With IP disputes common, companies and governments should make sure to choose the right dispute resolution mechanism
The rapid development of new technologies and processes in sectors such as pharmaceuticals, biotechnology, life sciences, aerospace, energy, telecommunications, and information technology has led to an exponential increase in the number of patents and trademarks issued and domain name registrations around the globe. The increase is unlikely to slow with ongoing events like the COVID 19 pandemic, the fourth industrial revolution, and the scramble to address climate change—all of which are driving further innovation.
To harness and capitalize on these advances, many companies and governments are seeking strategic partnerships with international business partners (both public and private), particularly in emerging markets. Business arrangements are increasingly cross-border and complex, often involving multiple parties in high-value, long-term arrangements. Because intellectual property (IP) is often an important asset in many of those arrangements, the transaction documents often include provisions addressing the use of IP, such as licensing, cooperation, or technology transfer agreements. In most cases, these seek to protect IP rights across a number of jurisdictions.
With IP disputes common, companies and governments should make sure to choose the right dispute resolution mechanism.
Advantages of international arbitration for IP disputes
Parties are increasingly choosing international arbitration to resolve disputes that might arise in arrangements that involve IP in more than one country. International arbitration is well suited for such complex, cross-border disputes.
Ability to select an expert arbitrator
Although some jurisdictions have specialized IP courts, many do not.
In some regions, IP disputes are resolved by jury trials, with laypersons deciding important factual issues. This raises concerns over whether those deciding the dispute have sufficient relevant skills to make the right decision. If parties include an arbitration clause, they can require that the tribunal have the appropriate expertise.
Private and confidential
International arbitration is a private and often confidential process, unlike most court proceedings. This offers benefits, from reducing the risk to proprietary or commercially sensitive information to avoiding airing disagreements between parties in open court.
Less formal and adversarial
Arbitration is less formal than litigation and, although not always less contentious, it can offer a less adversarial process than litigation. When combined with the confidential nature of most arbitrations, the less adversarial nature can help preserve a long-term or strategically important business relationship, which may be the most beneficial outcome.
Arbitration provides an impartial forum with neutral decision makers under acceptable law and in a language with which the parties are comfortable. It allows parties to avoid being before foreign courts, which can be particularly important where disputes involve jurisdictions, including emerging markets, where parties have less confidence (a) in the local rule of law or (b) that local courts will decide cases independently, fairly, impartially, and timely. Concerns over neutrality may be compounded where states, state-owned entities, or nationally strategic matters are involved.
One forum for all disputes
Where companies operate internationally, IP disputes often involve more than one jurisdiction. Because many IP rights protections are territorial in nature, the resolution of a dispute may require parallel litigation in courts in different countries. This can lead to conflicting judgments with the scope of the parties’ rights interpreted differently by different courts. Litigation in multiple fora may also complicate settlement.
International arbitration can offer a single forum where multiple disputes can be resolved holistically, before one tribunal. This offers greater consistency of outcome and often presents better opportunities for a global settlement.
Flexible process with good procedural safeguards.
Major arbitral rules are designed to work flexibly and accommodate the practices of parties from different legal traditions. Parties can tailor proceedings to their needs and that of the specific dispute. When leveraged properly, this is a powerful tool. As one example, discovery in IP litigation, particularly in the United States, can be extremely expensive. In arbitration, parties can agree on a limited scope of discovery, or agree that evidence will be on paper only and hearings be held virtually, saving significant time and cost. But, parties must actively seek to leverage procedural flexibility. That is where it becomes critical to hire experienced arbitration counsel. Too often these benefits are missed where, for example, proceedings are run by litigators who simply treat the arbitration as they would a lawsuit brought before a court.
That is not to say that it is a procedural “free-for-all.” Arbitration rules provide procedural safeguards. Some are mandatory, while others function through agreement and at the request of the parties. For example, interim relief (often of critical importance in IP disputes) can be sought in the arbitration, although parties often can seek interim relief from the courts in support of the arbitration. Expedited procedures may also be available, from appointment of an emergency arbitrator to accelerating the procedural timeline, curtailing disclosure, or imposing a shorter deadline for issuance of the award.
Cost and time efficiencies
Because parties and the tribunal can tailor the process, arbitration has the potential to reduce the costs and time of proceedings. As explained above, it does not always live up to this promise, but where counsel leverage procedural flexibility and utilize tools available to minimize costs (such as technologies to drive efficiencies in case management, disclosure, and document review), time and cost savings can be significant. This is magnified when arbitrators are experienced and possess excellent case management skills.
Arbitration awards are typically expressed as final and binding. Most arbitral rules and laws limit rights to appeal or challenge awards. While the ability to challenge an award on grounds of procedural unfairness, bias, or want of jurisdiction is usually available, most jurisdictions limit the right to appeal an award to multiple levels of senior courts. Outside the United States, this generally avoids protracted challenges to the decision.
Arbitration offers significant benefits when it comes to enforcement where disputes are cross-border. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the “New York Convention,” offers a regime for enforcement of awards that is accepted in almost all countries. It restricts the ability of domestic courts to reconsider the merits of awards and limits challenges to enforcement to a limited set of grounds (largely, serious procedural irregularities or lack of jurisdiction). There is no equivalent regime for enforcement of foreign court judgments, so it is often harder to enforce court judgments from one country in another country.