any piece of work can reach a wider audience at a greater pace today. A book written in one part of the world can be read by someone miles away in another part with so much ease. The increased accessibility and reach have given rise to newer problems in the form of copyright infringements. To tackle these copyright agreements are brought into use. Under copyright, the author grants a ‘license’ to people or companies to exploit the work such as publishing books, movies based on an adaptation of books, publishing music or adaptation of music, etc. A copyright agreement is a legal agreement containing details about the use or transfer of copyright. One of the significant aspects of these agreements is the arbitration clause. Arbitration clauses in a copyright agreement follow a peculiar pattern.

With globalization and the growth in the marketing industry, any piece of work can reach a wider audience at a greater pace today. A book written in one part of the world can be read by someone miles away in another part with so much ease. The increased accessibility and reach have given rise to newer problems in the form of copyright infringements. To tackle these copyright agreements are brought into use. Under copyright, the author grants a ‘license’ to people or companies to exploit the work such as publishing books, movies based on an adaptation of books, publishing music or adaptation of music, etc. A copyright agreement is a legal agreement containing details about the use or transfer of copyright. One of the significant aspects of these agreements is the arbitration clause. Arbitration clauses in a copyright agreement follow a peculiar pattern.

What is an Arbitration Clause?

“I can imagine no society which does not embody some method of arbitration.”– Herbert Read. The most common and widely prevalent method to seek justice is through litigation. However, the mechanism and institutions facilitating litigation are limited in number which results in delays in getting justice. To upholdthe principles of justice, alternative methods to seek justice have evolved. The most sought-after alternate means is arbitration. Arbitration is a form of the alternative dispute resolution process, which tends to resolve disputes outside courts. A third party, an independent arbitrator is appointed to resolve a dispute. In the famous English judgment of Collins v. Collins[1], a thorough definition of the concept of arbitration was given as “Arbitration is a reference to the decisions of one or more persons either with or without an umpire, a particular matter in difference between the parties”. 

An arbitration clause is a clause in any agreement that requires the parties to the agreement to resolve any dispute, arising under the agreement, through an arbitration process. It binds the parties to not sue each other before a court and opt for arbitration in case of any legal dispute. The stipulation of an arbitration clause varies as per the agreement and comfort of the parties.[2] However, certain essentials must be kept in mind while drafting an effective arbitration clause in an agreement.[3]

Advantages and Significance of an Arbitration Clause

Arbitration is gaining much popularity these days. An increasing number of commercial agreements include an arbitration clause for a smooth and quick dispute resolution. The reason being several advantages associated with it. It is an easy and hassle-free process. Since there is no involvement of lengthy and time taking courtroom procedures, it is very time efficient. Business houses that run on very tight schedules usually opt for this speedy resolution process.[4] Not only that, but it also helps save the time of already busy courts. It is also economically friendly as the cost involved is minimal. Further, the parties can also choose the arbitrator themselves, thus ensuring the comfortability and integrity of the process. Another striking advantage of arbitration is its confidentiality aspect. The identity of the parties involved in the process is kept confidential which prevents any harm to the reputation of the parties. Any conclusion reached in an arbitration process is based on mutual agreement. Hence it is a win-win situation for both parties, unlike court proceedings where one wins and the other loses. Such a clause becomes highly significant in cases of copyright agreements. Due to the importance of market reputation in issues involving copyright, parties usually do not prefer to engage in legal courtroom battles. Further, the stakes involved are quite high which makes the companies and parties apprehensive of the possibility of losing a legal battle. Thus, arbitration becomes a sought-after alternative. 

Components of a Valid Arbitration Clause

Most copyright agreements include an arbitration clause owing to its easy accessibility and great viability. Though arbitration clauses are to be drafted owing to the requirements and specifications of the parties involved, certain essentials must be included. Following is a list of the same:-

  1. Reference to arbitration: Firstly, an arbitration clause must clearly state that in case of any dispute, the parties must opt for arbitration. This is done to make the clause unequivocally clear and avoid any loopholes that can be misused.
  2. Scope of arbitration: In case the parties want to reserve certain disputes for litigation and refer others to the arbitration process, the same should be mentioned. All possible disputes arising out of the agreement must be considered. This is done to avoid any unnecessary confusion.
  3. Selection of arbitrator: The clause must specify whether the arbitrators shall be selected by the parties or they shall be appointed by any arbitration institution that shall be approached. 
  4. Arbitration institution; In the case of approaching an institution, the name of the institution must be specified.
  5. Number of arbitrators: In case the clause provides for parties to choose the arbitrators, the number of arbitrators to be appointed must be specified. The number should always be odd, to conclude the case of a difference of opinion. While choosing the number of arbitrators cost involved and the subject matter of arbitration must be kept in mind.
  6. Qualification of arbitrators: The basic qualification of arbitrators that is required must also be mentioned. This is essential in cases where dispute resolution might require special technical knowledge.
  7. The process to appoint the arbitrator(s): An effective arbitration clause should mention the process of appointment of arbitrators in addition to number and qualification. E.g. in some arbitration clauses, one arbitrator is appointed by each party and the third one is appointed by the two arbitrators. This is done to make the process confusion-free and easy.
  8. The seat of arbitration: This is an essential part of an arbitration clause, especiallywhen parties to an agreement belong to different places. The parties must beforehand decide the place of arbitration and indicate it in the arbitration clause.
  9. Language of arbitration: An arbitration clause must also specify the language to be used during the arbitration process if the parties speak different languages and have documents in different languages. This would save additional costs of translating the documents into other languages and help in avoiding any confusion in the future.
  10. Laws governing the process: Matters related to copyright may involve parties from different countries. In such a case both the parties would be subjected to different laws. To avoid any hassle, an arbitration clause should mention which laws shall govern the process.
Conclusion

Globalization and the expansion of technology have given a wider audience to people for showcasing their talent. However, what has accompanied is a greater risk of copyright-related disputes. Resolving such disputes through litigation may involve a lot of time and resources, apart from being extremely cumbersome. Thus, it is used as an alternative dispute resolution process. Many copyright agreements include arbitration clauses. However, certain essentials must be kept in mind while drafting one. An arbitration clause must be clear and specifying every aspect related to the process to fulfill its very motive-ensuring a smooth dispute resolution mechanism.

References

[1]L. A. No. 24137. In Bank. Apr. 12, 1957.]

[2]Arbitration clause patent license agreement, https://uk.practicallaw.thomsonreuters.com/w-004-1829?transitionType=Default&contextData=(sc.Default)&firstPage=true

[3]Shornya Banerjee,How to draft an arbitration clause in a copyright agreement, May 30,2021,https://blog.ipleaders.in/draft-arbitration-clause-copyright-agreement/

[4]What is an Arbitration clause?,https://www.legalmatch.com/law-library/article/what-is-an-arbitration-clause.html

This article is authored by Tisha Padhy, Student at National Law Institute University, Bhopal.

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The views and opinions expressed in this article are those of the author and do not reflect the views or opinions of Legally Flawless or its members.

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