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You have a dispute involving international parties or you are afraid that your deal will devolve into one. And if you are the aggrieved party you want and need to end up with an arbitration award in your favor that you can enforce almost anywhere under the New York Convention. But you have heard some terrifying stories about the international arbitrations most everyone signs up for that have gone on forever and devoured rather than helped the disputing parties.
There is a quick and economic shortcut to that arbitration award called Med-Arb. It is a so-called hybrid dispute resolution process in which, most typically, both parties to the dispute sign up with a mediator who, in the event of an impasse, is authorized by their agreement to put on an arbitrator’s hat and resolve any remaining issues that the mediation failed to dispose of.
Med-Arb is hardly a new process; it dates back to the ancient Greeks and has been and is being used in many countries, including the US, China, India, Italy and others. For a long time, though, it fell out of favor in the US. Now, however, as arbitration has come to be called the “new litigation” because of its increasing length and cost, Med-Arb has had a dramatic rise in popularity. In fact, many of its proponents refer to it as encompassing “the best of both worlds” because it combines so many of the benefits of mediation and arbitration. This amalgamation capitalizes on the advantages of both processes, while simultaneously eliminating many of their individual disadvantages. The combined proceeding aims to resolve disputes faster, more efficiently and more economically.
Of course Med-Arb’s biggest and overwhelming advantage is that you know when you sign up that your dispute is going to be resolved. Moreover, you can also be sure that if you pick a good Med-Arbiter you will at least start off with a sympathetic mediated hearing of the kind that not only saves time, and energy but also conserves relationships. Another certainty is that the proceeding will be a fraction of the time and cost of a typical long-running arbitration with excellent odds that a real arbitration will never be needed. Even in those relatively infrequent cases where a party, having disregarded the Med-Arbiter’s “hints,” causes an impasse, the arbitration portion need only deal with the remaining issue or issues that the mediator couldn’t resolve.
There used to be some doubt about whether a Med-Arb proceeding could generate an arbitration award enforceable under the New York Convention. But several articles have now been written confirming such enforceability in virtually all US courts. While Med-Arb requires “informed consent” and is not for everyone, it clearly can be the right choice for many parties wanting to avoid the cost and strain of drawn out expensive arbitration proceedings both international and domestic.
Author: Norman Solovay and Tanya de Sousa, McLaughlin & Stern, LLP Partner & Chair of its Alternative Dispute Resolution Practice
India has been judiciously treading the path of safeguarding, promoting and developing innovative and creative works, balancing its international obl igat ions inc luding under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and its commitment to the growth and progress of the nation. The steady affirmative steps taken by India in developing an Intellectual Property (IP) Regime in sync with the structure and efficiency of the global regime, continues to provide encouragement and incentives for the labour of creative minds.
Though the Indian IP regime is TRIPS compliant, at times the Indian legislature, judiciary and regulatory bodies have traversed beyond the minimum standards set under TRIPS, and have taken proactive steps to develop and strengthen the Indian IP regime.
Some of the initiatives are listed below:
The Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 is one such regulation that is beyond the TRIPS mandate, as border control measures vis-à-vis patents is not envisaged by TRIPS. Under the said rules, a right holder is to give a notice in writing to the Commissioner of Customs at the port of import of goods requesting for suspension of clearance of goods suspected to be infringing Intellectual Property Rights (IPRs). Upon the registration of such notice, the import of allegedly infringing goods into India would be deemed as prohibited under the Customs Act.
An interesting twist followed the enactment of these rules. The first case that dealt with the said border protection measures and patent protection involved a challenge to the import of dual SIM mobile phones by Samsung India. The complainant alleged that the said products infringed the patent claims of his products. However, the customs authorities in the various cities in which the complaints were filed adjudicated that the complainant’s claims were vexatious because the impugned goods were covered by prior art.
The aforesaid proceedings before the customs authorities and similar actions have raised various questions including the issue of competency of customs authorities to decide claims of patent infringement. With the reservations expressed by the judiciary on the grant of interim injunctions in patent matters and the importance of leading evidence, it would be interesting to see how the issue of competency of customs authorities to determine such issues would be addressed as and when it is raised in a judicial forum.
Meanwhile, the enactment of the said rules remains a positive and optimistic step as far as IP owners and interest holders are concerned. Anti-piracy initiatives of various individual IP owners and organisations have been instrumental in reducing piracy significantly. In simple terms, anti-piracy initiatives are the independent efforts of IP owners and rights holders whereby they identify various counterfeit products/ works and prosecute the offenders, besides promoting IP awareness. According to a recent Business Software Alliance study, software piracy in India has fallen by more than 3 percent from last year. The judicial support given t o various anti-piracy initiatives are also commendable.
The Indian judiciary has been encouraging prosecution of counterfeiters and has also been active in countering the counterfeit market by coming down heavily on counterfeiters. The courts have been awarding damages in actions against counterfeiters particularly software pirates. Software companies like Microsoft have obtained judgments awarding damages amounting to INR 1,050,000 in a judgement against a successful counterfeiter. The courts have also been fairly liberal in granting Anton Piller (which is a court order that provides the right to ‘search premises and seize evidence without prior warning’) and John Doe orders (which is issued against potential defendants who may be subsequently identified; these orders are known in India as ‘Ashok Kumar Orders’), to assist in the search and seizure of counterfeits.
Alliance Against Copyright Theft, a coalition between Bollywood and Hollywood studios, the International Intellectual Property Alliance, an international lobby group of US media industries and Center for Content Protection, the partnership between Motion Picture Association of America and Singapore’s Media Development Authority are the three prominent bodies engaged in protection and monitoring of content rights of various American entertainment groups. In the recent past, all the three have been actively engaged in monitoring content violations in India. They have been receiving governmental support in their enforcement activities. While delivering the keynote address at the ‘Seminar on Anti-Piracy and Regulation of Content – Legal Issues’ organised by the Society of Indian Law Firms at New Delhi on September 7, 2010 Information and Broadcasting Minister, Ambika Soni reiterated India’s commitment to eradicating piracy and said that the government is in ‘the process of examining a proposal regarding launch of a multimedia campaign involving all stakeholders against the menace of piracy’ and that ‘the Government and the private sector would work in tandem to make the campaign effective’.
The Competition Commission of India (CCI) is presently hearing a matter between the film producers and multiplex owners, wherein the multiplex owners have claimed that coordinated nonrelease of films by producers is in violation of Section 3 of the Competition Act, 2002. However, the film producers have put forth the argument that the distribution/ licensing of their film(s) is an exploitation of their individual “copyright”, which is statutorily recognised and that the said statute further provides for compulsory licensing by the Copyright Board in the manner set out therein.
It is also interesting to note the recognition of unconventional IPRs by the Indian trademarks registry. The Delhi branch of the trademarks registry granted India’s first “sound mark” registration to yahoo’s three-note yodel, in the year 2008. This encouraged other applicants, including Finnish mobile phone maker, Nokia and Germany’s Allianz among others to seek registration of their signature musical notations. Allianz has also successfully registered its sound mark and the prosecution of Nokia’s sound mark is pending with the trademarks registry, Mumbai branch. In the absence of specific guidelines, India seems to be following the American approach of graphical representation of sound marks i.e. musical notations as the representation of the mark, accompanied by an audio recording of the sound clip.
This trend by the Indian trademarks registry seems to be in tune with the present day needs as experienced by the marketing and advertising industry. It has certainly set a positive note on the significance and recognition of nonconventional marks, and it might not be too far from now that we will be hearing about registration of other unconventional marks like olfactory and gustatory ones.
As can be seen from above, the Indian IP regime seems to be attaining the perfect mélange of effective legislation with government commitment, committed IP offices and a pro-active judiciary. Some of the other notable strides made by the Indian judiciary include (i) recognition of law of dilution under Indian Trademark law, as amended in 1999, in the matter involving American automaker, Ford Motor Company; and (ii) the determination of protection granted to TV formats and concept notes in the Swayamvar case and Barbara Taylor Bradford case, two notable matters of the last decade that dealt extensively with TV format and concept notes respectively.
Last but not least, the year 2009 also saw the Supreme Court of India addressing the malady of delay in prosecution, a concern plaguing Indian IP enforcement scene. It issued a directive, in the matter of Bajaj Auto Limited v. TVS Motor Company, fixing a time frame for conclusion of IP matters pending before the courts. It opined that IP matters are to proceed on a day-to-day basis and that ideally final judgment should be given within four months from the date of the filing of the suit.
The end of last year also saw the Indian government removing all restrictions with respect to overseas remittance under technical collaboration agreements. Earlier, payments of royalty exceeding 5 percent on annual local sales, 8 percent on yearly exports and lump sum payment exceeding US$ 2 million alone required approval from the Ministry of Industry and Commerce.
Some Proposed Developments
The recent invigoration and revamping of Indian IP offices to increase efficiency and effectiveness are praiseworthy. Some of the noteworthy changes include digitisation of Indian patents and trademarks database, including publication of the examination reports on the Indian IP office website. Public health and general public good remains one of the driving factors behind development of the Indian IP regime. In light of this, it is only fitting that the Indian Government is contemplating greater regulatory control on branding of drugs. A reputed Indian financial newspaper carried a report on October 21, 2010 on a proposed move by the Indian Government to make registration of drug brands mandatory. The said report quoted the Indian Minister of State for Chemicals and Fertilizers on the apprehended dangers of having the same brand names for medicines and the need to regulate the same.
Meanwhile, India is also moving ahead with its commitment to having an IP structure in consonance with the international regime, by voluntarily taking on TRIPS plus IP commitments. India acceded to the Madrid Protocol in 2007, which provides for international filing of trademark applications and is slated to sign the Madrid Protocol treaty later this year. The trademark amendment bill incorporating amendments to Indian trademark law in light of the same has already received assent of both houses of Indian parliament.
India has also been dynamic in addressing the challenges posed by the digital age. In 2009, India has made far reaching amendments to its information technology law. The Indian Government now proposes to bring the copyright law in conformity with the World Intellectual Property Organization (WIPO) Internet Treaties, namely WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty which have set international standards in these spheres, by introducing the concept of digital rights management in India.
Author: Anand Desai, Managing Partner, DSK Legal
A Limited Liability Partnership is a hybrid between a company and a partnership that, as the name suggests, provides the benefits of limited liability and allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
LIMITED LIABILITY PARTNERSHIP: INTERNATIONAL PERSPECTIVE
Limited Liability Partnership has already been accepted as a business structure in many countries like US, UK, Japan, Singapore etc. In US, Limited liability partnerships emerged in the early 1990s: while only two states allowed LLPs in 1992, over forty had adopted LLP statutes by the time LLPs were added to the Uniform Partnership Act in 1996. Each state of US has its own law governing the formation of LLPs. The liability of the partners varies from state to state. In UK, LLPs are governed by the Limited Liability Partnerships Act, 2000 (in England and Wales and Scotland) and the Limited Liability Partnerships Act (Northern Ireland) 2002 in Northern Ireland. A UK Limited Liability Partnership is a Corporate body – that is, it has a perpetual succession. The feature of LLP in UK is that it combines the organizational flexibility and tax status of a partnership with limited liability for its members. In Japan, LLP is not a corporation, but rather exists as a contractual relationship between the partners. In Singapore, LLPs are formed under the Limited Liability Partnerships Act, 2005. This legislation draws on both the US and UK models of LLP and establishes LLP as a body corporate. However for tax purposes it is treated like a general partnership.
THE LLP LAW IN INDIA
The Indian Legislature, keeping in view, the international business trends where a range of services is being offered by professionals and businesses in the form of Limited Liability Partnerships, has enacted the much awaited Limited Liability Partnership Act. The Limited Liability Partnership Bill, 2006, was approved by the Cabinet on Dec 7, 2006 and was introduced in the Rajya Sabha on 15th Dec, 2006. It was later referred to the Department Related Parliamentary Standing Committee on Finance for examination. The Committee submitted its report to both Houses of Parliament on 27th Nov, 2007, recommending some changes along with some suggestions regarding the LLP Bill, 2006. On 12th Dec 2008, the Parliament passed the Limited Liability Partnership Bill, 2008. The Limited Liability Partnership Bill, 2008 received the assent of the Hon’ble President on 7th January, 2009 and has now become a legislation to be called as ‘Limited Liability Partnership Act, 2008’.
The Limited Liability Partnership shall be required to have at least two partners but there will be no limit on the maximum number of partners. If at any time the number of partners of an LLP is reduced below two and such LLP carries on business for more than six months, the person who is the only partner of the LLP during the time it carries on business after those six months shall be liable personally for the obligations of the LLP incurred during that period. Any individual or body corporate may be a partner in an LLP. Further, the provisions of the Indian Partnership Act, 1932 shall not be applicable to an LLP. Further, an LLP, will by its name has the power to sue and being sued, hold and dispose property, have a common seal and to do and suffer such other acts as bodies corporate may lawfully do and suffer. Every LLP is required to have either the words limited liability partnership or the acronym LLP as the last words of its name.
Incorporation of an LLP
An LLP is formed pursuant to a “limited liability partnership agreement” which means any written agreement between the partners of the limited liability partnership or between the limited liability partnership and its partners, which determines the mutual rights, and duties of the partners and their rights and duties in relation to that limited liability partnership.
For an LLP to be incorporated, at least two persons must subscribe their name to a document called an incorporation document, which must then be submitted to the Registrar of companies. There is also a requirement of fling a statement in the prescribed form, made by either an Advocate, or a Company Secretary, or a Chartered Accountant or a Cost Accountant in whole time practice in India or by anyone who subscribed his name to the incorporation document that all the requirements under the Act and the rules made thereunder are complied with in respect of the incorporation, along with the incorporation document. The incorporation document must contain information such as the name of the LLP, its proposed business, address of its registered office, the name, address and photographs of the persons who are to be its partners on incorporation.
Upon receiving the incorporation document the Registrar will retain and register it. Once the documents have been registered, the Registrar will issue a certificate that the LLP is incorporated by the name specified in the incorporation document. The certificate issued by the Registrar is evidence that all the requirements have been complied with.
Extent and Limitation of Liability
An LLP being a separate legal entity is liable for an obligation arising in contract or otherwise and the liabilities of the LLP will be met out of its property. A partner will not be held personally liable, directly or indirectly for an obligation of the LLP, solely by reason of being a partner of the LLP. However, such liability shall not affect the personal liability of a partner for his own wrongful act or omissions and in the event of an act carried out by the LLP or any of its partners, with intent to defraud creditors of the LLP or any other person, or for any fraudulent purpose, the liability of the LLP and partners who acted with intent to defraud creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the LLP. Therefore, a partner will be held personally liable for his own wrongful act or omission, but not for the wrongful act or omission of any other partner of the LLP.
Safeguards to Prevent Misuse
Since there would be limitation on the liability of the partners and the LLP shall be a separate legal entity contracting with third parties in its own right, the Act has certain built-in features which shall lead to greater control over LLPs than what could be exercised over traditional partnerships. Some of these requirements include the requirement of every LLP to have a registered office in India to which all communications will be made and received. Any change in the registered office has be intimated to the Registrar. Every LLP is also required to have at least two designated partners and one of them should be resident in India.The designated partners shall be answerable for all acts, matters and things as are required to be done by the LLP in respect of compliance of the provisions of the proposed legislation and be liable for penalties for non compliance.
The LLP shall be required to maintain proper books of accounts in the prescribed manner according to the double entry system of accounting at its registered office for the specified period of time. The LLP shall also be required, within a period of six months from the end of each financial year, to prepare a Statement of Account and Solvency for the said financial year, which report is then required to be signed by the designated partners of the LLP. Further, the LLP shall file an annual return duly authenticated with the Registrar within sixty days of closure of its financial year. Certain penal provisions have also been provided by the Act for the contravention of the Provisions pertaining to financial disclosures.
ADVANTAGES OF LIMITED LIABILITY PARTNERSHIP
In a nutshell, the Limited Liability Partnership has the following advantages:
- It provides limited liability to its partners. Though personal Liability arises in case of wrongful acts or omissions, a partner is not personally liable for such acts or omissions of other partner.
- LLP Business Structure also has the advantage of Internal Flexibility. As in traditional partnership, the internal structure of LLP can be organized as per mutual agreement.
- The requirements as to Board Meetings, Resolutions, Annual meetings, etc. are not there in case of LLP. There is less paperwork in case of LLPs, even the formation of a partnership agreement is not mandatory; the Act provides for default provisions in its Schedule I. The filing requirements are also less as compared to a company.
- Since LLP is a separate legal entity, its existence is not offered by the entry or exit of partners.
The passing of the Limited Liability Partnership Act, 2008 is a recognition of the changing needs of the businesses in today’s times. If it is implemented properly, the introduction of the LLP will provide a helpful new option for professional partnerships which are anxious about their exposure to liability. In view of the growth of Indian Service industry in recent times, LLPs would further contribute to the growth of the service industry and a large number of existing companies, public as well as private, are expected to convert into LLPs with a view to have access to the benefits of the LLP. The Government of India has made an endeavour to create a facilitating environment for entrepreneurs, service providers and professionals to meet the global competition; however it needs to be seen how far the change is useful.
Author: Kartik Dawar – Associate Advocate,Kaden Boriss Legal LLP