Intellectual Property Belonging To Joint Venture Company Cannot Be Diluted When Disputes Are Pending Adjudication: Delhi HC
The Delhi High Court held that an Intellectual Property (IP) belonging to a Joint Venture company cannot be diluted when the disputes are pending adjudication.
Bunch Microtechnologies Pvt Ltd (petitioner company) filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (the Act) against AMCP Edutech Pvt Ltd (respondent company) alleging breaches including failure to transfer IP rights which resulted in substantial losses for the petitioner company.
A Single Bench of Justice Prathiba M. Singh observed, “Under copyright laws, such rights could constitute partial ownership rights. This in effect means that the Petitioner as also AMCP which is a joint venture can continue to use the intellectual property of AMCP including Abhinay Maths and all the You Tube content, etc. The Respondent No.1- AMCP Edutech Pvt. Ltd is itself a joint venture company wherein the Respondent No.2-Abhinay Sharma has 60% stake and the Petitioner has 40% stake.”
Advocate Karun Mehta represented the appellants, while Advocate Amita Katragadda appeared for the respondents.
‘Classplus,’ an ed-tech start-up by the petitioner company, had entered into an agreement with the respondent company outlining the transfer of IP rights and Classplus’s investment in the respondent company.
The Petitioner company and its subsidiary ‘Testbook Edu Solutions Pvt. Ltd.’ had entered into a binding term sheet stipulating that the majority stakeholder (director) in the respondent company would conduct classes utilising the petitioner company’s technology. Additionally, the term sheet required the director to establish a new company and transfer all intellectual property rights related to his YouTube and other social media channels to this new entity. Clause 2 of the term sheet outlined these obligations explicitly.
“The Petitioner has admittedly, made an investment of Rs.4 crores and the IP as captured in schedule A had to vest with the Respondent No.1. It is in order to safeguard the investment of the Petitioner as also the IP belonging to the joint venture that the interim order dated 26th April, 2024 was passed,” the Court explained.
Owing to multiple breaches by the director, Testbook initiated arbitration proceedings against him. “In the opinion of this Court, the IP belonging to the Joint Venture company cannot be permitted to be diluted during the time when the disputes are pending adjudication,” the Bench held.
The Court stated, “A perusal of the consultant faculty agreement would show that the nature of rights given by Mrd. Abhinay Sharma in favour of Testbook/Petitioner are extremely wide i.e., they are irrevocable, sublicensable, perpetual, world-wide license to any consultant faculty content.”
“The present Section 9 petition under the Act shall be treated as Section 17 application before the ld. Arbitrator and the pleadings and the documents filed by the Respondents shall also be considered as a reply to the said Section 17,” the Court directed.
Consequently, the Court referred the disputes (investment agreement, branding agreement, consultancy agreement and copyright licensing agreement) arising out of the term sheet for adjudication to the Sole Arbitrator.
Accordingly, the High Court disposed of the petition.
Cause Title: Bunch Microtechnologies Pvt Ltd v. AMCP Edutech Pvt Ltd & Ors. (Neutral Citation: 2024:DHC:3595)
Appearance:
Appellants: Advocates Karun Mehta, Pratiksha Mishra, Yugam Taneja and Kaarunya Lakshmi
Respondents: Advocates Amita Katragadda, Shikha Tandon, Prafful Goyal, Kamakshi Puri, Adhiraj Singh Chauhan, Sejal Sethi and Diya Narag
